MetroCity Bankshares, Inc. [MCBS] Filings

10-Q 1 mcbs-20220331x10q.htm 10-Q

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2022

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from _______ to _______

Commission File Number 001-39068

METROCITY BANKSHARES, INC.

(Exact name of registrant as specified in its charter)

Georgia	47-2528408
(State or other jurisdiction of incorporation)	(I.R.S. Employer Identification No.)

5114 Buford Highway Doraville, Georgia	30340
(Address of principal executive offices)	(Zip Code)

(770) 455-4989

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each Exchange on which registered
Common Stock, par value $0.01 per share	MCBS	Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒	Non-accelerated filer	☐	Smaller reporting company	☐

Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 2, 2022, the registrant had 25,465,236 shares of common stock, par value $0.01 per share, issued and outstanding.

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METROCITY BANKSHARES, INC.

Quarterly Report on Form 10-Q

March 31, 2022

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		Page
Part I.	Financial Information

Item l.	Financial Statements:
	Consolidated Balance Sheets as of March 31, 2022 (unaudited) and December 31, 2021	3
	Consolidated Statements of Income (unaudited) for the Three Months Ended March 31, 2022 and 2021	4
	Consolidated Statements of Comprehensive Income (unaudited) for the Three Months Ended March 31, 2022 and 2021	5
	Consolidated Statements of Shareholders’ Equity (unaudited) for the Three Months Ended March 31, 2022 and 2021	6
	Consolidated Statements of Cash Flows (unaudited) for the Three Months Ended March 31, 2022 and 2021	7
	Notes to Consolidated Financial Statements (unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	48
Item 4.	Controls and Procedures	50

Part II.	Other Information

Item 1.	Legal Proceedings	50
Item 1A.	Risk Factors	51
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	51
Item 3.	Defaults Upon Senior Securities	51
Item 4.	Mine Safety Disclosures	51
Item 5.	Other Information	51
Item 6.	Exhibits	51
	Signatures	53

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

METROCITY BANKSHARES, INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share data)


	March 31,		December 31,
	2022		2021
	(Unaudited)
Assets:
Cash and due from banks	$	418,988	$	432,523
Federal funds sold		5,743		8,818
Cash and cash equivalents		424,731		441,341
Equity securities		11,024		11,386
Securities available for sale (at fair value)		23,886		25,733
Loans held for sale		37,928		—
Loans, less allowance for loan losses of $16,674 and $16,952, respectively		2,495,626		2,488,118
Accrued interest receivable		10,644		11,052
Federal Home Loan Bank stock		15,806		19,701
Premises and equipment, net		12,814		13,068
Operating lease right-of-use asset		8,925		9,338
Foreclosed real estate, net		3,562		3,618
SBA servicing asset, net		10,554		10,234
Mortgage servicing asset, net		6,925		7,747
Bank owned life insurance		67,841		59,437
Other assets		12,051		5,385
Total assets	$	3,142,317	$	3,106,158


Liabilities:
Deposits:
Non-interest-bearing demand	$	615,650	$	592,444
Interest-bearing		1,766,491		1,670,576
Total deposits		2,382,141		2,263,020

Federal Home Loan Bank advances		380,000		500,000
Other borrowings		405		459
Operating lease liability		9,445		9,861
Accrued interest payable		207		204
Other liabilities		59,709		42,391
Total liabilities	$	2,831,907	$	2,815,935

Shareholders' Equity:
Preferred stock, $0.01 par value, 10,000,000 shares authorized, no shares issued or outstanding		—		—
Common stock, $0.01 par value, 40,000,000 shares authorized, 25,465,236 shares issued and outstanding as of March 31, 2022 and December 31, 2021		255		255
Additional paid-in capital		51,753		51,559
Retained earnings		254,165		238,577
Accumulated other comprehensive income (loss)		4,237		(168)
Total shareholders' equity		310,410		290,223
Total liabilities and shareholders' equity	$	3,142,317	$	3,106,158

See accompanying notes to unaudited consolidated financial statements.

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METROCITY BANKSHARES, INC.

