METROCITY BANKSHARES, INC. REPORTS EARNINGS FOR THIRD QUARTER 2023

ATLANTA, Oct. 20, 2023 /PRNewswire/ -- MetroCity Bankshares, Inc. ("MetroCity" or the "Company") (NASDAQ: MCBS), holding company for Metro City Bank (the "Bank"), today reported net income of $11.4 million, or $0.45 per diluted share, for the third quarter of 2023, compared to $13.1 million, or $0.51 per diluted share, for the second quarter of 2023, and $16.9 million, or $0.66 per diluted share, for the third quarter of 2022. For the nine months ended September 30, 2023, the Company reported net income of $40.3 million, or $1.58 per diluted share, compared to $52.4 million, or $2.04 per diluted share, for the same period in 2022.

Third Quarter 2023 Highlights:

• Annualized return on average assets was 1.30%, compared to 1.55% for the second quarter of 2023 and 2.07% for the third quarter of 2022.
• Annualized return on average equity was 12.14%, compared to 14.87% for the second quarter of 2023 and 20.56% for the third quarter of 2022. Excluding average accumulated other comprehensive income, our return on average equity was 13.04% for the third quarter of 2023, compared to 15.50% for the second quarter of 2023 and 20.99% for the third quarter of 2022.
• Efficiency ratio of 43.6%, compared to 38.8% for the second quarter of 2023 and 36.4% for the third quarter of 2022.
• Total assets increased by $35.9 million, or 1.0%, to $3.51 billion from the previous quarter.

Year-to-Date 2023 Highlights:

• Return on average assets was 1.57% for the nine months ended September 30, 2023, compared to 2.25% for same period in 2022.
• Return on average equity was 14.96% for the nine months ended September 30, 2023, compared to 22.57% for same period in 2022. Excluding average accumulated other comprehensive income, our return on average equity was 15.81% for the nine months ended September 30, 2023, compared to 22.82% for the same period in 2022.
• Efficiency ratio of 38.2% for the nine months ended September 30, 2023, compared to 35.2% for the same period in 2022.

Results of Operations

Net Income

Net income was $11.4 million for the third quarter of 2023, a decrease of $1.7 million, or 12.8%, from $13.1 million for the second quarter of 2023. This decrease was due to a decrease in noninterest income of $1.9 million, a decrease in net interest income of $816,000 and an increase in noninterest expense of $251,000, offset by a decrease in income tax expense of $1.3 million. Net income decreased by $5.5 million, or 32.4%, in the third quarter of 2023 compared to net income of $16.9 million for the third quarter of 2022. This decrease was due to a decrease in net interest income of $5.6 million, a decrease in noninterest income of $2.2 million and an increase in provision for credit losses of $1.3 million, offset by a decrease in noninterest expense of $903,000 and a decrease in income tax expense of $2.8 million.

Net income was $40.3 million for the nine months ended September 30, 2023, a decrease of $12.1 million, or 23.2%, from $52.4 million for the nine months ended September 30, 2022. This decrease was due to a decrease in net interest income of $15.3 million, a decrease in noninterest income of $3.7 million and an increase in provision for credit losses of $802,000, offset by a decrease in noninterest expense of $4.0 million and a decrease in income tax expense of $3.7 million.

Net Interest Income and Net Interest Margin

Interest income totaled $48.7 million for the third quarter of 2023, an increase of $1.2 million, or 2.6%, from the previous quarter, primarily due to a 3 basis points increase in the loan yield and a $34.5 million increase in average earning asset balances. As compared to the third quarter of 2022, interest income for the third quarter of 2023 increased by $10.4 million, or 27.2%, primarily due to an increase in average loan balances of $137.3 million coupled with an 87 basis points increase in the loan yield.

Interest expense totaled $24.6 million for the third quarter of 2023, an increase of $2.0 million, or 9.1%, from the previous quarter, primarily due to a 17 basis points increase in deposit costs coupled with an $83.4 million increase in average interest-bearing deposits, as well as a 51 basis points increase in borrowing costs. As compared to the third quarter of 2022, interest expense for the third quarter of 2023 increased by $16.0 million, or 188.6%, due to a 257 basis points increase in deposit costs and a 181 basis points increase in borrowing costs coupled with a $262.5 million increase in average interest-bearing deposits.

