MetroCity Bankshares, Inc. Reports Earnings For Second Quarter 2021

ATLANTA, July 23, 2021 /PRNewswire/ -- MetroCity Bankshares, Inc. ("MetroCity" or the "Company") (NASDAQ: MCBS), holding company for Metro City Bank (the "Bank"), today reported net income of $14.4 million, or $0.56 per diluted share, for the second quarter of 2021, compared to $13.0 million, or $0.50 per diluted share, for the first quarter of 2021, and $7.7 million, or $0.30 per diluted share, for the second quarter of 2020. For the six months ended June 30, 2021, the Company reported net income of $27.4 million, or $1.06 per diluted share, compared to $17.6 million, or $0.68 per diluted share, for the same period in 2020.

Second Quarter 2021 Highlights:

• Annualized return on average assets was 2.53%, compared to 2.62% for the first quarter of 2021 and 1.89% for the second quarter of 2020.
• Annualized return on average equity was 22.51%, compared to 21.35% for the first quarter of 2021 and 13.92% for the second quarter of 2020.
• Efficiency ratio of 36.2%, compared to 36.0% for the first quarter of 2021 and 45.6% for the second quarter of 2020.
• Total assets increased by $363.5 million, or 16.9%, to $2.52 billion from the previous quarter.
• Total loans increased by $225.0 million, or 12.1%, to $2.09 billion from the previous quarter.
• Total deposits increased by $228.9 million, or 13.1%, to $1.97 billion from the previous quarter.
• Net interest margin was 4.60%, compared to 4.60% for the first quarter of 2021 and 4.09% for the second quarter of 2020.

Results of Operations

Net Income

Net income was $14.4 million for the second quarter of 2021, an increase of $1.4 million, or 10.9%, from $13.0 million for the first quarter of 2021. This increase was due to an increase in net interest income of $3.3 million and an increase in noninterest income of $408,000, offset by an increase in provision for loan losses of $606,000, an increase in noninterest expense of $1.4 million and an increase in provision for income taxes of $296,000.  Net income increased $6.7 million, or 86.0%, in the second quarter of 2021 compared to net income of $7.7 million for the second quarter of 2020. This increase was due to an increase in net interest income of $9.0 million and an increase in noninterest income of $3.1 million, offset by an increase in provision for loan losses of $1.1 million, an increase in noninterest expense of $2.4 million and an increase in provision for income taxes of $1.9 million.

Net Interest Income and Net Interest Margin

Interest income totaled $25.9 million for the second quarter of 2021, an increase of $3.2 million, or 14.2%, from the previous quarter, primarily due to a $225.9 million increase in average loan balances. We also recognized Paycheck Protection Program ("PPP") loan fee income of $1.7 million during the second quarter of 2021 compared to $1.1 million recognized during the first quarter of 2021. As compared to the second quarter of 2020, interest income for the second quarter of 2021 increased by $6.8 million, or 35.7%, primarily due to an increase in average loan balances of $648.8 million.

Interest expense totaled $1.1 million for the second quarter of 2021, a slight decrease of $75,000, or 6.6%, from the previous quarter, primarily due to a three basis points decrease in the cost of average money market deposits and a 12 basis points decrease in the cost of average time deposits. As compared to the second quarter of 2020, interest expense for the second quarter of 2021 decreased by $2.2 million, or 67.2%, primarily due to a 109 basis points decrease in deposit costs coupled with a $111.0 million decrease in higher cost average time deposits.

The net interest margin for the second and first quarter of 2021 was 4.60%. The cost of average interest-bearing liabilities for the second quarter of 2021 decreased by 7 basis points to 0.31% compared with the previous quarter, while the yield on average interest-earning assets for the second quarter of 2021 decreased by 6 basis points to 4.79% from 4.85% for the previous quarter. Average earning assets increased by $268.7 million from the previous quarter, primarily due to an increase in average loans of $225.9 million and a $43.9 million increase in average interest-earning cash accounts. Average interest-bearing liabilities increased by $176.0 million from the previous quarter as average interest-bearing deposits increased by $169.0 million and average borrowings increased by $7.0 million. The inclusion of PPP loan average balances, interest and fees had a 14 basis point impact on the yield on average loans and a 16 basis points impact on the net interest margin for the second quarter of 2021.

