MetroCity Bankshares, Inc., the holding company for Metro City Bank, has revealed its financial performance for Q3 2024. The Atlanta-based banking giant reported a net income of $16.7 million, translating to $0.65 per diluted share. This marks a slight drop from the $16.9 million ($0.66 per diluted share) reported in Q2 2024. However, compared to Q3 2023, where net income stood at $11.4 million, MetroCity showed a substantial increase of 46.1%.

The decrease from the previous quarter was primarily due to increased provisions for credit losses amounting to $710,000, a $423,000 dip in net interest income, and a $628,000 rise in noninterest expenses. These were partially offset by a $1.1 million increase in noninterest income and a $469,000 reduction in tax expenses. Despite these quarterly challenges, MetroCity Bankshares’ overall year-to-date net income for the nine months ending September 30, 2024, reached $48.3 million—an increase of 19.9% compared to $40.3 million during the same period in 2023.

Annualized Return and Efficiency Metrics Show Mixed Results

MetroCity reported an annualized return on average assets (ROAA) of 1.86% for Q3 2024, a slight dip from 1.89% in Q2 2024 but an improvement from 1.30% recorded in Q3 2023. The annualized return on average equity (ROAE) also saw a decline, standing at 16.26%, compared to 17.10% in Q2 2024. However, when excluding the impact of average accumulated other comprehensive income, the ROAE stood at 17.25%.

The efficiency ratio—a critical metric in banking, reflecting the company’s cost management—was 37.0% for Q3 2024, slightly up from 35.9% in Q2 but significantly better than the 43.0% recorded in Q3 2023.

Net Interest Margin Faces Downward Pressure

MetroCity’s net interest margin, which stood at 3.58% in Q3 2024, saw a reduction from 3.66% in the previous quarter. The decline was attributed to a decrease in average loan balances of $29.2 million and a decrease in loan yield by three basis points, coupled with an 81-basis point decrease in total investment yield.

Despite this quarterly drop, year-over-year comparisons revealed positive momentum as the net interest margin improved by 64 basis points, from 2.94% in Q3 2023 to 3.58% in Q3 2024, reflecting increased loan balances and higher yields.

Noninterest Income and Expenses

Noninterest income rose significantly by 19.0% to $6.6 million in Q3 2024, largely driven by gains from Small Business Administration (SBA) loan sales and higher mortgage fees. This contrasts with Q2 2024, where the absence of SBA loan sales impacted income levels. Year-on-year, noninterest income grew by 149.0%, reflecting the bank’s successful efforts in diversifying income streams through mortgage and SBA loan activities.

Meanwhile, noninterest expenses increased to $13.7 million, a 4.8% rise from the previous quarter, largely due to higher salary and real estate expenses. MetroCity continues to manage its operational costs, with a noted 18.4% rise in noninterest expenses compared to Q3 2023.

Balance Sheet and Asset Quality

As of September 30, 2024, MetroCity’s total assets were valued at $3.57 billion, marking a slight 1.3% decline from $3.62 billion at the end of Q2 2024. The decline was mainly due to reductions in cash, loans held for investment, and interest rate derivatives. However, year-over-year, the company saw a 1.7% increase in total assets.

Loans held for investment slightly decreased by $2.7 million compared to Q2, while deposits decreased by $22.7 million, reflecting cautious asset management strategies. The company’s nonperforming assets rose to $15.8 million, representing 0.44% of total assets, a modest increase from the $14.5 million recorded in Q2 2024.

Stock Performance and Market Sentiment

MetroCity Bankshares’ stock, listed on NASDAQ as MCBS, traded at $32.41 on October 18, 2024. The stock is performing robustly, even reaching a 52-week high of $32.52. Analysts note that the price-to-earnings ratio of 15.07x is favorable when compared to the broader market, indicating potential value for investors despite some concerns around valuation relative to the industry average.

Expert Analysis: Balancing Growth and Risk Management

Financial analysts have commented on MetroCity’s Q3 performance, emphasizing that while the dip in quarterly earnings was expected given the economic climate, the bank’s year-to-date figures demonstrate resilience. They note that the increase in provisions for credit losses is a prudent move to mitigate future risks, especially as the economic outlook remains volatile.

  Atlanta, Farid Tan, Lucas Stewart, Metro City Bank, MetroCity Bankshares, NASDAQ, Small Business Administration