METROCITY BANKSHARES, INC. REPORTS EARNINGS FOR SECOND QUARTER 2022

ATLANTA, July 22, 2022 /PRNewswire/ -- MetroCity Bankshares, Inc. ("MetroCity" or the "Company") (NASDAQ: MCBS), holding company for Metro City Bank (the "Bank"), today reported net income of $16.1 million, or $0.63 per diluted share, for the second quarter of 2022, compared to $19.4 million, or $0.76 per diluted share, for the first quarter of 2022, and $14.4 million, or $0.56 per diluted share, for the second quarter of 2021. For the six months ended June 30, 2022, the Company reported net income of $35.5 million, or $1.38 per diluted share, compared to $27.4 million, or $1.06 per diluted share, for the same period in 2021.

Second Quarter 2022 Highlights:

• Annualized return on average assets was 2.16%, compared to 2.52% for the first quarter of 2022 and 2.53% for the second quarter of 2021.
• Annualized return on average equity was 20.65%, compared to 26.94% for the first quarter of 2022 and 22.51% for the second quarter of 2021.
• Efficiency ratio of 37.6%, compared to 31.8% for the first quarter of 2022 and 36.2% for the second quarter of 2021.
• Total loans increased by $257.7 million, or 10.3%, to $2.77 billion from the previous quarter.
• Net interest margin was 4.26%, compared to 4.16% for the first quarter of 2022 and 4.60% for the second quarter of 2021.

Results of Operations

Net Income

Net income was $16.1 million for the second quarter of 2022, a decrease of $3.3 million, or 17.1%, from $19.4 million for the first quarter of 2022. This decrease was due to an decrease in noninterest income of $3.0 million, a decrease in net interest income of $433,000 and an increase in noninterest expense of $940,000, offset by a decrease in income tax expense of $943,000. Net income increased $1.7 million, or 11.9%, in the second quarter of 2022 compared to net income of $14.4 million for the second quarter of 2021. This increase was due to an increase in net interest income of $5.4 million and a decrease in provision for loan losses of $2.2 million, offset by a decrease in noninterest income of $3.9 million, an increase in noninterest expense of $1.0 million and an increase in provision for income taxes of $926,000.

Net Interest Income and Net Interest Margin

Interest income totaled $33.0 million for the second quarter of 2022, an increase of $1.1 million, or 3.4%, from the previous quarter, primarily due to a $63.8 million increase in average loan balances. We recognized Paycheck Protection Program ("PPP") loan fee income of $341,000 during the second quarter of 2022 compared to $503,000 recognized during the first quarter of 2022. As compared to the second quarter of 2021, interest income for the second quarter of 2022 increased by $7.1 million, or 27.6%, primarily due to an increase in average loan balances of $636.4 million.

Interest expense totaled $2.8 million for the second quarter of 2022, an increase of $1.5 million, or 115.8%, from the previous quarter, primarily due to a 28 basis points increase in deposit costs and a 54 basis points increase in borrowing costs. As compared to the second quarter of 2021, interest expense for the second quarter of 2022 increased by $1.7 million, or 163.9%, primarily due to a $465.7 million increase in average interest-bearing deposit balances coupled with a 26 basis points increase in deposit costs.

The net interest margin for the second quarter of 2022 was 4.26% compared to 4.16% for the previous quarter, an increase of ten basis points. The yield on average interest-earning assets for the second quarter of 2022 increased by 31 basis points to 4.65% from 4.34% for the previous quarter, while the cost of average interest-bearing liabilities for the second quarter of 2022 increased by 32 basis points to 0.56% from 0.24% for the previous quarter. Average earning assets decreased by $143.0 million from the previous quarter, primarily due to a decrease of $205.7 million in average interest-earning cash accounts offset by an increase in average loans of $63.8 million. Average interest-bearing liabilities decreased by $182.6 million from the previous quarter as average borrowings decreased by $221.5 million and interest-bearing deposits increased by $38.9 million. The inclusion of PPP loan average balances, interest and fees had a three basis points impact on both the yield on average loans and the net interest margin for the second quarter of 2022.

As compared to the same period in 2021, the net interest margin for the second quarter of 2022 decreased by 34 basis points to 4.26% from 4.60%, primarily due to a 14 basis point decrease in the yield on average interest-earning assets of $2.85 billion and a 25 basis point increase in the cost of average interest-bearing liabilities of $2.00 billion. Average earning assets for the second quarter of 2022 increased by $679.5 million from the second quarter of 2021, due to a $636.4 million increase in average loans and a $43.1 million increase in total investments. Average interest-bearing liabilities for the second quarter of 2022 increased by $618.0 million from the second quarter of 2021, driven by an increase in average interest-bearing deposits of $465.7 million and an increase in average borrowings of $152.3 million.

Noninterest Income

Noninterest income for the second quarter of 2022 was $4.7 million, a decrease of $3.0 million, or 39.2%, from the first quarter of 2022, primarily due to a significant decrease in Small Business Administration ("SBA") servicing income and gains on sale of SBA loans, partially offset by higher mortgage loan fees as mortgage loan originations totaled  $327.0 million during the second quarter of 2022 compared to $162.9 million for the previous quarter. We elected not to sell any SBA loans during the second quarter of 2022 as premiums drastically declined during the quarter. During the second quarter of 2022, we recorded a $2.3 million fair value loss on our SBA servicing asset and an $88,000 fair value impairment recovery on our mortgage servicing asset. These servicing asset adjustments had a $0.07 per share impact on our diluted earnings per share for the quarter.

Compared to the same period in 2021, noninterest income for the second quarter of 2022 decreased by $3.9 million, or 45.9%, primarily due to much lower SBA servicing income and gains on sale of SBA loans, offset by higher gains on sale of mortgage loans and mortgage serving income.

