Metropolitan Bank Holding Corp. (Form: 10-Q, Received: 08/14/2018 06:23:55)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2018

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

For the transition period from __________________ to __________________

Commission File No. 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 No.)

99 Park Avenue, New York, New York	10016
(Address of Principal Executive Offices)	(Zip Code)

(212) 659-0600

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

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 requirements for the past 90 days.

YES x NO ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, 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 x NO ¨

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

Large accelerated filer ¨		Accelerated filer ¨
Non-accelerated filer x		Smaller reporting company ¨
(Do not check if smaller reporting company)		Emerging Growth Company x

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 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES ¨ NO x

There were 8,207,234 shares of the Registrant’s common stock, par value $0.01 per share, outstanding as of August 9, 2018.

METROPOLITAN BANK HOLDING CORP.

Form 10-Q

Table of Contents

	Page

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

Consolidated Statements of Financial Condition as of June 30, 2018 and December 31, 2017	4

Consolidated Statements of Operations for the Three Months and Six Months ended June 30, 2018 and 2017	5

Consolidated Statements of Comprehensive Income for the Three Months and Six Months ended June 30, 2018 and 2017	6

Consolidated Statements of Changes in Stockholders’ Equity for the Six Months ended June 30, 2018 and 2017	7

Consolidated Statements of Cash Flows for the Six Months ended June 30, 2018 and 2017	8

Notes to Unaudited Consolidated Financial Statements	9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	34

Item 3. Quantitative and Qualitative Disclosures About Market Risk	48

Item 4. Controls and Procedures	49

PART II. OTHER INFORMATION	50

Item 1. Legal Proceedings	50

Item 1A. Risk Factors	50

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	50

Item 3. Defaults Upon Senior Securities	50

Item 4. Mine Safety Disclosures	50

Item 5. Other Information	50

Item 6. Exhibits	50

Signatures	51

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains certain “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, which may be identified by the use of such words as “may,” “believe,” “expect,” “anticipate,” “consider,” “should,” “plan,” “estimate,” “predict,” “continue,” “probable,” and “potential” or the negative of these terms or other comparable terminology. Examples of forward-looking statements include, but are not limited to, estimates with respect to the financial condition, results of operations and business of Metropolitan Bank Holding Corp. (the “Company”) and its wholly-owned subsidiary Metropolitan Commercial Bank (the “Bank”), and the Company’s strategies, plans, objectives, expectations and intentions, and other statements contained in this Quarterly Report on Form 10-Q that are not historical facts. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors (many of which are beyond the Company’s control) that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Factors that may cause actual results to differ from those results expressed or implied include those factors listed under the heading “Risk Factors” in the Company’s Annual Report on Form 10K filed with the Securities and Exchange Commission (the “SEC”) on March 28, 2018. In addition these factors include but are not limited to:

•

the timing and occurrence or non-occurrence of events may be subject to circumstances beyond the Company’s control;

•

there may be increases in competitive pressure among financial institutions or from non-financial institutions;

•

changes in the interest rate environment may reduce interest margins or affect the value of the Bank’s investments;

•

changes in deposit flows, loan demand or real estate values may adversely affect the Bank’s business;

•

changes in accounting principles, policies or guidelines may cause the Company’s financial condition to be perceived differently;

•

general economic conditions, including unemployment rates, either nationally or locally in some or all of the areas in which the Bank does business, or conditions in the securities markets or the banking industry may be less favorable than currently anticipated;

•

legislative or regulatory changes may adversely affect the Bank’s business;

•

applicable technological changes may be more difficult or expensive than anticipated;

•

success or consummation of new business initiatives may be more difficult or expensive than anticipated;

•

the risks associated with adverse changes to credit quality, including changes in the level of loan delinquencies and non-performing assets and charge-offs and changes in estimates of the adequacy of the allowance for loan losses;

•

difficulties associated with achieving or predicting expected future financial results;

•

the risk of an economic slowdown that would adversely affect credit quality and loan originations; and

•

the potential impact on the Bank’s operations and customers resulting from natural or man-made disasters, wars, acts of terrorism and cyberattacks.

The Company’s ability to predict results or the actual effects of its plans or strategies is inherently uncertain. As such, forward-looking statements can be affected by inaccurate assumptions made or by known or unknown risks and uncertainties. Consequently, no forward-looking statement can be guaranteed. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect conditions only as of the date of this filing. The Company does not intend to update any of the forward-looking statements after the date of this Form 10-Q or to conform these statements to actual events.

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (unaudited)

(in thousands, except share data)

	June 30			December 31
	2018			2017
Assets
Cash and due from banks	$	10,148		$	8,790
Overnight deposits		240,994			254,441
Total cash and cash equivalents		251,142			263,231
Investment securities available for sale, at fair value		28,989			32,157
Investment securities held to maturity (estimated fair value of $4,782 and $5,330 at June 30, 2018 and December 31, 2017, respectively)		4,985			5,428
Total securities		33,974			37,585
Other investments		16,770			11,677
Loans, net of deferred fees and unamortized costs		1,599,647			1,419,896
Allowance for loan losses		(17,463	)		(14,887	)
Net loans		1,582,184			1,405,009
Receivable from prepaid card programs, net		7,589			9,579
Accrued interest receivable		4,449			4,421
Premises and equipment, net		7,012			6,268
Prepaid expenses and other assets		7,715			5,751
Goodwill		9,733			9,733
Accounts receivable, net		3,927			6,601
Total assets	$	1,924,495		$	1,759,855
Liabilities and Stockholders’ Equity
Deposits:
Noninterest-bearing demand deposits	$	878,703		$	812,497
Interest-bearing deposits		661,779			591,858
Total deposits		1,540,482			1,404,355
Federal Home Loan Bank of New York advances		63,000			42,198
Trust preferred securities		20,620			20,620
Subordinated debts, net of issuance cost		24,517			24,489
Accounts payable, accrued expenses and other liabilities		18,111			21,678
Accrued interest payable		1,019			749
Prepaid debit cardholder balances		7,162			8,882
Total liabilities		1,674,911			1,522,971

Class A preferred stock, $0.01 par value, authorized 5,000,000 shares issued and none outstanding at June 30, 2018 and December 31, 2017		-			-
Class B preferred stock, $0.01 par value, authorized 2,000,000 shares, issued and 272,636 outstanding at June 30, 2018 and December 31, 2017		3			3
Common stock, $0.01 par value, authorized 10,000,000 shares, issued and 8,205,234 and 8,196,310 outstanding at June 30, 2018 and December 31, 2017, respectively		81			81
Additional paid in capital		212,100			211,145
Retained earnings		38,017			25,861
Accumulated other comprehensive loss, net of tax effect		(617	)		(206	)
Total stockholders’ equity		249,584			236,884
Total liabilities and stockholders’ equity	$	1,924,495		$	1,759,855

See accompanying notes to unaudited consolidated financial statements

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(in thousands, except share and per share data)

	Three months ended June 30					Six months ended June 30
	2018			2017		2018			2017
Interest and dividend income:
Loans, including fees	$	17,996		$	13,367	$	35,143		$	25,234
Securities:
Taxable		177			204		363			419
Tax-exempt		8			8		15			15
Money market funds and commercial paper		121			70		240			134
Overnight deposits		1,534			293		2,577			481
Other interest and dividends		162			105		288			206
Total interest income	$	19,998		$	14,047	$	38,626		$	26,489
Interest expense:
Deposits		1,799			1,468		3,238			2,728
Borrowed funds		191			243		341			429
Trust preferred securities interest expense		208			165		392			305
Subordinated debt interest expense		405			405		809			478
Total interest expense		2,603			2,281		4,780			3,940

Net interest income		17,395			11,766		33,846			22,549
Provision for loan losses		1,270			1,790		2,747			2,360

Net interest income after provision for loan losses		16,125			9,976		31,099			20,189

Non-interest income:
Service charges on deposit accounts		821			505		2,731			796
Prepaid debit card income		1,519			805		2,427			1,593
Other service charges and fees		346			250		2,840			416
Loan prepayment penalties		-			13		65			13
Losses on call of securities		(37	)		-		(37	)		-
Total non-interest income	$	2,649		$	1,573	$	8,026		$	2,818

Non-interest expense:
Compensation and benefits	$	6,126		$	4,264	$	12,443		$	8,841
Bank premises and equipment		1,288			1,037		2,468			2,110
Directors fees		210			175		571			349
Insurance expense		73			65		149			144
Professional fees		841			480		1,619			890
FDIC assessment		123			105		263			275
Data processing fees		609			291		2,115			550
Other expenses		1,005			724		1,885			1,216
Total non-interest expense		10,275			7,141		21,513			14,375

Net income before income tax expense		8,499			4,408		17,612			8,632
Income tax expense		2,634			1,757		5,456			3,431
Net income	$	5,865		$	2,651	$	12,156		$	5,201

Earnings per share:
Basic earnings	$	0.72		$	0.57	$	1.48		$	1.12
Diluted earnings	$	0.70		$	0.57	$	1.46		$	1.12

See accompanying notes to unaudited consolidated financial statements

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

(in thousands)

	Three months ended June 30,						Six months ended June 30,
	2018			2017			2018			2017

Net Income	$	5,865		$	2,651		$	12,156		$	5,201

Other comprehensive loss
Unrealized gains/(losses) of securities available for sale:
Unrealized holding gains/(losses) arising during the period		(166	)		28			(588	)		161
Reclassification adjustment for net losses included in net income		37			-			37			-
		(129	)		28			(551	)		161
Tax effect		40			(12	)		140			(69	)
Total unrealized gains/loss on securities available for sale, net of tax		(89	)		16			(411	)		92

Comprehensive income	$	5,776		$	2,667		$	11,745		$	5,293

See accompanying notes to unaudited consolidated financial statements

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (unaudited)

For the six months ended June 30, 2018 and 2017

(in thousands, except share data)

	Preferred Stock, Class A		Preferred Stock, Class B		Common Stock		Additional Paid-in Capital			Retained Earnings		AOCI (Loss), Net			Total

Balance at January 1, 2018 (8,196,310 shares)	$	-	$	3	$	81	$	211,145		$	25,861	$	(206	)	$	236,884
Restricted stock issued, net of forfeiture (8,987 shares)		-		-		-		440			-		-			440
Redemption of common stock for exercise of stock options and tax withholdings for restricted stock vesting (63 shares)		-		-		-		(72	)		-		-			(72	)
Employee and non-employee stock-based compensation								619			-		-			619
Issuance of common stock ⁽¹⁾		-		-		-		(33	)		-		-			(33	)
Net income		-		-		-		-			12,156		-			12,156
Other comprehensive loss		-		-		-		-			-		(411	)		(411	)
Balance at June 30, 2018 (8,205,234 shares)	$	-	$	3	$	81	$	212,100		$	38,017	$	(617	)	$	249,584

Balance at January 1, 2017 (4,604,563 shares)	$	-	$	3	$	45	$	96,116		$	13,492	$	(165	)	$	109,491
Restricted stock grants, net of forfeiture (28,449 shares)		-		-		-		(7	)		-		-			(7	)
Employee stock-based compensation expense		-		-		-		203			-		-			203
Net income		-		-		-		-			5,201		-			5,201
Other comprehensive income		-		-		-		-			-		92			92
Balance at June 30, 2017 (4,633,012 shares)	$	-		3		45		96,312			18,693		(73	)		114,980

(1) Represents costs incurred in connection with the Company's initial public offering completed in the prior period.

See accompanying notes to unaudited consolidated financial statements

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)

(in thousands, except share data)

	Six months ended June 30,
	2018			2017
Cash flows from operating activities:
Net income	$	12,156		$	5,201
Adjustments to reconcile net income to net cash:
Net depreciation amortization and accretion		850			420
Provision for loan losses		2,747			2,360
Net Change in deferred loan fees		940			(338	)
Gain on sale of loans held for sale		(50	)		-
Loss on call of securities		37			-
Deferred income tax benefit		62			51
Proceeds from the sale of loans held for sale		16,932			-
Stock-based compensation expense		619			203
Non-employee stock-based expense		220			-
Forfeiture of restricted shares		-			(7	)
Net change in:
Accrued interest receivable		(28	)		(324	)
Accounts payable, accrued expenses and other liabilities		(3,567	)		5,624
Debit cardholder balances		(1,720	)		6
Accrued interest payable		270			-
Accounts receivable, net		2,674			5,362
Receivable from prepaid card programs, net		1,990			(11	)
Prepaid expenses and other assets		(1,964	)		430
Net cash (used in) provided by operating activities		32,168			18,977

Cash flows from investing activities:
Loan originations and payments, net		(197,505	)		(230,535	)
Redemptions of other investments		2,120			208
Purchases of other investments		(7,213	)		(886	)
Purchases of securities available for sale		(1,812	)		(1,470	)
Proceeds from sales and calls of securities available for sale		1,463			-
Proceeds from paydowns and maturities of securities available for sale		2,809			3,614
Proceeds from paydowns of securities held to maturity		427			513
Purchase of premises and equipment, net		(1,370	)		(1,153	)
Net cash used in investing activities		(201,081	)		(229,709	)

Cash flows from financing activities:
Costs incurred from issuance of common stock in prior period		(33	)		-
Proceeds from issuance of subordinated debt, net of issuance cost		-			24,453
Proceeds from FHLB advances		90,240			120,000
Repayments of FHLB advances		(69,438	)		(124,616	)
Redemption of common stock for exercise of stock options and tax withholdings for restricted stock vesting		(72	)		-
Net increase in deposits		136,127			335,518
Net cash provided by financing activities		156,824			355,355

Increase in cash and cash equivalents		(12,089	)		144,623
Cash and cash equivalents at the beginning of the period		263,231			82,931
Cash and cash equivalents at the end of the period	$	251,142		$	227,554

Supplemental information:

Cash paid for:
Interest
Income Taxes	$	4,510		$	3,143
	$	7,389		$	2,837
Non-cash item:
Transfer of loans held for investment to held for sale	$	16,882		$	-

See accompanying notes to unaudited consolidated financial statements

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION

Metropolitan Bank Holding Corp. (a New York Corporation) (the “Company”) is a bank holding company whose principal activity is the ownership and management of Metropolitan Commercial Bank (the “Bank”), its wholly-owned subsidiary. The Bank’s primary market is the New York metropolitan area. The Bank offers a traditional range of services to individuals, businesses and others needing banking services. Its primary lending products are commercial mortgages and commercial and industrial loans. Substantially all loans are secured by specific items of collateral including business assets, consumer assets, and commercial and residential real estate. Commercial loans are expected to be repaid from the cash flows from the operations of the business. The Bank’s primary deposit products are checking, savings, and term deposit accounts, and its deposit accounts are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to the maximum amounts allowed by law. The Bank commenced operations on June 22, 1999.

The Company and the Bank are subject to the regulations of certain state and federal agencies and, accordingly, is periodically examined by those regulatory authorities. As a consequence of the extensive regulation of commercial banking activities, the Company’s business is susceptible to being affected by state and federal legislation and regulations.

NOTE 2 – BASIS OF PRESENTATION

The accounting and reporting policies of the Company conform with U.S. generally accepted accounting principles and predominant practices within the U.S. banking industry. All intercompany balances and transactions have been eliminated. The Unaudited Consolidated Financial Statements, which include the accounts of the Company and the Bank, have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC. The Unaudited Consolidated Financial Statements reflect all normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. In preparing the interim financial statements, management has made estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reported periods. The accounting and reporting policies of the Company conform with U.S generally accepted accounting principles and predominant practices within the U.S. banking industry.

Certain prior-year amounts have been reclassified to conform to current year’s presentation.

The results of operations for the three and six months ended June 30, 2018 are not necessarily indicative of the results of operations that may be expected for the entire fiscal year. The unaudited consolidated financial statements presented in this report should be read in conjunction with the Company’s audited consolidated financial statements and notes to audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

NOTE 3 – SUMMARY OF RECENT ACCOUNTING PRONOUNCEMENTS

Pursuant to the Jumpstart Our Business Startups Act (“JOBS Act”), an Emerging Growth Company (“EGC”) is permitted to elect to adopt new accounting guidance using adoption dates of nonpublic entities. The Company elected delayed effective dates of recently issued accounting standards.

Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606), implements a common revenue standard that clarifies the principles for recognizing revenue. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract and (v) recognize revenue when (or as) the entity satisfies a performance obligation. In August 2016, the FASB deferred the effective date of the ASU by one year which means ASU 2014-09 will be effective for the Company on January 1, 2019. Management is in the process of evaluating revenue streams to determine the impact the ASU could have on the Company’s operating results or financial condition.

In January 2016, the FASB issued ASU 2016-01, an amendment to Recognition and Measurement of Financial Assets and Financial Liabilities (Subtopic 825-10). The objectives of the ASU are to: (1) require equity investments to be measured at fair value, with changes in fair value recognized in net income, (2) simplify the impairment assessment of equity investments without readily determinable fair values, (3) eliminate the requirement to disclose methods and significant assumptions used to estimate fair value for financial instruments measured at amortized cost on the balance sheet, (4) require the use of the exit price notion when measuring the fair value of financial instruments, and (5) clarify the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. In February 2018, the FASB issued ASU 2018-03, Technical Corrections and Improvements to Financial Instruments – Overall – Recognition and Measurement of Financial Assets and Liabilities, an amendment to ASU 2016-01. The amendments clarify certain aspects of the guidance issued in ASU 2016-01. These ASUs will be effective for the Company on January 1, 2019. The Company has evaluated the impact of ASU 2016-01 and 2018-03 and has concluded that they will not have a material impact on its consolidated financial statements.

(continued)
9

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – SUMMARY OF RECENT ACCOUNTING PRONOUNCEMENTS (continued)

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 requires companies that lease valuable assets to recognize on their balance sheets the assets and liabilities generated by contracts longer than a year. The amendments in this update are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020, however, early adoption is permitted. Under ASU 2016-02, the Company will recognize a right-of-use asset and a lease obligation liability on the consolidated balance sheet, which will increase the Company’s assets and liabilities. The Company is evaluating other potential impacts of ASU 2016-02 on its consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The objectives of the ASU are to simplify the accounting for share-based payment transactions, including the income tax consequences, the treatment of forfeitures, and the classification on the statement of cash flows. The amendments: (i) allow companies to make an entity-wide accounting policy election either to estimate the number of forfeitures expected to occur or to account for forfeitures in the compensation cost when they occur, (ii) revise the withholding requirements for classifying stock awards as equity, (iii) requires that the tax effect of any difference between the compensation cost of an award recognized for financial reporting purposes and the deduction for an award for tax purposes is recognized as an income tax expense or benefit in the income statement in the period in which the tax deduction arises, and (iv) clarifies the classification of excess tax benefits and employee taxes paid when an employer withholds shares for tax-withholding purpose on the statement of cash flows.

