MCBS MetroCity Bankshares Inc

ATLANTA, July 19, 2024 /PRNewswire/ -- MetroCity Bankshares, Inc. ("MetroCity" or the "Company") (NASDAQ: MCBS), holding company for Metro City Bank (the "Bank"), today reported net income of $16.9 million, or $0.66 per diluted share, for the second quarter of 2024, compared to $14.6 million, or $0.57 per diluted share, for the first quarter of 2024, and $13.1 million, or $0.51 per diluted share, for the second quarter of 2023. For the six months ended June 30, 2024, the Company reported net income of $31.6 million, or $1.24 per diluted share, compared to $28.8 million, or $1.13 per diluted share, for the same period in 2023. 

Second Quarter 2024 Highlights:

• Annualized return on average assets was 1.89%, compared to 1.65% for the first quarter of 2024 and 1.55% for the second quarter of 2023.
• Annualized return on average equity was 17.10%, compared to 15.41% for the first quarter of 2024 and 14.87% for the second quarter of 2023. Excluding average accumulated other comprehensive income, our return on average equity was 18.26% for the second quarter of 2024, compared to 16.27% for the first quarter of 2024 and 15.50% for the second quarter of 2023.
• Efficiency ratio of 35.9%, compared to 37.9% for the first quarter of 2024 and 38.7% for the second quarter of 2023.
• Net interest margin increased by 42 basis points to 3.66% from 3.24% for the previous quarter.

Year-to-Date 2024 Highlights:

• Return on average assets was 1.77% for the six months ended June 30, 2024, compared to 1.71% for the same period in 2023.
• Return on average equity was 16.27% for the six months ended June 30, 2024, compared to 16.47% for the same period in 2023. Excluding average accumulated other comprehensive income, our return on average equity was 17.28% for the six months ended June 30, 2024, compared to 17.27% for the same period in 2023.
• Efficiency ratio of 36.8% for the six months ended June 30, 2024, compared to 35.9% for the same period in 2023.
• Net interest margin increased by 25 basis points to 3.45% from 3.20% for the same period in 2023.

Results of Operations

Net Income

Net income was $16.9 million for the second quarter of 2024, an increase of $2.3 million, or 15.8%, from $14.6 million for the first quarter of 2024. This increase was primarily due to an increase in interest income of $1.8 million and a decrease in interest expense of $1.9 million, offset by an increase in noninterest expense of $671,000 and an increase in income tax expense of $629,000. Net income increased by $3.8 million, or 29.2%, in the second quarter of 2024 compared to net income of $13.1 million for the second quarter of 2023. This increase was due to an increase in net interest income of $5.7 million and an increase in noninterest income of $868,000, offset by an increase in income tax expense of $925,000, an increase in noninterest expense of $1.6 million and an increase in provision for credit losses of $288,000.

Net income was $31.6 million for the six months ended June 30, 2024, an increase of $2.7 million, or 9.5%, from $28.8 million for the six months ended June 30, 2023. This increase was due to an increase in net interest income of $6.6 million and an increase in noninterest income of $292,000, offset by an increase in noninterest expense of $3.1 million, an increase in income tax expense of $887,000 and an increase in in provision for credit losses of $148,000.

Net Interest Income and Net Interest Margin

Interest income totaled $54.1 million for the second quarter of 2024, an increase of $1.8 million, or 3.3%, from the previous quarter, primarily due to a 122 basis points and $51.1 million increase in the fed funds sold and interest-bearing cash yield and balance, as well as a 12 basis points increase in the loan yield. As compared to the second quarter of 2023, interest income for the second quarter of 2024 increased by $6.6 million, or 14.0%, primarily due to a 51 basis points increase in the loan yield coupled with a $119.9 million increase in average loan balances, as well as a 109 basis points increase in the total investment yield.

Interest expense totaled $23.4 million for the second quarter of 2024, a decrease of $1.9 million, or 7.4%, from the previous quarter, primarily due to a 34 basis points decrease in deposit costs coupled with a $53.1 million decrease in average deposit balances, offset by a 28 basis points increase in borrowing costs and $25.4 million increase in the average borrowing balance. As compared to the second quarter of 2023, interest expense for the second quarter of 2024 increased by $884,000 or 3.9%, primarily due to a $139.8 million increase in deposit balances and a 106 basis points increase in borrowing costs. The Company currently has interest rate derivative agreements totaling $850.0 million that are designated as cash flow hedges of our deposit accounts indexed to the Effective Federal Funds Rate (currently 5.33%). The weighted average pay rate for these interest rate derivatives is 2.29%. During the second quarter of 2024, we recorded a credit to interest expense of $6.5 million from the benefit received on these interest rate derivatives compared to a benefit of $4.1 million and $857,000 recorded during the first quarter of 2024 and the second quarter of 2023, respectively.

