MCBS MetroCity Bankshares Inc

ATLANTA, Jan. 23, 2023 /PRNewswire/ -- MetroCity Bankshares, Inc. ("MetroCity" or the "Company") (NASDAQ: MCBS), holding company for Metro City Bank (the "Bank"), today reported net income of $13.2 million, or $0.52 per diluted share, for the fourth quarter of 2022, compared to $16.9 million, or $0.66 per diluted share, for the third quarter of 2022, and $17.4 million, or $0.68 per diluted share, for the fourth quarter of 2021. For the year ended December 21, 2022, the Company reported net income of $65.6 million, or $2.55 per diluted share, compared to $61.7 million, or $2.39 per diluted share, for the year ended December 31, 2021.

Fourth Quarter 2022 Highlights:

• Annualized return on average assets was 1.54%, compared to 2.07% for the third quarter of 2022 and 2.33% for the fourth quarter of 2021.
• Annualized return on average equity was 14.97%, compared to 20.56% for the third quarter of 2022 and 24.80% for the fourth quarter of 2021.
• Efficiency ratio of 40.3%, compared to 36.4% for the third quarter of 2022 and 33.7% for the fourth quarter of 2021.
• Total assets increased by $78.1 million, or 2.3%, to $3.43 billion from the previous quarter.
• Total loans increased by $77.4 million, or 2.6%, to $3.06 billion from the previous quarter.
• Total deposits increased by $96.0 million, or 3.7%, to $2.67 billion from the previous quarter.

Full Year 2022 Highlights:

• Return on average assets was 2.06%, compared to 2.51% for 2021.
• Return on average equity was 20.48%, compared to 23.55% for 2021.
• Efficiency ratio of 36.3%, compared to 35.1% for 2021.
• Total assets increased by $320.4 million, or 10.3%, to $3.43 billion from $3.11 billion at December 31, 2021.
• Total loans increased by $550.6 million, or 22.0%, to $3.06 billion from $2.51 billion at December 31, 2021.
• Total deposits increased by $403.8 million, or 17.8%, to $2.67 billion from $2.26 billion at December 31, 2021.

Results of Operations

Net Income

Net income was $13.2 million for the fourth quarter of 2022, a decrease of $3.7 million, or 22.0%, from $16.9 million for the third quarter of 2022. This decrease was primarily due to a decrease in net interest income of $838,000 and a decrease in noninterest income of $3.3 million, offset by a decrease in noninterest expense of $309,000 and a decrease in income tax expense of $649,000. Net income decreased by $4.3 million, or 24.5%, in the fourth quarter of 2022 compared to net income of $17.4 million for the fourth quarter of 2021. This decrease was due to a decrease in net interest income of $671,000 and a decrease in noninterest income of $5.7 million, offset by a decrease in provision for loan losses of $1.7 million, a decrease in noninterest expense of $133,000 and a decrease in provision for income taxes of $247,000.

Net income was $65.6 million for the year ended December 31, 2022, an increase of $3.9 million, or 6.3%, from $61.7 million for the year ended December 31, 2021. This increase was due to an increase in net interest income of $15.4 million and a decrease in provision for loan losses of $9.7 million, offset by a decrease in noninterest income of $14.6 million, an increase in noninterest expense of $1.9 million and an increase in provision for taxes of $4.7 million.

Net Interest Income and Net Interest Margin

Interest income totaled $43.9 million for the fourth quarter of 2022, an increase of $5.6 million, or 14.7%, from the previous quarter, primarily due to a $124.2 million increase in average loan balances coupled with a 39 basis points increase in the loan yield. As compared to the fourth quarter of 2021, interest income for the fourth quarter of 2022 increased by $13.1 million, or 42.4%, primarily due to an increase in average loan balances of $562.7 million coupled with a 57 basis points increase in the loan yield.

Interest expense totaled $15.0 million for the fourth quarter of 2022, an increase of $6.5 million, or 76.2%, from the previous quarter, primarily due to a 113 basis points increase in deposit costs and a 26 basis points increase in borrowing costs coupled with a $118.7 million increase in average interest-bearing deposits and a $27.7 million increase in average borrowings. As compared to the fourth quarter of 2021, interest expense for the fourth quarter of 2022 increased by $13.8 million, or 1,113.2%, due to a 234 basis points increase in deposit costs and a 175 basis points increase in borrowing costs coupled with a $419.1 million increase in average interest-bearing deposits.