The Company elected to adopt ASU 2016-09 in the second quarter of 2018 and, in accordance with the guidance, has adopted the guidance as of the beginning of the fiscal year. Under the ASU, the tax effects of awards are treated as discrete items in the reporting period in which they occur. Therefore, the tax effect of awards is not spread over the entire year through the use of the annual effective tax rate, but instead is recorded entirely in the period in which the tax deduction arose. The relevant information on restricted stock that vests and stock options that are excised is used to compare the cumulative book expense to the tax deduction. With this information, the discrete item is calculated and recorded. The Company prospectively applied the amendment in this guidance requiring recognition of excess tax benefits and deficits in the income statement resulting in a $62,000 income tax benefit recognized in the six months ended June 30, 2018, resulting in an effective tax rate of 31.1%.

The amendments in the guidance that require application using a modified retrospective transition method did not have an impact on the Company’s retained earnings as there were no unrecognized tax benefits that existed prior to April 1, 2018 nor were there forfeiture estimates that were that impacted compensation expense. 2018 will be the first year of recording any excess tax deduction and these will be reported as a discrete item in the quarter in which restricted stocks/stock options will vest/be exercised.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326), which requires the measurement of all expected credit losses for financial assets held at the reporting date be based on historical experience, current condition, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. This guidance also amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. For the Company, this guidance is effective for fiscal years and interim periods beginning after December 15, 2020. Management has established a committee to evaluate the impact of ASU 2016-13 on the Company’s financial statements. Management has also engaged a third party vendor for a software solution, which is expected to be implemented during 2018 to begin testing models and comparing results with current incurred loss estimates. Since the Bank has been using this vendor for credit analysis and stress testing solutions for over five years, sufficient loan level information should be readily available to test the Historical Loss and Migration Analysis models, among other potential modeling solutions. The Company expects to recognize a one-time cumulative adjustment to the allowance for loan losses as of the beginning of the reporting period in which the ASU takes effect, but cannot yet determine the magnitude of the impact on the consolidated financial statements.

(continued)
10

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – SUMMARY OF RECENT ACCOUNTING PRONOUNCEMENTS (continued)

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which eliminates the second step in the goodwill impairment test which requires an entity to determine the implied fair value of the reporting unit’s goodwill. Instead, an entity should recognize an impairment loss if the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, with the impairment loss not to exceed the amount of goodwill allocated to the reporting unit. The standard is effective for the Company beginning January 1, 2021, with early adoption permitted for goodwill impairment tests performed after January 1, 2017. Management expects that ASU 2017-04 will not have a significant impact on its consolidated financial statements.

In March 2017, the FASB issued ASU 2017-08, Premium Amortization on Purchased Callable Debt Securities, which shortens the amortization period for the premium on certain purchased callable debt securities to the earliest call date. Today, entities generally amortize the premium over the contractual life of the security. The new guidance does not change the accounting for purchased callable debt securities held at a discount as discounts continue to be amortized to maturity. ASU No. 2017-08 is effective for interim and annual reporting periods beginning after December 15, 2019 and early adoption is permitted. The guidance includes a modified retrospective transition approach under which a cumulative-effect adjustment will be made to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. Management expects that ASU 2017-08 will not have a significant impact on its consolidated financial statements.

On February 14, 2018 the FASB issued final guidance in the form of Accounting Standards Update No. 2018-02, which permits - but does not require - companies to reclassify stranded tax effects caused by 2017 tax reform from accumulated other comprehensive income to retained earnings. Additionally, the ASU requires new disclosures by all companies, whether they opt to do the reclassification or not. Management expects that ASU 2018-02 will not have a significant impact on its consolidated financial statements. The amendments in this update are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2018; however, early adoption is permitted.

(continued)
11

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 - INVESTMENT SECURITIES

The following table summarizes the amortized cost and fair value of securities available for sale and securities held to maturity at June 30, 2018 and December 31, 2017 and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive loss and gross unrecognized losses (dollars in thousands):

At June 30, 2018	Amortized Cost		Gross Unrealized/ Unrecognized Gains		Gross Unrealized/ Unrecognized Losses			Fair Value
Available for sale
Residential mortgage-backed securities	$	24,133	$	3	$	(672	)	$	23,464
Residential collateralized mortgage obligations		2,485		-		(134	)		2,351
Municipal bond		1,086		7		-			1,093
CRA mutual fund		2,183		-		(102	)		2,081
Total securities available for sale	$	29,887	$	10	$	(908	)	$	28,989

Held to maturity
Residential mortgage-backed securities	$	4,960		-	$	(203	)	$	4,757
Foreign government securities		25		-		-			25
Total securities held to maturity	$	4,985	$	-	$	(203	)	$	4,782

At December 31, 2017	Amortized Cost		Gross Unrealized/ Unrecognized Gains		Gross Unrealized/ Unrecognized Losses			Fair Value
Available for sale
Residential mortgage-backed securities	$	24,856	$	70	$	(242	)	$	24,684
Residential collateralized mortgage obligations		2,809		-		(103	)		2,706
Commercial collateralized mortgage obligations		1,581		-		(31	)		1,550
Municipal bond		1,098		11		-			1,109
CRA mutual fund		2,160		-		(52	)		2,108
Total securities available for sale	$	32,504	$	81	$	(428	)	$	32,157

Held to maturity
Residential mortgage-backed securities	$	5,403	$	-	$	(98	)	$	5,305
Foreign government securities		25		-		-			25
Total securities held to maturity	$	5,428	$	-	$	(98	)	$	5,330

(continued)
12

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 - INVESTMENT SECURITIES (continued)

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

	Three and six months ended June 30,
	2018			2017
Proceeds	$	1,500		$	-
Gross gains	$	-		$	-
Gross losses	$	(37	)	$	-
Tax impact	$	11		$	-

The amortized cost and fair value of debt securities at June 30, 2018 and December 31, 2017 are shown by contractual maturity. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties (dollars in thousands):

	Held to Maturity				Available for Sale
At June 30, 2018	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Within one year	$	25	$	25	$	-	$	-
One to five years		-		-		-		-
Five to ten years		-		-		-		-
Due after ten years		-		-		1,086		1,093
Total	$	25	$	25	$	1,086	$	1,093

Residential mortgage-backed securities	$	4,960	$	4,757	$	24,133	$	23,464
Residential collateralized mortgage obligations		-		-		2,485		2,351
CRA mutual fund		-		-		2,183		2,081
Total Securities	$	4,985	$	4,782	$	29,887	$	28,989

	Held to Maturity				Available for Sale
At December 31, 2017	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Within one year	$	-	$	-	$	-	$	-
One to five years		25		25		-		-
Five to ten years		-		-		-		-
Due after ten years		-		-		1,098		1,109
Total	$	25	$	25	$	1,098	$	1,109

Residential mortgage-backed securities	$	5,403	$	5,305	$	24,856	$	24,684
Residential collateralized mortgage obligations		-		-		2,809		2,706
Commercial collateralized mortgage obligations		-		-		1,581		1,550
CRA mutual fund		-		-		2,160		2,108
Total Securities	$	5,428	$	5,330	$	32,504	$	32,157

There were no securities pledged at June 30, 2018 and December 31, 2017 to secure borrowings.

(continued)
13

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 - INVESTMENT SECURITIES (continued)

At June 30, 2018 and December 31, 2017, all of the mortgage-backed securities and collateralized mortgage obligations held by the Bank were issued by U.S. Government-sponsored entities and agencies, primarily Fannie Mae and Freddie Mac, institutions which the Government has affirmed its commitment to support.

Securities with unrealized/unrecognized losses at June 30, 2018 and December 31, 2017, aggregated by investment category and length of time that individual securities have been in a continuous unrealized/unrecognized loss position, are as follows (dollars in thousands):

	Less than 12 Months					12 months or more					Total
At June 30, 2018	Estimated Fair Value		Unrealized/ Unrecognized Losses			Estimated Fair Value		Unrealized/ Unrecognized Losses			Estimated Fair Value		Unrealized/ Unrecognized Losses
Residential mortgage-backed securities	$	15,054	$	(308	)	$	8,148	$	(364	)	$	23,202	$	(672	)
Residential collateralized mortgage obligations		-		-			2,351		(134	)		2,351		(134	)
CRA mutual fund		-		-			2081		(102	)		2,081		(102	)
Total securities available for sale	$	15,054	$	(308	)	$	12,580	$	(600	)	$	27,634	$	(908	)

Residential mortgage-backed securities	$	2,909	$	(95	)	$	1,848	$	(108	)	$	4,757	$	(203	)
Total held to maturity	$	2,909	$	(95	)	$	1,848	$	(108	)	$	4,757	$	(203	)

	Less than 12 Months					12 months or more					Total
At December 31, 2017	Estimated Fair Value		Unrealized/ Unrecognized Losses			Estimated Fair Value		Unrealized/ Unrecognized Losses			Estimated Fair Value		Unrealized/ Unrecognized Losses
Residential mortgage-backed securities	$	9,194	$	(85	)	$	7,738	$	(157	)	$	16,932	$	(242	)
Residential collateralized mortgage obligations		-		-			2,706		(103	)		2,706		(103	)
Commercial collateralized mortgage obligations		-		-			1,550		(31	)		1,550		(31	)
CRA mutual fund		-		-			2,108		(52	)		2,108		(52	)
Total securities available for sale	$	9,194	$	(85	)	$	14,102	$	(343	)	$	23,296	$	(428	)

Residential mortgage-backed securities	$	3,260	$	(33	)	$	2,045	$	(65	)	$	5,305	$	(98	)
Total held to maturity	$	3,260	$	(33	)	$	2,045	$	(65	)	$	5,305	$	(98	)

(continued)
14

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 - INVESTMENT SECURITIES (continued)

The unrealized losses of securities are primarily due to the changes in market interest rates subsequent to purchase. The Bank does not consider these securities to be other-than-temporarily impaired at June 30, 2018 and December 31, 2017 since the decline in market value is attributable to changes in interest rates and not credit quality. In addition, the Company does not intend to sell and does not believe that it is more likely than not that it will be required to sell these investments until there is a full recovery of the unrealized loss, which may be at maturity. As a result, no impairment loss was recognized during the six months ended June 30, 2018.

At June 30, 2018 and December 31, 2017, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of stockholders’ equity.

NOTE 5 – LOANS AND ALLOWANCE FOR LOAN LOSSES

Loans, net of deferred costs and fees, consist of the following as of June 30, 2018 and December 31, 2017 (dollars in thousands):

	At June 30, 2018			At December 31, 2017
Real estate
Commercial	$	857,071		$	783,745
Construction		45,974			36,960
Multifamily		233,474			190,097
One-to-four family		23,929			25,568
Total real estate loans		1,160,448			1,036,370

Commercial and industrial		354,932			340,001
Consumer		86,277			44,595
Total loans		1,601,657			1,420,966
Deferred fees		(2,010	)		(1,070	)
Loans, net of deferred fees and unamortized costs		1,599,647			1,419,896
Allowance for loan losses		(17,463	)		(14,887	)
Balance at the end of the period	$	1,582,184		$	1,405,009

Non-performing loans include non-accrual loans and loans past due over 90 days and still accruing. Non-performing loans exclude troubled debt restructurings (“TDRs”) that are accruing and have been performing in accordance with the terms of their restructure agreement for at least six months.

Non-accrual loans and loans past due 90 days still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

There were no loans past due over 90 days and still accruing or non-accruing TDRs at June 30, 2018 and December 31, 2017. The following tables present the recorded investment in non-accrual loans by class of loans as of June 30, 2018 and December 31, 2017 (dollars in thousands):

	At June 30, 2018		At December 31, 2017
Commercial real estate	$	-	$	787
Commercial & industrial		-		-
One-to-four family		-		2,447
Consumer		192		155
Total	$	192	$	3,389

Interest on non-accrual loans not recognized was $1,000 and $37,000 for the three months ended June 30, 2018 and June 30, 2017, respectively. Interest on non-accrual loans not recognized was $2,500 and $77,000 for the six months ended June 30, 2018 and June 30, 2017, respectively.

(continued)
15

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 – LOANS AND ALLOWANCE FOR LOAN LOSSES (continued)

The following tables present the aging of the recorded investment in past due loans by class of loans as of June 30, 2018 and December 31, 2017 (dollars in thousands):

At June 30, 2018	30-59 Days		60-89 Days		Greater than 90 days		Total Past Due		Loans not Past Due		Total
Commercial real estate	$	96	$	-	$	-	$	96	$	856,975	$	857,071
Commercial & industrial		114		73		-		187		354,745		354,932
Construction		-		-		-		-		45,974		45,974
Multifamily		-		-		-		-		233,474		233,474
One-to-four family		-		-		-		-		23,929		23,929
Consumer		39		-		142		181		86,096		86,277
Total	$	249	$	73	$	142	$	464	$	1,601,193	$	1,601,657

At December 31, 2017	30-59 Days		60-89 Days		Greater than 90 days		Total Past Due		Loans not Past Due		Total
Commercial real estate	$	836	$	-	$	787	$	1,623	$	782,122	$	783,745
Commercial & industrial		85		142		-		227		339,774		340,001
Construction		-		-		-		-		36,960		36,960
Multifamily		-		-		-		-		190,097		190,097
One-to-four family		-		-		-		-		25,568		25,568
Consumer		149		21		155		325		44,270		44,595
Total	$	1,070	$	163	$	942	$	2,175	$	1,418,791	$	1,420,966

Troubled Debt Restructurings:

Loans for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, are considered TDRs and classified as impaired. Included in impaired loans at June 30, 2018 and December 31, 2017 were $2.6 million and $2.7 million of loans modified in TDRs, respectively. The Bank has not allocated specific reserves to those customers with loans modified in TDRs as of June 30, 2018, compared to $9,000 allocated at December 31, 2017. The Bank had not committed to lend additional amounts as of June 30, 2018 and December 31, 2017 to customers with outstanding loans that are classified as TDRs. During the three months and six months ended June 30, 2018 and 2017, there were no significant loans modified as TDRs. During the three and six months ended June 30, 2018 and June 30, 2017 there were no payment defaults on any loans previously identified as TDRs. A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Bank’s internal underwriting policy.

(continued)
16

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 – LOANS AND ALLOWANCE FOR LOAN LOSSES (continued)

Credit Quality Indicators:

The Bank categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Bank analyzes all loans individually by classifying the loans as to credit risk at least annually. An analysis is performed on a quarterly basis for loans classified as special mention, substandard, or doubtful. The Bank uses the following definitions for risk ratings:

Special Mention - Loans classified as special mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution's credit position at some future date.

Substandard - Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful - Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans not meeting the criteria above are considered to be pass-rated loans. Based on the most recent analysis performed, the risk category of loans by class of loans is as follows (dollars in thousands):

At June 30, 2018	Pass		Special Mention		Substandard		Doubtful		Total
Commercial real estate	$	855,536	$	392	$	1,143	$	-	$	857,071
Commercial & industrial		347,278		7,654		-		-		354,932
Construction		45,974		-		-		-		45,974
Multifamily		233,474		-		-		-		233,474
Total	$	1,482,262	$	8,046	$	1,143	$	-	$	1,491,451

At December 31, 2017	Pass		Special Mention		Substandard		Doubtful		Total
Commercial real estate	$	777,410	$	4,369	$	1,966	$	-	$	783,745
Commercial & industrial		331,775		8,226		-		-		340,001
Construction		36,960		-		-		-		36,960
Multifamily		190,097		-		-		-		190,097
Total	$	1,336,242	$	12,595	$	1,966	$	-	$	1,350,803

(continued)
17

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 – LOANS AND ALLOWANCE FOR LOAN LOSSES (continued)

For one-to-four family loans and consumer loans, the Bank evaluates credit quality based on the aging status of the loan, which was previously presented, and by performance status. Non-performing loans are loans past due over 90 days or more still accruing interest and loans on non-accrual status. The following table presents the recorded investment in one-to-four family and consumer loans based on performance status as of June 30, 2018 and December 31, 2017 (dollars in thousands):

At June 30, 2018	Performing		Non-Performing		Total
One-to-four family	$	23,929	$	-	$	23,929
Consumer		86,085		192		86,277
Total	$	110,014	$	192	$	110,206

At December 31, 2017	Performing		Non-Performing		Total
One-to-four family	$	23,121	$	2,447	$	25,568
Consumer		44,440		155		44,595
Total	$	67,561	$	2,602	$	70,163

The following table presents the activity in the Allowance for Loan Losses (referred herein as “ALLL”) by segment for the three and six months ending June 30, 2018 and 2017 (dollars in thousands):

Three months ended June 30, 2018	Commercial Real Estate		Commercial & Industrial			Construction		Multi Family		One-to-four Family			Consumer			Total
Allowance for loan losses:
Beginning balance	$	7,800	$	5,784		$	503	$	1,210	$	383		$	580			16,260
Provision/(credit) for loan losses		339		269			163		347		(3	)		155			1,270
Loans charged-off		-		-			-		-		-			(67	)		(67	)
Recoveries		-		-			-		-		-			-			-
Total ending allowance balance	$	8,139	$	6,053		$	666	$	1,557	$	380		$	668		$	17,463

Three months ended June 30, 2017	Commercial Real Estate		Commercial & Industrial			Construction		Multi Family		One-to-four Family			Consumer			Total
Allowance for loan losses:
Beginning balance	$	5,853	$	4,963		$	502	$	687	$	105		$	126			12,236
Provision for loan losses		605		713			55		255		(3	)		165			1,790
Loans charged-off		-		(88	)		-		-		-			(29	)		(117	)
Recoveries		-		-			-		-		-			-			-
Total ending allowance balance	$	6,458	$	5,588		$	557	$	942	$	102		$	262		$	13,909

(continued)
18

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 – LOANS AND ALLOWANCE FOR LOAN LOSSES (continued)

Six months ended June 30, 2018	Commercial Real Estate		Commercial & Industrial			Construction		Multi Family		One-to-four Family			Consumer			Total
Allowance for loan losses:
Beginning balance	$	7,136	$	5,578		$	519	$	1,156	$	138		$	360		$	14,887
Provision/(credit) for loan losses		950		546			147		401		242			461			2,747
Loans charged-off		-		(71	)		-		-		-			(153	)		(224	)
Recoveries		53		-			-		-		-			-			53
Total ending allowance balance	$	8,139	$	6,053		$	666	$	1,557	$	380		$	668		$	17,463

Six months ended June 30, 2017	Commercial Real Estate		Commercial & Industrial			Construction		Multi Family		One-to-four Family			Consumer			Total
Allowance for loan losses:
Beginning balance	$	5,206	$	5,364		$	409	$	620	$	109		$	107			11,815
Provision/(credit) for loan losses		1,252		444			148		322		(7	)		201			2,360
Loans charged-off		-		(220	)		-		-		-			(46	)		(266	)
Recoveries		-		-			-		-		-			-			-
Total ending allowance balance	$	6,458	$	5,588		$	557	$	942	$	102		$	262		$	13,909

(continued)
19

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 – LOANS AND ALLOWANCE FOR LOAN LOSSES (continued)

The following tables present the balance in the ALLL and the recorded investment in loans by portfolio segment based on impairment method as of June 30, 2018 and December 31, 2017 (dollars in thousands):

At June 30, 2018	Commercial Real Estate		Commercial & Industrial		Construction		Multi Family		One-to-four Family		Consumer		Total
Allowance for loan losses:
Individually evaluated for impairment	$	-	$	-	$	-	$	-	$	-	$	96	$	96
Collectively evaluated for impairment		8,139		6,053		666		1,557		380		572		17,367
Total ending allowance balance	$	8,139	$	6,053	$	666	$	1,557	$	380	$	668	$	17,463

Loans:
Individually evaluated for impairment	$	1,535	$	-	$	-	$	-	$	1,099	$	192	$	2,826
Collectively evaluated for impairment		855,536		354,932		45,974		233,474		22,830		86,085		1,598,831
Total ending loan balance	$	857,071	$	354,932	$	45,974	$	233,474	$	23,929	$	86,277	$	1,601,657

At December 31, 2017	Commercial Real Estate		Commercial & Industrial		Construction		Multi Family		One-to-four Family		Consumer		Total
Allowance for loan losses:
Individually evaluated for impairment	$	-	$	-	$	-	$	-	$	9	$	77	$	86
Collectively evaluated for impairment		7,136		5,578		519		1,156		129		283	$	14,801
Total ending allowance balance	$	7,136	$	5,578	$	519	$	1,156	$	138	$	360	$	14,887

Loans:
Individually evaluated for impairment	$	2,368	$	-	$	-	$	-	$	3,566	$	155	$	6,089
Collectively evaluated for impairment		781,377		340,001		36,960		190,097		22,002		44,440		1,414,877
Total ending loan balance	$	783,745	$	340,001	$	36,960	$	190,097	$	25,568	$	44,595	$	1,420,966

(continued)
20

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 – LOANS AND ALLOWANCE FOR LOAN LOSSES (continued)

A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Management applies its normal loan review procedures in making these judgments. Impaired loans include individually classified nonaccrual loans and TDRs.