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(Dollars in thousands, except per share data)


	Three Months Ended
	March 31,
	2022		2021
Interest and dividend income:
Loans, including fees	$	31,459	$	22,500
Other investment income		492		170
Federal funds sold		2		2
Total interest income		31,953		22,672

Interest expense:
Deposits		1,139		992
FHLB advances and other borrowings		161		146
Total interest expense		1,300		1,138

Net interest income		30,653		21,534

Provision for loan losses		104		1,599

Net interest income after provision for loan losses		30,549		19,935

Noninterest income:
Service charges on deposit accounts		481		373
Other service charges, commissions and fees		2,159		3,398
Gain on sale of residential mortgage loans		1,211		—
Mortgage servicing income, net		101		166
Gain on sale of SBA loans		1,568		1,854
SBA servicing income, net		1,644		2,133
Other income		492		262
Total noninterest income		7,656		8,186

Noninterest expense:
Salaries and employee benefits		7,096		6,699
Occupancy and equipment		1,227		1,275
Data processing		277		308
Advertising		150		145
Other expenses		3,429		2,281
Total noninterest expense		12,179		10,708

Income before provision for income taxes		26,026		17,413
Provision for income taxes		6,597		4,432
Net income available to common shareholders	$	19,429	$	12,981

Earnings per share:
Basic	$	0.76	$	0.51
Diluted	$	0.76	$	0.50

See accompanying notes to unaudited consolidated financial statements.

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METROCITY BANKSHARES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(Dollars in thousands)


	Three Months Ended
	March 31,
	2022		2021

Net income	$	19,429	$	12,981

Other comprehensive gain (loss):

Unrealized holding losses on securities available for sale		(1,484)		(210)
Net changes in fair value of cash flow hedges		7,358		—
Tax effect		(1,469)		54

Other comprehensive gain (loss)		4,405		(156)

Comprehensive income	$	23,834	$	12,825

See accompanying notes to unaudited consolidated financial statements.

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METROCITY BANKSHARES, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)

(Dollars in thousands, except per share data)


								Accumulated
	Common Stock			Additional				Other
	Number of			Paid-in		Retained		Comprehensive
	Shares	Amount		Capital		Earnings		Income (Loss)		Total
Three Months Ended:
Balance, January 1, 2022	25,465,236	$	255	$	51,559	$	238,577	$	(168)	$	290,223
Net income	—		—		—		19,429		—		19,429
Stock based compensation expense	—		—		194		—		—		194
Other comprehensive income	—		—		—		—		4,405		4,405
Dividends on common stock ($0.15 per share)	—		—		—		(3,841)		—		(3,841)
Balance, March 31, 2022	25,465,236	$	255	$	51,753	$	254,165	$	4,237	$	310,410

Balance, January 1, 2021	25,674,573	$	257	$	55,674	$	188,705	$	195	$	244,831
Net income	—		—		—		12,981		—		12,981
Stock based compensation expense	—		—		303		—		—		303
Other comprehensive loss	—		—		—		—		(156)		(156)
Dividends on common stock ($0.10 per share)	—		—		—		(2,584)		—		(2,584)
Balance, March 31, 2021	25,674,573	$	257	$	55,977	$	199,102	$	39	$	255,375

See accompanying notes to unaudited consolidated financial statements.

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METROCITY BANKSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Dollars in thousands)


	Three Months Ended March 31,
	2022		2021
Cash flow from operating activities:
Net income	$	19,429	$	12,981
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion		711		732
Provision for loan losses		104		1,599
Stock based compensation expense		194		303
Unrealized losses recognized on equity securities		362		—
Loss on sale of foreclosed real estate		15		—
Proceeds from sales of residential real estate loans		58,198		—
Gain on sale of residential mortgages		(1,211)		—
Origination of SBA loans held for sale		(23,391)		(22,949)
Proceeds from sales of SBA loans held for sale		24,959		24,803
Gain on sale of SBA loans		(1,568)		(1,854)
Increase in cash value of bank owned life insurance		(404)		(227)
Decrease in accrued interest receivable		408		156
Increase in SBA servicing rights		(320)		(892)
Decrease in mortgage servicing rights		822		1,269
Increase in other assets		(810)		(381)
Increase (decrease) in accrued interest payable		3		(16)
Increase in other liabilities		16,915		9,739
Net cash flow provided by operating activities		94,416		25,263