The net interest margin for the second quarter of 2024 was 3.66% compared to 3.24% for the previous quarter, an increase of 42 basis points. The yield on average interest-earning assets for the second quarter of 2024 increased by 18 basis points to 6.45% from 6.27% for the previous quarter, while the cost of average interest-bearing liabilities for the second quarter of 2024 decreased by 26 basis points to 3.68% from 3.94% for the previous quarter. Average earning assets increased by $13.8 million from the previous quarter, due to an increase in average total investments of $50.9 million, offset by a decrease in average loans of $37.1 million. Average interest-bearing liabilities decreased by $27.7 million from the previous quarter as average interest-bearing deposits decreased by $53.1 million while average borrowings increased by $25.4 million.

As compared to the same period in 2023, the net interest margin for the second quarter of 2024 increased by 56 basis points to 3.66% from 3.10%, primarily due to a 55 basis points increase in the yield on average interest-earning assets of $3.37 billion and a six basis point decrease in the cost of average interest-bearing liabilities of $2.55 billion. Average earning assets for the second quarter of 2024 increased by $144.9 million from the second quarter of 2023, due to a $119.9 million increase in average loans and a $24.9 million decrease in average total investments. Average interest-bearing liabilities for the second quarter of 2024 increased by $138.0 million from the second quarter of 2023, driven by an increase in average interest-bearing deposits of $139.8 million, offset by a decrease in average borrowings of $1.8 million.  

Noninterest Income

Noninterest income for the second quarter of 2024 was $5.6 million, a decrease of $9,000, or 0.2%, from the first quarter of 2024, primarily due to lower gains on sale and servicing income from Small Business Administration ("SBA") loans, offset by higher gains on sale and servicing income from mortgage loans, service charges on deposit accounts and other income. Mortgage loan sales totaled $111.4 million (average sales premium of 1.05%) during the second quarter of 2024 compared to $21.9 million during the first quarter of 2024. There were no SBA loans sold during the second quarter of 2024 compared to $24.1 million SBA loan sold during the first quarter of 2024. During the second quarter of 2024, we recorded a $503,000 fair value adjustment charge on our SBA servicing asset compared to a fair value adjustment gain of $361,000 during the first quarter of 2024.

Compared to the same period in 2023, noninterest income for the second quarter of 2024 increased by $868,000, or 18.5%, primarily due to higher gains on sale and servicing income from mortgage loans and higher mortgage loan fees from higher volume, offset by lower gains on sale and servicing income from SBA loans. During the second quarter of 2023, we recorded a $255,000 fair value adjustment gain on our SBA servicing asset.

Noninterest income for the six months ended June 30, 2024 totaled $11.1 million, an increase of $292,000, or 2.7%, from the six months ended June 30, 2023, primarily due to higher mortgage loan fees from higher volume, as well as higher gains on sale and servicing income from mortgage loans, offset by decreases in gains on sale of SBA loans, SBA servicing income and other income.

Noninterest Expense

Noninterest expense for the second quarter of 2024 totaled $13.0 million, an increase of $671,000, or 5.4%, from $12.4 million for the first quarter of 2024. This increase was primarily attributable to increases in salary and employee benefits, data processing expense and security expense, partially offset by lower professional fees, FDIC insurance premiums, advertising expense, and loan and other real estate owned related expenses. Compared to the second quarter of 2023, noninterest expense during the second quarter of 2024 increased by $1.6 million, or 13.7%, primarily due to higher salary and employee benefits, occupancy expense, security expense and other real estate owned related expenses, offset by lower FDIC insurance premiums and professional fees.

Noninterest expense for the six months ended June 30, 2024 totaled $25.4 million, an increase of $3.1 million, or 14.0%, from $22.3 million for the six months ended June 30, 2023. This increase was primarily attributable to increases in salaries and employee benefits due to higher commissions from higher loan volume, employee insurance and stock based compensation, as well as higher expenses related to depreciation, rent, data processing and security. These expense increases were partially offset by lower loan related expenses and legal fees.

The Company's efficiency ratio was 35.9% for the second quarter of 2024 compared to 37.9% and 38.7% for the first quarter of 2024 and second quarter of 2023, respectively. For the six months ended June 30, 2024, the efficiency ratio was 36.8% compared to 35.9% for the same period in 2023.

Income Tax Expense

The Company's effective tax rate for the second quarter of 2024 was 27.5%, compared to 28.4% for the first quarter of 2024 and 29.6% for the second quarter of 2023. The Company's effective tax rate for the six months ended June 30, 2024 was 27.9% compared to 28.2% for the same period in 2023.