The following table presents loans individually evaluated for impairment recognized as of June 30, 2018 and December 31, 2017 (dollars in thousands):

At June 30, 2018	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With an allowance recorded:
One-to-four family	$	-	$	-	$	-
Consumer		210		192		96
Total	$	210	$	192	$	96

Without an allowance recorded:
Commercial real estate	$	2,004	$	1,535	$	-
One-to-four family		1,376		1,099		-
Total	$	3,380	$	2,634	$	-

At December 31, 2017	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With an allowance recorded:
One-to-four family	$	686	$	556	$	9
Consumer		155		155		77
Total	$	841	$	711	$	86

Without an allowance recorded:
Commercial real estate	$	2,890	$	2,368	$	-
One-to-four family		3,157		3,010		-
Total	$	6,047	$	5,378	$	-

(continued)
21

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 – LOANS AND ALLOWANCE FOR LOAN LOSSES (continued)

The following table presents the average recorded investment and interest income of loans individually evaluated for impairment recognized by class of loans as of and for the three month periods ended June 30, 2018 and 2017 (in thousands):

Three months ended June 30, 2018	Average Recorded Investment		Interest Income Recognized
With an allowance recorded:
One-to-four family	$	-	$	-
Consumer		138		-
Total	$	138	$	-

Without an allowance recorded:
Commercial real estate	$	1,540	$	16
One-to-four family		1,104	$	14
Total	$	2,644	$	30

Three months ended June 30, 2017	Average Recorded Investment		Interest Income Recognized
With an allowance recorded:
One-to-four family	$	847	$	9
Commercial and industrial		3,660		-
Consumer		48		-
Total	$	4,555	$	9

Without an allowance recorded:
Commercial real estate	$	6,331	$	68
Commercial and industrial		1,160		12
One-to-four family		283		26
Total	$	7,774	$	106

(continued)
22

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 – LOANS AND ALLOWANCE FOR LOAN LOSSES (continued)

The following table presents the average recorded investment and interest income of loans individually evaluated for impairment recognized by class of loans as of and for the six month periods ended June 30, 2018 and 2017 (in thousands):

Six months ended June 30, 2018	Average Recorded Investment		Interest Income Recognized
With an allowance recorded:
One-to-four family	$	185	$	-
Consumer		144		2
Total	$	329	$	2

Without an allowance recorded:
Commercial real estate	$	1,816	$	62
One-to-four family		1,373		28
Total	$	3,189	$	90

Six months ended June 30, 2017	Average Recorded Investment		Interest Income Recognized
With an allowance recorded:
One-to-four family	$	753	$	18
Commercial and industrial		3,660		-
Consumer		32		1
Total	$	4,445	$	19

Without an allowance recorded:
Commercial real estate	$	6,056	$	112
Commercial and industrial		1,192		26
One-to-four family		377		-
Total	$	7,625	$	138

(continued)
23

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – EARNINGS PER SHARE

The computation of basic and diluted earnings per share is shown below (dollars in thousands, except share data):

	Three months ended June 30,						Six months ended June 30,
	2018			2017			2018			2017
Basic
Net income per consolidated statements of operations	$	5,865		$	2,651		$	12,156		$	5,201
Less: Earnings allocated to participating securities		(49	)		(51	)		(102	)		(100	)
Net income available to common stockholders	$	5,816		$	2,600		$	12,054		$	5,101

Weighted average common shares outstanding including participating securities		8,198,257			4,629,004			8,195,542			4,629,004
Less: Weighted average participating securities		(68,770	)		(89,079	)		(68,770	)		(89,079	)
Weighted average common shares outstanding		8,129,487			4,539,925			8,126,772			4,539,925

Basic earnings per common share	$	0.72		$	0.57		$	1.48		$	1.12

Diluted
Net income allocated to common stockholders	$	5,816		$	2,600		$	12,054		$	5,101

Weighted average common shares outstanding for basic earnings per common share		8,129,487			4,539,925			8,126,772			4,539,925
Add: Dilutive effects of assumed exercise of stock options		160,561			33,000			156,834			33,000
Average shares and dilutive potential common shares		8,290,048			4,572,925			8,283,606			4,572,925

Dilutive earnings per common share	$	0.70		$	0.57		$	1.46		$	1.12

All stock options for shares of common stock were considered in computing diluted earnings per common share for three months and six months ended June 30, 2018 and 2017, as no options were anti-dilutive.

NOTE 7 - STOCK COMPENSATION PLAN

The Company has two share-based compensation plans which are described below.

Stock Option Plan

The Company established the 1999 Stock Option Plan (the “1999 Plan”), as amended, under which certain employees and directors may receive stock options. Stock options are generally granted with an exercise price equal to 100% of the fair value of the common stock at the date of grant. As of June 30, 2018 and December 31, 2017, there were no unissued shares of the Company’s common stock authorized for option grants under the Plan.

(continued)
24

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 - STOCK COMPENSATION PLAN ( continued)

Equity Incentive Plan

In May 2009 the Company approved the 2009 Equity Incentive Plan (the “2009 Plan”) as a successor to the 1999 Plan. The 2009 Plan permits the granting of restricted shares, incentive stock options (“ISO”), nonqualified stock options, stock appreciation rights, restricted share units and other stock-based awards to employees, directors, officers, consultants, advisors, suppliers and any other persons or entity whose services are considered valuable for up to 1,183,000 shares. Under the terms of the 2009 Plan, each option agreement cannot have an exercise price that is less than 100% of the fair value of the shares covered by the option on the date of grant. In the case of an ISO granted to any 10% stockholder, the exercise price shall not be less than 110% of the fair value of the shares covered by the option on the date of grant.

In no event shall the exercise price of an option be less than the par value of the shares for which the option is exercisable. In no event shall the exercise period exceed ten years from the date of grant of the option, except, in the case of an ISO granted to a 10% stockholder, the exercise period shall not exceed five years from the date of grant. In the event of a change in control, the Company may determine that any award then outstanding shall be assumed or an equivalent award shall be substituted by the successor company.

The fair value of each option award is estimated on the date of grant using a closed form option valuation (Black-Scholes) model that uses the assumptions noted in the table below. Expected volatilities based on historical volatilities of the Company’s common stock are not significant. The expected term of options granted is based on historical data and represents the period of time that options granted are expected to be outstanding, which takes into account that the options are not transferable. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant. No options were granted during three and six months ended June 30, 2018 and 2017.

A summary of the status of the Company’s stock option plan and the change during the six months ended June 30, 2018 is presented below:

	Six Months Ended June 30, 2018
	Number of Options			Weighted Average Exercise Price

Outstanding, beginning of period		271,500			19.79
Granted		-			-
Exercised		(3,000	)		30.00
Cancelled/forfeited		-			-
Outstanding, end of period		268,500		$	19.68
Options vested and exercisable at end of period		268,500		$	19.68

Weighted average remaining contractual life (years)					5.13

Options exercised during the six months ended June 30, 2018 were a cashless exercise. There was no unrecognized compensation cost related to non-vested stock options granted under the 2009 Plan at June 30, 2018 and December 31, 2017.

(continued)
25

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 - STOCK COMPENSATION PLAN ( continued)

There was no compensation cost related to stock option plan for the three and six months ended June 30, 2018 and 2017.

The following table summarizes information about stock options outstanding at June 30, 2018:

	Options Outstanding
Range of Average Exercise Prices	Number Outstanding at June 30, 2018		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price
$10 – 20		231,000		5.89	$	18.00
$21 – 30		37,500		0.45	$	30.00
$10 – 30		268,500		5.13	$	19.68

Restricted Stock Awards

The Company issued restricted stock awards to certain key personnel under the 2009 Equity Incentive Plan. Each restricted stock award vests based on vesting schedule outlined in the reward agreement. Restricted stock awards are subject to forfeiture if the holder is not employed by the Company on the vesting date. In 2013, stockholders approved an additional 300,000 shares available under the plan, and in 2016, an additional 760,000 shares were authorized. Total remaining shares issuable under the plan are 724,642 at June 30, 2018, which includes performance based stock awards discussed below. There were 8,987 restricted shares granted to the Board of Directors as directors’ fees during the three months ended June 30, 2018 . These shares vested on the same day as they were awarded and the expense related to these were booked as directors’ fees expense.

As of June 30, 2018, there was $817,000 of total unrecognized compensation expense related to the restricted stock awards. The cost is expected to be recognized over a weighted-average period of 2.82 years.

Total compensation cost that has been charged against income for this plan was $98,000 and $161,000 for the three and six months ended June 30, 2018; and $92,000 and $204,000 for the three and six months ended June 30, 2017, respectively.

(continued)
26

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 - STOCK COMPENSATION PLAN ( continued)

The following table summarizes the changes in the Company’s non-vested restricted stock awards for the six months ended June 30, 2018:

	Six Months Ended June 30, 2018
	Number of Shares			Weighted Average Grant Date Fair Value

Outstanding, beginning of period		76,104		$	20.61
Granted		8,987			48.99
Forfeited		-			-
Vested		(16,321	)		35.06
Outstanding at end of period		68,770		$	23.61

The total fair value of shares vested was $742,000 during the six months ended June 30, 2018, respectively.

Performance Based Stock Awards

During the six months ended June 30, 2018, the Company established a long term incentive award program under the 2009 Equity Incentive Plan. For each award, threshold target Performance Restricted Share Units (“PRSUs”) are eligible to be earned over a three-year performance period based on the Company’s relative performance on certain measurement goals that were established at the onset of the performance period. These awards were accounted for in accordance with on guidance prescribed in ASC Topic 718, Compensation – Stock Compensation. During the six months ended June 30, 2018, 90,000 PRSUs were awarded under the program. These units will be granted at the end of the three year performance period. The following table summarizes the changes in the Company’s non-vested PRSU awards for the six months ended June 30, 2018 (dollars in thousands, except share information):

	For the six months ended June 30, 2018

Weighted average service inception date fair value of award shares	$	4,125,300
Minimum aggregate share payout		12,000
Maximum aggregate share payout		90,000
Likely aggregate share payout		90,000
Compensation expense recognized	$	561,412

Total compensation cost that has been charged against income for this plan was $382,000 and $561,000 for the three and six months ended June 30, 2018, respectively.

NOTE 8 - FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company uses fair value measurements to record fair value adjustments to certain assets and to determine fair value disclosures. The Company did not have any liabilities that were measured at fair value at June 30, 2018 and December 31, 2017. Securities available-for-sale are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets or liabilities on a non-recurring basis, such as certain impaired loans and goodwill. These non-recurring fair value adjustments generally involve the write-down of individual assets due to impairment losses.

(continued)
27

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)

Accounting guidance establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

Assets and Liabilities Measured on a Recurring Basis

Assets measured on a recurring basis are limited to the Bank’s available-for-sale securities (“AFS”) portfolio. The AFS portfolio is carried at estimated fair value with any unrealized gains and losses, net of taxes, reported as accumulated other comprehensive income or loss in shareholders’ equity. The fair values for substantially all of these securities are obtained monthly from an independent nationally recognized pricing service. On a monthly basis, the Bank assesses the reasonableness of the fair values obtained by reference to a second independent nationally recognized pricing service. Based on the nature of these securities, the Bank’s independent pricing service provides prices which are categorized as Level 2 since quoted prices in active markets for identical assets are generally not available for the majority of securities in the Bank’s portfolio. Various modeling techniques are used to determine pricing for the Bank’s mortgage-backed securities, including option pricing and discounted cash flow models. The inputs to these models include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data. On an annual basis, the Bank obtains the models, inputs and assumptions utilized by its pricing service and reviews them for reasonableness. The Bank also owns equity securities with a carrying value of $2.1 million at both June 30, 2018 and December 31, 2017, for which fair values are obtained from quoted market prices in active markets and, as such, are classified as Level 1.

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

	Fair Value Measurement using:
	Carrying Amount		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
At June 30, 2018
Residential mortgage-backed securities	$	23,464	$	-	$	23,464	$	-
Residential collateralized mortgage obligation		2,351		-		2,351		-
Municipal bond		1,093		-		1,093		-
CRA Mutual Fund		2,081		2,081		-		-

At December 31, 2017
Residential mortgage-backed securities	$	24,684	$	-	$	24,684	$	-
Residential collateralized mortgage obligation		2,706		-		2,706		-
Commercial collateralized mortgage obligations		1,550		-		1,550		-
Municipal bond		1,109		-		1,109		-
CRA Mutual Fund		2,108		2,108		-		-

(continued)
28

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)

There were no transfers between Level 1 and Level 2 during 2018.

There were no assets measured at fair value on a non-recurring basis at June 30, 2018 and December 31, 2017.

Carrying amount and estimated fair values of financial instruments at June 30, 2018 and December 31, 2017 were as follows (dollars in thousands):

			Fair Value Measurement Using:
At June 30, 2018	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
Assets:
Cash and due from banks	$	10,148	$	10,148	$	-	$	-	$	10,148
Overnight deposits		240,994		240,994		-		-		240,994
Securities available for sale		28,989		2,081		26,908		-		28,989
Securities held to maturity		4,985		-		4,782		-		4,782
Loans, net		1,582,184		-		-		1,628,843		1,628,843
Other investments		-		-		-		-		-
FRB Stock		7,223		N/A		N/A		N/A		N/A
FHLB Stock		4,047		N/A		N/A		N/A		N/A
SBA Loan Fund		5,000		N/A		N/A		N/A		N/A
Disability Opportunity Fund		500		-		-		500		500
Accrued interest receivable		4,449		30		112		4,307		4,449
Liabilities:
Deposits without stated maturities	$	1,450,766	$	1,450,766	$	-	$	-	$	1,450,766
Deposits with stated maturities		89,716		-		88,954		-		88,954
Federal Home Loan Bank of New York advances		63,000		-		62,979		-		62,979
Trust preferred securities payable		20,620		-		-		20,001		20,001
Subordinated debt, net of issuance cost		24,517		-		25,313		-		25,313
Accrued interest payable		1,019		21		787		211		1,019

(continued)
29

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)

			Fair Value Measurement Using:
At December 31, 2017	Carrying Amount		Quoted Prices in Active Markets for Identica l Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
Assets:
Cash and due from banks	$	8,790	$	8,790	$	-	$	-	$	8,790
Overnight deposits		254,441		254,441		-		-		254,441
Securities available for sale		32,157		2,108		30,049		-		32,157
Securities held to maturity		5,428		-		5,330		-		5,330
Loans, net		1,405,009		-		-		1,410,860		1,410,860
Other investments
FRB Stock		3,911		N/A		N/A		N/A		N/A
FHLB Stock		2,766		N/A		N/A		N/A		N/A
SBA Loan Fund		5,000		N/A		N/A		N/A		N/A
Certificates of deposit		2,000		2,000		-		-		2,000
Accrued interest receivable		4,421		11		116		4,294		4,421
Liabilities:
Deposits without stated maturities	$	1,324,110	$	1,324,110	$	-	$	-		1,324,110
Deposits with stated maturities		80,245		-		80,079		-		80,079
Borrowed funds		42,198		-		42,188		-		42,188
Trust preferred securities payable		20,620		-		-		19,997		19,997
Subordinated debt, net of issuance cost		24,489		-		25,500		-		25,500
Accrued interest payable		749		27		258		464		749

The methods and assumptions used to estimate fair value are described as follows:

Cash and Due from Banks: Carrying amounts of cash approximate fair value, since these instruments are either payable on demand or have short-term maturities and as such are classified as Level 1.

Securities Available for Sale and Held to Maturity: If available, the estimated fair values are based on independent dealer quotations on nationally recognized securities exchanges and are classified as Level 1. For securities where quoted prices are not available, fair value is based on matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities resulting in a Level 2 classification.

Other Investments: It is not practicable to determine the fair value of Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) stock, and investments in Solomon Hess SBA Loan Fund (“SBA Loan Fund”), due to restrictions placed on transferability. Certificates of deposit values are based on actively quoted prices and as such are classified as Level 1. Other investments also include a $500,000 investment in The Disability Opportunity Fund (“DOF”), which is an equity equivalent investment to a community development financial institution. Quoted prices are not available for the DOF and fair value is estimated using discounted cash flow analysis, using interest rates currently available for similar investments resulting in a level 3 classification.

(continued)
30

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)

Loans: Fair values of loans, excluding loans held for sale are estimated as follows: For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values resulting in a Level 3 classification. Fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality establishing discount factors for these types of loans and resulting in a Level 3 classification. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price. The fair value of impaired loans with specific allocations of the ALLL is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available for similar loans and collateral underlying such loans. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairments and adjusted accordingly.

Deposits without stated maturities: The fair values disclosed for demand deposits (e.g. interest and non-interest checking, savings and certain types of money market accounts) are equal to the amount payable on demand at the recording date (i.e., their carrying amount) resulting in a Level 1 price.

Deposits with stated maturities : The estimated fair values of certificates of deposit are based on discounted cash flow calculations that use a replacement cost of funds approach to establishing discount rates for certificate of deposit maturities resulting in a Level 2 classification.

Borrowed funds: Represents FHLB advances for which the estimated fair values are based on discounted cash flow calculations that use a replacement cost of funds approach to establishing discount rates for funding maturities resulting in a Level 2 classification for all other maturity terms.