Cash flow from investing activities:
Purchases of securities available for sale		—		(1,034)
Proceeds from maturities, calls or paydowns of securities available for sale		345		185
Redemption of Federal Home Loan Bank stock		3,895		2,196
Increase in loans, net		(102,527)		(236,440)
Purchases of premises and equipment		(26)		(99)
Proceeds from sales of foreclosed real estate owned		41		—
Purchase of bank owned life insurance		(8,000)		—
Net cash flow used by investing activities		(106,272)		(235,192)

Cash flow from financing activities:
Dividends paid on common stock		(3,821)		(2,567)
Increase in deposits, net		119,121		266,031
Decrease in other borrowings, net		(54)		(4)
Proceeds from Federal Home Loan Bank advances		—		—
Repayments of Federal Home Loan Bank advances		(120,000)		(30,000)
Net cash flow (used) provided by financing activities		(4,754)		233,460

See accompanying notes to unaudited consolidated financial statements.

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METROCITY BANKSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Dollars in thousands)


	Three Months Ended March 31,
	2022		2021

Net change in cash and cash equivalents		(16,610)		23,531
Cash and cash equivalents at beginning of period		441,341		150,688

Cash and cash equivalents at end of period	$	424,731	$	174,219

Supplemental schedule of noncash investing and financing activities:

Transfer of loans to loans held for sale	$	94,915	$	—

Transfer of loan principal to foreclosed real estate, net of write-downs	$	—	$	—

Initial recognition of operating lease right-of-use assets	$	—	$	560

Initial recognition of operating lease liabilities	$	—	$	560

Supplemental disclosures of cash flow information - Cash paid during the year for:

Interest	$	1,297	$	1,154

Income taxes	$	488	$	261

See accompanying notes to unaudited consolidated financial statements.

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METROCITY BANKSHARES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited consolidated financial statements include the accounts of MetroCity Bankshares, Inc. (“Company”) and its wholly-owned subsidiary, Metro City Bank (the “Bank”). The Company owns 100% of the Bank. The “Company” or “our,” as used herein, includes Metro City Bank unless the context indicates that we refer only to MetroCity Bankshares, Inc.

These unaudited consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) followed within the financial services industry for interim financial information and Article 10 of Regulation S-X. Accordingly, they do not include all of the information or notes required for complete financial statements.

The Company principally operates in one business segment, which is community banking.

In the opinion of management, all adjustments, consisting of normal and recurring items, considered necessary for a fair presentation of the consolidated financial statements for the interim periods have been included. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain amounts reported in prior periods have been reclassified to conform to current year presentation. These reclassifications did not have a material effect on previously reported net income, shareholders’ equity or cash flows.

Operating results for the three month period ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. These statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2021.

The Company’s significant accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements for the year ended December 31, 2021, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (the “Company’s 2021 Form 10-K”). There were no new accounting policies or changes to existing policies adopted during the first three months of 2022 which had a significant effect on the Company’s results of operations or statement of financial condition. For interim reporting purposes, the Company follows the same basic accounting policies and considers each interim period as an integral part of an annual period.

Contingencies

Due to the nature of their activities, the Company and its subsidiary are at times engaged in various legal proceedings that arise in the course of normal business, some of which were outstanding as of March 31, 2022. Although the ultimate outcome of all claims and lawsuits outstanding as of March 31, 2022 cannot be ascertained at this time, it is the opinion of management that these matters, when resolved, will not have a material adverse effect on the Company’s results of operations or financial condition.