Balance Sheet

Total Assets

Total assets were $3.62 billion at June 30, 2024, a decrease of $31.8 million, or 0.9%, from $3.65 billion at March 31, 2024, and an increase of $140.3 million, or 4.0%, from $3.48 billion at June 30, 2023. The $31.8 million decrease in total assets at June 30, 2024 compared to March 31, 2024 was primarily due to decreases in loans held for sale of $72.6 million, loans held for investment of $25.4 million and interest rate derivatives of $2.5 million, partially offset by an increase in cash and due from banks of $70.7 million. The $140.3 million increase in total assets at June 30, 2024 compared to June 30, 2023 was primarily due to increases in cash and due from banks of $74.5 million, loans held for investment of $69.8 million, Federal Home Loan Bank stock of $4.7 million and bank owned life insurance of $2.1 million, partially offset by decreases in federal funds sold of $9.4 million and interest rate derivatives of $3.1 million.   

Our investment securities portfolio made up only 0.78% of our total assets at June 30, 2024 compared to 0.78% and 0.84% at March 31, 2024 and June 30, 2023, respectively.

Loans

Loans held for investment were $3.09 billion at June 30, 2024, a decrease of $25.4 million, or 0.8%, compared to $3.12 billion at March 31, 2024, and an increase of $69.8 million, or 2.3%, compared to $3.02 billion at June 30, 2023. The decrease in loans at June 30, 2024 compared to March 31, 2024 was due to a $20.8 million decrease in residential mortgage loans, a $14.2 million decrease in construction and development loans and a $260,000 decrease in commercial and industrial loans, offset by a $9.6 million increase in commercial real estate loans. There were no loans classified as held for sale at June 30, 2024 and June 30, 2023. Loans held for sale were $72.6 million a at March 31, 2024.

Deposits

Total deposits were $2.75 billion at June 30, 2024, a decrease of $68.0 million, or 2.4%, compared to total deposits of $2.81 billion at March 31, 2024, and an increase of $47.4 million, or 1.8%, compared to total deposits of $2.70 billion at June 30, 2023. The decrease in total deposits at June 30, 2024 compared to March 31, 2024 was due to a $68.2 million decrease in money market accounts (includes $36.3 million decrease in brokered MMAs) and a $26.8 million decrease in interest-bearing demand deposits (mostly brokered deposits), offset by a $17.3 million increase in noninterest-bearing demand deposits, a $7.9 million increase in time deposits and a $1.8 million increase in savings accounts.

Noninterest-bearing deposits were $564.1 million at June 30, 2024, compared to $546.8 million at March 31, 2024 and $575.3 million at June 30, 2023. Noninterest-bearing deposits constituted 20.5% of total deposits at June 30, 2024, compared to 19.4% at March 31, 2024 and 21.3% at June 30, 2023. Interest-bearing deposits were $2.18 billion at June 30, 2024, compared to $2.27 billion at March 31, 2024 and $2.12 billion at June 30, 2023. Interest-bearing deposits constituted 79.5% of total deposits at June 30, 2024, compared to 80.6% at March 31, 2024 and 78.7% at June 30, 2023.

Uninsured deposits were 23.4% of total deposits at June 30, 2024, compared to 23.0% and 30.7% at March 31, 2024 and June 30, 2023, respectively. As of June 30, 2024, we had $1.27 billion of available borrowing capacity at the Federal Home Loan Bank ($709.7 million), Federal Reserve Discount Window ($509.2 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 $128,000 during the second quarter of 2024, compared to a credit provision for credit losses of $140,000 and $416,000 recorded during the first quarter of 2024 and second quarter of 2023, respectively. The credit provision recorded during the second quarter of 2024 was primarily due the decrease in loan balances and an $83,000 recovery recorded during the quarter. Annualized net recoveries to average loans for the second quarter of 2024 was 0.01%, compared to a net recovery of 0.00% for the first quarter of 2024 and a net charge-off of 0.06% for the second quarter of 2023.

Nonperforming assets totaled $27.0 million, or 0.75% of total assets, at June 30, 2024, a decrease of $3.2 million from $30.3 million, or 0.83% of total assets, at March 31, 2024, and an increase of $3.4 million from $23.6 million, or 0.68% of total assets, at June 30, 2023. The decrease in nonperforming assets at June 30, 2024 compared to March 31, 2024 was due to a $2.9 million decrease in accruing restructured loans and a $293,000 decrease in nonaccrual loans.  

Allowance for credit losses as a percentage of total loans was 0.58% at June 30, 2024, compared to 0.58% at March 31, 2024 and 0.60% at June 30, 2023. Allowance for credit losses as a percentage of nonperforming loans was 70.16% at June 30, 2024, compared to 62.37% and 79.88% at March 31, 2024 and June 30, 2023, 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 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 or the conflict in Israel and the surrounding region; 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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