Trust Preferred Securities: The estimated fair value is based on estimates using market data for similarly risk weighted items and takes into consideration the features of the debentures which is an unobservable input resulting in a Level 3 classification.

Subordinated Debt, net of debt issuance costs: The fair value of subordinated debt is estimated using discounted cash flow analyses based on then current borrowing rates for similar types of borrowing arrangements (deemed a Level 2 valuation), and is provided to the Company independently by a market maker in the underlying security.

Accrued Interest Receivable and Payable: For these short-term instruments, the carrying amount is a reasonable estimate of the fair value resulting in a Level 1, 2 or 3 classification consistent with the underlying asset or liability the interest is associated with.

Stock based compensation liability: The fair values of liabilities related to performance based stock compensation are measured using quoted stock price resulting in a level 1 classification for these liabilities.

Off-Balance-Sheet Liabilities: The fair value of off-balance-sheet commitments to extend credit is estimated using fees currently charged to enter into similar agreements. The fair value was immaterial as of June 30, 2018 and December 31, 2017.

Fair value estimates are made at specific points in time and are based on existing on-and off-balance sheet financial instruments. These estimates are subjective in nature and dependent on a number of significant assumptions associated with each financial instrument or group of financial instruments, including estimates of discount rates, risks associated with specific financial instruments, estimates of future cash flows, and relevant available market information. Changes in assumptions could significantly affect the estimates. In addition, fair value estimates do not reflect the value of anticipated future business, premiums or discounts that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument, or the tax consequences of realizing gains or losses on the sale of financial instruments.

(continued)
31

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table presents changes in Accumulated Other Comprehensive Income (Loss), net of tax, for the three and six months ended June 30, 2018 and 2017 (dollars in thousands):

	Three months ended June 30,						Six months ended June 30,
	2018			2017			2018			2017
Beginning balance	$	(528	)	$	(89	)	$	(206	)	$	(165	)
Net change in other comprehensive income (loss) before reclassification		(166	)		28			(588	)		161
Amounts reclassified from accumulated other comprehensive income		37			-			37			-
Tax effect		40			(12	)		140			(69	)
Net current period other comprehensive loss		(89	)		16			(411	)		92
Ending balance	$	(617	)	$	(73	)	$	(617	)	$	(73	)

NOTE 10 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

The Bank is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the financial statements. The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.

The Bank had outstanding the following off-balance-sheet financial instruments whose contract amounts represent credit risk at June 30, 2018 and December 31, 2017 (dollars in thousands):

	At June 30, 2018				At December 31, 2017
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Undrawn lines of credit	$	36,193	$	104,844	$	39,651	$	76,008
Letters of credit		24,915		-		23,741		-
	$	61,108	$	104,844	$	63,392	$	76,008

A commitment to extend credit is a legally binding agreement to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally expire within two years. At June 30, 2018, the Bank’s fixed rate loan commitments are to make loans with interest rates ranging from 3.0% to 5.7% and maturities of one year or more. At December 31, 2017, the Bank’s fixed rate loan commitments had interest rates ranging from 3.5% to 9.5% and maturities of one year or more. The amount of collateral obtained, if any, by the Bank upon extension of credit is based on management’s credit evaluation of the borrower. Collateral held varies but may include mortgages on commercial and residential real estate, security interests in business assets, equipment, deposit accounts with the Bank or other financial institutions and securities.

(continued)
32

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK ( continued)

The Bank has stand-by letters of credit in the amount of $24.9 million and $23.7 million included above as of June 30, 2018 and December 31, 2017, respectively, for which the Bank has pledged interest-bearing accounts of $0.9 million and $1.7 million as of June 30, 2018 and December 31, 2017, respectively. The stand-by letters of credit mature within one year.

NOTE 11 – SUBORDINATED DEBT

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.

(continued)
33

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Company Background

The Company is a bank holding company headquartered in New York, New York and registered under the Bank Holding Company Act (“BHCA”). Through its wholly owned bank subsidiary, Metropolitan Commercial Bank, a New York state chartered bank, the Company provides a broad range of business, commercial and retail banking products and services to small businesses, middle-market enterprises, public entities and affluent individuals in the New York metropolitan area. The Bank’s 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.

Critical Accounting Policies

Note 1 to the Company’s Audited Consolidated Financial Statements, included in its 2017 Annual Report on Form 10K, contains a summary of the Company’s significant accounting policies. Critical accounting estimates are necessary in the application of certain accounting policies and procedures and are particularly susceptible to significant change. Critical accounting policies are defined as those involving significant judgments and assumptions by management that could have a material impact on the carrying value of certain assets or on income under different assumptions or conditions. Management believes that the most critical accounting policies, which involve the most complex or subjective decisions or assessments, are as follows:

Allowance for loan losses

The ALLL has been determined in accordance with U.S. generally accepted accounting principles, under which the Bank is required to maintain an adequate ALLL at June 30, 2018. The Bank is responsible for the timely and periodic determination of the amount of the allowance required. Management believes that the ALLL is adequate to cover specifically identifiable loan losses, as well as estimated losses inherent in the Bank’s portfolio for which certain losses are probable but not specifically identifiable.

Although management evaluates available information to determine the adequacy of the ALLL, the level of allowances is an estimate which is subject to significant judgement and short term change. Because of uncertainties associated with local economic conditions, collateral values and future cash flows on the loan portfolio, it is reasonably possible that a material change could occur in the allowance for loan losses in the near term due to economic, operating, regulatory and other conditions beyond the Company’s control. However, the amount of the change that is reasonably possible cannot be estimated. The evaluation of the adequacy of loan collateral is often based upon estimates and appraisals. Because of changing economic conditions, the valuations determined from such estimates and appraisals may also change. Accordingly, the Company may ultimately incur losses that vary from management’s current estimates. Adjustments to the allowance for loan losses will be reported in the period such adjustments become known or can be reasonably estimated. All loan losses are charged to the allowance for loan losses when the loss actually occurs or when the collectability of the principal is unlikely. Recoveries are credited to the allowance at the time of recovery.

Emerging Growth Company

Pursuant to the JOBS Act, an EGC is provided the option to adopt new or revised accounting standards that may be issued by the FASB or the SEC either (i) within the same periods as those otherwise applicable to non-EGCs or (ii) within the same time periods as private companies. The Company elected delayed effective dates of recently issued accounting standards. As permitted by JOBS Act, so long as it qualifies as an EGC, the Company will take advantage of some of the reduced regulatory and reporting requirements that are available to it, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation, and exemptions from the requirements of holding non-binding advisory votes on executive compensation and golden parachute payments.

Results of Operations

Net income increased $3.2 million to $5.9 million, or $0.70 per diluted common share, for the three months ended June 30, 2018 as compared to $2.7 million for the same period in 2017. This increase was due primarily to a $5.6 million increase in net interest income and a $1.0 million increase in non-interest income, partially offset by a $3.2 million increase in non-interest expense.

For the six months ended June 30, 2018, net income increased $7.0 million to $12.2 million, or $1.46 per diluted common share, as compared to $5.2 million, or $1.12 per diluted common share, for the same period in 2017. This increase was due primarily to an $11.3 million increase in net interest income and a $5.2 million increase in non-interest income, partially offset by a $7.1 million increase in non-interest expense and a $2.1 million increase in income tax expense.

Net Interest Income

Net interest income is the difference between interest earned on assets and interest incurred on liabilities. The following tables present analysis of net interest income by each major category of interest-earning assets and interest-bearing liabilities for the three and six month periods ended June 30, 2018 and June 30, 2017. The table presents the annualized average yield on interest-earning assets and the annualized average cost of interest-bearing liabilities. Yields and costs were derived by dividing annualized income or expense by the average balance of interest-earning assets and interest-bearing liabilities, respectively, for the periods shown. Average balances were derived from daily balances over the periods indicated. Interest income includes fees that we considered to be adjustments to yields. Yields on tax-exempt obligations were not computed on a tax equivalent basis. Nonaccrual loans were included in the computation of average balances and therefore have a zero yield. The yields set forth below include the effect of deferred loan origination fees and costs, and purchase discounts and premiums that are amortized or accreted to interest income.

	Three months ended June 30,
(dollars in thousands)	2018								2017
	Average Outstanding Balance			Interest		Yield/Rate			Average Outstanding Balance			Interest		Yield/Rate
Assets:
Interest-earning assets:
Loans	$	1,532,073		$	17,996		4.71	%	$	1,182,724		$	13,367	4.53	%
Available-for-sale securities		30,117			158		2.10	%		35,315			181	2.06	%
Held-to-maturity securities		5,096			27		2.09	%		6,104			31	2.07	%
Overnight deposits		340,300			1,534		1.81	%		117,912			293	1.00	%
Other interest-earning assets		35,932			283		3.16	%		28,753			175	2.44	%
Total interest-earning assets		1,943,518			19,998		4.13	%		1,370,808			14,047	4.11	%
Non-interest-earning assets		20,134								56,463
Allowance for loan losses		(16,742	)							(12,669	)
Total assets	$	1,946,910							$	1,414,602

Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
Money market and savings accounts	$	549,950		$	1,428		1.04	%	$	577,296		$	1,221	0.85	%
Certificates of deposit		84,636			371		1.76	%		77,881			247	1.27	%
Total interest-bearing deposits		634,586			1,799		1.14	%		655,177			1,468	0.90	%
Borrowed funds		80,772			804		3.99	%		119,069			813	2.74	%
Total interest-bearing liabilities		715,358			2,603		1.46	%		774,246			2,281	1.18	%
Non-interest-bearing liabilities:
Non-interest-bearing deposits		948,021								511,793
Other non-interest bearing liabilities		37,422								14,917
Total liabilities		1,700,801								1,300,956

Stockholders' Equity		246,109								113,646
Total liabilities and equity	$	1,946,910							$	1,414,602

Net interest income				$	17,395							$	11,766
Net interest rate spread ⁽¹⁾							2.67	%						2.93	%
Net interest-earning assets ⁽²⁾	$	1,228,160							$	596,562
Net interest margin ⁽³⁾							3.59	%						3.44	%
Ratio of interest earning assets to interest bearing liabilities							2.72	x						1.77	x

	Six months ended June 30,
	2018								2017
(dollars in thousands)	Average Outstanding Balance			Interest		Yield/Rate			Average Outstanding Balance			Interest		Yield/Rate
Assets:
Interest-earning assets:
Loan	$	1,504,695		$	35,143		4.71	%	$	1,125,028		$	25,234		4.52	%
Available-for-sale securities		30,970			324		2.11	%		36,060			369		2.06	%
Held-to-maturity securities		5,207			54		2.10	%		6,229			65		2.10	%
Overnight deposits		304,686			2,577		1.71	%		101,461			481		0.96	%
Other interest-earning assets		35,838			528		2.97	%		30,040			340		2.28	%
Total interest-earning assets		1,881,396			38,626		4.14	%		1,298,818			26,489		4.11	%
Non-interest-earning assets		34,055								46,944
Allowance for loan losses		(16,057	)							(12,307	)
Total assets	$	1,899,394							$	1,333,455

Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
Money market and savings accounts	$	532,301		$	2,619		0.99	%	$	555,383		$	2,226		0.81	%
Certificates of deposit		78,761			619		1.58	%		81,012			502		1.25	%
Total interest-bearing deposits		611,062			3,238		1.07	%		636,395			2,728		0.86	%
Borrowed funds		82,535			1,542		3.77	%		110,884			1,212		2.20	%
Total interest-bearing liabilities		693,597			4,780		1.39	%		747,279			3,940		1.06	%
Non-interest-bearing liabilities:
Non-interest-bearing deposits		919,990								470,987
Other non-interest-bearing liabilities		42,608								2,942
Total liabilities		1,656,195								1,221,208

Stockholders' Equity		243,199								112,247
Total liabilities and equity	$	1,899,394							$	1,333,455

Net interest income				$	33,846							$	22,549
Net interest rate spread ⁽¹⁾							2.75	%							3.05	%
Net interest-earning assets ⁽²⁾	$	1,187,799							$	551,539
Net interest margin ⁽³⁾							3.63	%							3.50	%
Ratio of interest earning assets to interest bearing liabilities							2.71	x							1.74	x

(1)

Represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(2)

Represents total average interest-earning assets less total average interest-bearing liabilities.

(3)

Represents net interest income divided by total average interest-earning assets.

For the quarter ended June 30, 2018, net interest income was $17.4 million, an increase of $5.6 million or 47.5%, when compared to the second quarter of 2017. Net interest margin improved by 15 basis points to 3.59% for the second quarter of 2018 as compared to 3.44% for the second quarter of 2017. This improvement was mainly the result of an 18 basis point increase in the average yields of loans to 4.71% for the second quarter of 2018 as compared to 4.53% for the same period in 2017 and an increase of 81 basis points in the average yield on overnight deposits to 1.81% as compared to 1.00% for the same period in 2017. Net interest margin also benefited from the effect of an increase in average non-interest-bearing deposits as a percentage of total average deposits in the second quarter of 2018 as compared to the second quarter of 2017. Average non-interest-bearing deposits increased $436.2 million to $948.0 million in the second quarter of 2018, compared to $511.8 million for the second quarter of 2017 and accounted for 60% of average total deposits for the second quarter of 2018 as compared to 44% for the second quarter of 2017.

For the six months ended June 30, 2018, net interest income was $33.8 million, an increase of $11.3 million or 50.2%, as compared to the same period in 2017. Net interest margin increased 13 basis points to 3.63% for the six months ended June 30, 2018 as compared to 3.50% for the same period in 2017. This increase was primarily the result of an increase of 19 basis points in average loan yields to 4.71% for the six months ended June 30, 2018 as compared to 4.52% for the same period in 2017 and an increase of 75 basis points in the average yield on overnight deposits to 1.71% as compared to 0.96% for the same period in 2017. Net interest margin also benefited from the effect of an increase in average non-interest-bearing deposits as a percentage of total average deposits at June 30, 2018 as compared to the same period in 2017. Average non-interest-bearing deposits increased $449.0 million to $920.0 million at June 30, 2018, compared to $471.0 million for the same period in 2017 and accounted for 60% of average total deposits for the six months ended June 30, 2018 as compared to 43% for the same period in 2017.

Interest Income

For the second quarter of 2018, total interest income amounted to $20.0 million, an increase of $6.0 million or 42.9% as compared to $14.0 million for the second quarter of 2017. This increase was due primarily to a $4.6 million increase in interest on loans and a $1.2 million increase in interest on overnight funds. The increase in interest income on loans was due to a $349.3 million increase in the average balance of loans to $1.53 billion for the second quarter of 2018 as compared to the second quarter of 2017. In addition, the average yield earned on loans increased 18 basis points to 4.71% from 4.53% for those same periods. The increase in interest income on overnight funds was due to a $222.4 million increase in the average balance to $340.3 million for the second quarter of 2018 as compared to $117.9 million for the second quarter of 2017. The average yield earned on overnight deposits increased 81 basis points to 1.81% for the second quarter of 2018 as compared to 1.00% for the second quarter of 2017. Overnight funds consist primarily of balances held at the Federal Reserve.

Total interest income amounted to $38.6 million for the six months ended June 30, 2018, an increase of $12.1 million or 45.7% as compared to $26.5 million for the same period in 2017. This increase was due primarily to a $9.9 million increase in interest on loans and a $2.1 million increase in interest on overnight funds. The increase in interest income on loans was due to a $379.7 million increase in the average balance of loans to $1.50 billion for the six months ended June 30, 2018 as compared to the same period in 2017. In addition, the average yield earned on loans increased 19 basis points to 4.71% from 4.52% for those same periods. The increase in interest income on overnight funds was due to a $203.2 million increase in the average balance to $304.7 million for the six months ended June 30, 2018 as compared to $101.5 million for the same period in 2017. The average yield earned on overnight deposits increased 75 basis points to 1.71% for the six months ended June 30, 2018 as compared to 0.96% for the same period in 2017. Average overnight deposits included approximately $246 million of funds from the settlement accounts of digital currency customer relationships. The Bank’s current policy is to not leverage these funds into other interest-earning assets; however, the Bank may consider changing this policy in the future.

Interest Expense

For the second quarter of 2018, total interest expense was $2.6 million, an increase of $0.3 million or 13%, when compared to the second quarter of 2017. This increase was due primarily to an increase of 24 basis points in the average rate paid on interest-bearing deposits to 1.14% for the second quarter of 2018 as compared to 0.90% for the second quarter of 2017. This increase was partially offset by a $20.6 million decrease in the average balance of total interest-bearing deposits to $634.6 million for the second quarter of 2018 as compared to $655.2 million for the second quarter of 2017.

For the second quarter of 2018, average borrowed funds decreased $38.3 million, or 32.2%, to $80.8 million compared to $119.1 million for the second quarter of 2017. The average cost of total borrowings was 3.99% and 2.74% for the second quarters of 2018 and 2017, respectively. The cost of borrowings increased primarily due to increased market interest rates.

For the six months ended June 30, 2018, total interest expense was $4.8 million as compared to $3.9 million for the same period in 2017. This increase was due primarily to an increase of $510,000 in interest expense on interest-bearing deposits and an increase of $330,000 in interest expense on borrowings. The increase in interest on deposits was due to an increase of 21 basis points in the average rate paid on interest-bearing deposits to 1.07% for the second quarter of 2018 as compared to 0.86% for the second quarter of 2017. This increase was partially offset by a $25.3 million decrease in the average balance of total interest-bearing deposits to $611.1 million for the six months ended June 30, 2018 as compared to $636.4 million for the same period in 2017.

For the six months ended June 30, 2018, average total borrowings decreased $28.4 million, or 25.6%, to $82.5 million compared to $110.9 million for the same period in 2017. The average cost of total borrowings was 3.77% and 2.20% for the six months ended June 30, 2018 and 2017, respectively. The increase in the average cost of borrowings reflects the effect of the issuance in March 2017 of $25.0 million in subordinated notes bearing an interest rate of 6.3%, which impacted the full six months of 2018 and only four months of the six month period in 2017. Additionally, the cost of borrowings increased due to increased market interest rates.

Provision for Loan Losses

The provision for loan losses was $1.3 million for the quarter ended June 30, 2018, compared to $1.8 million for the second quarter of 2017, a decrease of $0.5 million or 27.8%. The Bank’s provision for loan losses was $2.7 million for the six month period ended June 30, 2018, compared to $2.4 million for the same period in 2017, an increase of $0.3 million or 12.5%. The ALLL as a percentage of loans was 1.09% and 1.08% at June 30, 2018 and June 30, 2017, respectively.

For additional information about the provision for loan losses, see the discussion of asset quality and the ALLL later in this report, as well as in Note 5 in this report.

Non-Interest Income

Non-interest income increased by $1.0 million to $2.6 million in the second quarter of 2018 as compared to $1.6 million for the second quarter of 2017, primarily due to an increase of $316,000 in service charges on deposits and a $714,000 increase in prepaid debit card income. Included in prepaid debit card income is $500,000 in early termination fees related to one card program.

