MCBS MetroCity Bankshares Inc

ATLANTA, Oct. 18, 2024 /PRNewswire/ -- MetroCity Bankshares, Inc. ("MetroCity" or the "Company") (NASDAQ: MCBS), holding company for Metro City Bank (the "Bank"), today reported net income of $16.7 million, or $0.65 per diluted share, for the third quarter of 2024, compared to $16.9 million, or $0.66 per diluted share, for the second quarter of 2024, and $11.4 million, or $0.45 per diluted share, for the third quarter of 2023. For the nine months ended September 30, 2024, the Company reported net income of $48.3 million, or $1.89 per diluted share, compared to $40.3 million, or $1.58 per diluted share, for the same period in 2023.

Third Quarter 2024 Highlights:

• Annualized return on average assets was 1.86%, compared to 1.89% for the second quarter of 2024 and 1.30% for the third quarter of 2023.
• Annualized return on average equity was 16.26%, compared to 17.10% for the second quarter of 2024 and 12.14% for the third quarter of 2023. Excluding average accumulated other comprehensive income, our return on average equity was 17.25% for the third quarter of 2024, compared to 18.26% for the second quarter of 2024 and 13.04% for the third quarter of 2023.
• Efficiency ratio of 37.0%, compared to 35.9% for the second quarter of 2024 and 43.0% for the third quarter of 2023.
• Net interest margin was 3.58% compared to 3.66% for the previous quarter.

Year-to-Date 2024 Highlights:

• Return on average assets was 1.80% for the nine months ended September 30, 2024, compared to 1.57% for the same period in 2023.
• Return on average equity was 16.27% for the nine months ended September 30, 2024, compared to 14.96% for the same period in 2023. Excluding average accumulated other comprehensive income, our return on average equity was 17.27% for the nine months ended September 30, 2024, compared to 15.81% for the same period in 2023.
• Efficiency ratio of 36.9% for the nine months ended September 30, 2024, compared to 38.1% for the same period in 2023.
• Net interest margin increased by 39 basis points to 3.50% from 3.11% for the same period in 2023.

Results of Operations

Net Income

Net income was $16.7 million for the third quarter of 2024, a decrease of $236,000, or 1.4%, from $16.9 million for the second quarter of 2024. This decrease was primarily due to an increase in provision for credit losses of $710,000, a decrease in net interest income of $423,000 and an increase in noninterest expense of $628,000, offset by an increase in noninterest income of $1.1 million and a decrease in income tax expense of $469,000. Net income increased by $5.3 million, or 46.1%, in the third quarter of 2024 compared to net income of $11.4 million for the third quarter of 2023. This increase was due to an increase in net interest income of $6.1 million and an increase in noninterest income of $4.0 million, offset by an increase in noninterest expense of $2.1 million, an increase in income tax expense of $1.7 million and an increase in provision for credit losses of $963,000.

Net income was $48.3 million for the nine months ended September 30, 2024, an increase of $8.0 million, or 19.9%, from $40.3 million for the nine months ended September 30, 2023. This increase was due to an increase in net interest income of $12.7 million and an increase in noninterest income of $4.3 million, offset by an increase in noninterest expense of $5.2 million, an increase in income tax expense of $2.6 million and an increase in in provision for credit losses of $1.1 million.

Net Interest Income and Net Interest Margin

Interest income totaled $53.8 million for the third quarter of 2024, a decrease of $275,000, or 0.5%, from the previous quarter, primarily due to a $29.2 million decrease in average loans balances and a three basis points decrease in the loan yield, as well as an 81 basis points decrease in the total investment yield. As compared to the third quarter of 2023, interest income for the third quarter of 2024 increased by $5.1 million, or 10.5%, primarily due to a 45 basis points increase in the loan yield coupled with a $86.2 million increase in average loan balances, as well as a 38 basis points increase in the total investment yield and a $19.7 million increase in the total investment average balances.

Interest expense totaled $23.5 million for the third quarter of 2024, an increase of $148,000, or 0.6 %, from the previous quarter, primarily due to an 18 basis points increase in borrowing costs and a $6.4 million increase in the average borrowing balance, offset by a two basis points decrease in deposit costs coupled with a $24.6 million decrease in average deposit balances. As compared to the third quarter of 2023, interest expense for the third quarter of 2024 decreased by $1.1 million or 4.1%, primarily due to a 44 basis points decrease in deposit costs, offset by a 73 basis points increase in borrowing costs and a $50.7 million increase in the average borrowing balance. 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 4.83%). The weighted average pay rate for these interest rate derivatives is 2.29%. During the third quarter of 2024, we recorded a credit to interest expense of $6.4 million from the benefit received on these interest rate derivatives compared to a benefit of $6.5 million and $1.3 million recorded during the second quarter of 2024 and the third quarter of 2023, respectively.

