Yahoo Finance

Results of Operations

Net Income

Net income was $16.3 million for the first quarter of 2025, an increase of $62,000, or 0.4%, from $16.2 million for the fourth quarter of 2024. This increase was primarily due to a decrease in noninterest expense of $527,000, an increase in net interest income of $494,000, an increase in noninterest income of $135,000 and a decrease in provision for credit losses of $67,000, offset by an increase in income tax expense of $1.2 million Net income increased by $1.7 million, or 11.4%, in the first quarter of 2025 compared to net income of $14.6 million for the first quarter of 2024. This increase was due to an increase in net interest income of $3.5 million and a decrease in income tax expense of $22,000, offset by an increase in noninterest expense of $1.4 million, an increase in provision for credit losses of $275,000 and a decrease in noninterest income of $112,000.

Net Interest Income and Net Interest Margin

Interest income totaled $52.5 million for the first quarter of 2025, a decrease of $95,000, or 0.2%, from the previous quarter, primarily due to a $20.3 million decrease in the average total investments balance and a 90 basis points decrease in the total investments yield, offset by a 9 basis points increase in the loan yield and a $47.0 million increase in average loan balances. As compared to the first quarter of 2024, interest income for the first quarter of 2025 increased by $161,000, or 0.3%, primarily due to a 6 basis points increase in the loan yield coupled with a $2.6 million increase in average loan balances and a $15.0 million increase in average total investment balances, offset by a 71 basis points decrease in the total investments yield.

Interest expense totaled $22.0 million for the first quarter of 2025, a decrease of $589,000, or 2.6%, from the previous quarter, primarily due to a 19 basis points decrease in time deposit costs coupled with a $18.4 million decrease in the average time deposits. As compared to the first quarter of 2024, interest expense for the first quarter of 2025 decreased by $3.3 million, or 13.1%, primarily due to a 61 basis points decrease in deposit costs coupled with a $67.0 million decrease in average deposit balances, offset by a 44 basis points increase in borrowing costs and a $46.2 million increase in the average borrowing balance. The Company currently has interest rate derivative agreements totaling $950.0 million that are designated as cash flow hedges of our deposit accounts indexed to the Effective Federal Funds Rate (currently 4.33%). The weighted average pay rate for these interest rate derivatives is 2.29%. During the first quarter of 2025, we recorded a credit to interest expense of $4.3 million from the benefit received on these interest rate derivatives compared to a benefit of $5.1 million and $4.1 million recorded during the fourth quarter of 2024 and the first quarter of 2024, respectively.

The net interest margin for the first quarter of 2025 was 3.67% compared to 3.57% for the previous quarter, an increase of ten basis points. The yield on average interest-earning assets for the first quarter of 2025 increased by six basis points to 6.31% from 6.25% for the previous quarter, while the cost of average interest-bearing liabilities for the first quarter of 2025 decreased by seven basis points to 3.48% from 3.55% for the previous quarter. Average earning assets increased by $26.6 million from the previous quarter, due to an increase in average loan balances of $47.0 million, offset by a decrease of $20.3 million in average total investments. Average interest-bearing liabilities increased by $35.9 million from the previous quarter as average interest-bearing deposits increased by $20.9 million and average borrowings increased by $15.0 million.

As compared to the same period in 2024, the net interest margin for the first quarter of 2025 increased by 43 basis points to 3.67% from 3.24%, primarily due to a four basis points increase in the yield on average interest-earning assets of $3.38 billion and a 46 basis points decrease in the cost of average interest-bearing liabilities of $2.56 billion. Average earning assets for the first quarter of 2025 increased by $17.6 million from the first quarter of 2024, due to a $15.0 million increase in average total investments and a $2.6 million increase in average loans. Average interest-bearing liabilities for the first quarter of 2025 decreased by $20.8 million from the first quarter of 2024, driven by the decrease in average interest-bearing deposits of $67.0 million, offset by a $46.2 increase in average borrowings.

Noninterest Income

Noninterest income for the first quarter of 2025 was $5.5 million, an increase of $135,000, or 2.5%, from the fourth quarter of 2024, primarily due to higher gains on sale from our residential mortgage loans and other income from unrealized gains recognized by our equity securities, offset by lower gains on sale and servicing income from our Small Business Administration ("SBA") loans, lower servicing income from our  residential mortgage loans and lower mortgage loan fees from lower volume. SBA loan sales totaled $16.6 million (sales premium of 5.97%) during the first quarter of 2025 compared to $19.2 million (sales premium of 6.25%) during the fourth quarter of 2024. Mortgage loan originations totaled $91.1 million during the first quarter 2025 compared to $103.3 million during the fourth quarter of 2024. Mortgage loan sales totaled $40.1 million (average sales premium of 1.06%) during the first quarter of 2025. No mortgage loans were sold during the fourth quarter of 2024. During the first quarter of 2025, we recorded a $104,000 fair value adjustment charge on our SBA servicing asset compared to a fair value adjustment charge of $31,000 during the fourth quarter of 2024. We also recorded a $42,000 fair value impairment charge on our mortgage servicing asset during the first quarter of 2025 compared to a $232,000 fair value impairment recovery recorded during the fourth quarter of 2024.