For the six months ended June 30, 2018, non-interest income increased by $5.2 million from the same period in 2017. This increase was due primarily to increases of $1.9 million in service charges on money market accounts, $834,000 in prepaid debit card income and $2.4 million in other service charges and fees.

The increase in service charges on money market accounts for the quarter and six month periods was due primarily to an increase in the number and balance of these deposits.

The increase in other service charges and fees for the six months ended June 30, 2018 is primarily due to an increase of $2.1 million in foreign currency conversion fees related to customers in the digital currency industry. Notwithstanding this increase, foreign currency conversion fees decreased $2.2 million from the sequential first quarter of 2018. Foreign currency conversion fees were at an elevated level during the fourth quarter of 2017 and continuing into the first quarter of 2018, as customers, particularly those in the digital currency business, were transferring funds from their global corporate accounts back into their U.S. dollar accounts with the Bank.

Non-Interest Expense

Non-interest expense increased $3.2 million to $10.3 million during the second quarter of 2018 as compared to $7.1 million for the second quarter of 2017. Compensation and benefits increased $1.8 million to $6.1 million for the second quarter of 2018 as compared to $4.3 million for the second quarter of 2017. This increase was due primarily to an increase of 21 full-time equivalent employees. Data processing fees increased $318,000 to $609,000 for the second quarter of 2018 as compared to the second quarter of 2017 primarily due to costs to support the Bank’s balance sheet growth as well as increased wire transfer costs.

For the six months ended June 30, 2018, non-interest expense increased $7.1 million to $21.5 million as compared to the same period in 2017. Compensation and benefits increased $3.6 million to $12.4 million for the six months ended June 30, 2018 as compared to $8.8 million for the same period in 2017. For those same periods, data processing fees increased $1.6 million to $2.1 million due primarily to costs related to wire transfer activity, particularly for customers in the digital currency business, as well as costs to support the Bank’s balance sheet growth.

COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 2018 AND DECEMBER 31, 2017

The Company’s total assets were $1.92 billion at June 30, 2018, an increase of $160.0 million from $1.76 billion at December 31, 2017. The increase was primarily due to an increase in net loans of $177.2 million or 12.6%, partially offset by a decrease in cash and cash equivalents of $12.1 million or 4.6%, a $2.7 million decrease in accounts receivables and a $2.0 million decrease in receivables from prepaid card debit programs.

Loans

At June 30, 2018, gross loans were $1.6 billion, or 83.0% of total assets, compared to $1.4 billion, or 80.7% of total assets, at December 31, 2017. The following table sets forth the composition of the Bank’s loan portfolio, by type of loan at the dates indicated, and the dollar and percentage change (dollars in thousands):

	At June 30, 2018		At December 31, 2017		Dollar Change			Percentage Change
Real Estate:
Commercial	$	857,071	$	783,745	$	73,326			9.4	%
Construction		45,974		36,960		9,014			24.4
Multifamily		233,474		190,097		43,377			22.8
One-to-four family		23,929		25,568		(1,639	)		-6.4
Commercial and industrial		354,932		340,001		14,931			4.4
Consumer		86,277		44,595		41,682			93.5
Total loans receivable	$	1,601,657	$	1,420,966	$	180,691

Loans, net of deferred fees and unamortized costs increased to $1.6 billion at June 30, 2018 as compared to $1.4 billion at December 31, 2017. The increase is due to loan originations of $331.2 million during 2018, offset by repayments and amortization of $154.8 million.

Asset Quality

Non-Performing Assets

Non-performing assets consist of non-accrual loans, non-accrual TDRs and other real estate owned that has been acquired in partial or full satisfaction of loan obligations or upon foreclosure. Past due status on all loans is based on the contractual terms of the loan. It is generally the Bank’s policy that a loan 90 days past due be placed in non-accrual status unless factors exist that would eliminate the need to place a loan in this status. A loan may also be designated as non-accrual at any time if payment of principal or interest in full is not expected due to deterioration in the financial condition of the borrower. At the time loans are placed in non-accrual status, the accrual of interest is discontinued and previously accrued interest is reversed. All payments received on non-accrual loans are applied to principal. Loans are considered for return to accrual status when they become current as to principal and interest and remain current for a period of six consecutive months or when, in the opinion of management, the Bank expects to receive all of its original principal and interest. In the case of non-accrual loans where a portion of the loan has been charged off, the remaining balance is kept in non-accrual status until the entire principal balance has been recovered.

The table below sets forth the amounts and categories of the Company’s non-performing assets at the dates indicated (dollars in thousands):

(dollars in thousands)	At or for the three months ended
At end of quarter	June 30, 2018			December 31, 2017
Non-performing assets:
Non-accrual loans:
Real Estate:
Commercial	$	-		$	787
One-to-four family		-			2,447
Commercial and industrial		-			-
Consumer		192			155
Total non-accrual loans	$	192		$	3,389
Total non-performing assets	$	192		$	3,389
Accruing loans 90 days or more past due		-			-
Nonaccrual loans as % of loans outstanding		0.01	%		0.24	%

Allowance for loan losses	$	17,463		$	14,887
Allowance for loan losses as % of loans outstanding		1.09	%		1.05	%

Ratios:
Total non-accrual loans to total loans		0.01	%		0.24	%
Total non-accrual loans to total assets		0.01	%		0.19	%
Total non-performing assets to total assets		0.01	%		0.19	%

Interest income that would have been recorded for the quarters ended June 30, 2018 and 2017, had nonaccrual loans been current according to their original terms, amounted to $1,000 and $37,000, respectively.

Interest income that would have been recorded for the six month periods ended June 30, 2018 and 2017, had nonaccrual loans been current according to their original terms, amounted to $2,500 and $77,000, respectively.

Interest income that would have been recorded for the quarters and six months periods ended June 30, 2018 and 2017, had TDRs been current according to their original terms, was immaterial.

Non-Performing Loans

Non-performing loans totaled $192,000 at June 30, 2018, or 0.01% of total loans, compared with $3.4 million at December 31, 2017, or 0.24% of total loans. The decrease in non-performing loans at June 30, 2018 was primarily in residential real estate, in particular one large, well collateralized one-to-four family loan. This loan became current as of the first quarter of 2018 by generating payments for six months before being designated as accruing, and was removed from non-accrual status, in accordance with Bank policy. Non-performing assets, as a percentage of total assets, was 0.01% at June 30, 2018, compared with 0.19% of total assets at December 31, 2017.

Accruing Loans Past due 90 Days or More

There were no accruing loans past due 90 days or more at June 30, 2018, or December 31, 2017.

Troubled Debt Restructurings

The Bank works closely with borrowers that have financial difficulties to identify viable solutions that minimize the potential for loss. In that regard, the Bank has modified the terms of select loans to maximize their collectability. The modified loans are considered TDRs under current accounting guidance. Modifications generally involve short-term deferrals of principal and/or interest payments, reductions of scheduled payment amounts, interest rates or principal of the loan, and forgiveness of accrued interest. The Company had no non-accrual TDRs at June 30, 2018 or December 31, 2017. As of June 30, 2018, the Bank had $2.6 million of accruing TDRs, as compared to $2.7 million in accruing TDRs as of December 31, 2017.

Impaired Loans

A loan is classified as impaired when, based on current information and events, it is probable that the Bank will be unable to collect both the principal and interest due under the contractual terms of the loan agreement. Impaired loans at June 30, 2018 totaled $2.8 million, including TDRs of $2.6 million, as compared to impaired loans of $6.1 million at December 31, 2017, including TDRs of $2.7 million. The decrease in non-performing assets was primarily due to a residential real estate loan that became current in the first quarter of 2018.

The majority of the Company's impaired loans are secured and measured for impairment based on collateral evaluations. It is the Company's policy to obtain updated appraisals, by independent third parties, on loans secured by real estate at the time a loan is determined to be impaired. An impairment measurement is performed based upon the most recent appraisal on file to determine the amount of any specific allocation or charge-off. In determining the amount of any specific allocation or charge-off, the Company will make adjustments to reflect the estimated costs to sell the property. Upon receipt and review of the updated appraisal, an additional measurement is performed to determine if any adjustments are necessary to reflect the proper provisioning or charge-off. Impaired loans are reviewed on a quarterly basis to determine if any changes in credit quality or market conditions would require any additional allocation or recognition of additional charge-offs. Real estate values in the Company's market area have been holding steady. Non-real estate collateral may be valued using (i) an appraisal, (ii) net book value of the collateral per the borrower’s financial statements, or (iii) accounts receivable aging reports, that may be adjusted based on management’s knowledge of the client and client’s business. If market conditions warrant, future appraisals are obtained for both real estate and non-real estate collateral.

Allowance for Loan Losses

The allowance is an amount that management believes will be adequate to absorb probable incurred losses on existing loans. The allowance is established based on management’s evaluation of the probable incurred losses inherent in the Bank’s portfolio in accordance with GAAP, and is comprised of both specific valuation allowances and general valuation allowances.

The ALLL was $17.5 million at June 30, 2018, as compared to $14.9 million at December 31, 2017. The ratio of ALLL to total loans was 1.09% at June 30, 2018, as compared to 1.05% at December 31, 2017. Net charge-offs for the three month periods ended June 30, 2018 and 2017 were $67,000 and $117,000 respectively. Net charge-offs for the six month periods ended June 30, 2018 and 2017 were $171,000 and $266,000 respectively.

Summary of Loan Loss Experience

The following tables present a summary by loan portfolio segment of the ALLL, loan loss experience, and provision for loan losses for the periods indicated (dollars in thousands):

	Three months ended June 30,						Six months ended June 30,
	2018			2017			2018			2017
Balance at beginning of period	$	16,260		$	12,236		$	14,887		$	11,815
Charge-offs:
Real Estate:
Commercial		-			-			-			-
One-to-four family		-			-			-			-
Commercial and industrial					(88	)		(71	)		(220	)
Consumer		(67	)		(29	)		(153	)		(46	)
Total charge-offs		(67	)		(117	)		(224	)		(266	)
Recoveries:
Real Estate:
Commercial		-			-			53			-
One-to-four family
Total recoveries		-			-			53			-

Net charge-offs		(67	)		(117	)		(171	)		(266	)
Provision for loan losses		1,270			1,790			2,747			2,360
Balance at end of period		17,463			13,909			17,463			13,909

Annualized ratio of net charge-offs to average loans outstanding		0.02	%		0.04	%		0.02	%		0.05	%

Deposits

The table below summarizes the Company’s deposit composition by segment for the periods indicated, and the dollar and percent change from December 31, 2017 to June 30, 2018 (dollars in thousands):

	At June 30, 2018		At December 31, 2017		Dollar Change			Percentage Change
Non-interest-bearing demand deposits	$	878,703	$	812,497	$	66,206			8.15	%
Money market		552,668		484,589		68,079			14.05
Savings accounts		19,395		27,024		(7,629	)		(28.23	)
Time deposits		89,716		80,245		9,471			11.80
Total	$	1,540,482	$	1,404,355	$	136,127

Total deposits increased $136 million, or 9.7%, to $1.5 billion at June 30, 2018 from $1.4 billion at December 31, 2017. The increase was attributable primarily to increases of $66.2 million in non-interest bearing demand deposits, and $69.9 million in interest-bearing deposits, which include money market, savings and time deposits.

Deposit balances, at June 30, 2018, related to the digital currency corporate accounts were $89.4 million and represented 5.8% of the total deposit base while that of the settlement accounts was $232.2 million and represented 15.2% of the total deposit base. Deposit balances, at December 31, 2017, related to the digital currency corporate accounts were $95.4 million and represented 6.8% of the total deposit base while that of the settlement accounts was $213.2 million and represented 15.9% of the total deposit base. The Bank’s policy is to not leverage the funds in settlement accounts into interest-earning assets other than overnight deposits with the Federal Reserve; however, the Bank may consider changing this policy in the future.

The Company’s deposit strategy is to fund the Bank with stable, low-cost deposits, primarily checking account deposits and other low interest-bearing deposit accounts. A checking account is the driver of a banking relationship and consumers consider the bank where they have their checking account as their primary bank. These customers will typically turn to their primary bank first when in need of other financial services. Strategies that have been developed and implemented to generate these deposits include: (i) acquiring deposits by deepening existing relationships and entering new markets through de novo branching or branch acquisitions, (ii) training branch employees to identify and meet client financial needs with Bank products and services, (iii) linking business loans to the customer's primary checking account at the Bank, (v) continuing to develop the debit card issuing business that generates non-interest bearing deposits, and (vi) constantly monitoring the Company’s pricing strategies to ensure competitive products and services.

Borrowings

At June 30, 2018, FHLB advances amounted to $63.0 million as compared to $42.2 million at December 31, 2017.

At June 30, 2018, the Bank had the ability to borrow a total of $244.7 million from the FHLBNY, subject to pledging additional collateral. The Bank also had an available line of credit with the Federal Reserve Bank of New York (“FRBNY”) discount window of $141.5 million. At December 31, 2017, the Bank had the ability to borrow a total of $263.4 million from the FHLBNY. At December 31, 2017, the Bank also had an available line of credit with the FRBNY discount window of $92.9 million.

Trust Preferred Securities: 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 $10.3 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.

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 $10.3 million aggregate principal amount of Floating Rate Junior Subordinated Debentures (the “Debentures II”) issued by the Company. The Debentures II, 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 II are callable after five years.

On March 8, 2017, the Company completed the issuance of its $25 million subordinated notes at 100% issue price to accredited institutional investors. The notes mature on March 15, 2027 and bear an interest rate of 6.25% per annum. The interest is paid semi-annually on March 15 ^th and September 15 ^th of each year through March 15, 2022 and quarterly thereafter on March 15 ^th , June 15 ^th , September 15 ^th and December 15 ^th of each year. The 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 subordinated notes are callable beginning March 15, 2022 and on any scheduled interest payment date thereafter. The subordinated notes may be called, in whole or in part, at a call price equal to 100% of the principal amount of the subordinated notes plus any accrued and unpaid interest.

Stockholders’ Equity

Total stockholders’ equity increased $12.7 million, or 5.4%, to $249.6 million at June 30, 2018, from $236.8 million at December 31, 2017. The increase was primarily due to $12.2 million in net income.

Contractual Obligations and Off-Balance Sheet Arrangements

Contractual Obligations. In the ordinary course of its operations, the Bank enters into certain contractual obligations. The following table presents these contractual obligations as of June 30, 2018 and December 31, 2017, respectively.

The following table presents the Company’s contractual obligations as of June 30, 2018 and December 31, 2017 (dollars in thousands):

	Less Than One Year		More than One year Through Three Years		More Than Three Years Through Five Years		Over Five Years		Total
At June 30, 2018
Operating lease obligations	$	2,753	$	5,250	$	4,094	$	5,853	$	17,950
Trust preferred securities payable		-		-		-		20,620		20,620
Subordinated debt, net of issuance costs		-		-		-		24,517		24,517
Federal Home Loan Bank of New York advances		63,000		-		-		-		63,000
Time deposits		59,895		29,352		430		39		89,716
Total	$	125,648	$	34,602	$	4,524	$	51,029	$	215,803

At December 31, 2017
Operating lease obligations	$	2,753	$	5,491	$	4,330	$	6,754	$	19,328
Trust preferred securities payable		-		-		-		20,620		20,620
Subordinated notes		-		-		-		24,489		24,489
Federal Home Loan Bank of New York advances		42,198		-		-		-		42,198
Time deposits		63,245		16,287		713		-		80,245
Total	$	108,196	$	21,778	$	5,043	$	51,863	$	186,880

Off-Balance Sheet Arrangements. 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, which involve elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. The Bank’s exposure to credit loss is represented by the contractual amount of the instruments. The Bank uses the same credit policies in making commitments as it does for on-balance sheet instruments.

The following table presents a summary of the Bank’s commitments and contingent liabilities as of June 30, 2018 and December 31, 2017 (dollars in thousands):

	At June 30, 2018				At December 31, 2017
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Undrawn lines of credit	$	36,193	$	104,844	$	39,651	$	76,008
Letters of credit		24,915		-		23,741		-
	$	61,108	$	104,844	$	63,392	$	76,008

Liquidity and Capital Resources

Liquidity is the ability to meet current and future financial obligations of a short-term nature. The Bank’s primary sources of funds consist of deposit inflows, loan repayments and maturities and sales of securities. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition.

The Bank regularly reviews the need to adjust its investments in liquid assets based upon its assessment of: (1) expected loan demand, (2) expected deposit flows, (3) yields available on interest earning deposits and securities, and (4) the objectives of its asset/liability management program. Excess liquid assets are invested generally in interest earning deposits and short- and intermediate-term securities.

The Bank’s most liquid assets are cash and cash equivalents. The levels of these assets are dependent on its operating, financing, lending and investing activities during any given period. At June 30, 2018 and December 31, 2017, cash and cash equivalents totaled $251.1 million and $263.2 million, respectively. Securities classified as available-for-sale, which provide additional sources of liquidity, totaled $29.0 million at June 30, 2018 and $32.2 million at December 31, 2017.

The Bank has no material commitments or demands that are likely to affect its liquidity other than set forth below. In the event loan demand were to increase faster than expected, or any unforeseen demand or commitment were to occur, the Bank could access its borrowing capacity with the FHLBNY or obtain additional funds through brokered certificates of deposit.

At June 30, 2018, the Bank had $141.0 million in loan commitments outstanding. It also had $24.9 million in standby letters of credit at June 30, 2018. At December 31, 2017, the Bank had $115.7 million in loan commitments outstanding and $23.7 million in standby letters of credit.

Time deposits due within one year of June 30, 2018 totaled $59.9 million, or 3.89% of total deposits. Total certificates of deposit were $89.7 million or 5.8% of total deposits at June 30, 2018. Time deposits due within one year of December 31, 2017 totaled $63.2 million, or 4.5% of total deposits. Total time deposits were $80.2 million or 5.7% of total deposits at December 31, 2017.

The Bank’s primary investing activities are the origination, and to a lesser extent purchase, of loans and the purchase of securities. During the six months ended June 30, 2018 and 2017, the Bank originated or purchased $331.2 million and $280.3 million of loans, respectively. During the six months ending June 30, 2018, the Bank purchased $1.8 million of securities available for sale. During the year ended December 31, 2017, the Bank originated or purchased $762.2 million of loans and purchased $1.5 million of securities.

Financing activities consist primarily of activity in deposit accounts and FHLB advances. The Bank experienced an increase in total deposits of $136.1 million and $335.5 million for the six months ended June 30, 2018 and 2017, respectively. It generated deposits from businesses and individuals through client referrals and other relationships and through its retail presence. Management believes that the Bank has a very stable core deposit base due primarily to its cash management solutions for middle-market businesses as it strongly encourages and is generally successful in having its business borrowers maintain their entire banking relationship with it. The high level of transaction accounts is expected to be maintained. The Bank has established deposit concentration thresholds to avoid the possibility of dependence on any single depositor base for funds. Since inception, the Bank has not had the need to borrow significantly from the FHLBNY. It has been able to use the cash generated from the increases in deposits to fund loan growth in recent periods.