The net interest margin for the third quarter of 2024 was 3.58% compared to 3.66% for the previous quarter, a decrease of eight basis points. The yield on average interest-earning assets for the third quarter of 2024 decreased by nine basis points to 6.36% from 6.45% for the previous quarter, while the cost of average interest-bearing liabilities for the third quarter of 2024 increased by one basis point to 3.69% from 3.68% for the previous quarter. Average earning assets decreased by $4.5 million from the previous quarter, due to a decrease in average loans of $29.2 million, offset by an increase in average total investments of $24.7 million. Average interest-bearing liabilities decreased by $18.1 million from the previous quarter as average interest-bearing deposits decreased by $24.6 million while average borrowings increased by $6.4 million.

As compared to the same period in 2023, the net interest margin for the third quarter of 2024 increased by 64 basis points to 3.58% from 2.94%, primarily due to a 44 basis points increase in the yield on average interest-earning assets of $3.37 billion and a 28 basis points decrease in the cost of average interest-bearing liabilities of $2.54 billion. Average earning assets for the third quarter of 2024 increased by $105.9 million from the third quarter of 2023, due to a $86.2 million increase in average loans and a $19.7 million increase in average total investments. Average interest-bearing liabilities for the third quarter of 2024 increased by $82.4 million from the third quarter of 2023, driven by increases in average borrowings of $50.7 million and average interest-bearing deposits of $31.8 million.  

Noninterest Income

Noninterest income for the third quarter of 2024 was $6.6 million, an increase of $1.1 million, or 19.0%, from the second quarter of 2024, primarily due to higher gains on sale and servicing income from Small Business Administration ("SBA") loans, higher mortgage loan fees from higher volume and higher other income from unrealized gains recognized on our equity securities, offset by lower gains on sale and servicing income from mortgage loans. SBA loan sales totaled $28.9 million (sales premium of 6.67%) during the third quarter of 2024 compared to no SBA loans sold during the second quarter of 2024. Mortgage loan originations totaled $122.4 million during the third quarter 2024 compared to $94.1 million during the second quarter of 2024. Mortgage loan sales totaled $54.2 million (average sales premium of 1.03%) during the third quarter of 2024 compared to $111.4 million (average sales premium of 1.06%) during the second quarter of 2024. During the third quarter of 2024, we recorded a $202,000 fair value adjustment gain on our SBA servicing asset compared to a fair value adjustment charge of $503,000 during the second quarter of 2024. We also recorded a $252,000 fair value impairment charge on our mortgage servicing asset during the third quarter of 2024 compared to no impairment recorded during the second quarter of 2024.

Compared to the same period in 2023, noninterest income for the third quarter of 2024 increased by $4.0 million, or 149.0%, primarily due to higher gains on sale and servicing income from mortgage and SBA loans, higher mortgage loan fees from higher volume and higher other income from higher bank owned life insurance income and unrealized gains recognized on our equity securities. During the third quarter of 2023, we recorded a $909,000 fair value adjustment charge on our SBA servicing asset.

Noninterest income for the nine months ended September 30, 2024 totaled $17.7 million, an increase of $4.3 million, or 31.5%, from the nine months ended September 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 and servicing income of SBA loans.

Noninterest Expense

Noninterest expense for the third quarter of 2024 totaled $13.7 million, an increase of $628,000, or 4.8%, from $13.0 million for the second quarter of 2024. This increase was primarily attributable to higher commissions from higher loan volume, as well as higher stock based compensation  and other real estate owned expenses, partially offset by lower FDIC insurance premiums, data processing expense, and security expense. Compared to the third quarter of 2023, noninterest expense during the third quarter of 2024 increased by $2.1 million, or 18.4%, 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 nine months ended September 30, 2024 totaled $39.1 million, an increase of $5.2 million, or 15.5%, from $33.8 million for the nine months ended September 30, 2023. This increase was primarily attributable to increases in salaries and employee benefits including higher commissions from higher loan volume, employee insurance and stock based compensation, as well as higher expenses related to depreciation, rent, data processing, security, other real estate owned and FDIC insurance premiums. These expense increases were partially offset by lower loan related expenses and legal fees.

The Company's efficiency ratio was 37.0% for the third quarter of 2024 compared to 35.9% and 43.0% for the second quarter of 2024 and third quarter of 2023, respectively. For the nine months ended September 30, 2024, the efficiency ratio was 36.9 % compared to 38.1% for the same period in 2023.

Income Tax Expense

The Company's effective tax rate for the third quarter of 2024 was 26.3%, compared to 27.5% for the second quarter of 2024 and 27.0% for the third quarter of 2023. The Company's effective tax rate for the nine months ended September 30, 2024 was 27.4% compared to 27.9% for the same period in 2023.

