MetroCity Bankshares(MCBS) - 2024 Q1 - Quarterly Results

First Quarter 2024 Earnings Release Results of Operations MetroCity Bankshares reported a net income of $14.6 million for Q1 2024, showing a 28.9% increase quarter-over-quarter but a 7.0% decrease year-over-year, with improved efficiency Q1 2024 Key Financial Results | Metric | Q1 2024 | Q4 2023 | Q1 2023 | | :--- | :--- | :--- | :--- | | Net Income (in millions) | $14.6 | $11.3 | $15.7 | | Diluted EPS | $0.57 | $0.44 | $0.62 | | Annualized ROA | 1.65% | 1.29% | 1.87% | | Annualized ROE | 15.41% | 11.71% | 18.09% | | Efficiency Ratio | 37.9% | 45.1% | 33.4% | - The $3.3 million quarter-over-quarter increase in net income was due to a $0.963 million increase in net interest income, a $0.922 million decrease in provision for credit losses, an $0.856 million increase in noninterest income, and a $1.6 million decrease in noninterest expense[3] - The $1.1 million year-over-year decrease in net income was attributed to a $0.576 million decrease in noninterest income and a $1.6 million increase in noninterest expense, partially offset by higher net interest income and lower credit loss provisions[3] Net Interest Income and Net Interest Margin Net interest income for Q1 2024 was $27.1 million, with the net interest margin (NIM) increasing by 7 basis points quarter-over-quarter to 3.24% but decreasing 6 basis points year-over-year Net Interest Margin Analysis | Metric | Q1 2024 | Q4 2023 | Q1 2023 | | :--- | :--- | :--- | :--- | | Net Interest Income (in millions) | $27.1 | $26.1 | $26.2 | | Net Interest Margin | 3.24% | 3.17% | 3.30% | | Yield on Earning Assets | 6.27% | 6.14% | 5.77% | | Cost of Interest-Bearing Liabilities | 3.94% | 3.91% | 3.30% | - Interest income increased by $1.7 million from Q4 2023, primarily due to a 23 basis point increase in loan yield and a $106.2 million increase in average loan balances[4] - Interest expense rose by $0.724 million from Q4 2023, mainly because of higher costs on time deposits and borrowings, with interest rate derivatives crediting interest expense by $4.1 million in Q1 2024[5] Noninterest Income Noninterest income for Q1 2024 increased 18.2% quarter-over-quarter to $5.6 million due to resumed SBA and residential mortgage loan sales, but decreased 9.4% year-over-year due to lower SBA gains - Noninterest income increased by $0.856 million from Q4 2023, primarily due to higher gains on sale of SBA and residential mortgage loans[8] Loan Origination and Sales (Q1 2024) | Activity | Amount (in millions) | | :--- | :--- | | SBA Loan Sales | $24.1 | | Mortgage Loan Sales | $21.9 | | Mortgage Loan Originations | $94.0 | - Compared to Q1 2023, noninterest income decreased by $0.576 million, mainly due to lower gains on sale and servicing income from SBA loans[10] Noninterest Expense Noninterest expense in Q1 2024 decreased 11.2% quarter-over-quarter to $12.4 million due to lower salary and benefits, but increased 14.4% year-over-year due to higher compensation and professional fees - Noninterest expense decreased by $1.6 million from Q4 2023, primarily due to lower salary and employee benefits and occupancy expense[11] - Noninterest expense increased by $1.6 million from Q1 2023, mainly due to higher salary and employee benefits, occupancy expense, FDIC insurance premiums, and professional fees[11] Efficiency Ratio | Period | Efficiency Ratio | | :--- | :--- | | Q1 2024 | 37.9% | | Q4 2023 | 45.1% | | Q1 2023 | 33.4% | Income Tax Expense The company's effective tax rate for Q1 2024 was 28.4%, compared to 29.7% in Q4 2023 and 27.1% in Q1 2023 Effective Tax Rate | Period | Rate | | :--- | :--- | | Q1 2024 | 28.4% | | Q4 2023 | 29.7% | | Q1 2023 | 27.1% | Balance Sheet Analysis As of March 31, 2024, total assets grew to $3.65 billion, a 4.1% increase from the previous quarter, driven by higher cash and loans held for sale, while total deposits increased 3.0% to $2.81 billion Key Balance Sheet Items (as of March 31, 2024) | Metric | Q1 2024 | Q4 2023 | Change (QoQ) | | :--- | :--- | :--- | :--- | | Total Assets (in billions) | $3.65 | $3.50 | +4.1% | | Loans Held for Investment (in billions) | $3.11 | $3.14 | -0.9% | | Total Deposits (in billions) | $2.81 | $2.73 | +3.0% | - The bank's investment securities portfolio constituted only 0.78% of total assets at March 31, 2024[15] - Uninsured deposits decreased to 23.0% of