On November 10, 2017, the Company completed its initial public offering. The net proceeds from the stock offering has increased the Company’s liquidity and capital resources. Over time, the initial level of liquidity will be reduced as net proceeds from the stock offering are used for general corporate purposes, including the funding of loans. The Company’s financial condition and results of operations will be enhanced by the net proceeds from the stock offering, resulting in increased net interest earning assets and net interest income. However, due to the increase in equity resulting from the net proceeds raised in the offering, as well as other factors associated with the offering, return on equity will be adversely affected until the proceeds can be invested fully in interest earning assets.

The Company and the Bank are subject to various regulatory capital requirements administered by the Federal banking agencies. At June 30, 2018 and December 31, 2017, the Bank met all applicable regulatory capital requirements to be considered “well capitalized” under regulatory guidelines. The Company and the Bank manage their capital to comply with their internal planning targets and regulatory capital standards administered by federal banking agencies. The Bank reviews capital levels on a monthly basis.

	At June 30, 2018			At December 31, 2017			At December 31, 2016			Minimum Ratio to be “Well Capitalized”			Minimum Ratio Required for Capital Adequacy Purposes
The Company:
Tier 1 leverage ratio		13.5	%		13.7	%		10.5	%		N/A			4.0	%
Common equity tier 1		14.3	%		15.3	%		10.8	%		N/A			4.5	%
Tier 1 risk-based capital ratio		15.8	%		17.1	%		11.3	%		N/A			8.0	%
Total risk-based capital ratio		18.4	%		19.9	%		12.5	%		N/A			6.0	%

The Bank
Tier 1 leverage ratio		14.5	%		14.7	%		10.4	%		5.0	%		4.0	%
Common equity tier 1		17.0	%		18.4	%		11.3	%		6.5	%		4.5	%
Tier 1 risk-based capital ratio		17.0	%		18.4	%		11.3	%		10.0	%		8.0	%
Total risk-based capital ratio		18.1	%		19.4	%		12.4	%		8.0	%		6.0	%

Basel III revised the capital adequacy requirements and the Prompt Corrective Action Framework effective January 1, 2015 for the Bank. When fully phased in on January 1, 2019, the Basel Rules will require the Company and The Bank to maintain a 2.5% “capital conservation buffer” on top of the minimum risk-weighted asset ratios. The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with a (i) CET1 to risk-weighted assets, (ii) Tier 1 capital to risk-weighted assets, or (iii) total capital to risk-weighted assets above the respective minimum but below the capital conservation buffer will face constraints on dividends, equity repurchases and discretionary bonus payments to executive officers based on the amount of the shortfall. The implementation of the capital conservation buffer began on January 1, 2016 at the 0.625% level. The buffer was 1.25% and 1.875% at December 31, 2017 and June 30, 2018, respectively, and will be fully implemented at 2.5% on January 1, 2019.

As a result of the recently enacted Economic Growth, Regulatory Relief, and Consumer Protection Act (the “Act”), banking regulatory agencies must adopt a revised definition of “well capitalized” for financial institutions and holding companies with assets of less than $10 billion and that are not determined to be ineligible by their primary federal regulator due to their risk profile (a “qualifying community bank”). The new definition will expand the ways that a qualifying community bank may meet its capital requirements and be deemed “well capitalized.” The new rule will establish a “community bank leverage ratio” equal to the tangible equity capital divided by the average total consolidated assets. A qualifying community bank that exceeds a to-be-determined threshold for this new leverage ratio, which regulators must set at between 8% and 10%, will be considered to be well capitalized and to have met generally applicable leverage capital requirements, generally applicable risk-based capital requirements, and any other capital or leverage requirements to which such financial institution or holding company is subject.

In addition, as a result of the Act, the Federal Reserve Board is required to amend its small bank holding company and savings and loan holding company policy statement to provide that holding companies with consolidated assets of less than $3 billion that are (i) not engaged in significant nonbanking activities, (ii) do not conduct significant off-balance sheet activities, and (3) do not have a material amount of SEC-registered debt or equity securities, other than trust preferred securities, that contribute to an organization’s complexity, will no longer be subject to regulatory capital requirements, effective no later than November 2018.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

General . The principal objective of the Company’s asset and liability management function is to evaluate the interest rate risk within the balance sheet and pursue a controlled assumption of interest rate risk while maximizing net income and preserving adequate levels of liquidity and capital. The Board of Directors of the Company has oversight of the Bank’s asset and liability management function, which is managed by its Asset/Liability Management Committee (“ALCO”). The ALCO meets regularly to review, among other things, the sensitivity of assets and liabilities to market interest rate changes, local and national market conditions and market interest rates. That group also reviews liquidity, capital, deposit mix, loan mix and investment positions.

Interest Rate Risk . As a financial institution, the Bank’s primary component of market risk is interest rate volatility. Fluctuations in interest rates will ultimately impact both the level of income and expense recorded on most assets and liabilities, and the fair value of all interest earning assets and interest bearing liabilities, other than those which have a short term to maturity. Interest rate risk is the potential of economic losses due to future interest rate changes. These economic losses can be reflected as a loss of future net interest income and/or a loss of current fair values. The objective is to measure the effect on net interest income and to adjust the balance sheet to minimize the inherent risk while at the same time maximizing income.

The Company manages its exposure to interest rates primarily by structuring its balance sheet in the ordinary course of business. It does not typically enter into derivative contracts for the purpose of managing interest rate risk, but may do so in the future. Based upon the nature of operations, the Company is not subject to foreign exchange or commodity price risk and does not own any trading assets.

Net Interest Income At-Risk. The Bank analyzes its sensitivity to changes in interest rates through a net interest income simulation model. It estimates what net interest income would be for a one-year period based on current interest rates, and then calculates what the net interest income would be for the same period under different interest rate assumptions. The following table shows the estimated impact on net interest income for the one-year period beginning June 30, 2018 resulting from potential changes in interest rates, expressed in basis points. These estimates require certain assumptions to be made, including loan and mortgage-related investment prepayment speeds, reinvestment rates, and deposit maturities and decay rates. These assumptions are inherently uncertain. As a result, no simulation model can precisely predict the impact of changes in interest rates on net interest income.

Although the net interest income table below provides an indication of interest rate risk exposure at a particular point in time, such estimates are not intended to, and do not, provide a precise forecast of the effect of changes in market interest rates on net interest income and will differ from actual results. The following table indicates the sensitivity of projected annualized net interest income to the interest rate movements described above at June 30, 2018 (dollars in thousands):

At June 30, 2018
Change in Interest Rates (basis points)		Net Interest Income Year 1 Forecast		Year 1 Change from Level
	+400	$	84,203		18.73	%
	+300		80,885		14.06	%
	+200		77,555		9.36	%
	+100		74,377		4.88	%
	-		70,917		-
	-100		67,335		-5.05	%

The table above indicates that at June 30, 2018, in the event of a 200 basis point increase in interest rates, the Company would experience a 9.36% increase in net interest income. In the event of a 100 basis point decrease in interest rates, it would experience a 5.05% decrease in net interest income.

Economic Value of Equity Analysis

The Bank analyzes the sensitivity of its financial condition to changes in interest rates through an economic value of equity model. This analysis measures the difference between predicted changes in the fair value of assets and predicted changes in the present value of liabilities assuming various changes in current interest rates.

The table below represents an analysis of interest rate risk as measured by the estimated changes in economic value of equity, resulting from an instantaneous and sustained parallel shift in the yield curve (+100, +200, +300 and +400 basis points and -100 basis points) at June 30, 2018 (dollars in thousands):

				Estimated Increase (Decrease) in EVE						EVE as a Percentage of Fair Value of Assets ⁽³⁾
Change in Interest Rates (basis points) ⁽¹⁾		Estimated EVE ⁽²⁾		Dollars			Percent			EVE Ratio ⁽⁴⁾		Increase (Decrease) (basis points)


	+400	$	286,573	$	(27,793	)		-8.84	%		16.24		(0.37	)
	+300		292,636		(21,730	)		-6.91	%		16.82		0.21
	+200		298,396		(15,970	)		-5.08	%		16.37		(0.24	)
	+100		308,762		(5,604	)		-1.78	%		16.60		(0.01	)
	-		314,366		-			-			16.61		-
	-100		315,298		932			0.30	%		16.39		(0.22	)

(1) Assumes an immediate uniform change in interest rates at all maturities.

(2) EVE is the fair value of expected cash flows from assets, less the fair value of the expected cash flows arising from the Company’s liabilities adjusted for the value of off-balance sheet contracts.

(3) Fair value of assets represents the amount at which an asset could be exchanged between knowledgeable and willing parties in an arms-length transaction.

(4) EVE Ratio represents EVE divided by the fair value of assets.

The table above indicates that at June 30, 2018, in the event of a 100 basis point decrease in interest rates, the Company would experience a 0.30% increase in its economic value of equity. In the event of a 200 basis points increase in interest rates, it would experience a decrease of 5.08% in economic value of equity.

The preceding income simulation analysis does not represent a forecast of actual results and should not be relied upon as being indicative of expected operating results. These hypothetical estimates are based upon numerous assumptions, which are subject to change, including: the nature and timing of interest rate levels including the yield curve shape, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits, reinvestment/replacement of asset and liability cash flows, and others. Also, as market conditions vary, prepayment/refinancing levels, the varying impact of interest rate changes on caps and floors embedded in adjustable-rate loans, early withdrawal of deposits, changes in product preferences, and other internal/external variables will likely deviate from those assumed.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company's management, with the participation of its Chief Executive Officer, who is the Company's principal executive officer, and the Chief Financial Officer, who is the Company's principal financial officer, have evaluated the effectiveness of the Company's disclosure controls and procedures as of June 30, 2018 pursuant to Rule 13a-15 of the Exchange, as amended. Based upon that evaluation, the principal executive officer and principal financial officer have concluded that the Company's disclosure controls and procedures are effective as of June 30, 2018. In addition, there have been no changes in the Company’s internal control over financial reporting during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Disclosure controls and procedures are designed with the objective of ensuring that information required to be disclosed in reports filed by the Company under the Exchange Act, such as this Quarterly Report, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Disclosure controls and procedures are also designed with the objective of ensuring that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is subject to various pending and threatened legal actions relating to the conduct of its normal business activities. In the opinion of management, the ultimate aggregate liability, if any, arising out of any such pending or threatened legal actions will not be material to the Company’s financial condition, results of operations, and liquidity.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this quarterly report, the reader should carefully consider the factors discussed under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K filed with the SEC on March 28, 2018. The Company’s evaluation of the risk factors applicable to it has not changed materially from those disclosed in the Annual Report on Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

See Index of Exhibits that follows

SIGNATURES

Pursuant to the requirements 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. and Subsidiary

Date: August 14, 2018	By:	/s/ Mark R. DeFazio

	Mark R. DeFazio

	President and Chief Executive Officer

Date: August 14, 2018	By:	/s/ Anthony Fabiano

	Anthony Fabiano

	Executive Vice President and Chief Financial Officer

EXHIBIT INDEX

10.1	Employment Agreement between Metropolitan Commercial Bank and Scott Lublin dated April 25, 2018

31.1	Certification of the Principal Executive Officer of the Corporation, pursuant to Securities Exchange Act Rule 13a-14(a).

31.2	Certification of the Principal Financial Officer of the Corporation, pursuant to Securities Exchange Act Rule 13a-14(a).

32	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by Principal Executive Officer of the Corporation and the Principal Financial Officer of the Corporation.

101	INS XBRL Instance

101	SCH XBRL Taxonomy Extension Schema

101	CAL XBRL Taxonomy Extension Calculation

101	DEF XBRL Taxonomy Extension Definition

101	LAB XBRL Taxonomy Extension Label

101	PRE XBRL Taxonomy Extension Presentation

Exhibit 10.1

Metropolitan Bank Holding Corporation

AND MetropOLitan commercial bank

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (“ Agreement ”) is made effective as of April 25, 2018 (the “ Commencement Date ”), by and between Metropolitan Commercial Bank, a commercial bank with its main office at 99 Park Avenue, New York, New York 10016 (the “ Bank ”) and a wholly owned subsidiary of Metropolitan Bank Holding Corp., a New York corporation with its principal place of business also located at 99 Park Avenue, New York, New York 10016 (the “ Company ”), and Scott Lublin, a natural person residing in East Brunswick, New Jersey (“ Executive ”). The Company is a signatory to this Agreement for the sole purpose of guaranteeing the payments hereunder.

WHEREAS , Executive has accepted a position with the Bank as Executive Vice President and Chief Lending Officer of the Bank; and

WHEREAS , the Bank considers the maintenance of a competent and experienced executive management team to be essential to its long-term success; and

WHEREAS , the Board of Directors of the Bank (the “ Bank’s Board ”) has determined that it is in the best interests of the Bank that Executive serve as the Bank’s Executive Vice President and Chief Lending Officer, pursuant to this Agreement, which will supersede in its entirety any and all other agreements and understandings between Executive and the Bank or the Company regarding Executive’s employment by the Bank; and

WHEREAS , Executive is willing to serve the Bank in the positions and on the terms and conditions hereinafter set forth;

NOW, THEREFORE , in consideration of the mutual covenants herein contained, and upon the other terms and conditions hereinafter provided, the parties hereby agree as follows:

1. POSITION AND RESPONSIBILITIES.

(a) Positions . During the period of Executive’s employment under this Agreement, Executive agrees to serve as Executive Vice President and Chief Lending Officer of the Bank.

(b) Responsibilities . As Executive Vice President and Chief Lending Officer of the Bank, Executive shall perform all duties and have all powers that are commonly incident to such offices or which, consistent with such offices, may be delegated to Executive by the President and Chief Executive Officer of the Bank, including but not limited to the day to day lending operations of the Bank. During the period of Executive’s employment under this Agreement, except for periods of absence occasioned by illness, vacation, or other reasonable leaves of absence, Executive shall devote substantially all of his business time, attention, skill and efforts to the faithful performance of his duties under this Agreement, including activities and services related to the organization, operation and management of the the Bank and its affiliates, as well as participation in community, professional and civic organizations; provided , however , that, with the approval of the Bank’s Board, as evidenced by a resolution thereof, Executive may serve, or continue to serve, on the boards of directors of, and hold any other offices or positions in, any such other companies or organizations that, in the judgment of the Bank’s Board, will not present any conflict of interest with the Bank or its affiliates, or materially negatively impact or interfere with Executive’s performance of his duties pursuant to this Agreement.

(c) Working Facilities. The Bank will furnish Executive with the working facilities and staff customary for executive officers with the title and duties set forth in this Agreement and as are necessary for him to perform his duties. The location of such facilities and staff shall be at the main office of the Bank or such other office as may be agreed upon from time to time by the parties.

2. TERM OF EMPLOYMENT.

(a) Term. The term of Executive’s employment under this Agreement (the “ Term ”) shall be (i) the initial term of employment, consisting of the period commencing on the Commencement Date and expiring on the third anniversary of the Commencement Date, plus (ii) any and all extensions of the Term made pursuant to paragraph (b) of this Section 2 below. Upon expiration of the last day of the Term, if and as thus extended (the “ Expiration Date ”), Executive’s employment under this Agreement shall terminate, if it has not earlier terminated pursuant to the provisions hereof.

(b) Extension of Term . The Term of Executive’s employment under this Agreement shall be automatically extended by one day upon completion of each day of Executive’s employment hereunder, such that a constantly extending twenty-four (24) calendar month Term shall remain in effect hereunder, provided , however , that the Bank may elect at any time, for any reason or no reason, to discontinue such automatic extension, by delivery of a written notice of such discontinuation to Executive, prepared and delivered in accordance with the provisions of Section 8(a) below (any such notice, a “ Non-renewal Notice ”), in which event the Term of Executive’s employment under this Agreement shall no longer be automatically extended for each day of employment hereunder, but rather shall expire on a fixed Expiration Date, such being the third anniversary of the date of the Non-renewal Notice, as specified in such notice. During the period commencing not more than sixty (60) and not less than thirty (30) days prior to each anniversary of the Commencement Date of this Agreement (each, an “ Anniversary Date ”), assuming no prior Non-renewal Notice has been delivered by the Bank to Executive, the Bank’s Board will conduct a review of Executive’s performance, and in connection therewith, will make a determination as to whether the automatic extension of the Term of Executive’s employment, as described in the preceding sentence, will be permitted to continue, or alternatively, whether such automatic extension of the Term will be discontinued, such that a fixed Expiration Date will be established.

(c) Early Termination . At any time during the Term of this Agreement, Executive’s employment hereunder may be terminated early, i.e., before the Expiration Date, (i) by the mutual agreement of the parties hereto, (ii) by one of the parties hereto, without the consent of the other party, under certain circumstances and subject to certain terms and conditions as set forth in Sections 4, 5 and 7 hereof, or (iii) upon the death, Disability or Retirement of Executive, as set forth in Section 12 hereof. The effective date of any such early termination of Executive’s employment hereunder shall be referred to as the “ Termination Date .”

3. COMPENSATION AND BENEFITS.

(a) Base Salary. During the Term of Executive’s employment under this Agreement, the Bank shall pay to Executive for all services rendered by Executive under this Agreement a base salary (“ Base Salary ”) at the initial rate of $400,000 per annum, subject to possible increases from time to time as provided in the ensuing sentence of this paragraph (a), which Base Salary will be payable in accordance with the customary payroll practices of the Bank. The Bank’s Board shall review not less often than annually the then current per annum rate of Executive’s Base Salary, based upon such factors as each board deems relevant, and in connection with any such review, may enter into negotiations with Executive to increase Executive’s Base Salary above its then current per annum rate (in which event the new base salary shall become Executive’s “Base Salary” under this Agreement), or to maintain Executive’s Base Salary at its then current per annum rate. Under no circumstances, however, may the Bank’s Board decrease Executive’s Base Salary to a per annum rate below the per annum rate then in effect, unless Executive shall have expressly consented in advance in writing to such decrease, or based upon a Bank-wide decrease to most executive officers compensation due to the economic performance of the Company or the Bank, and provided that the percentage decrease to Executive’s Base Salary shall not be in excess of the average decrease to the other executive officer’s base salaries. In the absence of any review or other action by the Bank’s Board, Executive shall continue to receive his Base Salary at the per annum rate then in effect, as last approved by the Bank’s Board or as set forth in this Section 3. The parties agree that the negotiations regarding Executive’s Base Salary shall be concluded no later than February 28 of the year, retroactive to January 1 of such year (with any amounts owed from January 1 to the date of determination of the new Base Salary paid in the next payroll immediately following such determination).

