MCBS MetroCity Bankshares Inc

ATLANTA, Jan. 22, 2021 /PRNewswire/ -- MetroCity Bankshares, Inc. ("MetroCity" or the "Company") (NASDAQ: MCBS), holding company for Metro City Bank (the "Bank"), today reported net income of $9.5 million, or $0.37 per diluted share, for the fourth quarter of 2020, compared to $9.4 million, or $0.36 per diluted share, for the third quarter of 2020, and $10.7 million, or $0.42 per diluted share, for the fourth quarter of 2019. For the year ended December 31, 2020, the Company reported net income of $36.4 million, or $1.41 per diluted share, compared to $44.7 million, or $1.81 per diluted share, for the year ended December 31, 2019.

Fourth Quarter 2020 Highlights:

• Annualized return on average assets was 2.14%, compared to 2.20% for the third quarter of 2020 and 2.57% for the fourth quarter of 2019.
• Annualized return on average equity was 15.78%, compared to 16.22% for the third quarter of 2020 and 20.40% for the fourth quarter of 2019.
• Efficiency ratio of 45.1%, compared to 42.5% for the third quarter of 2020 and 40.5% for the fourth quarter of 2019.
• Total assets increased by $156.3 million, or 9.0%, to $1.90 billion from the previous quarter.
• Total loans increased by $170.4 million, or 11.7%, to $1.63 billion from the previous quarter.
• Total deposits increased by $142.1 million, or 10.6%, to $1.48 billion from the previous quarter.
• Net interest margin increased to 4.46%, compared to 3.97% for the third quarter of 2020 and 3.82% for the fourth quarter of 2019.

Full Year 2020 Highlights:

• Return on average assets was 2.17%, compared to 2.87% for 2019.
• Return on average equity was 16.02%, compared to 24.23% for 2019.
• Efficiency ratio was 44.0%, compared to 39.7% for 2019.
• Total assets increased by $264.3 million, or 16.2%, to $1.90 billion from $1.63 billion at December 31, 2019.
• Total loans, excluding loans held for sale, increased by $469.2 million, or 40.4%, to $1.63 billion from $1.16 billion at December 31, 2019.
• Total deposits increased by $172.5 million, or 13.2%, to $1.48 billion from $1.31 billion at December 31, 2019.
• Net interest margin increased to 4.18% compared to 4.15% in 2019.

COVID-19 Pandemic

The Company prioritizes the health and safety of its employees and customers, and continues to take protective measures during the ongoing coronavirus (COVID-19) pandemic, such as implementing remote work arrangements to the fullest extent possible and by adjusting banking center hours and operational measures to promote social distancing. At the same time, the Company continues to closely monitor the effects of the COVID-19 pandemic on our loan and deposit customers, and is assessing the risks in our loan portfolio and working with our customers to reduce the pandemic's impact on them while minimizing losses for the Company. Meanwhile, the Company remains focused on improving shareholder value, managing credit exposure, monitoring expenses, enhancing the customer experience and supporting the communities it serves.

We have implemented loan programs to allow customers who are experiencing hardships from the COVID-19 pandemic to defer loan principal and interest payments for up to nine months. The Small Business Administration (the "SBA") made debt relief payments for the principal, interest and fee payments of all our SBA loan customers for six months through the end of September 2020. As of December 31, 2020, we had 14 non-SBA commercial customers with outstanding loan balances totaling $42.0 million who were approved for a third round of payment deferrals. This is a decline from the second round of payment deferrals that were granted to 24 non-SBA commercial customers with outstanding balances totaling $82.5 million as of September 30, 2020. Included in the third round of non-SBA payment deferrals were eight loans totaling $24.2 million with a weighted average loan-to-value ("LTV") of 44.2% in the hotel industry and no loans in the restaurant industry, which are two industries heavily impacted by the COVID-19 pandemic. As of December 31, 2020 and following the expiration of the SBA debt relief payments mentioned above, we had approved three month payment deferrals for 18 SBA loans with outstanding gross loan balances totaling $25.5 million ($6.4 million unguaranteed book balance). Of these SBA payment deferrals, four loans totaling $6.0 million ($1.5 million unguaranteed book balance) were in the restaurant industry and no loans were in the hotel industry. As of December 31, 2020, the Company had 51 loans totaling $141.2 million in the hotel industry and 116 loans totaling $36.1 million in the restaurant industry.

