MCBS MetroCity Bankshares Inc

ATLANTA, July 21, 2023 /PRNewswire/ -- MetroCity Bankshares, Inc. ("MetroCity" or the "Company") (NASDAQ: MCBS), holding company for Metro City Bank (the "Bank"), today reported net income of $13.1 million, or $0.51 per diluted share, for the second quarter of 2023, compared to $15.7 million, or $0.62 per diluted share, for the first quarter of 2023, and $16.1 million, or $0.63 per diluted share, for the second quarter of 2022. For the six months ended June 30, 2023, the Company reported net income of $28.8 million, or $1.13 per diluted share, compared to $35.5 million, or $1.38 per diluted share, for the same period in 2022.

Second Quarter 2023 Highlights:

• Annualized return on average assets was 1.55%, compared to 1.87% for the first quarter of 2023 and 2.16% for the second quarter of 2022.
• Annualized return on average equity was 14.87%, compared to 18.09% for the first quarter of 2023 and 20.65% for the second quarter of 2022. Excluding average accumulated other comprehensive income, our return on average equity was 15.50% for the second quarter of 2023, compared to 19.08% for the first quarter of 2023 and 20.90% for the second quarter of 2022.
• Efficiency ratio of 38.8%, compared to 33.1% for the first quarter of 2023 and 37.6% for the second quarter of 2022.
• Total assets increased by $56.1 million, or 1.6%, to $3.48 billion from the previous quarter.
• Total deposits increased by $54.4 million, or 2.1%, to $2.70 billion from the previous quarter.

Year-to-Date 2023 Highlights:

• Return on average assets was 1.71% for the six months ended June 30, 2023, compared to 2.34% for same period in 2022.
• Return on average equity was 16.47% for the six months ended June 30, 2023, compared to 23.67% for same period in 2022. Excluding average accumulated other comprehensive income, our return on average equity was 17.27% for the six months ended June 30, 2023, compared to 23.81% for the same period in 2022.
• Efficiency ratio of 35.8% for the six months ended June 30, 2023, compared to 34.6% for the same period in 2022.

Results of Operations

Net Income

Net income was $13.1 million for the second quarter of 2023, a decrease of $2.6 million, or 16.7%, from $15.7 million for the first quarter of 2023. This decrease was due to a decrease in net interest income of $1.3 million, a decrease in noninterest income of $1.3 million and an increase in noninterest expense of $855,000, offset by a decrease in provision for credit losses of $416,000 and a decrease in income tax expense of $335,000. Net income decreased by $3.0 million, or 18.6%, in the second quarter of 2023 compared to net income of $16.1 million for the second quarter of 2022. This decrease was due to a decrease in net interest income of $5.3 million, offset by an increase in noninterest income of $108,000, a decrease in noninterest expense of $1.6 million, a decrease in income tax expense of $149,000 and a decrease in provision for credit losses of $416,000.

Net income was $28.8 million for the six months ended June 30, 2023, a decrease of $6.7 million, or 18.8%, from $35.5 million for the six months ended June 30, 2022. This decrease was due to a decrease in net interest income of $9.7 million and a decrease in noninterest income of $1.5 million, offset by a decrease in noninterest expense of $3.1 million, a decrease in income tax expense of $906,000 and a decrease in provision for credit losses of $520,000.

Net Interest Income and Net Interest Margin

Interest income totaled $47.5 million for the second quarter of 2023, an increase of $1.5 million, or 3.3%, from the previous quarter, primarily due to a 10 basis points increase in the loan yield and a 73 basis points increase in the investments yield. As compared to the second quarter of 2022, interest income for the second quarter of 2023 increased by $14.5 million, or 43.8%, primarily due to an increase in average loan balances of $408.7 million coupled with a 100 basis points increase in the loan yield.

Interest expense totaled $22.5 million for the second quarter of 2023, an increase of $2.8 million, or 14.1%, from the previous quarter, primarily due to a 40 basis points increase in deposit costs and a 56 basis points increase in borrowing costs. As compared to the second quarter of 2022, interest expense for the second quarter of 2023 increased by $19.7 million, or 702.6%, due to a 333 basis points increase in deposit costs and a 225 basis points increase in borrowing costs coupled with a $291.9 million increase in average interest-bearing deposits and a $124.2 million increase in average borrowings.