total deposits at March 31, 2024, down from 26.5% at December 31, 2023[20] - As of March 31, 2024, the company had $1.22 billion of available borrowing capacity from the FHLB, Federal Reserve Discount Window, and other institutions[20] Total Assets Total assets reached $3.65 billion at the end of Q1 2024, marking a $144.4 million (4.1%) increase quarter-over-quarter and a $228.2 million (6.7%) increase year-over-year, primarily fueled by cash and loans held for sale Total Assets Growth | Date | Total Assets (in billions) | | :--- | :--- | | March 31, 2024 | $3.65 | | December 31, 2023 | $3.50 | | March 31, 2023 | $3.42 | - The primary drivers for the QoQ increase in total assets were increases in cash and cash equivalents (+$114.0 million) and loans held for sale (+$52.1 million), partially offset by a decrease in loans held for investment (-$28.0 million)[14] Loans Loans held for investment decreased 0.9% to $3.11 billion in Q1 2024 due to residential mortgage loans, while loans held for sale significantly increased to $74.4 million Loan Portfolio Composition | Category | March 31, 2024 (in billions) | December 31, 2023 (in billions) | | :--- | :--- | :--- | | Loans Held for Investment | $3.11 | $3.14 | | Loans Held for Sale (in millions) | $74.4 | $22.3 | - The quarterly decrease in loans held for investment was driven by a $48.7 million reduction in residential mortgage loans, while commercial real estate loans increased by $13.1 million[17] Deposits Total deposits grew by 3.0% to $2.81 billion in Q1 2024, led by a $50.2 million rise in time deposits and a $34.7 million increase in noninterest-bearing demand deposits Deposit Composition | Deposit Type | March 31, 2024 (in billions) | December 31, 2023 (in billions) | | :--- | :--- | :--- | | Total Deposits | $2.81 | $2.73 | | Noninterest-bearing Deposits (in millions) | $546.8 | $512.0 | | Interest-bearing Deposits (in billions) | $2.27 | $2.22 | - The QoQ increase in total deposits was driven by a $50.2 million increase in time deposits and a $34.7 million increase in noninterest-bearing demand deposits[18] - Noninterest-bearing deposits represented 19.4% of total deposits at March 31, 2024, compared to 18.7% at December 31, 2023 and 21.8% at March 31, 2023[19] Asset Quality Asset quality improved in Q1 2024, with nonperforming assets (NPAs) decreasing by $8.1 million to $30.3 million, or 0.83% of total assets, and the allowance for credit losses to nonperforming loans improving to 62.37% - The company recorded a credit provision for credit losses of $0.140 million in Q1 2024, compared to a provision expense of $0.782 million in Q4 2023, mainly due to reclassifying residential mortgage loans to held for sale[21] Asset Quality Metrics | Metric | March 31, 2024 | December 31, 2023 | March 31, 2023 | | :--- | :--- | :--- | :--- | | Nonperforming Assets (NPA) (in millions) | $30.3 | $38.4 | $19.5 | | NPA to Total Assets | 0.83% | 1.10% | 0.57% | | ACL to Total Loans | 0.58% | 0.57% | 0.63% | | ACL to Nonperforming Loans | 62.37% | 49.06% | 101.22% | - The decrease in nonperforming assets from Q4 2023 was due to a $1.4 million decrease in nonaccrual loans and a $6.7 million decrease in accruing restructured loans[22] Company Information and Disclosures MetroCity Bankshares, Inc., a Georgia-based bank holding company for Metro City Bank, operates 20 branches across seven states, serving multi-ethnic communities, with the report including standard forward-looking statement disclaimers - Metro City Bank, founded in 2006 and headquartered in the Atlanta metropolitan area, operates 20 full-service branches in Alabama, Florida, Georgia, New York, New Jersey, Texas, and Virginia[24] - The press release contains forward-looking statements subject to various risks and uncertainties, including economic conditions, interest rate changes, and competition[25] - The company cautions readers not to place undue reliance on forward-looking statements and does not commit to updating them except as required by law[26] Financial Tables This section provides detailed unaudited financial statements and data for MetroCity Bankshares, Inc., including selected historical financial data, consolidated balance sheets, income statements, and detailed breakdowns of loans and nonperforming assets Selected Financial Data This table presents a summary of key income statement data, per share