As of December 31, 2020, our residential real estate loan portfolio made up 59.6% of our total loan portfolio and had a weighted average amortized LTV of approximately 55.6%. As of December 31, 2020, 1.0% of our residential mortgages remain on hardship payment deferral covering principal and interest payments for three to six months. This is a significant decrease from the first round of payment deferrals granted during the second quarter of 2020, which made up 19.2% of our residential mortgage balances as of June 30, 2020, and a slight decrease from the second round of payment deferrals granted during the third quarter of 2020, which made up 1.7% of our residential mortgage balances as of September 30, 2020.

As a preferred SBA lender, we are participating in the Paycheck Protection Program ("PPP") created under the Coronavirus Aid, Relief and Economic Security Act and implemented by the SBA to help provide loans to our business customers in need. As of December 31, 2020, the Company approved and funded over 1,800 PPP loans totaling $96.9 million. These PPP loans were funded with our current cash balances and all PPP loans are fully guaranteed by the SBA. As of January 20, 2020, the SBA had granted forgiveness for PPP loans totaling $8.4 million.

The Economic Aid Act, signed into law on December 27, 2020, authorized an additional $284.5 billion in new PPP funding and extends the authority of lenders to make PPP loans through March 31, 2021.  We are participating in this new round of PPP loan funding by offering first and second draw loans.

Based on the Company's capital levels as of December 31, 2020, conservative underwriting policies, low LTV ratios, and strong liquidity position, management expects to be able to continue to assist the Company's customers and communities during these difficult times, manage the economic risks and uncertainties associated with the COVID-19 pandemic and remain well capitalized.

Results of Operations

Net Income

Net income was $9.5 million for the fourth quarter of 2020, a slight increase of $69,000, or 0.7%, from $9.4 million for the third quarter of 2020. This increase was primarily due to an increase in net interest income of $2.5 million and a decrease in provision for loan losses of $494,000, offset by a decrease in noninterest income of $1.8 million and an increase in noninterest expense of $927,000. Net income decreased $1.2 million, or 11.4%, in the fourth quarter of 2020 compared to net income of $10.7 million for the fourth quarter of 2019. This decrease was primarily due to a decrease in noninterest income of $3.2 million, an increase in noninterest expense of $1.2 million and an increase in provision for loan losses of $1.0 million, offset by an increase in net interest income of $3.5 million and a decrease in provision for income taxes of $715,000.

Net Interest Income and Net Interest Margin

Interest income totaled $19.8 million for the fourth quarter of 2020, an increase of $1.7 million, or 9.4%, from the previous quarter, primarily due to a nine basis points increase in the yield on average loans and a $114.5 million increase in average loan balances. We also recognized PPP loan fee income of $518,000 during the fourth quarter of 2020. During the third quarter of 2020, we reevaluated the estimated life of our PPP loan fee amortization period, extending it from nine months to 24 months due to the uncertainty in the PPP loan forgiveness process. As compared to the fourth quarter of 2019, interest income for the fourth quarter of 2020 decreased by $786,000, or 3.8%, primarily due to a 90 basis points decrease in the yield on average loans.

Interest expense totaled $1.4 million for the fourth quarter of 2020, a decrease of $781,000, or 35.6%, from the previous quarter, primarily due to a 39 basis points decrease in deposit costs and a $64.5 million decrease in higher cost average time deposits. As compared to the fourth quarter of 2019, interest expense for the fourth quarter of 2020 decreased by $4.3 million, or 75.2%, primarily due to a 160 basis points decrease in deposit costs coupled with a $324.6 million decrease in higher cost average time deposits.