As compared to the same period in 2020, the net interest margin for the second quarter of 2021 increased by 51 basis points to 4.60% from 4.09%, primarily due to a 101 basis point decrease in the cost of average interest-bearing liabilities of $1.38 billion and a decrease of 14 basis points in the yield on average interest-earning assets of $2.17 billion. Average earning assets for the second quarter of 2021 increased by $610.0 million from the second quarter of 2020, primarily due to a $648.8 million increase in average loans, offset by a $40.0 million decrease in average securities purchased under agreements to resell. Average interest-bearing liabilities for the second quarter of 2021 increased by $394.7 million from the second quarter of 2020, driven by an increase in average interest-bearing deposits of $383.3 million and an increase in average borrowings of $11.3 million.

Noninterest Income

Noninterest income for the second quarter of 2021 was $8.6 million, an increase of $408,000, or 5.0%, from the first quarter of 2021, primarily due to higher mortgage loan fees and gains on sale of SBA loans, partially offset by decreases in mortgage and SBA servicing income. During the second quarter of 2021, we recorded a $624,000 fair value adjustment gain on our SBA servicing asset and a $603,000 fair value impairment charge on our mortgage servicing asset. These servicing asset adjustments had no impact on our diluted earnings per share for the quarter.

Compared to the same period in 2020, noninterest income for the second quarter of 2021 increased by $3.1 million, or 56.3%, primarily due to the increase in mortgage loan fees and gains on sale of SBA loans, partially offset by a decrease in mortgage servicing income. Mortgage loan originations totaled $326.5 million during the second quarter of 2021 compared to $48.9 million during the second quarter of 2020. There were no mortgage loan sales during the second quarter of 2021 or 2020.

Noninterest Expense

Noninterest expense for the second quarter of 2021 totaled $12.1 million, an increase of $1.4 million, or 12.9%, from $10.7 million for the first quarter of 2021. This increase was primarily attributable to higher salaries and employee benefits, professional fees and expenses related to other real estate owned. Compared to the second quarter of 2020, noninterest expense during the second quarter of 2021 increased by $2.4 million, or 24.4%, primarily due to higher salaries and employee benefits, loan related expenses and other real estate owned related expenses.

The Company's efficiency ratio was 36.2% for the second quarter of 2021 compared to 36.0% and 45.6% for the first quarter of 2021 and second quarter of 2020, respectively. For the six months ended June 30, 2021, the efficiency ratio was 36.1% compared with 44.3% for the same period in 2020.

Income Tax Expense

The Company's effective tax rate for the second quarter of 2021 was 24.7%, compared to 25.5% for the first quarter of 2021 and 26.7% for the second quarter of 2020.

Balance Sheet

Total Assets

Total assets were $2.52 billion at June 30, 2021, an increase of $363.5 million, or 16.9%, from $2.15 billion at March 31, 2021, and an increase of $796.1 million, or 46.2%, from $1.72 billion at June 30, 2020. The $363.5 million increase in total assets at June 30, 2021 compared to March 31, 2021 was primarily due to increases in loans of $225.0 million and cash and due from banks of $139.5 million, partially offset by a $2.1 million increase in the allowance for loan losses. The $796.1 million increase in total assets at June 30, 2021 compared to June 30, 2020 was primarily due to increases in loans of $726.8 million, cash and due from banks of $101.0 million and bank owned life insurance of $15.8 million, partially offset by a decrease in the mortgage servicing asset of $6.5 million and an increase in the allowance for loan losses of $6.0 million. 

Loans

Loans held for investment were $2.09 billion at June 30, 2021, an increase of $225.0 million, or 12.1%, compared to $1.87 billion at March 31, 2021, and an increase of $726.8 million, or 53.2%, compared to $1.36 billion at June 30, 2020. The increase in loans held for investment at June 30, 2021 compared to March 31, 2021 was primarily due to a $249.5 million increase in residential mortgages, a $6.5 million increase in construction and development loans and a $2.4 million increase in commercial real estate loans, offset by a $32.8 million decrease in commercial and industrial loans primarily due to PPP loan forgiveness. Included in commercial and industrial loans are PPP loans totaling $93.1 million as of June 30, 2021. There were no loans classified as held for sale at June 30, 2021, March 31, 2021 or June 30, 2020.