Operating, Accounting and Reporting Considerations Related to COVID-19

The COVID-19 pandemic has negatively impacted the global economy, including the Company’s market areas. In response to this crisis, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was passed by Congress and signed into law on March 27, 2020. The CARES Act provided an estimated $2.2 trillion to fight the COVID-19 pandemic and stimulate the economy by supporting individuals and businesses through loans, grants, tax changes, and other types of relief. Some of the provisions applicable to the Company include, but are not limited to:

●

Accounting for Loan Modifications - The CARES Act provided that financial institutions may elect to suspend (1) the requirements under GAAP for certain loan modifications that would otherwise be categorized as a troubled debt restructure (“TDR”) and (2) any determination that such loan modifications would be considered a TDR,

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including the related impairment for accounting purposes. The Consolidated Appropriations Act (“CAA”), signed into law on December 27, 2020, extended the applicable period to include modification to loans held by financial institutions executed between March 1, 2020 and the earlier of (i) January 1, 2022, or (ii) 60 days after the date of termination of the COVID-19 national emergency.

●

Paycheck Protection Program - The CARES Act established the Paycheck Protection Program (“PPP”), an expansion of the Small Business Administration’s (“SBA”) 7(a) loan program and the Economic Injury Disaster Loan Program (“EIDL”), administered directly by the SBA. The CAA provided several amendments to the PPP, including additional funding for first and second draws of PPP loans up to March 31, 2021. On March 30, 2021, the PPP Extension Act of 2021 was signed into law, which extended the program to May 31, 2021. The Company was a participant in the PPP.

Also in response to the COVID-19 pandemic, the Board of Governors of the Federal Reserve System (“FRB”), the Federal Deposit Insurance Corporation (“FDIC”), the National Credit Union Administration (“NCUA”), the Office of the Comptroller of the Currency (“OCC”), and the Consumer Financial Protection Bureau (“CFPB”), in consultation with the state financial regulators (collectively, the “agencies”) issued a joint interagency statement (issued March 22, 2020; revised statement issued April 7, 2020). Some of the provisions applicable to the Company include, but are not limited to:

●

Accounting for Loan Modifications - Loan modifications that do not meet the conditions of the CARES Act may still qualify as a modification that does not need to be accounted for as a TDR. The agencies confirmed with the Financial Accounting Standards Board (“FASB”) staff that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief are not TDRs. This includes short-term (e.g., three months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or insignificant delays in payment.

●

Past Due Reporting - With regard to loans not otherwise reportable as past due, financial institutions are not expected to designate loans with deferrals granted due to COVID-19 as past due because of the deferral. A loan’s payment date is governed by the due date stipulated in the legal agreement. If a financial institution agrees to a payment deferral, these loans would not be considered past due reporting during the period of the deferral.

●

Nonaccrual Status - During short-term COVID-19 modifications, these loans generally should not be reported as nonaccrual or as classified.

The Company began offering short-term loan modifications to assist borrowers during the COVID-19 pandemic. These modifications generally involve principal and/or interest payment deferrals for up to six months. These modifications generally meet the criteria of both Section 4013 of the CARES Act and the joint interagency statement, and therefore, the Company does not account for such loan modifications as TDRs. As the COVID-19 pandemic persists in negatively impacting the economy, the Company continues to offer additional loan modifications to borrowers struggling as a result of COVID-19. Similar to the initial modifications granted, the additional round of loan modifications are granted specifically under Section 4013 of the CARES Act and generally involve principal and/or interest payment deferrals for up to an additional six months for commercial and consumer loans, and principal-only deferrals for up to an additional 12 months for selected commercial loans. On August 3, 2020, the Federal Financial Institutions Examination Council on behalf of its members (collectively “the FFIEC members”) issued a joint statement on additional loan accommodations related to COVID-19. The joint statement clarifies that for loan modifications in which Section 4013 is being applied, subsequent modifications could also be eligible under Section 4013. To be eligible, each loan modification must be (1) related to the COVID-19 event; (2) executed on a loan that was not more than 30 days past due as of December 31, 2019; and (3) executed between March 1, 2020, and the earlier of (A) 60 days after the date of termination of the National Emergency or (B) December 31, 2020. The December 31, 2020 deadline was subsequently extended to January 1, 2022, by the CAA. Substantially all of the Company’s additional round of loan modifications granted under Section 4013 of the CARES Act are in compliance with the aforementioned FFIEC requirements. Accordingly, the Company does not account for such loan modifications as TDRs.