Compared to the first quarter of 2024, noninterest income for the first quarter of 2025 decreased by $112,000, or 2.0%, primarily due to lower gains on sale and servicing income from our SBA loans, offset by increases in gains on sale and servicing income from our residential mortgage loans, as well as higher other income from unrealized gains recognized on our equity securities and an increased bank owned life insurance income. During the first quarter of 2024, we recorded a $360,000 fair value gain on our SBA servicing asset.

Noninterest Expense

Noninterest expense for the first quarter of 2025 totaled $13.8 million, a decrease of $527,000, or 3.7%, from $14.3 million for the fourth quarter of 2024. This decrease was primarily attributable to the decrease in salaries and employee benefits which included lower 401k match, FICA taxes and stock-based compensation expenses, partially offset by higher legal fees and security expense. Included in other noninterest expenses during the first quarter of 2025 were $262,000 of merger-related due diligence expenses.

Compared to the first quarter of 2024, noninterest expense during the first quarter of 2025 increased by $1.4 million, or 11.6%, primarily due to higher salary and employee benefits, occupancy expense, data processing expense, security expense and merger-related expenses, offset by lower FDIC insurance premiums and professional fees.

The Company's efficiency ratio was 38.3% for the first quarter of 2025 compared to 40.5% and 37.9% for the fourth quarter of 2024 and first quarter of 2024, respectively.

Income Tax Expense

The Company's effective tax rate for the first quarter of 2025 was 26.2%, compared to 22.1% for the fourth quarter of 2024 and 28.4% for the first quarter of 2024. The effective tax rate was much lower during the fourth quarter of 2024 due to a tax provision to tax return adjustment recorded for our 2023 state tax returns filed during the fourth quarter of 2024.

Balance Sheet

Total Assets

Total assets were $3.66 billion at March 31, 2025, an increase of $65.9 million, or 1.8%, from $3.59 billion at December 31, 2024, and an increase of $12.5 million, or 0.3%, from $3.65 billion at March 31, 2024. The $65.9 million increase in total assets at March 31, 2025 compared to December 31, 2024 was primarily due to increases in cash and due from banks of $36.0 million, loans held for sale of $35.7 million, other assets of $14.9 million and equity securities of $8.1 million, partially offset by decreases in loans held for investment of $26.6 million and interest rate derivatives of $4.6 million. The $12.5 million increase in total assets at March 31, 2025 compared to March 31, 2024 was primarily due to increases in cash and due from banks of $18.0 million, other assets of $17.3 million, loans held for investment of $15.5 million, federal funds sold of $8.2 million, equity securities of $8.2 million, Federal Home Loan Bank stock of $3.6 million and bank owned life insurance of $2.4 million, partially offset by decreases in loans held for sale of $36.9 million and interest rate derivatives of $21.5 million.

Our investment securities portfolio made up only 0.93% of our total assets at March 31, 2025 compared to 0.77% and 0.78% at December 31, 2024 and March 31, 2024, respectively.

Loans

Loans held for investment were $3.13 billion at March 31, 2025, a decrease of $26.6 million, or 0.8%, compared to $3.16 billion at December 31, 2024, and an increase of $15.5 million, or 0.5%, compared to $3.12 billion at March 31, 2024. The decrease in loans at March 31, 2025 compared to December 31, 2024 was due to a $56.4 million decrease in residential mortgage loans and a $6.7 million decrease in commercial and industrial loans, offset by a $30.1 million increase in commercial real estate loans and a $6.8 million increase in construction and development loans. Loans classified as held for sale totaled $35.7 million and $72.6 million at March 31, 2025 and March 31, 2024, respectively. There were no loans classified as held for sale at December 31, 2024.

Deposits

Total deposits were $2.74 billion at March 31, 2025, an increase of $232,000 compared to total deposits of $2.74 billion at December 31, 2024, and a decrease of $76.8 million, or 2.7%, compared to total deposits of $2.81 billion at March 31, 2024. The increase in total deposits at March 31, 2025 compared to December 31, 2024 was due to a $44.5 million increase in money market accounts and a $3.7 million increase in noninterest-bearing demand deposits, offset by a $36.2 million decrease in time deposits, a $11.6 million decrease in interest-bearing demand deposits and a $238,000 decrease in savings accounts.