Noninterest Expense

Noninterest expense for the second quarter of 2022 totaled $13.1 million, an increase of $940,000, or 7.7%, from $12.2 million for the first quarter of 2022. This increase was primarily attributable to higher salaries and employee benefits partially due to an increase in commissions earned as loan volume increased during the quarter. Compared to the second quarter of 2021, noninterest expense during the second quarter of 2022 increased by $1.0 million, or 8.5%, primarily due to higher salaries and employee benefits and IT-related expenses.

The Company's efficiency ratio was 37.6% for the second quarter of 2022 compared to 31.8% and 36.2% for the first quarter of 2022 and second quarter of 2021, respectively. For the six months ended June 30, 2022, the efficiency ratio was 34.6% compared with 36.1% for the same period in 2021.

Income Tax Expense

The Company's effective tax rate for the second quarter of 2022 was 26.0%, compared to 25.3% for the first quarter of 2022 and 24.7% for the second quarter of 2021.

Balance Sheet

Total Assets

Total assets were $3.17 billion at June 30, 2022, an increase of $25.5 million, or 0.8%, from $3.14 billion at March 31, 2022, and an increase of $650.0 million, or 25.8%, from $2.52 billion at June 30, 2021. The $25.5 million increase in total assets at June 30, 2022 compared to March 31, 2022 was primarily due to increases in loans held for investment of $257.7 million and other assets of $13.1 million, partially offset by decreases in cash and cash equivalents of $201.6 million and loans held for sale of $37.9 million. The $650.0 million increase in total assets at June 30, 2022 compared to June 30, 2021 was primarily due to increases in loans of $678.3 million, equity securities of $10.8 million, bank owned life insurance of $32.0 million and other assets of $20.2 million, offset by a $90.8 million decrease in cash and cash equivalents and an increase in the allowance for loan losses of $2.8 million. 

Loans

Loans held for investment were $2.77 billion at June 30, 2022, an increase of $257.7 million, or 10.3%, compared to $2.51 billion at March 31, 2022, and an increase of $678.3 million, or 32.4%, compared to $2.09 billion at June 30, 2021. The increase in loans at June 30, 2022 compared to March 31, 2022 was primarily due to a $6.4 million increase in construction and development loans, a $14.2 million increase in commercial real estate loans and a $246.5 million increase in residential mortgages, offset by a $8.2 million decrease in commercial and industrial loans primarily due to PPP loan forgiveness. Included in commercial and industrial loans are PPP loans totaling $8.9 million as of June 30, 2022. PPP Loans totaled $19.8 million as of March 31, 2022 and $93.1 million as of June 30, 2021. There were no loans classified as held for sale at June 30, 2022 or June 30, 2021. Loans held for sale were $37.9 million at March 31, 2022.

Deposits

Total deposits were $2.40 billion at June 30, 2022, an increase of $14.9 million, or 0.6%, compared to total deposits of $2.38 billion at March 31, 2022, and an increase of $422.2 million, or 21.4%, compared to total deposits of $1.97 billion at June 30, 2021. The increase in total deposits at June 30, 2022 compared to March 31, 2022 was due to an $11.3 million increase in money market accounts, a $4.5 million increase in noninterest-bearing demand deposits, a $2.7 million increase in time deposits and a $0.7 million increase in interest-bearing demand deposits, offset by a $4.3 million decrease in savings accounts.

Noninterest-bearing deposits were $620.2 million at June 30, 2022, compared to $615.7 million at March 31, 2022 and $618.1 million at June 30, 2021. Noninterest-bearing deposits constituted 25.9% of total deposits at June 30, 2022, compared to 25.8% at March 31, 2022 and 31.3% at June 30, 2021. Interest-bearing deposits were $1.78 billion at June 30, 2022, compared to $1.77 billion at March 31, 2022 and $1.36 billion at June 30, 2021. Interest-bearing deposits constituted 74.1% of total deposits at June 30, 2022, compared to 74.2% at March 31, 2022 and 68.7% at June 30, 2021.

Asset Quality

The Company recorded no provision for loan losses during the second quarter of 2022, compared to $104,000 during the first quarter of 2022 and $2.2 million during the second quarter of 2021. Annualized net charge-offs to average loans for the second quarter of 2022 was 0.00%, compared to 0.06% for the first quarter of 2022 and 0.02% for the second quarter of 2021. 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 $34.0 million, or 1.07% of total assets, at June 30, 2022, an increase of $18.0 million from $16.0 million, or 0.51% of total assets, at March 31, 2022, and an increase of $20.0 million from $14.0 million, or 0.56% of total assets, at June 30, 2021. The increase in nonperforming assets at June 30, 2022 compared to March 31, 2022 was due to a $10.4 million increase in nonaccrual loans and a $7.6 million increase in accruing troubled debt restructurings.

Allowance for loan losses as a percentage of total loans was 0.60% at June 30, 2022, compared to 0.66% at both March 31, 2022 and June 30, 2021. Excluding outstanding PPP loans of $8.9 million as of June 30, 2022, $19.8 million as of March 31, 2022 and $93.1 million as of June 30, 2021, the allowance for loan losses as a percentage of total loans was 0.60% at June 30, 2022, 0.67% at March 31, 2022 and 0.69% at June 30, 2021. Allowance for loan losses as a percentage of nonperforming loans was 54.79% at June 30, 2022, compared to 134.39% and 147.82% at March 31, 2022 and June 30, 2021, 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 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 effects of the ongoing COVID-19 pandemic and related variants 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 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 and related variants on the Company's assets, business, cash flows, financial condition, liquidity, prospects and results of operations; 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; 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; higher inflation and its impacts; the effects of war or other conflicts including the impacts related to or resulting from Russia's military action in Ukraine; 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 and related variants. 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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