The net interest margin for the fourth quarter of 2020 was 4.46% compared to 3.97% for the previous quarter, an increase of 49 basis points. The cost of interest-bearing liabilities for the fourth quarter of 2020 decreased by 35 basis points to 0.56% compared with the previous quarter, while the yield on interest-earning assets for the fourth quarter of 2020 increased by 29 basis points to 4.80% from 4.51% for the previous quarter. Average earning assets increased by $46.6 million from the previous quarter, primarily due to an increase in average loans of $114.5 million, partially offset by a $35.6 million decrease in average interest-earning cash accounts and a $32.2 million decrease in average securities purchased under agreements to resell. Average interest-bearing liabilities increased by $40.5 million from the previous quarter as average interest-bearing deposits increased by $36.9 million and average borrowings increased by $3.6 million. The inclusion of PPP loan average balances, interest and fees had a 12 basis points impact on the yield on average loans and a seven basis points impact on the net interest margin for the fourth quarter of 2020.

As compared to the same period in 2019, the net interest margin for the fourth quarter of 2020 increased by 64 basis points to 4.46% from 3.82%, primarily due to a 150 basis point decrease in the cost of interest-bearing liabilities of $995.3 million and a decrease of 47 basis points in the yield on average interest-earning assets of $1.65 billion. Average earning assets for the fourth quarter of 2020 increased by $92.7 million from the fourth quarter of 2019, primarily due to a $242.9 million increase in average loans, partially offset by a $145.2 million decrease in interest-earning cash accounts. Average interest-bearing liabilities for the fourth quarter of 2020 decreased by $98.6 million from the fourth quarter of 2019, primarily driven by a decrease in average interest-bearing deposits of $124.2 million, offset by an increase in average borrowings of $25.6 million.

Noninterest Income

Noninterest income for the fourth quarter of 2020 was $6.1 million, a decrease of $1.8 million, or 22.9%, from the third quarter of 2020, primarily due to lower mortgage and SBA servicing income and gains on sale of SBA loans, partially offset by higher mortgage loan fees as mortgage volume significantly increased during the quarter. During the fourth quarter of 2020, we recorded a $524,000 fair value adjustment charge on our SBA servicing asset and a $199,000 fair value impairment charge on our mortgage servicing asset. These servicing asset adjustments had a $0.02 per share impact on our diluted earnings per share for the quarter.

Compared to the same period in 2019, noninterest income for the fourth quarter of 2020 decreased by $3.2 million, or 34.4%, primarily due to the decrease in mortgage servicing income and gains earned from the sales of mortgage loans. There were no mortgage loan sales during the fourth quarter of 2020 compared to mortgage loan sales of $106.5 million during the same period in 2019.

Noninterest Expense

Noninterest expense for the fourth quarter of 2020 totaled $11.1 million, an increase of $927,000, or 9.1%, from $10.2 million for the third quarter of 2020. This increase was primarily attributable to higher salaries and employee benefits and loan related expenses. Compared to the fourth quarter of 2019, noninterest expense during the fourth quarter of 2020 increased by $1.2 million, or 12.6%, primarily due to higher salaries and employee benefits.

The Company's efficiency ratio was 45.1% for the fourth quarter of 2020 compared to 42.5% and 40.5% for the third quarter of 2020 and fourth quarter of 2019, respectively. For the year ended December 31, 2020, the efficiency ratio was 44.0% compared with 39.7% for the same period in 2019.

Income Tax Expense

The Company's effective tax rate for the fourth quarter of 2020 was 24.6%, compared to 23.7% for the third quarter of 2020 and 26.2% for the fourth quarter of 2019. The effective tax rate for the year ended December 31, 2020 was 25.4% compared to 26.5% for the year ended December 31, 2019.

Balance Sheet

Total Assets

Total assets were $1.90 billion at December 31, 2020, an increase of $156.3 million, or 9.0%, from $1.74 billion at September 30, 2020, and an increase of $264.3 million, or 16.2%, from $1.63 billion at December 31, 2019. The $156.3 million increase in total assets from at December 31, 2020 compared to September 30, 2020 was primarily due to increases in loans of $170.4 million and cash and due from banks of $31.5 million, partially offset by a $40.0 million decrease in securities purchased under agreements to resell. The $264.3 million increase in total assets at December 31, 2020 compared to December 31, 2019 was primarily due to increases in loans held for investment of $469.2 million and bank owned life insurance of $15.6 million, partially offset by decreases in cash and due from banks of $129.8 million, securities purchased under agreements to resell of $15.0 million and loans held for sale of $85.8 million.