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Recently Issued Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) to replace the incurred loss model with an expected loss model, which is referred to as the current expected credit loss (“CECL”) model. The CECL model is applicable to the measurement of credit losses on financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and similar instruments) and net investments in leases recognized by a lessor. For debt securities with other-than-temporary impairment (“OTTI”), the guidance will be applied prospectively. Existing purchased credit impaired (“PCI”) assets will be grandfathered and classified as purchased credit deteriorated (“PCD”) assets at the date of adoption. The assets will be grossed up for the allowance of expected credit losses for all PCD assets at the date of adoption and will continue to recognize the noncredit discount in interest income based on the yield of such assets as of the adoption date. Subsequent changes in expected credit losses will be recorded through the allowance. Adoption is effective for interim and annual reporting periods beginning after December 15, 2022. Early adoption is permitted; however, we plan to adopt ASU 2016-13 on January 1, 2023. The Company has selected a software solution supported by a third-party vendor to be used in developing an expected credit loss model compliant with ASU 2016-13. The Company has also contracted with a third-party vendor to assist with our CECL implementation and help establish the necessary policies and procedures to be fully compliant with ASU 2016-13. We will continue to evaluate the impact of this new accounting standard through its effective date.

The Company has further evaluated other Accounting Standards Updates issued during 2022 to date but does not expect updates other than those summarized above to have a material impact on the consolidated financial statements.

NOTE 2 – INVESTMENT SECURITIES

The amortized costs, gross unrealized gains and losses, and estimated fair values of securities available for sale as of March 31, 2022 and December 31, 2021 are summarized as follows:


	March 31, 2022
	Gross		Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
(Dollars in thousands)	Cost		Gains		Losses		Value
Obligations of U.S. Government entities and agencies	$	6,729	$	—	$	—	$	6,729
States and political subdivisions		8,157		3		(590)		7,570
Mortgage-backed GSE residential		10,431		—		(844)		9,587
Total	$	25,317	$	3	$	(1,434)	$	23,886


	December 31, 2021
	Gross		Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
(Dollars in thousands)	Cost		Gains		Losses		Value
Obligations of U.S. Government entities and agencies	$	6,949	$	—	$	—	$	6,949
States and political subdivisions		8,169		203		(11)		8,361
Mortgage-backed GSE residential		10,562		11		(150)		10,423
Total	$	25,680	$	214	$	(161)	$	25,733

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The amortized costs and estimated fair values of investment securities available for sale at March 31, 2022 by contractual maturity are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


	Securities Available for Sale
	Amortized		Estimated
(Dollars in thousands)	Cost		Fair Value
Due in one year or less	$	5,961	$	5,961
Due after one year but less than five years		2,010		2,012
Due after five years but less than ten years		1,175		1,082
Due in more than ten years		5,740		5,244
Mortgage-backed GSE residential		10,431		9,587
Total	$	25,317	$	23,886

There were no securities pledged as of March 31, 2022 and December 31, 2021 to secure public deposits and repurchase agreements. There were no securities sold during the three months ended March 31, 2022 and 2021.

Information pertaining to securities with gross unrealized losses at March 31, 2022 and December 31, 2021 aggregated by investment category and length of time that individual securities have been in a continuous loss position, are summarized in the table below.


	March 31, 2022
	Twelve Months or Less				Over Twelve Months
	Gross		Estimated		Gross		Estimated
	Unrealized		Fair		Unrealized		Fair
(Dollars in thousands)	Losses		Value		Losses		Value
States and political subdivisions	$	590	$	6,589	$	—	$	—
Mortgage-backed GSE residential		844		9,587
Total	$	1,434	$	16,176	$	—	$	—


	December 31, 2021
	Twelve Months or Less				Over Twelve Months
	Gross		Estimated		Gross		Estimated
	Unrealized		Fair		Unrealized		Fair
(Dollars in thousands)	Losses		Value		Losses		Value
States and political subdivisions	$	11	$	2,201	$	—	$	—
Mortgage-backed GSE residential		150		9,530		—		—
Total	$	161	$	11,731	$	—	$	—

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

At March 31, 2022, the eighteen securities available for sale with an unrealized loss have depreciated 8.15% from the Company’s amortized cost basis. These securities have not been in a loss position for greater than twelve months.

