MetroCity Bankshares(MCBS) - 2024 Q2 - Quarterly Report

Financial Performance - For the three months ended June 30, 2024, net interest income was $30.712 million, an increase from $24.970 million in the same period of 2023, reflecting a year-over-year growth of 22%[138]. - Net income for the three months ended June 30, 2024, was $16.937 million, representing a 29% increase from $13.108 million in the same period of 2023[138]. - Basic earnings per share for Q2 2024 rose to $0.67 from $0.52 in Q2 2023, while diluted earnings per share increased to $0.66 from $0.51[143]. - Interest income for Q2 2024 totaled $54.1 million, up 14.0% from $47.5 million in Q2 2023, primarily due to a 51 basis points increase in loan yield[144]. - The net interest margin for Q2 2024 improved by 56 basis points to 3.66%, driven by a 55 basis points increase in the yield on average interest-earning assets[150]. - Net income for Q2 2024 was $16.9 million, a 29.2% increase from $13.1 million in Q2 2023, driven by a $5.7 million increase in net interest income[142]. Credit Losses and Allowances - The adoption of the CECL model resulted in an increase of the allowance for credit losses by $5.1 million and a reduction of retained earnings by $3.8 million[124]. - The provision for credit losses for the three months ended June 30, 2024, was a reversal of $128,000 compared to a provision of $416,000 in the same period of 2023[138]. - The allowance for credit losses as a percentage of gross loans was 0.58% as of June 30, 2024, compared to 0.60% in the same period of 2023[161]. - The allowance for credit losses was $18.0 million at June 30, 2024, a decrease of $152,000, or 0.8%, compared to $18.1 million at December 31, 2023[185]. - The adequacy of reserves for credit losses is critical, influenced by economic conditions and the quality of the loan portfolio[128]. Asset and Deposit Management - As of June 30, 2024, MetroCity Bankshares, Inc. reported total assets of $3.62 billion, total loans of $3.09 billion, total deposits of $2.75 billion, and total shareholders' equity of $407.2 million[133]. - The company's total deposits increased by 0.5% to $2.75 billion as of June 30, 2024, with uninsured deposits decreasing to 23.4% of total deposits from 26.5% at the end of 2023[141]. - Total assets increased $112.5 million, or 3.2%, to $3.62 billion at June 30, 2024 compared to $3.50 billion at December 31, 2023[178]. - The average balance of total deposits was $2,729,933 thousand with a weighted average rate of 2.91% for the six months ended June 30, 2024[197]. - Brokered deposits decreased to $751.7 million, or 27.4% of total deposits, at June 30, 2024, down from $766.3 million, or 28.1% of total deposits, at December 31, 2023[195]. Risk Management - The risk management framework must effectively mitigate various risks, including credit risk and liquidity risk, to ensure financial stability[121]. - The company highlighted the impact of prolonged elevated interest rates and inflation on its financial projections and credit quality[119]. - Interest rate risk is identified as the primary market risk, with management actively monitoring and managing this risk through various simulations and assessments[212][214]. - The company maintains off-balance sheet financial instruments, including commitments to extend credit and standby letters of credit, which involve credit and interest rate risk[210]. Operational Efficiency - The efficiency ratio for the three months ended June 30, 2024, was 35.93%, an improvement from 38.65% in the same period of 2023[138]. - The company faces challenges in maintaining expenses in line with current projections amid competitive pressures from other financial institutions[121]. - Noninterest expense for the three months ended June 30, 2024 was $13.0 million, an increase of $1.6 million, or 13.7%, compared to $11.5 million for the same period in 2023[172]. Capital and Liquidity - The company's capital ratios remain strong, with common equity Tier 1 and total capital ratios at 18.25% and 19.12%, respectively, as of June 30, 2024[141]. - The company's total capital ratio was 19.12% as of June 30, 2024, exceeding the minimum requirement for "well-capitalized" institutions[208]. - The Tier 1 capital ratio was 18.25% as of June 30, 2024, above the required 8.50%[208]. - The liquidity position is supported by management of liquid assets and access to alternative sources of funds, including wholesale/brokered deposits and additional borrowings[202]. Market and Economic Conditions - The concentration of the loan portfolio in real estate loans poses risks related to market fluctuations and borrower financial health[120]. - The company is subject to regulatory scrutiny and must comply with capital and liquidity requirements, impacting its growth plans[118]. - The Economic Value of Equity (EVE) sensitivity showed a potential decrease of (16.30)% in a +300 basis point shock scenario as of June 30, 2024[220].