data, performance ratios, asset quality metrics, and balance sheet ratios for the five quarters ending March 31, 2024 Selected Financial Data | (Dollars in thousands, except per share data) | March 31, 2024 | December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 | | :--- | :--- | :--- | :--- | :--- | :--- | | Net income | $14,631 | $11,347 | $11,428 | $13,108 | $15,730 | | Diluted income per share | $0.57 | $0.44 | $0.45 | $0.51 | $0.62 | | Dividends per share | $0.20 | $0.18 | $0.18 | $0.18 | $0.18 | | Return on average assets | 1.65% | 1.29% | 1.30% | 1.55% | 1.87% | | Net interest margin | 3.24% | 3.17% | 2.94% | 3.10% | 3.30% | | Efficiency ratio | 37.86% | 45.13% | 43.04% | 38.65% | 33.38% | Consolidated Balance Sheets This table provides the unaudited consolidated balance sheets, detailing assets, liabilities, and shareholders' equity for the five quarters ending March 31, 2024 Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2024 | December 31, 2023 | March 31, 2023 | | :--- | :--- | :--- | :--- | | Total assets | $3,647,219 | $3,502,823 | $3,419,013 | | Cash and cash equivalents | $258,836 | $144,805 | $224,064 | | Loans less allowance | $3,096,085 | $3,123,993 | $2,993,073 | | Total liabilities | $3,250,615 | $3,121,306 | $3,066,052 | | Total deposits | $2,813,858 | $2,730,936 | $2,644,093 | | Total shareholders' equity | $396,604 | $381,517 | $352,961 | Consolidated Statements of Income This table presents the unaudited consolidated statements of income, showing revenues, expenses, and net income for the five quarters ending March 31, 2024 Consolidated Income Statement Highlights (in thousands) | Account | Q1 2024 | Q4 2023 | Q1 2023 | | :--- | :--- | :--- | :--- | | Total interest income | $52,358 | $50,671 | $45,965 | | Total interest expense | $25,273 | $24,549 | $19,732 | | Net interest income | $27,085 | $26,122 | $26,233 | | Provision for credit losses | $(140) | $782 | $— | | Total noninterest income | $5,568 | $4,712 | $6,144 | | Total noninterest expense | $12,361 | $13,915 | $10,807 | | Net income | $14,631 | $11,347 | $15,730 | Average Balances and Yields/Rates This table provides a detailed analysis of average asset and liability balances, along with their corresponding yields and rates, for Q1 2024, Q4 2023, and Q1 2023, culminating in the net interest margin calculation Yields and Rates Analysis | Metric | Q1 2024 | Q4 2023 | Q1 2023 | | :--- | :--- | :--- | :--- | | Yield on Earning Assets | 6.27% | 6.14% | 5.77% | | Cost of Interest-Bearing Liabilities | 3.94% | 3.91% | 3.30% | | Net Interest Spread | 2.33% | 2.23% | 2.47% | | Net Interest Margin | 3.24% | 3.17% | 3.30% | Loan Data This table details the composition of the gross loans held for investment portfolio by category for the five quarters ending March 31, 2024 Gross Loans Held for Investment (in thousands) | Loan Category | March 31, 2024 | % of Total | December 31, 2023 | % of Total | | :--- | :--- | :--- | :--- | :--- | | Commercial real estate | $724,263 | 23.2% | $711,177 | 22.6% | | Residential real estate | $2,301,596 | 73.7% | $2,350,299 | 74.6% | | Total Gross Loans | $3,122,428 | 100.0% | $3,150,961 | 100.0% | Nonperforming Assets This table provides a breakdown of nonperforming assets, including nonaccrual loans and other real estate owned (OREO), and related asset quality ratios for the five quarters ending March 31, 2024 Nonperforming Assets (in thousands) | Category | March 31, 2024 | December 31, 2023 | March 31, 2023 | | :--- | :--- | :--- | :--- | | Nonaccrual loans | $13,297 | $14,682 | $9,064 | | Accruing restructured loans | $15,534 | $22,233 | $9,654 | | Total non-performing loans | $28,831 | $36,915 | $18,718 | | Other real estate owned | $1,452 | $1,466 | $766 | | Total non-performing assets | $30,283 | $38,381 | $19,484 | Allowance for Loan Losses This table presents a reconciliation of the allowance for loan losses, showing the beginning balance, net charge-offs/recoveries, provisions, and the ending balance for the five quarters ending March 31, 2024 Allowance for Loan Losses Reconciliation (in thousands) | Category | Q1 2024 | Q4 2023 | Q1 2023 | | :--- | :--- | :--- | :--- | | Beginning Balance | $18,112 | $17,660 | $13,888 | | Total net charge-offs/(recoveries) | $(4) | $309 | $(4) | | Provision for loan losses | $(134) | $761 | $— | | Ending Balance | $17,982 | $18,112 | $18,947 |