The net interest margin for the fourth quarter of 2022 was 3.58% compared to 3.84% for the previous quarter, a decrease of 26 basis points. The yield on average interest-earning assets for the fourth quarter of 2022 increased by 49 basis points to 5.43% from 4.94% for the previous quarter, while the cost of average interest-bearing liabilities for the fourth quarter of 2022 increased by 98 basis points to 2.49% from 1.51% for the previous quarter. Average earning assets increased by $130.9 million from the previous quarter, primarily due to an increase in average loans of $124.2 million and an increase in average total investments of $6.7 million. Average interest-bearing liabilities increased by $146.4 million from the previous quarter as average interest-bearing deposits increased by $118.7 million and average borrowings increased by $27.7 million.

As compared to the same period in 2021, the net interest margin for the fourth quarter of 2022 decreased by 57 basis points to 3.58% from 4.15%, primarily due to a 225 basis point increase in the cost of average interest-bearing liabilities of $2.39 billion, offset by a 111 basis point increase in the yield on average interest-earning assets of $3.21 billion. Average earning assets for the fourth quarter of 2022 increased by $376.5 million from the fourth quarter of 2021, primarily due to a $562.7 million increase in average loans, offset by a $186.0 million decrease in average interest-earning cash accounts. Average interest-bearing liabilities for the fourth quarter of 2022 increased by $357.1 million from the fourth quarter of 2021, driven by an increase in average interest-bearing deposits of $419.1 million, offset by a decrease in average borrowings of $62.0 million.

Noninterest Income

Noninterest income for the fourth quarter of 2022 was $1.8 million, a decrease of $3.3 million, or 64.8%, from the third quarter of 2022, primarily due to lower mortgage loan fees, lower gains on sale of Small Business Administration ("SBA") loans and a significant decrease in SBA servicing income. Mortgage loan originations totaled $88.0 million during the fourth quarter 2022 compared to $255.7 million during the third quarter of 2022. During the fourth quarter of 2022, we recorded a $1.2 million fair value adjustment charge on our SBA servicing asset which had a $0.04 per share impact on our diluted earnings per share for the quarter.

Compared to the same period in 2021, noninterest income for the fourth quarter of 2022 decreased by $5.7 million, or 76.1%, primarily due to much lower gains on sale of SBA loans, mortgage loan fees and mortgage and SBA servicing income.

Noninterest income for the year ended December 31, 2022 totaled $19.2 million, a decrease of $14.6 million, or 43.2%, from the year ended December 31, 2021, primarily due to lower mortgage loan fees from lower volume, gains on sale of SBA loans and SBA servicing income, offset by increases in gains on sale of mortgage loans, service charges on deposit accounts and other income. Beginning in the second quarter of 2022, we elected to stop selling the guaranteed portion of our SBA loans since the sales premiums offered by third party investors had significantly declined compared to prior year. As of December 31, 2022, approximately $137.8 million of the $299.3 million of SBA loan balances outstanding on our books had SBA guarantees. During the year ended December 31, 2022, we also recorded a $3.1 million fair value adjustment charge on our SBA servicing asset compared to a $619,000 fair value gain during the year ended December 31, 2021. Mortgage loan originations totaled $833.6 million during the year ended December 31, 2022 compared to $1.20 billion during the year ended December 31, 2021. Mortgage loan sales totaled $94.9 million during the year ended December 31, 2022 compared to no mortgage loan sales during the year ended December 31, 2021.

Noninterest Expense

Noninterest expense for the fourth quarter of 2022 totaled $12.4 million, a decrease of $309,000, or 2.4%, from $12.7 million for the third quarter of 2022. This decrease was primarily attributable to lower commissions from lower loan volume and lower loan and other real estate owned related expenses, partially offset by higher employee salaries and benefits. Compared to the fourth quarter of 2021, noninterest expense during the fourth quarter of 2022 decreased by $133,000, or 1.1%, primarily due to lower commissions, FDIC deposit insurance premiums, and loan related expenses, partially offset by higher employee salaries and benefits.

Noninterest expense for the year ended December 31, 2022 totaled $50.4 million, an increase of $1.9 million, or 4.0%, from $48.4 million for the year ended December 31, 2021. This increase was primarily attributable to higher employee salaries and benefits, FDIC deposit insurance premiums, professional fees, communication expenses and fair value losses on our equity investments, offset by lower commissions due to lower loan volume, occupancy and equipment expenses, and loan and other real estate owned related expenses.