Deposits

Total deposits were $1.97 billion at June 30, 2021, an increase of $228.9 million, or 13.1%, compared to total deposits of $1.75 billion at March 31, 2021, and an increase of $624.9 million, or 46.3%, compared to total deposits of $1.35 billion at June 30, 2020. The increase in total deposits at June 30, 2021 compared to March 31, 2021 was primarily due to the $71.9 million increase in noninterest-bearing demand deposits, $131.5 million increase in money market accounts, $9.5 million increase in interest-bearing demand deposits, and a $11.6 million increase in time deposits. The increase in money market accounts was primarily due to the increase of $119.6 million in brokered money market balances during the quarter.

Noninterest-bearing deposits were $618.1 million at June 30, 2021, compared to $546.2 million at March 31, 2021 and $449.2 million at June 30, 2020. Noninterest-bearing deposits constituted 31.3% of total deposits at June 30, 2021, compared to 31.3% at March 31, 2021 and 33.3% at June 30, 2020. Interest-bearing deposits were $1.36 billion at June 30, 2021, compared to $1.20 billion at March 31, 2021 and $900.7 million at June 30, 2020. Interest-bearing deposits constituted 68.7% of total deposits at June 30, 2021, compared to 68.7% at March 31, 2021 and 66.7% at June 30, 2020.

Asset Quality

The Company recorded a provision for loan losses of $2.2 million during the second quarter of 2021. Annualized net charge-offs to average loans for the second quarter of 2021 was 0.02%, compared to 0.00% for the first quarter of 2021 and 0.01% for the second quarter of 2020. We continue to include qualitative factors in our allowance for loan losses calculation in light of the continued economic uncertainties caused by the ongoing COVID-19 pandemic, partially resulting in the increased provision expense recorded during the second quarter of 2021 along with the growth in our loan portfolio. The Company is not required to implement 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 until January 1, 2023, and is continuing to account for the allowance for loan losses under the incurred loss model.

Nonperforming assets totaled $14.0 million, or 0.56% of total assets, at June 30, 2021, a decrease of $1.8 million from $15.8 million, or 0.73% of total assets, at March 31, 2021, and a slight increase of $378,000 from $13.7 million, or 0.79% of total assets, at June 30, 2020. The decrease in nonperforming assets at June 30, 2021 compared to March 31, 2021 was primarily due to a $2.4 million decrease in nonaccrual loans, partially offset by an $812,000 increase in other real estate owned.

Allowance for loan losses as a percentage of total loans was 0.66% at June 30, 2021, compared to 0.63% at March 31, 2021 and 0.58% at June 30, 2020. Excluding outstanding PPP loans of $93.1 million as of June 30, 2021, $125.6 million as of March 31, 2021 and $96.1 million as of June 30, 2020, the allowance for loan losses as a percentage of total loans was 0.69% at June 30, 2021, 0.67% at March 31, 2021 and 0.62% at June 30, 2020. Allowance for loan losses as a percentage of nonperforming loans was 147.82% at June 30, 2021, compared to 98.33% and 59.66% at March 31, 2021 and June 30, 2020, respectively.

COVID-19

As of June 30, 2021, we had six non-SBA commercial customers with outstanding loan balances totaling $15.3 million that were under approved payment deferrals. This is a decline from the active payment deferrals as of March 31, 2021 that were granted to nine non-SBA commercial customers with outstanding balances totaling $26.5 million. As of June 30, 2021, we had seven SBA loans with outstanding gross loan balances totaling $13.3 million ($3.3 million unguaranteed book balance) that were under approved payment deferrals.  As of July 20, 2021, the SBA had granted forgiveness on (1) PPP loans totaling $71.8 million, or 74.1% of PPP loans funded from the first round of PPP funding under the Coronavirus Aid, Relief and Economic Security Act, and (2) PPP loans totaling $3.9 million, or 6.3% of PPP loans funded under the Economic Aid Act.

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, including statements regarding the potential effects of the ongoing COVID-19 pandemic on our business and financial results and conditions, 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 of 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: general business and economic conditions, particularly those affecting the financial services; the impact of the ongoing COVID-19 pandemic on the Company's assets, business, cash flows, financial condition, liquidity, prospects and results of operations; potential increases in the provision for loan losses resulting from the ongoing COVID-19 pandemic; changes in the interest rate environment, including changes to the federal funds rate; 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, including changes to statutes, regulations or regulatory policies or practices as a result of, or in response to, the ongoing COVID-19 pandemic; changes in tax laws; 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. 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.