Noninterest-bearing deposits were $540.0 million at March 31, 2025, compared to $536.3 million at December 31, 2024 and $546.8 million at March 31, 2024. Noninterest-bearing deposits constituted 19.7% of total deposits at March 31, 2025, compared to 19.6% at December 31, 2024 and 19.4% at March 31, 2024. Interest-bearing deposits were $2.20 billion at March 31, 2025, compared to $2.20 billion at December 31, 2024 and $2.27 billion at March 31, 2024. Interest-bearing deposits constituted 80.3% of total deposits at March 31, 2025, compared to 80.4% at December 31, 2024 and 80.6% at March 31, 2024.

Uninsured deposits were 24.3% of total deposits at March 31, 2025, compared to 24.1% and 23.0% at December 31, 2024 and March 31, 2024, respectively. As of March 31, 2025, we had $1.26 billion of available borrowing capacity at the Federal Home Loan Bank ($648.6 million), Federal Reserve Discount Window ($561.0 million) and various other financial institutions (fed fund lines totaling $47.5 million).

Asset Quality

The Company recorded a provision for credit losses of $135,000 during the first quarter of 2025, compared to provision for credit losses of $202,000 during the fourth quarter of 2024 and a credit provision for credit losses of $140,000 during the first quarter of 2024. The provision expense recorded during the first quarter of 2025 was primarily due to the increase in general reserves allocated to our commercial real estate loans, partially offset by the decrease in reserves allocated to our residential real estate loan portfolio and individually analyzed loans. Annualized net charge-offs to average loans for the first quarter of 2025 was 0.02%, compared to net charge-offs of 0.01% for the fourth quarter of 2024 and 0.00% for the first quarter of 2024.

Nonperforming assets totaled $18.5 million, or 0.51% of total assets, at March 31, 2025, an increase of $93,000 from $18.4 million, or 0.51% of total assets, at December 31, 2024, and an increase of $3.8 million from $14.7 million, or 0.40% of total assets, at March 31, 2024. The increase in nonperforming assets at March 31, 2025 compared to December 31, 2024 was due to a $1.3 million increase in other real estate owned offset by a $1.2 million decrease in nonaccrual loans.

Allowance for credit losses as a percentage of total loans was 0.59% at March 31, 2025, compared to 0.59% at December 31, 2024 and 0.58% at March 31, 2024. Allowance for credit losses as a percentage of nonperforming loans was 110.52% at March 31, 2025, compared to 104.08% and 135.23% at December 31, 2024 and March 31, 2024, 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, tariffs or trade wars (including reduced consumer spending, lower economic growth or recession, reduced demand for U.S. exports, disruptions to supply chains, and decreased demand for other banking products and services), high unemployment rates, inflationary pressures, increasing insurance costs, elevated interest rates, including the impact of changes in interest rates on our financial projections, models and guidance and slowdowns in economic growth, as well as the financial stress on borrowers as a result of the foregoing; uncertain duration of trade conflicts; magnitude of the impact that the proposed tariffs may have on our customers' businesses; potential impacts of adverse developments in the banking industry, including impacts on customer confidence, deposits, 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, which could have an adverse effect on the Company's profitability; 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; 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; risks associated with the proposed merger of First IC with the Company (the "Proposed Merger"), including (a) the risk that the cost savings and any revenue synergies from the Proposed Merger is less than or different from expectations, (b) disruption from the Proposed Merger with customer, supplier, or employee relationships, (c) the occurrence of any event, change, or other circumstances that could give rise to the termination of the Agreement and Plan of Merger by and between the Company and First IC, (d) the failure to obtain necessary regulatory approvals for the Proposed Merger, (e) the failure to obtain the approval of First IC's shareholders in connection with the Proposed Merger, (f) the possibility that the costs, fees, expenses and charges related to the Proposed Merger may be greater than anticipated, including as a result of unexpected or unknown factors, events, or liabilities, (g) the failure of the conditions to the Proposed Merger to be satisfied, (h) the risks related to the integration of the combined businesses, including the risk that the integration will be materially delayed or will be more costly or difficult than expected, (i) the diversion of management time on merger-related issues, (j) the ability of the Company to effectively manage the larger and more complex operations of the combined company following the Proposed Merger, (k) the risks associated with the Company's pursuit of future acquisitions, (l) the risk of expansion into new geographic or product markets, (m) reputational risk and the reaction of the parties' customers to the Proposed Merger, (n) the Company's ability to successfully execute its various business strategies, including its ability to execute on potential acquisition opportunities, (o) the risk of potential litigation or regulatory action related to the Proposed Merger, and (p) general competitive, economic, political, and market conditions; the ability to keep pace with technological changes, including changes regarding maintaining cybersecurity and the impact of generative artificial intelligence; increased competition in the financial services industry, particularly from regional and national institutions; the impact of a failure in, or breach of, the Company's operational or security systems or infrastructure, or those of third parties with whom the Company does business, including as a result of cyber-attacks or an increase in the incidence or severity of fraud, illegal payments, security breaches or other illegal acts impacting the Company or the Company's customers; 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 the surrounding region; 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.