The net interest margin for the third quarter of 2023 was 2.94% compared to 3.10% for the previous quarter, a decrease of 16 basis points. The yield on average interest-earning assets for the third quarter of 2023 increased by two basis points to 5.92% from 5.90% for the previous quarter, while the cost of average interest-bearing liabilities for the third quarter of 2023 increased by 23 basis points to 3.97% from 3.74% for the previous quarter. Average earning assets increased by $34.5 million from the previous quarter, due to an increase in average total investments of $29.9 million and an increase in average loans of $4.6 million. Average interest-bearing liabilities increased by $37.4 million from the previous quarter as average interest-bearing deposits increased by $83.4 million while average borrowings decreased by $46.0 million.

As compared to the same period in 2022, the net interest margin for the third quarter of 2023 decreased by 90 basis points to 2.94% from 3.84%, primarily due to a 246 basis point increase in the cost of average interest-bearing liabilities of $2.45 billion, offset by a 98 basis point increase in the yield on average interest-earning assets of $3.26 billion. Average earning assets for the third quarter of 2023 increased by $183.7 million from the third quarter of 2022, primarily due to a $137.3 million increase in average loans and a $49.1 million increase in average interest-earning cash accounts. Average interest-bearing liabilities for the third quarter of 2023 increased by $212.1 million from the third quarter of 2022, driven by an increase in average interest-bearing deposits of $262.5 million, offset by a decrease in average borrowings of $50.4 million.

Noninterest Income

Noninterest income for the third quarter of 2023 was $2.9 million, a decrease of $1.9 million, or 39.0%, from the second quarter of 2023, primarily due to lower gains on sale of Small Business Administration ("SBA") loans and SBA servicing income, partially offset by higher mortgage loan fees. SBA loan sales totaled $5.2 million (sales premium of 6.00%) during the third quarter of 2023 compared to $30.3 million (sales premium of 5.24%) during the second quarter of 2023. Mortgage loan originations totaled $91.9 million during the third quarter 2023 compared to $72.8 million during the second quarter of 2023. During the third quarter of 2023, we recorded a $909,000 fair value adjustment charge on our SBA servicing asset which had a $0.03 per share impact on our diluted earnings per share for the quarter.

Compared to the same period in 2022, noninterest income for the third quarter of 2023 decreased by $2.2 million, or 43.1%, primarily due to lower mortgage fees, SBA servicing income and gains on sale of SBA loans.

Noninterest income for the nine months ended September 30, 2023 totaled $13.7 million, a decrease of $3.7 million, or 21.4%, from the nine months ended September 30, 2022, primarily due to lower mortgage loan fees from lower volume and lower gains on sale of mortgage loans as no mortgage loans were sold during 2023 to date, offset by increases in gains on sale of SBA loans, SBA servicing income and other income.

Noninterest Expense

Noninterest expense for the third quarter of 2023 totaled $11.8 million, an increase of $251,000, or 2.2%, from $11.5 million for the second quarter of 2023. This increase was primarily attributable to an increase in occupancy expense, an increase in loan and other real estate owned related expenses and fair value losses on our equity securities, partially offset by decreases in salary and employee benefits, FDIC insurance premiums, data processing expenses and security expenses. Compared to the third quarter of 2022, noninterest expense during the third quarter of 2023 decreased by $903,000, or 7.1%, primarily due to lower commissions paid and loan related expenses due to lower loan volume.

Noninterest expense for the nine months ended September 30, 2023 totaled $34.0 million, a decrease of $4.0 million, or 10.5%, from $38.0 million for the nine months ended September 30, 2022. This decrease was primarily attributable to a decrease in salaries and employee benefits partially due to lower commissions from lower loan volume, as well as lower loan related expenses and fair value losses on our equity securities.

The Company's efficiency ratio was 43.6% for the third quarter of 2023 compared to 38.8% and 36.4% for the second quarter of 2023 and third quarter of 2022, respectively. For the nine months ended September 30, 2023, the efficiency ratio was 38.2% compared to 35.2% for the same period in 2022.

Income Tax Expense

The Company's effective tax rate for the third quarter of 2023 was 27.0%, compared to 29.6% for the second quarter of 2023 and 29.3% for the third quarter of 2022. The Company's effective tax rate for the nine months ended September 30, 2023 was 27.9% compared to 26.9% for the same period in 2022.