The net interest margin for the second quarter of 2023 was 3.10% compared to 3.30% for the previous quarter, a decrease of 20 basis points. The yield on average interest-earning assets for the second quarter of 2023 increased by 13 basis points to 5.90% from 5.77% for the previous quarter, while the cost of average interest-bearing liabilities for the second quarter of 2023 increased by 44 basis points to 3.74% from 3.30% for the previous quarter. Average earning assets decreased by $1.3 million from the previous quarter, due to a decrease in average loans of $25.5 million, offset by an increase in average total investments of $24.2 million. Average interest-bearing liabilities decreased by $9.8 million from the previous quarter as average borrowings decreased by $32.2 million while average interest-bearing deposits increased by $22.3 million.

As compared to the same period in 2022, the net interest margin for the second quarter of 2023 decreased by 116 basis points to 3.10% from 4.26%, primarily due to a 318 basis point increase in the cost of average interest-bearing liabilities of $2.42 billion, offset by a 125 basis point increase in the yield on average interest-earning assets of $3.23 billion. Average earning assets for the second quarter of 2023 increased by $381.5 million from the second quarter of 2022, primarily due to a $408.7 million increase in average loans, offset by a $24.0 million decrease in average interest-earning cash accounts. Average interest-bearing liabilities for the second quarter of 2023 increased by $416.1 million from the second quarter of 2022, driven by an increase in average interest-bearing deposits of $291.9 million and an increase in average borrowings of $124.2 million.  

Noninterest Income

Noninterest income for the second quarter of 2023 was $4.8 million, a decrease of $1.3 million, or 20.9%, from the first quarter of 2023, primarily due to lower gains on sale of Small Business Administration ("SBA") loans, SBA servicing income and other income, partially offset by higher mortgage loan fees. SBA loan sales totaled $30.3 million (sales premium of 5.24%) during the second quarter of 2023 compared to $36.5 million (sales premium of 6.80%) during the first quarter of 2023. Mortgage loan originations totaled $72.8 million during the second quarter 2023 compared to $43.3 million during the first quarter of 2023. During the second quarter of 2023, we recorded a $255,000 fair value adjustment gain on our SBA servicing asset which had a $0.01 per share impact on our diluted earnings per share for the quarter.

Compared to the same period in 2022, noninterest income for the second quarter of 2023 increased slightly by $108,000, or 2.3%, primarily due to higher gains on sale of SBA loans and SBA servicing income, partially offset by lower mortgage loan fees as a result of lower volume and lower gains on sale of mortgage loans, as no mortgage loans were sold during the second quarter of 2023.

Noninterest income for the six months ended June 30, 2023 totaled $10.8 million, a decrease of $1.5 million, or 12.4%, from the six month ended June 30, 2022, primarily due to lower mortgage loan fees from lower volume and lower gains on sale of mortgage loans as no mortgage loans were sold during the first half of 2023, offset by increases in gains on sale of SBA loans, SBA servicing income and other income.

Noninterest Expense

Noninterest expense for the second quarter of 2023 totaled $11.5 million, an increase of $855,000, or 8.0%, from $10.7 million for the first quarter of 2023. This increase was primarily attributable to an increase in salaries and employee benefits, FDIC deposit insurance premiums and fair value losses on our equity securities, partially offset by lower occupancy and equipment expense and loan related expenses. Compared to the second quarter of 2022, noninterest expense during the second quarter of 2023 decreased by $1.6 million, or 12.1%, primarily due to lower salaries and employee benefits and loan related expenses.

Noninterest expense for the six months ended June 30, 2023 totaled $22.2 million, a decrease of $3.1 million, or 12.2%, from $25.3 million for the six months ended June 30, 2022. This decrease was primarily attributable to a decrease in salaries and employee benefits partially due to lower commissions from lower loan volume, as well as lower loan and other real estate owned related expenses and fair value losses on our equity securities.

The Company's efficiency ratio was 38.8% for the second quarter of 2023 compared to 33.1% and 37.6% for the first quarter of 2023 and second quarter of 2022, respectively. For the six months ended June 30, 2023, the efficiency ratio was 35.8% compared to 34.6% for the same period in 2022.

Income Tax Expense

The Company's effective tax rate for the second quarter of 2023 was 29.6%, compared to 27.1% for the first quarter of 2023 and 26.0% for the second quarter of 2022. The Company's effective tax rate for the six months ended June 30, 2023 was 28.2% compared to 25.6% for the same period in 2022.

Balance Sheet

Total Assets

Total assets were $3.48 billion at June 30, 2023, an increase of $56.1 million, or 1.6%, from $3.42 billion at March 31, 2023, and an increase of $307.2 million, or 9.7%, from $3.17 billion at June 30, 2022. The $56.1 million increase in total assets at June 30, 2023 compared to March 31, 2023 was primarily due to increases in cash and cash equivalents of $38.7 million, loans of $8.7 million and other assets of $9.1 million, partially offset by a decrease in Federal Home Loan Bank stock of $2.1 million. The $307.2 million increase in total assets at June 30, 2023 compared to June 30, 2022 was primarily due to increases in loans of $250.7 million, cash and cash equivalents of $39.6 million and other assets of $20.5 million, partially offset by a $3.6 million decrease in mortgage servicing rights and a $2.7 million decrease in securities available for sale. 