(b) Bonus. Executive shall be entitled to an annual cash bonus payment (the “ Bonus Payment ”) under the Bank’s Executive Annual Incentive Plan, or any successor thereto, to be determined by the Bank’s Board after discussion with President and Chief Executive Officer and with the Executive. The Bonus Payment will be based upon the achievement of certain performance targets for such year established by the Compensation Committee of the Bank’s Board, subject to the other terms and conditions of the bonus plan and applicable law and regulation. Any such Bonus Payment shall be made not later than March 15th of the calendar year following the calendar year in which the services are performed to which the Bonus Payment relates (so that the Bonus Payment constitutes a short-term deferral exempt from Code Section 409A, as defined herein). Payment to Executive for any calendar year of a Bonus Payment, if any, shall not be construed as an increase in Executive’s Base Salary. Any payment to Executive of a Bonus Payment in any year shall not be offset against, and shall not preclude payment to Executive of, any other special cash incentive compensation or cash bonus under any other incentive compensation plan, program or arrangement of the Bank that may be applicable to Executive from time to time.

(c) Vacation and Holidays. Executive shall be entitled to twenty-five (25) paid vacation days each year in accordance with the terms of the Bank’s vacation policy, to be taken at times selected by him and which are, to the maximum extent possible, at a time mutually agreed upon by the parties or in accordance with the Bank’s policies. Executive shall also be entitled to paid legal holidays in accordance with the policies of the Bank. After three (3) months of employment with the Bank, five (5) days of annual sick leave and five (5) days of annual personal leave accrue.

(d) Stock-Based Awards. Executive shall be entitled to participate in any equity or equity-based compensation plans as may be adopted by the Company and, as necessary, approved by the Company’s stockholders from time to time, under which awards may be granted to senior officers or employees of the Company or the Bank (any such, a “ Stock Plan ”). The terms and conditions of any such types of equity awards granted to Executive generally shall be not less favorable from the standpoint of the award recipient than the terms and conditions of such types of awards granted to other similarly-situated senior officers, subject to the terms and conditions in the relevant Stock Plan.

(e) Other Employee Benefits. In addition to any other compensation or benefits provided for under this Agreement, Executive shall be entitled to participate in any employee benefit plans, arrangements and perquisites of the Bank that is generally available to senior officers of the Bank in accordance with such plans, arrangements or perquisites standard eligibility requirements. Executive shall also be entitled to participate in any employee benefits or perquisites the Bank offers to senior officers or employees from time to time during the Term of his employment. The Bank will not, without Executive’s prior written consent, make any changes in such plans, arrangements or perquisites which would adversely affect Executive’s rights or benefits thereunder (other than a reduction or elimination of benefits under one or more benefit plans maintained by the Bank as part of a good faith, overall reduction or elimination of such plans or benefits applicable to all participants in a manner that does not discriminate against Executive (except as such discrimination may be necessary to comply with applicable law)) without separately providing for an arrangement that both ensures Executive receives or will receive the economic value that Executive would otherwise lose as a result of such adverse changes, and which does not give rise to a violation of Code Section 409A. Without limiting the generality of the foregoing provisions of this paragraph (e), Executive shall be entitled to participate in or receive benefits under all plans relating to stock options, restricted stock awards or restricted stock units, stock purchases, pension, profit sharing, employee stock ownership, supplemental retirement, directors’ retirement, group life insurance, medical and other health and welfare coverage that are made available by the Bank currently or at any time in the future during the Term of this Agreement, subject to and on a basis consistent with, the terms, conditions and overall administration of such plans and arrangements.

4. CERTAIN EARLY TERMINATIONS OF EMPLOYMENT; PAYMENTS AND BENEFITS.

(a) Termination of Executive by the Bank, Not for Cause . If at any time during the Term of Executive’s employment under this Agreement, the Bank early terminates Executive’s employment (other than a Termination for Cause under Section 7 or a Termination due to Disability under Section 12), the Bank (i) shall pay to Executive the cash payment specified in paragraph (c) of this Section 4, below, and (ii) shall provide and pay to Executive those post-termination benefits and payments specified in paragraph (d) of this Section 4, below. A termination of Executive’s employment by the Bank pursuant to the foregoing sentence (any such, a “ Termination without Cause ”) shall be effected by way of a written Notice of Termination delivered by the Bank to Executive, as defined and subject to the terms and conditions set forth in Section 8(b) below, which notice, among other things, shall identify the proposed Termination Date, which date may not be earlier than the date of the notice. The ultimate Termination Date of Executive’s employment shall be the proposed Termination Date identified in the Notice of Termination, unless prior to such date the parties shall mutually agree in writing (a) that there will not be any such termination of Executive’s employment under this Section 4(a), or (b) that such termination will take place but as of some other date that is earlier or later than such proposed Termination Date, in which event such other date will become the actual Termination Date.

(b) Termination of Employment by Executive for Good Reason.

(i) Executive’s Election and Notice . If at any time during the Term of Executive’s employment under this Agreement, there shall occur any of the specific actions or events, or series of actions or events, that individually or collectively constitute “ Good Reason ,” as defined in Section 25 of this Agreement, Executive shall have the right, exercisable by him at any time within ninety (90) days after he first becomes aware (or reasonably should have become aware) of such occurrence, to elect to terminate his own employment with the Bank under this Section 4(b). Such termination (a “ Termination for Good Reason ”) shall be communicated to the Bank by way of a prior written Notice of Termination, as defined and subject to the terms and conditions set forth in Section 8(b) below, delivered by Executive to the Bank, which notice, among other things, shall identify with reasonable specificity the action or event, or series of actions or events, constituting the Good Reason underlying Executive’s election, as well as the proposed Termination Date of his employment, which date may not be earlier than the thirtieth (30 ^th ) day following the date of such notice.

(ii) Possible Cure . If Executive has elected to terminate his own employment under this Section 4(b) and has delivered a Notice of Termination to such effect, the Bank, if it has the ability to cure the actions or conditions constituting the Good Reason cited by Executive in his notice before the proposed Termination Date identified in Executive’s notice (or such later Termination Date as may be agreed upon by the parties), may elect to effect such a cure. If the Bank succeeds in such cure, then: (A) the proposed Termination for Good Reason by Executive of his own employment under this paragraph (b) will be deemed ineffective, (B) the mutual obligations, duties and rights of the parties under this Agreement will continue in effect as though Executive had never attempted to terminate his employment for Good Reason, and (C) the Bank not shall take any adverse or retaliatory action against Executive solely as a result of his initial election to terminate his employment under this Section 4(b).

(iii) Consequences of Termination . If, and when, a Termination for Good Reason by Executive of his own employment under this paragraph (b) becomes effective, the Bank (i) shall pay to Executive the cash payment specified in Section 4(c) below, and (ii) shall provide and pay to Executive the continuing post-termination benefits and payments specified in Section 4(d), below. The Termination Date of such termination shall be the proposed Termination Date set forth in Executive’s notice of Termination, unless prior to such date the parties shall mutually agree in writing (a) that there will not be any such termination of Executive’s employment under this Section 4(b), or (b) that such termination will take place but as of some other date that is earlier or later than such proposed Termination Date, in which event such other date will become the actual Termination Date.

(c) Cash Payment . In the event of any Termination without Cause of Executive’s employment under Section 4(a) above, or any Termination for Good Reason by Executive of his own employment under Section 4(b) above, the Bank shall pay to Executive (or, if Executive dies after such termination of employment but before such payment, to his beneficiary(ies) or his estate, as the case may be), within the period following the Termination Date specified below, a amount in cash equal to two (2) times Executive’s Base Salary. The parties hereto further agree that all payments received by Executive hereunder will not be subject to diminution if Executive, subsequent to such Termination Not for Cause or Termination for Good Reason, becomes employed elsewhere.

The total amount paid to Executive under this Section 4(c) shall be paid in a single lump sum cash distribution made within ten (10) days following the Termination Date; provided however, if, at the Termination Date, Executive is a “ Specified Employee, ” as defined in Treasury Regulation 1.409-1(i), then, solely to the extent required to avoid penalties under Section 409A of the Internal Revenue Code (the “ Code ”), such payment shall be delayed until the first day of the seventh full month following the Termination Date, or ten (10) days following his earlier death.

(d) Other Post-Termination Benefits. In the event of Executive’s Termination without Cause under Section 4(a), above, or Termination for Good Reason under Section 4(b) above, Executive shall become immediately vested in any outstanding unvested equity or equity-based awards granted to Executive.

5. VOLUNTARY TERMINATION BY EXECUTIVE OF EMPLOYMENT WITHOUT GOOD REASON.

(a) 30 Day Prior Notice. If at any time during the Term of Executive’s employment under this Agreement, Executive elects to voluntarily terminate his own employment with the Bank, other than any such early termination that qualifies as (i) a Termination for Good Reason under Section 4(b), above, or (ii) a termination for Disability or upon Retirement under Section 12, below, Executive shall be obligated to deliver, and shall deliver to the Bank, a prior written Notice of Termination, as defined and subject to the terms and conditions set forth in Section 8(b), below, which notice, among other things, shall identify the proposed Termination Date, which may not be earlier than the thirtieth (30 ^th ) day nor later than the forty-fifth (45 ^th ) day following the date of the notice.

(b) Payments; Benefits . In the event of any such voluntary termination of employment by Executive under this Section 5, Executive shall be entitled to receive from the Bank, as of or after the Termination Date of his employment, any accrued but unpaid Base Salary payable to Executive as of the Termination Date, and any other benefits or rights due to Executive as of or after the Termination Date under any other compensation or benefit plan, policy or arrangement of the Company and/or the Bank as in effect on the Termination Date, including any vested benefits or amounts payable thereunder to Executive as a former employee, in accordance with the terms and conditions of such plans, policies and arrangements, including retirement plans and health and welfare plan.

6. PAYMENT TO EXECUTIVE UPON TERMINATION WITHOUT CAUSE OR FOR GOOD REASON IN CONNECTION WITH THE A CHANGE IN CONTROL.

(a) Payment Upon a Change in Control. In the event Executive has a Termination without Cause or Termination for Good Reason in connection with or following a Change in Control, as defined in Section 25, below, the Bank shall, within ten (10) days following the termination of employment, pay and provide to Executive (or if Executive dies prior to such payment, to his beneficiary or beneficiaries or his estate, as the case may be), in lieu of any cash payments under Section 4(c) above which are payable only in the event of a termination of employment prior to a Change in Control, a lump sum cash payment equal to two (2) times Executive’s Base Salary. , In addition, in the event Executive has a Termination without Cause or Termination for Good Reason in connection with or following a Change in Control, Executive shall be entitled to the Post-Termination Benefits set forth in Section 6(b) below.

(b) Post-Termination Benefits . In the event of a Termination without Cause or a Termination for Good Reason in connection with or following a Change-in-Control, as defined in Section 25, Executive shall become immediately vested in any outstanding unvested equity or equity-based awards granted to Executive.

7. TERMINATION OF EXECUTIVE’S EMPLOYMENT FOR CAUSE .

(a) At any time during the Term of this Agreement, including after a Change in Control, the Bank may terminate Executive’s employment hereunder for “ Cause ,” as defined in Section 25, below. In the event that any termination under this Section 7 (a “ Termination for Cause ”) becomes effective, Executive shall not have any rights to receive, and shall not receive, any compensation or benefits for any period after the Termination Date, including compensation or benefits that he would otherwise have been entitled to receive after a termination of his employment under any other provisions of this Agreement, except for any such compensation or benefits that he is entitled to receive as a matter of law.

(b) In order for a Termination for Cause to become effective under this Section 7, each of the following must occur:

(i)

Notice . The Bank must deliver to Executive a written Notice of Termination, as defined, and meeting the requirements set forth in Section 8(b) below, which notice (i) clearly discloses that the Bank intends to terminate Executive for Cause within the meaning of this Section 7; (ii) sets forth in reasonable detail the facts and circumstances allegedly constituting such Cause such that Executive has a fair opportunity to understand and defend himself against such allegations; and (iii) advises Executive of his right to request a hearing, as described in subparagraph (b)(ii), below, and the date or range of dates for such hearing, if requested.

(ii)

Hearing . The Bank, as applicable, shall provide Executive with an opportunity to be heard, with assistance of counsel if he so desires, before the Bank’s Board at a hearing to be held on a date or within a range of dates identified in the Notice of Termination, which date may not in any event be earlier than the thirtieth (30 ^th ) day after the date of the notice, for the purpose of enabling Executive to demonstrate, through written and/or verbal rebuttal, that Cause for his termination does not exist. The hearing may be held in conjunction with a regular or special meeting of the Bank’s Board at which Executive’s Termination for Cause will subsequently be evaluated and determined.

(iii)

Final Determination by Board . After the hearing (if there is a hearing), or after a period of at least thirty (30) days has elapsed after the date of the Notice of Termination (if there is not a hearing), the Bank’s Board, acting at a regular or special meeting of such board duly called and held, shall make a final determination in its reasonable discretion as to whether Cause for the termination of Executive exists and if the board determines, by the affirmative vote of not less than a majority of the entire membership thereof (excluding Executive), that Cause for the termination of Executives does exist and that Executive should be terminated for Cause, there shall be delivered to Executive written notice of the final determination of the board that Executive be terminated for Cause and identifying the effective date of such termination (the “ Termination Date ”).

(c) Without limiting the foregoing, the Bank, on or after delivery to Executive of the initial Notice of Termination to Executive, may suspend Executive, with or without pay (but with all benefits continued), for a period not to exceed forty (40) days, and such suspension shall not constitute either a Termination without Cause or a Termination for Good Reason of Executive under the Agreement. In the event that Executive is suspended and it is ultimately determined that Executive should not be terminated for Cause, then Executive shall immediately resume employment with the Bank in accordance with the terms of this Agreement, and if Executive’s suspension was without pay, then all suspended pay shall be paid to Executive with his first paycheck after the suspension is lifted. To the extent possible, the Bank shall take all necessary actions to either not disclose the suspension, or if disclosure is required, that such disclosure be made in a manner that is reasonably determined to not adversely affect the personal and business reputation of Executive.

8. CERTAIN NOTICES

(a) Non-Renewal Notice . Any Non-Renewal Notice delivered by the Bank to Executive under Section 2(b) of this Agreement shall be in writing. Such notice shall state that the Bank’s Board has elected to discontinue the automatic extension of the Term of Executive’s employment under Section 2(b), by action taken by the Board, and shall identify the date on which the Board acted, and that such date shall be deemed the date of non-renewal as well as the date of the Non-Renewal Notice. Any notice given under this Section 8(a) may be delivered to Executive (i) in person, by an agent or representative of the Bank, (ii) by paid courier, (iii) by e-mail (in which there must be a confirmation that the email was received and read), or (iv) by U.S. mail, return receipt requested, in each case, at or addressed to the residence address of Executive (or if by email, the email address of Executive) as set forth at such time on the Bank’s records.

(b) Notice of Termination . In the event of any early termination of Executive’s employment under this Agreement, including without limitation under any of Sections 4, 5 and 7, the notice of termination (a “ Notice of Termination ”) required to be delivered by the party electing to terminate Executive’s employment to each of the other party hereto shall be in writing, and shall identify (i) the specific termination provision in this Agreement relied upon by the terminating party, (ii) the terminating party’s proposed Termination Date for such termination, and (iii) the date of the notice, determined as provided below. The Notice of Termination shall also set forth such other information, if any, as may be required in the particular termination provision under which the election is being made. The Notice of Termination must be delivered in person by the terminating party, or by a representative or agent of any such party, to the other party, at the address of the particular party (which shall be the street address of the main office of the Bank on such date, and for Executive, the street address of his principal residence on such date). The date of any Notice of Termination is the date such notice is delivered to the party entitled to such delivery. Such date of delivery shall be set forth on the notice itself, or shall be communicated by the terminating party to the other party by other means, including email or other electronic means of communication (in which case there must be a confirmation that the email or other electronic means of communication was received and read), on or as soon as possible after the date of the notice.

(c) Upon delivery by either party to the other party of a Notice of Termination with respect to any early termination of Executive’s employment under this Agreement, the ability of the other party to early terminate Executive’s employment hereunder shall be suspended until the attempt by the party giving the earlier Notice of Termination to achieve such termination is abandoned or fails, provided however, that no provision in this Agreement, including this Section 8(c), will prevent, suspend, or in any way delay or interfere with any determination by the Bank to notify Executive that he is being terminated for Cause and to proceed with all actions required in connection with such termination, which determination, once reached and communicated to Executive by way of a Notice of Termination, will preempt and preclude the Executive, to early terminate his employment, until the for Cause termination proceeding has been completed or abandoned.

9. REDUCTION OF PAYMENTS TO AVOID EXCESS PARACHUTE PAYMENT.

Notwithstanding anything herein to the contrary contained in this Agreement or in any other agreement between the Company and/or the Bank and Executive or any plan or policy of or binding upon the Company and/or the Bank, in the event that the aggregate payments or benefits made or to be made to Executive under this Agreement, in connection with a “change of control” as defined under Section 280G of the Internal Revenue Code of 1986, as amended (the “Code” ), when combined with any other payments or benefits made or permitted, or required to be made or permitted, to Executive under any other plan, agreement or arrangement of the Company and/or the Bank or any of their subsidiaries or affiliates, should cause or have caused Executive to be obligated to pay or to become liable for any Federal excise taxes under Code Section 4999(a) and/or any state or local excise taxes attributable to payments that qualify as “excess parachute payments” under Code Section 280G, as determined by an accounting or law firm (“Firm”) regularly utilized by the Company and/or the Bank, then such payments payable under this Agreement shall be reduced to avoid such “excess parachute payment,” as defined in Code Section 280G(b)(1). The manner of reduction shall be determined by the Company, taking into account any requests of Executive regarding which parachute payments shall be reduced, unless such request would give rise to a violation of Code Section 409A or other applicable law. Nothing in this Section 9 shall result in the reduction of any payments or benefits to which Executive may be entitled upon termination of employment and/or a Change in Control other than as specified in this Section 9, or a reduction in benefits payable under this Agreement below zero.

10. POST-TERMINATION OBLIGATIONS.

Executive shall, upon reasonable notice, furnish to the Bank such information and assistance as may reasonably be required in connection with any litigation to which the Bank or any of its affiliates is, or may become, a party. Executive also agrees, upon prior reasonable notice and reimbursement by the Bank of reasonable costs and expenses of Executive, including for his time, to cooperate with the Bank or its affiliates in any legal matters that may require Executive’s participation and/or assistance during the twenty-four (24) month period following the Expiration Date of Executive’s employment under this Agreement or any earlier termination of such employment. Executive expressly agrees to provide reasonable assistance (including testimony where appropriate) in such matters. The Bank will only request such assistance from Executive if such assistance is reasonably necessary.

11. NON-COMPETITION, NON-SOLICITATION, NON-DISCLOSURE AND NON-DISPARAGEMENT.

(a) Non-Solicitation . Executive recognizes that the business of the Company and the Bank is highly competitive, and therefore acknowledges and agrees that at all times while employed by the Bank and for a period of one (1) year following the termination of Executive’s employment with the Bank, Executive shall not, directly or indirectly, individually or together with any other person, as owner, shareholder, investor, member, partner, proprietor, principal, director, officer, executive, manager, agent, representative, independent contractor, consultant or otherwise:

(i)

solicit in any manner or seek to obtain the business of any person who is or was a customer or an active prospective customer of the Company or the Bank during the one-year period prior to the termination of Executive’s employment; or

(ii)

request or advise any customer, supplier, vendor or others who were doing business with the Company or the Bank during the one-year period prior to the termination of Executive’s employment, or any other person, to terminate, reduce, limit or change their business or relationship with the Company or the Bank; or

(iii)

induce, request or attempt to influence any officer of the Company or the Bank to terminate his or her employment with the Company or the Bank;

provided , however , this Section 11(a) shall not apply to hiring or recruitment efforts that are initially directed to the public without the direct or indirect involvement by Executive (e.g., through a recruiter or a recruiting website).