Balance Sheet

Total Assets

Total assets were $3.51 billion at September 30, 2023, an increase of $35.9 million, or 1.0%, from $3.48 billion at June 30, 2023, and an increase of $162.6 million, or 4.9%, from $3.35 billion at September 30, 2022. The $35.9 million increase in total assets at September 30, 2023 compared to June 30, 2023 was primarily due to increases in cash and cash equivalents of $19.3 million, loans of $9.2 million, other assets of $5.9 million and Federal Home Loan Bank stock of $2.3 million, partially offset by decreases in investment securities of $1.3 million and SBA servicing rights of $911,000. The $162.6 million increase in total assets at September 30, 2023 compared to September 30, 2022 was primarily due to increases in cash and cash equivalents of $102.3 million, loans of $51.6 million, other assets of $12.7 million, premises and equipment of $3.8 million and accrued interest receivable of $2.9 million, partially offset by a $3.2 million decrease in mortgage servicing rights, a $3.6 million decrease in foreclosed real estate and a $2.7 million decrease in investment securities.

Our investment securities portfolio made up only 0.79% of our total assets at September 30, 2023 compared to 0.84% and 0.91% at June 30, 2023 and September 30, 2022, respectively.

Loans

Loans held for investment were $3.03 billion at September 30, 2023, an increase of $9.2 million, or 0.3%, compared to $3.02 billion at June 30, 2023, and an increase of $51.6 million, or 1.7%, compared to $2.98 billion at September 30, 2022. The increase in loans at September 30, 2023 compared to June 30, 2023 was primarily due to a $21.9 million increase in residential mortgage loans, offset by a $10.0 million decrease in construction and development loans, a $2.2 million decrease in commercial and industrial loans and a $989,000 decrease in commercial real estate loans. There were no loans classified as held for sale at September 30, 2023, June 30, 2023 or September 30, 2022.

Deposits

Total deposits were $2.72 billion at September 30, 2023, an increase of $20.1 million, or 0.7%, compared to total deposits of $2.70 billion at June 30, 2023, and an increase of $147.7 million, or 5.7%, compared to total deposits of $2.57 billion at September 30, 2022. The increase in total deposits at September 30, 2023 compared to June 30, 2023 was due to a $35.6 million increase in time deposits and a $7.8 million increase in money market accounts, offset by a $15.8 million decrease in noninterest-bearing demand deposits, a $7.2 million decrease in interest-bearing demand deposits and a $398,000 decrease in savings accounts.

Noninterest-bearing deposits were $559.5 million at September 30, 2023, compared to $575.3 million at June 30, 2023 and $602.2 million at September 30, 2022. Noninterest-bearing deposits constituted 20.6% of total deposits at September 30, 2023, compared to 21.3% at June 30, 2023 and 23.4% at September 30, 2022. Interest-bearing deposits were $2.16 billion at September 30, 2023, compared to $2.12 billion at June 30, 2023 and $1.97 billion at September 30, 2022. Interest-bearing deposits constituted 79.4% of total deposits at September 30, 2023, compared to 78.7% at June 30, 2023 and 76.6% at September 30, 2022.

Uninsured deposits were 31.4% of total deposits at September 30, 2023, compared to 30.7% and 29.2% at June 30, 2023 and September 30, 2022, respectively. As of September 30, 2023, we had $1.21 billion of available borrowing capacity at the Federal Home Loan Bank ($712.8 million), Federal Reserve Discount Window ($446.2 million) and various other financial institutions (fed fund lines totaling $47.5 million).

Asset Quality

The Company recorded a credit provision for credit losses of $381,000 during the third quarter of 2023, compared to a credit provision for credit losses of $416,000 and $1.7 million recorded during the second quarter of 2023 and third quarter of 2022, respectively. The credit provision recorded during the third quarter of 2023 was primarily due a decrease in the general reserves allocated to our residential mortgage loan portfolio as the outlook for the national housing price index improved during the third quarter 2023. Annualized net recoveries to average loans for the third quarter of 2023 was 0.00%, compared to a net charge-off of 0.06% for the second quarter of 2023 and a net recovery of 0.00% for the third quarter of 2022.

Nonperforming assets totaled $37.8 million, or 1.08% of total assets, at September 30, 2023, an increase of $14.2 million from $23.6 million, or 0.68% of total assets, at June 30, 2023, and an increase of $5.3 million from $32.5 million, or 0.97% of total assets, at September 30, 2022. The increase in nonperforming assets at September 30, 2023 compared to June 30, 2023 was primarily due to a $12.4 million increase in accruing restructured loans and a $2.1 million increase in nonaccrual loans, offset by $240,000 decrease in other real estate owned.

Allowance for credit losses as a percentage of total loans was 0.58% at September 30, 2023, compared to 0.60% at June 30, 2023 and 0.50% at September 30, 2022. Allowance for credit losses as a percentage of nonperforming loans was 47.61% at September 30, 2023, compared to 79.88% and 53.25% at June 30, 2023 and September 30, 2022, 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 the recent 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 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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