The Company's efficiency ratio was 40.3% for the fourth quarter of 2022 compared to 36.4% and 33.7% for the third quarter of 2022 and fourth quarter of 2021, respectively. For the year ended December 31, 2022, the efficiency ratio was 36.3% compared with 35.1% for the year ended December 31, 2021.

Income Tax Expense

The Company's effective tax rate for the fourth quarter of 2022 was 32.6%, compared to 29.3% for the third quarter of 2022 and 27.5% for the fourth quarter of 2021. The effective tax rate for the year ended December 31, 2022 was 28.1% compared to 25.3% for the year ended December 31, 2021. The elevated effective tax rate during the fourth quarter of 2022, as well as the year ended December 31, 2022, was due to the re-allocation of state income tax apportionment schedules for prior year's tax returns.

Balance Sheet

Total Assets

Total assets were $3.43 billion at December 31, 2022, an increase of $78.1 million, or 2.3%, from $3.35 billion at September 30, 2022, and an increase of $320.4 million, or 10.3%, from $3.11 billion at December 31, 2021. The $78.1 million increase in total assets at December 31, 2022 compared to September 30, 2022 was primarily due to increases in loans of $77.4 million and federal funds sold of $12.9 million, partially offset by a decrease in cash and due from banks of $13.1 million. The $320.4 million increase in total assets at December 31, 2022 compared to December 31, 2021 was primarily due to increases in loans of $550.6 million, federal funds sold of $19.7 million, bank owned life insurance of $9.7 million and other assets of $32.4 million, partially offset by a $281.6 million decrease in cash and due from banks. 

Loans

Loans held for investment were $3.06 billion at December 31, 2022, an increase of $77.4 million, or 2.6%, compared to $2.98 billion at September 30, 2022, and an increase of $550.6 million, or 22.0%, compared to $2.51 billion at December 31, 2021. The increase in loans at December 31, 2022 compared to September 30, 2022 was primarily due to a $48.6 million increase in commercial real estate loans, a $32.2 million increase in residential mortgages and a $480,000 increase in commercial and industrial loans, offset by a $3.5 million decrease in construction and development loans. Included in commercial and industrial loans are PPP loans totaling $713,000 as of December 31, 2022. PPP loans totaled $1.6 million as of September 30, 2022 and $31.0 million as of December 31, 2021. There were no loans classified as held for sale at December 31, 2022, September 30, 2022 or December 31, 2021.

Deposits

Total deposits were $2.67 billion at December 31, 2022, an increase of $96.0 million, or 3.7%, compared to total deposits of $2.57 billion at September 30, 2022, and an increase of $403.8 million, or 17.8%, compared to total deposits of $2.26 billion at December 31, 2021. The increase in total deposits at December 31, 2022 compared to September 30, 2022 was due to a $203.5 million increase in time deposits, a $22.3 million increase in interest-bearing demand deposits and a $9.7 million increase in noninterest-bearing deposits, offset by a $136.4 million decrease in money market accounts and a $3.2 million decrease in savings accounts.

Noninterest-bearing deposits were $612.0 million at December 31, 2022, compared to $602.2 million at September 30, 2022 and $592.4 million at December 31, 2021. Noninterest-bearing deposits constituted 22.9% of total deposits at December 31, 2022, compared to 23.4% at September 30, 2022 and 26.2% at December 31, 2021. Interest-bearing deposits were $2.05 billion at December 31, 2022, compared to $1.97 billion at September 30, 2022 and $1.67 billion at December 31, 2021. Interest-bearing deposits constituted 77.1% of total deposits at December 31, 2022, compared to 76.6% at September 30, 2022 and 73.8% at December 31, 2021.

Asset Quality

The Company recorded a credit provision for loan losses of $1.2 million during the fourth quarter of 2022, compared to a $1.7 million credit provision recorded during the third quarter of 2022 and a $546,000 provision expense recorded during the fourth quarter of 2021. The credit provision recorded during the fourth quarter of 2022 was due to the continued release of additional reserves allocated for the uncertainties in our loan portfolio caused by the ongoing COVID-19 pandemic. Annualized net charge-offs to average loans for the fourth quarter of 2022 was a net recovery of 0.01%, compared 0.00% for the third quarter of 2022 and net charge-offs of 0.01% for the fourth quarter of 2021. The Company implemented the provisions of the current expected credit losses accounting standard issued by the Financial Accounting Standards Board in the Accounting Standards Update No. 2016-13 on January 1, 2023. The allowance for loan losses was accounted for under the incurred loss model as of December 31, 2022.