Balance Sheet

Total Assets

Total assets were $3.57 billion at September 30, 2024, a decrease of $46.2 million, or 1.3%, from $3.62 billion at June 30, 2024, and an increase of $58.2 million, or 1.7%, from $3.51 billion at September 30, 2023. The $46.2 million decrease in total assets at September 30, 2024 compared to June 30, 2024 was primarily due to decreases in cash and due from banks of $46.3 million, interest rate derivatives of $17.3 million and loans held for investment of $2.7 million, partially offset by an increase in federal funds sold of $9.6 million, other assets of $5.1 million and loans held for sale of $4.6 million. The $58.2 million increase in total assets at September 30, 2024 compared to September 30, 2023 was primarily due to increases in loans held for investment of $57.9 million, federal funds sold of $9.5 million, other assets of $7.5 million and loans held for sale of $4.6 million, partially offset by a decrease in interest rate derivatives of $27.6 million.   

Our investment securities portfolio made up only 0.81% of our total assets at September 30, 2024 compared to 0.78% and 0.79% at June 30, 2024 and September 30, 2023, respectively.

Loans

Loans held for investment were $3.09 billion at September 30, 2024, a decrease of $2.7 million, or 0.1%, compared to $3.09 billion at June 30, 2024, and an increase of $57.9 million, or 1.9%, compared to $3.03 billion at September 30, 2023. The decrease in loans at September 30, 2024 compared to June 30, 2024 was due to a $6.4 million decrease in residential mortgage loans and a $4.7 million decrease in commercial and industrial loans, offset by a $5.1 million increase in commercial real estate loans and a $3.0 million increase in construction and development loans. Loans classified as held for sale totaled $4.6 million at September 30, 2024. There were no loans classified as held for sale at June 30, 2024 or September 30, 2023.

Deposits

Total deposits were $2.72 billion at September 30, 2024, a decrease of $22.7 million, or 0.8%, compared to total deposits of $2.75 billion at June 30, 2024, and an increase of $4.5 million, or 0.2%, compared to total deposits of $2.72 billion at September 30, 2023. The decrease in total deposits at September 30, 2024 compared to June 30, 2024 was due to a $17.2 million decrease in interest-bearing demand deposits, an $11.6 million decrease in noninterest-bearing demand deposits and a $2.4 million decrease in savings accounts, offset by an  $8.0 million increase in money market accounts (includes $11.4 million increase in brokered MMAs) and a $448,000 increase in time deposits.  

Noninterest-bearing deposits were $552.5 million at September 30, 2024, compared to $564.1 million at June 30, 2024 and $559.5 million at September 30, 2023. Noninterest-bearing deposits constituted 20.3% of total deposits at September 30, 2024, compared to 20.5% at June 30, 2024 and 20.6% at September 30, 2023. Interest-bearing deposits were $2.17 billion at September 30, 2024, compared to $2.18 billion at June 30, 2024 and $2.16 billion at September 30, 2023. Interest-bearing deposits constituted 79.7 % of total deposits at September 30, 2024, compared to 79.5% at June 30, 2024 and 79.4% at September 30, 2023.

Uninsured deposits were 23.6% of total deposits at September 30, 2024, compared to 23.4% and 27.2% at June 30, 2024 and September 30, 2023, respectively. As of September 30, 2024, we had $1.28 billion of available borrowing capacity at the Federal Home Loan Bank ($701.6 million), Federal Reserve Discount Window ($532.2 million) and various other financial institutions (fed fund lines totaling $47.5 million).

Asset Quality

The Company recorded a provision for credit losses of $582,000 during the third quarter of 2024, compared to a credit to provision for credit losses of $128,000 and $381,000 recorded during the second quarter of 2024 and third quarter of 2023, respectively. The provision expense recorded during the third quarter of 2024 was primarily due the increase in reserves allocated to our individually analyzed loans, as well as the increase in general reserves allocated to our commercial real estate loan portfolio due to higher loan balances. Annualized net charge-offs to average loans for the third quarter of 2024 was 0.00%, compared to a net recovery of 0.01% for the second quarter of 2024 and a net recovery of 0.00% for the third quarter of 2023.

Nonperforming assets totaled $15.8 million, or 0.44% of total assets, at September 30, 2024, an increase of $1.4 million from $14.5 million, or 0.40% of total assets, at June 30, 2024, and a decrease of $57,000 from $15.9 million, or 0.45% of total assets, at September 30, 2023. The increase in nonperforming assets at September 30, 2024 compared to June 30, 2024 was due to a $1.3 million increase in nonaccrual loans and a $63,000 increase in other real estate owned.  

Allowance for credit losses as a percentage of total loans was 0.60% at September 30, 2024, compared to 0.58% at both June 30, 2024 and September 30, 2023. Allowance for credit losses as a percentage of nonperforming loans was 129.85% at September 30, 2024, compared to 138.11% and 116.74% at June 30, 2024 and September 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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