MetroCity Bankshares(MCBS) - 2024 Q3 - Quarterly Report

Financial Performance - Net income for the three months ended September 30, 2024, was $16.70 million, compared to$11.43 million for the same period in 2023, marking a year-over-year increase of 46.2%[167]. - Basic earnings per share for the three months ended September 30, 2024, was $0.66, compared to$0.45 for the same period in 2023, an increase of 46.7%[167]. - For the nine months ended September 30, 2024, net income increased by 19.9% to $48.3 million from$40.3 million in the same period in 2023, attributed to a $12.7 million increase in net interest income[171]. - Noninterest income increased to$6.62 million for the three months ended September 30, 2024, from $4.71 million in the same period of 2023, reflecting a growth of 40.5$30.29 million, compared to $26.12 million for the same period in 2023, representing an increase of 15.5$5.1 million and a reduction of retained earnings by $3.8 million[152]. - Provision for credit losses for the three months ended September 30, 2024, was$582 thousand, compared to a negative provision of $381 thousand for the same period in 2023[167]. - The allowance for credit losses (ACL) as a percentage of gross loans was 0.60$18.6 million at September 30, 2024, up by $477,000 or 2.6$18.1 million at December 31, 2023[223]. - The allowance for credit losses to nonperforming loans was 129.85% at September 30, 2024, compared to 123.36% at December 31, 2023[226]. Loan Portfolio and Asset Management - The concentration of the loan portfolio in real estate loans poses additional risks related to market fluctuations and collateral values[148]. - Average loans increased by $86.2 million in Q3 2024, with notable increases in commercial real estate loans by$93.5 million and residential mortgage loans by $6.1 million[173]. - Gross loans reached$3,115,441 thousand, generating interest income of $50,336 thousand, with a yield of 6.43$2,295,573 thousand, contributing $31,267 thousand in interest income at a yield of 5.42$14.3 million, a decrease from $14.7 million at December 31, 2023[221]. Deposits and Funding - Total deposits decreased by$7.8 million, or 0.3%, to $2.72 billion at September 30, 2024, compared to$2.73 billion at December 31, 2023[233]. - Uninsured deposits were estimated at $648.8 million, representing 23.6$751.0 million[235]. - The average total deposits for the three months ended September 30, 2024, was $2,703,171, with a weighted average rate of 2.88$58.5 million, contributing to the overall deposit changes[233]. Interest Income and Expense - Interest income for Q3 2024 totaled $53.8 million, a 10.5$48.7 million in Q3 2023, primarily due to a 45 basis points increase in loan yield[173]. - Interest expense for Q3 2024 decreased by 4.1% to $23.5 million from$24.6 million in Q3 2023, mainly due to a 44 basis points decrease in deposit costs[175]. - The net interest margin for Q3 2024 increased by 64 basis points to 3.58% from 2.94% in Q3 2023, driven by a 44 basis points increase in yield on average interest-earning assets[179]. - The company anticipates continued growth in interest income driven by an increase in average balances and improved rates[185]. - The company recorded a credit to interest expense of $6.4 million from interest rate derivatives for the three months ended September 30, 2024, up from$1.3 million in the same period of 2023[239]. Risk Management and Economic Conditions - The company faces risks from general economic conditions, including employment levels, interest rates, and inflation, which could affect customer behavior and financial performance[146]. - The risk management framework must effectively mitigate various risks inherent to banking operations, including credit and liquidity risks[149]. - Interest rate risk is identified as the primary source of market risk, arising from timing differences in repricing and maturities of interest-earning assets and interest-bearing liabilities[254][255]. - The company’s liquidity position is supported by liquid assets and access to alternative funding sources, including wholesale/brokered deposits and additional borrowings[243]. - The company is subject to increased competition from other financial institutions and fintech companies, which may impact its market position[149]. Capital and Regulatory Compliance - The company must comply with capital and liquidity requirements, which may affect its ability to raise capital on favorable terms[146]. - The Bank's total capital to risk-weighted assets ratio was 20.03% as of September 30, 2024, compared to 17.60% as of December 31, 2023, indicating a strong capital position[249]. - The company’s capital ratios exceeded all regulatory requirements, categorizing the Bank as "well-capitalized" as of September 30, 2024[247]. - The company declared a cash dividend of $0.23 per share on October 16, 2024, payable on November 8, 2024[250]. - The company maintained$532.2 million in Federal Reserve discount window funds available as of September 30, 2024, compared to $446.3 million as of December 31, 2023[244]. Interest Rate Sensitivity - As of September 30, 2024, a hypothetical +200 basis point increase in interest rates is projected to result in a net interest income increase of 1.70%, while a -200 basis point decrease would lead to a decline of 4.10%[265]. - The Economic Value of Equity (EVE) is projected to decrease by 11.80% under a +300 basis point shock scenario as of September 30, 2024, and by 22.20% under the same scenario as of December 31, 2023[266]. - The sensitivity of EVE to a -200 basis point shock is projected to be 18.60% as of December 31, 2023, indicating a significant potential impact on equity value[266]. - The asset liability committee (ALCO) focuses on ensuring a stable and increasing flow of net interest income through active management of the balance sheet[256]. - The company utilizes income simulations and EVE simulations as primary tools for measuring and managing interest rate risk, assessing potential earnings impacts over a two-year horizon[259].