Nonperforming assets totaled $24.5 million, or 0.71% of total assets, at December 31, 2022, a decrease of $8.0 million from $32.5 million, or 0.97% of total assets, at September 30, 2022, and an increase of $9.1 million from $15.4 million, or 0.50% of total assets, at December 31, 2021. The decrease in nonperforming assets at December 31, 2022 compared to September 30, 2022 was due to a $7.6 million decrease in nonaccrual loans and a $518,000 decrease in accruing troubled debt restructurings, offset by a $180,000 increase in loans past due ninety days and still accruing.

Allowance for loan losses as a percentage of total loans was 0.45% at December 31, 2022, compared to 0.50% at September 30, 2022 and 0.67% at December 31, 2021. Allowance for loan losses as a percentage of nonperforming loans was 68.88% at December 31, 2022, compared to 53.25% and 143.69% at September 30, 2022 and December 31, 2021, respectively.

About MetroCity Bankshares, Inc.

MetroCity Bankshares, Inc. is a Georgia corporation and a registered bank holding company for its wholly-owned banking subsidiary, Metro City Bank, which is headquartered in the Atlanta, Georgia metropolitan area. Founded in 2006, Metro City Bank currently operates 19 full-service branch locations in multi-ethnic communities in Alabama, Florida, Georgia, New York, New Jersey, Texas and Virginia. To learn more about Metro City Bank, visit www.metrocitybank.bank.

Forward-Looking Statements

Statements in this press release regarding future events and our expectations and beliefs about our future financial performance and financial condition, as well as trends in our business and markets, constitute "forward-looking statements" within the meaning of, and subject to the protections of, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are not historical in nature and may be identified by references to a future period or periods by the use of the words "believe," "expect," "anticipate," "intend," "plan," "estimate," "project," "outlook," or words of similar meaning, or future or conditional verbs such as "will," "would," "should," "could," or "may." The forward-looking statements in this press release should not be relied on because they are based on current information and on assumptions that we make about future events and circumstances that are subject to a number of known and unknown risks and uncertainties that are often difficult to predict and beyond our control. As a result of those risks and uncertainties, and other factors, our actual financial results in the future could differ, possibly materially, from those expressed in or implied by the forward-looking statements contained in this press release and could cause us to make changes to our future plans. Factors that might cause such differences include, but are not limited to: the impact of current and future economic conditions, particularly those affecting the financial services industry, including the effects of declines in the real estate market, high unemployment rates, inflationary pressures, elevated interest rates and slowdowns in economic growth, as well as the financial stress on borrowers as a result of the foregoing; the impact of the ongoing COVID-19 pandemic and related variants on the Company's assets, business, cash flows, financial condition, liquidity, prospects and results of operations; changes in the interest rate environment, including changes to the federal funds rate; changes in prices, values and sales volumes of residential and commercial real estate; developments in our mortgage banking business, including loan modifications, general demand, and the effects of judicial or regulatory requirements or guidance; competition in our markets that may result in increased funding costs or reduced earning assets yields, thus reducing margins and net interest income; interest rate fluctuations, which could have an adverse effect on the Company's profitability; legislation or regulatory changes which could adversely affect the ability of the consolidated Company to conduct business combinations or new operations; changes in tax laws; significant turbulence or a disruption in the capital or financial markets and the effect of a fall in stock market prices on our investment securities; the effects of war or other conflicts including the impacts related to or resulting from Russia's military action in Ukraine; and adverse results from current or future litigation, regulatory examinations or other legal and/or regulatory actions, including as a result of the Company's participation in and execution of government programs related to the ongoing COVID-19 pandemic and related variants. Therefore, the Company can give no assurance that the results contemplated in the forward-looking statements will be realized. Additional information regarding these and other risks and uncertainties to which our business and future financial performance are subject is contained in the sections titled "Cautionary Note Regarding Forward-Looking Statements" and "Risk Factors" in the Company's most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q on file with the U.S. Securities and Exchange Commission (the "SEC"), and in other documents that we file with the SEC from time to time, which are available on the SEC's website, http://www.sec.gov. In addition, our actual financial results in the future may differ from those currently expected due to additional risks and uncertainties of which we are not currently aware or which we do not currently view as, but in the future may become, material to our business or operating results. Due to these and other possible uncertainties and risks, readers are cautioned not to place undue reliance on the forward-looking statements contained in this press release or to make predictions based solely on historical financial performance. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law. All forward-looking statements, express or implied, included in this press release are qualified in their entirety by this cautionary statement.