State and political subdivisions. The Company’s unrealized loss on nine investments in state and political subdivision bonds relate to interest rate increases. Management currently does not believe it is probable that it will be unable to collect all amounts due according to the contractual terms of these investments. Because the Company does not plan to sell these investments, and because it is not more likely than not that the Company will be required to sell these investments before the recovery of the par value, which may be at maturity, management does not consider these investments to be other-than-temporarily impaired at March 31, 2022.

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Mortgage-backed GSE residential. The Company’s unrealized loss on nine investments in residential GSE mortgage-backed securities was caused by interest rate increases. The contractual cash flows of the investment are guaranteed by an agency of the U.S. Government. Accordingly, it is expected that the security would not be settled at a price less than the amortized cost base of the Company’s investment. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company has no immediate plans to sell the investment, and because it is not more likely than not that the Company will be required to sell the investment before recovery of their amortized cost base, which may be maturity, management does not consider this investment to be other-than-temporarily impaired at March 31, 2022.

Equity Securities

As of March 31, 2022 and December 31, 2021, the Company had equity securities with carrying values totaling $11.0 and $11.4 million, respectively. The equity securities consist of our investment in a market-rate bond mutual fund that invests in high quality fixed income bonds, mainly government agency securities whose proceeds are designed to positively impact community development throughout the United States. The mutual fund focuses exclusively on providing affordable housing to low- and moderate-income borrowers and renters, including those in Majority Minority Census Tracts.

During the three months ended March 31, 2022, we recognized an unrealized loss of $362,000 in net income on our equity securities. The unrealized loss is recorded in Other Expenses on the Consolidated Statements of Income. No unrealized gains or losses on equity securities were recognized in net income during the three months ended March 31, 2021.

NOTE 3 – LOANS AND ALLOWANCE FOR LOAN LOSSES

Major classifications of loans at March 31, 2022 and December 31, 2021 are summarized as follows:


	March 31,		December 31,
(Dollars in thousands)	2022		2021
Construction and development	$	38,683	$	38,857
Commercial real estate		567,031		520,488
Commercial and industrial		66,073		73,072
Residential real estate		1,846,434		1,879,012
Consumer and other		130		79
Total loans receivable		2,518,351		2,511,508
Unearned income		(6,051)		(6,438)
Allowance for loan losses		(16,674)		(16,952)
Loans, net	$	2,495,626	$	2,488,118

Included in the commercial and industrial loans are PPP loans totaling $19.8 million and $31.0 million as of March 31, 2022 and December 31 2021, respectively.

The Company is not committed to lend additional funds to borrowers with non-accrual or restructured loans.

In the normal course of business, the Company may sell and purchase loan participations to and from other financial institutions and related parties. Loan participations are typically sold to comply with the legal lending limits per borrower as imposed by regulatory authorities. The participations are sold without recourse and the Company imposes no transfer or ownership restrictions on the purchaser.

Table of Contents

A summary of changes in the allowance for loan losses by portfolio segment for the three months ended March 31, 2022 and 2021 is as follows:


	Three Months Ended March 31, 2022
	Construction
	and		Commercial		Commercial		Residential		Consumer
(Dollars in thousands)	Development		Real Estate		and Industrial		Real Estate		and Other		Unallocated		Total
Allowance for loan losses:
Beginning balance	$	100	$	4,146	$	4,989	$	7,717	$	—	$	—	$	16,952
Charge-offs		—		—		(390)		—		—		—		(390)
Recoveries		—		2		1		—		5		—		8
Provision		(7)		146		(159)		(93)		—		217		104
Ending balance	$	93	$	4,294	$	4,441	$	7,624	$	5	$	217	$	16,674

MetroCity Bankshares, Inc. [MCBS] Filings
10-Q	[2022-05-06]
10-K	[2022-03-11]
10-Q	[2021-11-05]
10-Q	[2021-08-09]
10-Q	[2021-05-10]
10-K	[2021-03-15]
10-Q	[2020-11-13]
10-Q	[2020-08-13]
10-Q	[2020-05-15]
10-K	[2020-03-19]
10-Q	[2019-11-08]
S-1	[2019-09-04]