Loans

Loans held for investment were $1.63 billion at December 31, 2020, an increase of $170.4 million, or 11.7%, compared to $1.46 billion at September 30, 2020, and an increase of $469.2 million, or 40.4%, compared to $1.16 billion at December 31, 2019. The increase in loans held for investment at December 31, 2020 compared to September 30, 2020 was primarily due to a $143.1 million increase in residential mortgages, a $29.8 million increase in commercial real estate loans and a $7.0 million increase in construction and development loans, offset by a $9.6 million decrease in commercial and industrial loans. Included in commercial and industrial loans are PPP loans totaling $92.4 million as of December 31, 2020. There were no loans classified as held for sale at December 31, 2020 and September 30, 2020. Loans held for sale were $85.8 million at December 31, 2019.

Deposits

Total deposits were $1.48 billion at December 31, 2020, an increase of $142.1 million, or 10.6%, compared to total deposits of $1.34 billion at September 30, 2020, and an increase of $172.5 million, or 13.2%, compared to total deposits of $1.31 billion at December 31, 2019. The increase in total deposits at December 31, 2020 compared to September 30, 2020 was primarily due to the $147.2 million increase in money market accounts and a $7.7 million increase in interest-bearing demand deposits, partially offset by a $16.5 million decrease in time deposits. The increase in money market accounts was partially due to the addition of $122.3 million in brokered money market accounts during the quarter.

Noninterest-bearing deposits were $462.9 million at December 31, 2020, compared to $460.7 million at September 30, 2020 and $292.0 million at December 31, 2019. Noninterest-bearing deposits constituted 31.3% of total deposits at December 31, 2020, compared to 34.4% at September 30, 2020 and 22.3% at December 31, 2019. Interest-bearing deposits were $1.0 billion at December 31, 2020, compared to $877.1 million at September 30, 2020 and $1.0 billion at December 31, 2019. Interest-bearing deposits constituted 68.7% of total deposits at December 31, 2020, compared to 65.6% at September 30, 2020 and 77.7% at December 31, 2019.

Asset Quality

The Company recorded a provision for loan losses of $956,000 during the fourth quarter of 2020. Annualized net charge-offs to average loans for the fourth quarter of 2020 was 0.04%, compared to 0.00% for both the third quarter of 2020 and fourth quarter of 2019. We continue to include qualitative factors in our allowance for loan losses calculation in light of the continued economic uncertainties caused by the ongoing COVID-19 pandemic, resulting in the increased provision expense recorded during the fourth quarter of 2020. 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 $16.9 million, or 0.89% of total assets, at December 31, 2020, a decrease of $561,000 from $17.5 million, or 1.01% of total assets, at September 30, 2020, and an increase of $1.8 million from $15.1 million, or 0.93% of total assets, at December 31, 2019. The decrease in nonperforming assets at December 31, 2020 compared to September 30, 2020 was primarily due to a $4.6 million decrease in accruing troubled debt restructured loans, partially offset by a $473,000 increase in nonaccrual loans and $3.6 million increase in other real estate owned.

Allowance for loan losses as a percentage of total loans was 0.62% at December 31, 2020, compared to 0.64% at September 30, 2020 and 0.59% at December 31, 2019. Excluding outstanding PPP loans of $92.4 million as of December 31, 2020 and $96.9 million as of September 30, 2020, the allowance for loan losses as a percentage of total loans was 0.66% at December 31, 2020 and 0.68% at September 30, 2020. Allowance for loan losses as a percentage of nonperforming loans was 77.40% at December 31, 2020, compared to 54.24% and 46.54% at September 30, 2020 and December 31, 2019, 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 potential effects of the ongoing COVID-19 pandemic 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 of 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 on the Company's assets, business, cash flows, financial condition, liquidity, prospects and results of operations; potential increases in the provision for loan losses resulting from the ongoing COVID-19 pandemic; changes in the interest rate environment, including changes to the federal funds rate; 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, including changes to statutes, regulations or regulatory policies or practices as a result of, or in response to, the ongoing COVID-19 pandemic; changes in tax laws; 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. 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.