US Metro Bancorp Strengthens Capital Structure with $31.9 Million Subordinated Debt Offering and Redemption of $16 Million Note
US Metro Bancorp (OTCQX: USMT), the parent holding company of US Metro Bank, has taken a significant step to reinforce its capital position and support future growth by completing a private placement of $31.9 million in subordinated debt. The transaction, finalized on October 31, 2025, marks an important milestone in the company’s ongoing efforts to manage funding costs, enhance capital flexibility, and position the bank for continued expansion across its core markets.
The newly issued notes carry a fixed interest rate of 6.00% per year and mature on October 31, 2028. Interest will be paid quarterly. The proceeds from this issuance will be used for general corporate purposes, with emphasis on supporting organic growth and optimizing the company’s capital stack. Specifically, the proceeds will allow US Metro Bancorp to retire a prior series of subordinated notes with less favorable terms.
In conjunction with the new capital raise, US Metro Bancorp also announced its intention to redeem $16.0 million of subordinated notes issued previously, which bear a 5.65% fixed-to-floating interest rate structure. These notes were scheduled to transition into their floating rate period beginning November 1, 2025—meaning the cost of carrying that debt was expected to increase in line with prevailing market interest rate trends. By electing to redeem the notes on November 7, 2025, the company has taken a proactive approach to reduce exposure to rising interest expenses.
Janney Montgomery Scott LLC served as the financial advisor for the offering, supporting the structuring and successful placement of the new subordinated debt.
Strengthening Balance Sheet Flexibility in a Rising Rate Environment
The move to replace floating-rate debt with fixed-rate subordinated notes comes at a time when financial institutions across the country continue to navigate a dynamic interest rate landscape. With benchmark interest rates elevated, many banks face pressure on funding costs and net interest margins. By securing long-term, fixed-rate capital, US Metro Bancorp is taking steps to stabilize financing costs and give itself predictable balance sheet flexibility over the next several years.
US Metro Bancorp CEO Dong Il Kim emphasized the importance of this transaction as part of a disciplined financial strategy. “We are pleased with the results of our second subordinated debt capital raise this year. This capital raise allows US Metro Bancorp to refinance higher floating rate debt and supports the continued growth of the Bank,” Kim said. His comments underscore the broader intent behind the move—to strategically align the company’s capital structure with its long-term expansion objectives.
For banks, subordinated debt is frequently used as a tool to bolster Tier 2 regulatory capital, providing a means to support additional lending, absorb potential credit losses, and pursue growth opportunities. The fixed rate component of this issuance gives the company greater predictability in its capital planning, particularly at a time of fluctuating economic conditions.
A Growing Full-Service Commercial Bank
US Metro Bank, a California-chartered commercial bank headquartered in Garden Grove, has been serving clients since 2006. Over the years, the bank has built a reputation for providing comprehensive financial solutions tailored to commercial customers, entrepreneurs, real estate investors, and small to mid-sized businesses. The bank offers a broad range of deposit products and commercial lending options, including commercial real estate, commercial and industrial loans, Small Business Administration (SBA) loans, United States Department of Agriculture (USDA) loans, and mortgage products.
Because many of its loan offerings are oriented toward business borrowers and real estate investors, maintaining adequate capital reserves is essential to supporting continued loan portfolio growth. The additional capital from the recent subordinated debt issuance positions the bank to continue expanding its lending activities in strategic markets—particularly those with strong business and property investment demand.
US Metro Bank has focused its growth strategy on relationship banking—emphasizing strong customer service, community presence, and flexibility in underwriting. This approach has helped the bank build durable customer relationships and a stable deposit base, both of which have become increasingly valuable amid the shifting economic climate and competitive banking landscape in the region.
Importance of Capital Strategy in the Current Banking Climate
The banking industry continues to operate under an environment marked by credit tightening, evolving regulatory expectations, and economic uncertainty. Institutions that demonstrate thoughtful, disciplined capital planning are often better positioned to navigate loan demand cycles, maintain liquidity, and adapt to changing interest rate trends.
By replacing higher-cost floating rate debt with fixed-rate capital, US Metro Bancorp has taken steps to mitigate future cost pressures. This move helps preserve the bank’s net interest margin—one of the most critical profit metrics for any commercial bank. Furthermore, the maturity schedule of the newly issued notes allows the company to plan long-term investment and lending strategies without facing near-term refinancing risk.
The redemption of the older $16.0 million subordinated notes is also notable. Once those notes transitioned into their floating-rate period, interest expenses could have fluctuated significantly depending on broader rate trends. Refinancing the debt before this transition reflects proactive financial management—mitigating risk rather than reacting to it.
Like all financial institutions, US Metro Bancorp faces a range of risks and uncertainties. The company acknowledged in its announcement that future performance could be affected by fluctuations in interest rates, economic conditions within its geographic markets, competitive pressures within the banking sector, and its ability to attract and retain skilled personnel. The company also emphasized that maintaining strong customer and referral relationships remains critical to sustaining its business growth.
These considerations align with broader economic realities faced nationwide. Commercial lenders continue to balance lending opportunities with credit risk assessments, especially in commercial real estate sectors where valuations, occupancy rates, and refinancing conditions vary by region. Maintaining adequate capital significantly helps banks absorb credit risk fluctuations.
The successful completion of the $31.9 million subordinated debt placement demonstrates investor confidence in US Metro Bancorp’s financial performance, growth strategy, and leadership direction. By securing fixed-rate capital and retiring higher-cost debt, the company has strengthened its financial foundation and enhanced its ability to support the commercial banking needs of its customers.
As US Metro Bank continues to expand its lending capabilities and deepen customer relationships across Southern California and beyond, the strengthened capital position is expected to play an important role in supporting sustainable growth.
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