(b) Non-Disclosure . Executive recognizes and acknowledges that his knowledge of the business activities and plans for business activities of the Company, the Bank and their affiliates, as it may exist from time to time, is a valuable, special and unique asset of the business of the Company, the Bank and their affiliates. Executive will not, for a period of three (3) years following expiration or termination of his employment hereunder, disclose any knowledge of the past, present, planned or considered business activities of the Company, the Bank or their affiliates to any person, firm, corporation or other entity for any reason or purpose whatsoever, unless expressly authorized in writing to do so by the Bank’s Board or as required by law upon the written advice of qualified legal counsel. Notwithstanding the foregoing, Executive may disclose any knowledge of banking, financial and/or economic principles, concepts or ideas which are not solely and exclusively derived from the business plans and activities of the Company, the Bank or their subsidiaries. In the event of a breach or threatened breach by Executive of the provisions of this Section 11(b), the Company and/or the Bank will be entitled to an injunction restraining Executive from disclosing, in whole or in part, knowledge of the past, present, planned or considered business activities of the Company, the Bank or their subsidiaries or from rendering any services to any person, firm, corporation or other entity to whom such knowledge, in whole or in part, has been disclosed or is threatened to be disclosed. Nothing herein will be construed as prohibiting the Company and/or the Bank from pursuing any other remedies available to the Company and/or the Bank for such breach or threatened breach of this Section 11(b), including the recovery of damages from Executive.

(c) Non-Disparagement . Executive agrees that, during the Term and thereafter, he will not, directly or indirectly, alone or in conjunction with any other party, make statements to customers or suppliers of the Company and/or the Bank or to other members of the public that are in any way disparaging or negative towards the Company or the Bank, or the products or services of either, or the Company’s or the Bank’s representatives, Directors, or employees. The Bank agrees that, during the Term and thereafter, it will not, directly or indirectly, alone or in conjunction with any other party, make statements to customers or suppliers of the Company and/or the Bank or to other members of the public that are in any way disparaging or negative towards Executive.

(d) Remedies . Executive acknowledges and agrees that his obligations under this Section 11 are of a special and unique nature and that a failure to perform any such obligation or a violation of any such obligation would cause irreparable harm to the Company and/or the Bank, the amount of which cannot be accurately compensated for in damages by an action at law. In the event of a breach by Executive of any of the provisions of this Section 11, the Company and/or the Bank shall be entitled to an injunction restraining Executive from such breach. Nothing in this Section shall be construed as prohibiting the Company and/or the Bank and/or Executive from pursuing any other remedies available for any breach of this Section 11.

12. DEATH, DISABILITY OR RETIREMENT.

(a) Death. This Agreement shall terminate upon Executive’s death, and within thirty days of Executive’s death, the Bank shall pay to Executive’s estate (at the direction of his executor or administrator), as the case may be, the sum of: (a) the amount of any earned but unpaid Base Salary and benefits; plus (b) one (1) times Executive’s Base Salary. In addition, Executive shall become immediately vested in any outstanding unvested equity or equity-related awards granted to Executive (including any performance restricted share unit awards).

(b) Disability. In the event of a determination of Disability, Executive’s obligation to perform services under this Agreement will terminate. In the event of a determination of Disability in accordance, Executive shall receive benefits under any disability program sponsored by the Bank. In addition, Executive shall become immediately vested in any outstanding unvested equity or equity-related awards granted to Executive (including any performance restricted share unit awards).

(c) Retirement. If Executive has attained retirement or early retirement age under any tax-qualified retirement plan of the Bank in which Executive is a covered employee (“Retirement Plan”), Executive may elect to retire under such Retirement Plan, in the manner and subject to the procedures specified in such plan, and in such event, Executive shall be entitled to such benefits and shall receive such payments as are provided under such Retirement Plan and under any other tax-qualified or nonqualified retirement pension, severance or other similar plan then maintained by the Bank in which Executive is then a covered employee or otherwise entitled to participate. The termination of Executive’s employment incident to such retirement will not be deemed an early termination of Executive’s employment under any of Sections 4, 5 or 7 of this Agreement.

13. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFIT PLANS.

This Agreement contains the entire understanding between the parties hereto regarding the issues addressed herein, and supersedes any prior agreement or other understanding (whether or not in writing) between the Bank and Executive, except that this Agreement shall not affect or operate to reduce any benefit or compensation inuring to Executive of a kind elsewhere provided. No provision of this Agreement shall be interpreted to mean that Executive is subject to receiving fewer benefits than those available to him without reference to this Agreement.

14. NO ATTACHMENT.

(a) No Offset or Attachment. Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge or hypothecation, or to execution, attachment, levy or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to affect any such action shall be null, void and of no effect.

(b) Binding. This Agreement shall be binding upon and inure to the benefit of Executive, the Company and the Bank and their respective successors and assigns.

15. MODIFICATION AND WAIVER.

(a) Modification/Amendments. This Agreement may not be modified or amended, except by an instrument in writing signed by the parties hereto.

(b) Waivers. No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future as to any act other than that specifically waived.

16. SEVERABILITY.

If, for any reason, any provision of this Agreement, or any part of any provision, is held invalid, such invalidity shall not affect any other provision of this Agreement or any remaining part of such provision not held so invalid, and each such other provision and part thereof shall to the full extent consistent with law continue in full force and effect.

17. HEADINGS FOR REFERENCE ONLY.

The headings of sections and paragraphs herein are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement.

18. GOVERNING LAW; JURISDICTION AND VENUE.

(a) This Agreement shall be governed by the laws of the State of New York without regard to principles of conflicts of law of the State of New York and applicable federal law.

(b) Any and all disputes arising out of this Agreement shall be adjudicated by the Supreme Court of the State of New York, New York County. Furthermore, the Supreme Court of the State of New York, New York County shall exclusively have and exercise personal jurisdiction over the parties hereto concerning any and all disputes arising out of this Agreement and the parties hereto unconditionally submit to such jurisdiction and the exclusivity thereof.

THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT THAT THEY MAY HAVE TO TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION, OR IN ANY LEGAL PROCEEDING, DIRECTLY OR INDIRECTLY BASED UPON OR ARISING OUT OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT (WHETHER BASED ON CONTRACT, TORT, OR ANY OTHER THEORY). EACH PARTY (i) CERTIFIES THAT NO REPRESENTATIVE, AGENT, OR ATTORNEY OF ANY OF THE OTHER PARTIES HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT ANY SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (ii) ACKNOWLEDGES THAT THEY HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS STATED ABOVE.

19. ATTORNEY’S FEES.

All reasonable legal fees paid or incurred by Executive pursuant to any dispute or question of interpretation relating to this Agreement shall be paid or reimbursed by the Company and/or the Bank if and only if Executive is wholly successful in to a legal judgment, arbitration or settlement. Such payment or reimbursement shall occur no later than two and one-half (2½) months after the dispute is settled or resolved in Executive’s favor. If Executive does not wholly prevail in such dispute or question of interpretation relating to this Agreement, then each party shall be responsible for the payment of such party’s own legal fees and expenses.

20. NO WAIVERS.

The failure to enforce at any time any of the provisions of this Agreement, or to require at any time performance by any other party of any of the provisions hereof shall in no way be construed to be a waiver of such provision, nor in any way to affect the validity of this Agreement or any part hereof, or the right of any party thereafter to enforce each and every provision in accordance herewith.

21. INDEMNIFICATION.

The Bank shall provide Executive (including his heirs, executors and administrators) with coverage under a standard directors’ and officers’ liability insurance policy at the expense of the Bank, and the Bank shall indemnify Executive (and his heirs, executors and administrators) to the fullest extent permitted under applicable law against all expenses and liabilities reasonably incurred by him in connection with or arising out of any action, suit or proceeding in which he may be involved by reason of his having been a director or officer of the Bank (whether or not he continues to be a director or officer at the time of incurring such expenses or liabilities), such expenses and liabilities to include, but not be limited to, judgments, court costs, attorneys’ fees and the costs of reasonable settlements.

22. SUCCESSORS AND ASSIGNS.

The Company and/or the Bank shall require any successor or assignee, whether direct or indirect, by purchase, merger, consolidation or otherwise, to all or substantially all of the business or assets of the Company and/or the Bank, expressly and unconditionally to assume and agree to perform the Company’s and/or the Bank’s obligations under this Agreement, in the same manner and to the same extent that the Company and/or the Bank would be required to perform if no such succession or assignment had taken place. Failure of any successor or assignee of the Company or the Bank, whether pursuant to a Change in Control or otherwise, to assume the Agreement shall be deemed to be a material breach of this Agreement, in which case payments shall be made to Executive pursuant to Section 6 (reduced by any payments previously made pursuant to that Section).

23. SUBJECT TO APPLICABLE LAW.

Any payments made or benefits provided by the Company and/or the Bank to Executive pursuant to this Agreement, or otherwise, and any rights or obligations related to such payments or benefits, are subject to and conditioned upon compliance with applicable law, including but not limited to 12 U.S.C. §§371c, 371c-1 and 12 C.F.R. Part 223 promulgated thereunder, and 12 U.S.C. §1828(k) and 12 C.F.R. Part 359 promulgated thereunder.

24. SECTION 409A COMPLIANCE.

The parties intend that all provisions of this Agreement shall either be exempt from or comply with the requirements of Code Section 409A. For purposes of this Agreement, “termination,” “termination date” and “terminate” when used in the context of termination of employment shall mean a “separation from service” with the Bank and its affiliates (i.e., generally an entity 50% or more of which is owned or controlled by the Bank), as such term is defined in Treasury Regulation Section 1.409A-1(h) (provided, that the reasonably anticipated reduced level of bona fide services, if any, to be performed by Executive after such separation from service shall be less than 50 percent of the average level of bona fide services provided to the Bank and its affiliates by Executive in the immediately preceding 36 month period). Nothing in this Agreement shall be interpreted to permit accelerated payment or further deferral of nonqualified deferred compensation, as defined in Code Section 409A, or any other payment or further deferral in violation of the requirements of Code Section 409A. Executive does not have any right to make any election regarding the time or form of payment due under this Agreement. Expenses and reimbursement of expenses will be paid by the Bank consistent with its generally applicable policies, and in any event no later than the end of the calendar year following the calendar year in which the expenses are incurred. With respect to reimbursements that constitute taxable income to Executive, no such reimbursements or expenses eligible for reimbursement in any calendar year shall in any way affect the expenses eligible for reimbursement in any other calendar year and Executive’s right to reimbursement shall not be subject to liquidation in exchange for any other benefit. No provision of this Agreement shall be operative to the extent that it will result in the imposition of the additional tax described in Code Section 409A(a)(1)(B)(i)(II) and the parties agree to revise the Agreement as necessary to comply with Code Section 409A or an exemption therefrom and fulfill the purpose of the voided provision, or to comply with any available correction program that would eliminate or mitigate potential sanctions under Code Section 409A. No provision of this Agreement shall be interpreted or construed to transfer any liability for failure to comply with the requirements of Code Section 409A from Executive or any other individual to the Bank or any of its affiliates, employees or agents. All taxes associated with payments made to Executive pursuant to this Agreement, including any liability imposed under Code Section 409A, shall be borne by Executive.

25. CERTAIN DEFINED TERMS.

For purposes of this Agreement, the following capitalized terms shall have the meanings given to each below

(a) “Cause.” For purposes of this Agreement, “Cause” shall mean, the Executive’s (i) consistent failure to comply with the rules, procedures or policies of the Bank and its affiliates including, without limitation, any failure to timely report to work at expected work hours, such determination to be made by the Bank in its sole and absolute discretion, (ii) failure to perform the duties assigned by the President of the Bank or the Board in a manner that fully meets expected performance standards, as determined by the Bank in its sole and absolute discretion, (iii) perpetrate an act that constitutes a crime, including without limitation, a felony, misdemeanor, fraud, larceny, embezzlement, misappropriation of funds or other misconduct, which results in pecuniary loss to the Bank or any of its affiliates or that brings the Bank or any of its affiliates into public disrepute, (iv) failure or refusal to perform any of his duties or responsibilities, or breach of his duties or obligations under this Agreement, any such failure, refusal or breach to be determined by the Bank in its sole and absolute discretion, (v) disqualification of the Executive to serve as a senior officer of the Bank by any regulatory agency, (vi) willful malfeasance, misconduct, negligence, or incompetence, (vii) engaging in any material transaction which constitutes self-dealing or a conflict of interest between the Executive and the Bank without prior disclosure of such transaction to the Bank by the Executive and receipt of prior written approval from the Bank, or (viii) use of alcohol or drugs that interferes with the performance of the Executive’s duties or other obligations to the Bank and its affiliates.

(b) “Change-in-Control.” For purposes of this Agreement, a “Change in Control” shall mean the first to occur of any of the following events:

(i)

A change in the composition of the Company’s Board or the Bank’s Board occurring within a rolling two-year period commencing on the Commencement Date and each annual anniversary thereafter, as a result of which fewer than a majority of the directors are Incumbent Directors. “ Incumbent Directors ” refers to the persons who were directors of either the Bank or the Company immediately before the beginning of such two-year period commencing on the Commencement Date; provided that any director who was not a director as of the Commencement Date shall be deemed to be an Incumbent Director if that director was elected to such board of directors by, or on the recommendation of or with the approval of, at least two-thirds (2/3) of the directors who then qualified as Incumbent Directors; and provided further that no director whose initial assumption of office is in connection with an actual or threatened election contest (relating to the election of directors) shall be deemed to be an Incumbent Director;

(ii)

The Board of Directors of the Company or the Bank effect a merger or consolidation of the Company or the Bank with any other corporation or bank, other than a merger or consolidation in which persons constituting a majority of the board of directors of the corporation or the bank resulting from the merger or consolidation are Incumbent Directors; or

(iii)

The Company or the Bank sells to any one person, or more than one person acting as a group (as determined under Code Section 409A) assets of the Company or the Bank that have a total fair market value equal to more than forty percent (40%) of the total gross fair market value of all of the assets of the corporation immediately before such disposition or related dispositions, where “gross fair market value” means the value of the assets of the corporation, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets).

Notwithstanding anything herein to the contrary, this definition of Change in Control will conform to the requirements of Code Section 409A and any provision in this definition inconsistent therewith will be null and void.

(c) “Good Reason.” For purposes of this Agreement, “Good Reason” shall mean the occurrence during the Term of Executive’s employment under this Agreement of any one or more of the following actions or events, or series of actions or events, unless the same shall have been expressly consented to, in advance, by Executive in writing: (A) failure by the Bank’s Board to elect or re-elect or appoint or re-appoint Executive as Executive Vice President and Chief Lending Officer of the Bank, in connection with any annual or other election or appointment by the Bank of its senior officers for an upcoming year or period (the foregoing provisions shall apply equally to the failure by the Bank’s Board to appoint or re-appoint or to elect or re-elect Executive to the position of Executive Vice President and Chief Lending Officer of a successor to the Bank); (B) any material diminution in Executive’s functions, duties or responsibilities with the Bank or its affiliates , the general effect of which would cause Executive’s positions to become of lesser responsibility, importance or scope from the positions and attributes thereof described in Section 1 of this Agreement; (C) relocation of Executive’s principal place of employment to any location more than fifteen (15) miles radius from Executive's principal place of employment on the Commencement Date, unless the distance in miles between Executive’s principal residence and his new principal place of employment following such relocation is less than the distance in miles between Executive’s principal residence and his principal place of employment immediately prior to such relocation; (D) the completion of any liquidation or dissolution of the Bank or the Bank, other than a liquidation or dissolution that is caused by a reorganization that does not affect the status of Executive; or (E) any material breach of this Agreement by the Bank.

26. PERFORMANCE GUARANTEE; SOURCE OF PAYMENTS.

The Company unconditionally agrees to pay and provide to Executive all amounts and benefits due hereunder to Executive, including amounts and benefits specifically required to be paid and provided by the Bank, if such amounts are not timely paid or provided by the Bank, for any reason or no reason. All payments provided in this Agreement shall be timely paid in cash or check from the general funds of the payor.

27. EXECUTIVE REPRESENTATIONS AND WARRANTIES.

Executive expressly represents and warranties that he: (i) is not a party to any non-competition and/or non-solicitation agreement or employment agreement containing non-compete and/or non-solicitation provisions with any other employer or former employer which would in any way restrict Executive’s performance of the duties set forth in this Agreement; (ii) is not subject to any other obligation which would in any way restrict the performance of his duties hereunder; and (iii) will not bring to the Bank during his employment or use in connection with his employment any confidential or proprietary information that he used or had access to by reason of any previous employment that is the property of another employer.

[Signature Page Follows]

SIGNATURES

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

ATTEST:		METROPOLITAN BANK HOLDING CORPORATION (as guarantor of payments under the Agreement)

		/s/ Mark R. DeFazio
Secretary		Mark R. DeFazio President and Chief Executive Officer

		METROPOLITAN COMMERICAL

		/s/ Mark R. DeFazio
Secretary		Mark R. DeFazio President and Chief Executive Officer

WITNESS:		EXECUTIVE:

		/s/Scott Lublin
Secretary		Scott Lublin

Section 2: EX-31.1 (EXHIBIT 31.1)

Exhibit 31.1

Certification of Principal Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002

I, Mark R. DeFazio, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Metropolitan Bank Holding Corp. and Subsidiary;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e):

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the Examining Committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 14, 2018

	/s/ Mark R. DeFazio

	Mark R. DeFazio

	President and Chief Executive Officer

Section 3: EX-31.2 (EXHIBIT 31.2)

Exhibit 31.2

Certification of Principal Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002

I, Anthony J. Fabiano, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Metropolitan Bank Holding Corp. and Subsidiary;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)):

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 14, 2018

	/s/ Anthony Fabiano

	Anthony J. Fabiano

	Executive Vice President and Chief Financial Officer

Section 4: EX-32 (EXHIBIT 32)

Exhibit 32

Certification of Chief Executive Officer and Chief Financial Officer
Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To
Section 906 of The Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of Metropolitan Bank Holding Corp. and Subsidiary (the “Company”) for the period ended June 30, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Mark R. DeFazio, as Chief Executive Officer of the Company, and Anthony J. Fabiano, as Executive Vice President and Chief Financial Officer of the Company, each hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 14, 2018

	/s/ Mark R. DeFazio

	Mark R. DeFazio

	President and Chief Executive Office

	/s/ Anthony J. Fabiano

	Anthony J. Fabiano

	Executive Vice President and Chief Financial Officer