Our investment securities portfolio made up only 0.84% of our total assets at June 30, 2023 compared to 0.87% and 1.02% at March 31, 2023 and June 30, 2022, respectively.

Loans

Loans held for investment were $3.02 billion at June 30, 2023, an increase of $8.7 million, or 0.3%, compared to $3.01 billion at March 31, 2023, and an increase of $250.7 million, or 9.1%, compared to $2.77 billion at June 30, 2022. The increase in loans at June 30, 2023 compared to March 31, 2023 was primarily due to a $17.3 million increase in commercial and industrial loans, a $3.1 million increase in residential mortgage loans and a $2.6 million increase in construction and development loans, offset by a $14.8 million decrease in commercial real estate loans. There were no loans classified as held for sale at June 30, 2023, March 31, 2023 or June 30, 2022.

Deposits

Total deposits were $2.70 billion at June 30, 2023, an increase of $54.4 million, or 2.1%, compared to total deposits of $2.64 billion at March 31, 2023, and an increase of $301.5 million, or 12.6%, compared to total deposits of $2.40 billion at June 30, 2022. The increase in total deposits at June 30, 2023 compared to March 31, 2023 was due to a $80.9 million increase in money market accounts and a $42.4 million increase in time deposits, offset by a $64.4 million decrease in interest-bearing demand deposits, a $2.5 million decrease in savings accounts and a $2.0 million decrease in noninterest-bearing deposits.

Noninterest-bearing deposits were $575.3 million at June 30, 2023, compared to $577.3 million at March 31, 2023 and $620.2 million at June 30, 2022. Noninterest-bearing deposits constituted 21.3% of total deposits at June 30, 2023, compared to 21.8% at March 31, 2023 and 25.9% at June 30, 2022. Interest-bearing deposits were $2.12 billion at June 30, 2023, compared to $2.07 billion at March 31, 2023 and $1.78 billion at June 30, 2022. Interest-bearing deposits constituted 78.7% of total deposits at June 30, 2023, compared to 78.2% at March 31, 2023 and 74.1% at June 30, 2022.

Uninsured deposits were 30.7% of total deposits at June 30, 2023, compared to 31.9% and 28.5% at March 31, 2023 and June 30, 2022, respectively. As of June 30, 2023, we had $1.19 billion of available borrowing capacity at the Federal Home Loan Bank ($702.5 million), Federal Reserve Discount Window ($444.6 million) and various other financial institutions (fed fund lines totaling $47.5 million).

Asset Quality

The Company recorded a credit provision for credit losses of $416,000 during the second quarter of 2023, compared to no provision for credit losses recorded during the first quarter of 2023 and second quarter of 2022. The credit provision recorded during the second quarter of 2023 was due to the decrease in reserves allocated to individually analyzed loans, as well as a decrease in the general reserves allocated to our residential mortgage loan portfolio as the outlook for the national housing price index improved during the second quarter 2023. Annualized net charge-offs to average loans for the second quarter of 2023 was 0.06%, compared to a net recovery of 0.00% for both the first quarter of 2023 and second quarter of 2022.

Nonperforming assets totaled $23.6 million, or 0.68% of total assets, at June 30, 2023, an increase of $4.1 million from $19.5 million, or 0.57% of total assets, at March 31, 2023, and a decrease of $10.4 million from $34.0 million, or 1.07% of total assets, at June 30, 2022. The increase in nonperforming assets at June 30, 2023 compared to March 31, 2023 was primarily due to a $4.0 million increase in nonaccrual loans and a $235,000 increase in other real estate owned.  

Allowance for credit losses as a percentage of total loans was 0.60% at June 30, 2023, compared to 0.63% at March 31, 2023 and 0.60% at June 30, 2022. Allowance for credit losses as a percentage of nonperforming loans was 79.88% at June 30, 2023, compared to 101.22% and 54.79% at March 31, 2023 and June 30, 2022, 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 20 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; potential impacts of the recent adverse developments in the banking industry highlighted by high-profile bank failures, including impacts on customer confidence, deposit outflows, liquidity and the regulatory response thereto; risks arising from media coverage of the banking industry; risks arising from perceived instability in the banking sector; 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. 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.

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