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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 September 30, 2023

OR

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 November 1, 2023, the registrant had 25,206,085 shares of common stock, par value $0.01 per share, issued and outstanding.

METROCITY BANKSHARES, INC.

Quarterly Report on Form 10-Q

September 30, 2023

TABLE OF CONTENTS

    

Page

Part I.

Financial Information

Item l.

Financial Statements:

Consolidated Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022

3

Consolidated Statements of Income (unaudited) for the Three and Nine Months Ended September 30, 2023 and 2022

4

Consolidated Statements of Comprehensive Income (unaudited) for the Three and Nine Months Ended September 30, 2023 and 2022

5

Consolidated Statements of Shareholders’ Equity (unaudited) for the Three and Nine Months Ended September 30, 2023 and 2022

6

Consolidated Statements of Cash Flows (unaudited) for the Nine Months Ended September 30, 2023 and 2022

7

Notes to Consolidated Financial Statements (unaudited)

9

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

36

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

60

Item 4.

Controls and Procedures

61

Part II.

Other Information

Item 1.

Legal Proceedings

62

Item 1A.

Risk Factors

62

Item 2.

Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

62

Item 3.

Defaults Upon Senior Securities

63

Item 4.

Mine Safety Disclosures

63

Item 5.

Other Information

63

Item 6.

Exhibits

63

Signatures

64

2

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

METROCITY BANKSHARES, INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share data)

September 30, 

December 31, 

    

2023

    

2022

(Unaudited)

Assets:

 

 

  

Cash and due from banks

$

279,106

$

150,964

Federal funds sold

 

2,951

 

28,521

Cash and cash equivalents

 

282,057

 

179,485

Equity securities

10,113

10,300

Securities available for sale

 

17,664

 

19,245

Loans, less allowance for credit losses of $17,660 and $13,888, respectively

 

3,012,287

 

3,041,801

Accrued interest receivable

 

14,612

 

13,171

Federal Home Loan Bank stock

 

17,846

 

17,493

Premises and equipment, net

 

17,459

 

14,257

Operating lease right-of-use asset

 

7,340

 

8,463

Foreclosed real estate, net

761

4,328

SBA servicing asset

 

7,107

 

7,085

Mortgage servicing asset, net

 

1,823

 

3,973

Bank owned life insurance

 

70,462

 

69,130

Interest rate derivatives

46,502

28,781

Other assets

 

4,994

 

9,727

Total assets

$

3,511,027

$

3,427,239

Liabilities:

 

  

 

  

Deposits:

 

  

 

  

Non-interest-bearing demand

$

559,540

$

611,991

Interest-bearing

 

2,159,048

 

2,054,847

Total deposits

 

2,718,588

 

2,666,838

Federal Home Loan Bank advances

325,000

375,000

Other borrowings

 

 

392

Operating lease liability

 

7,537

 

8,885

Accrued interest payable

 

3,915

 

2,739

Other liabilities

 

71,283

 

23,964

Total liabilities

$

3,126,323

$

3,077,818

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, 25,241,157 and 25,169,709 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively

252

252

Additional paid-in capital

 

45,580

 

45,298

Retained earnings

 

308,589

 

285,832

Accumulated other comprehensive income

 

30,283

 

18,039

Total shareholders' equity

 

384,704

 

349,421

Total liabilities and shareholders' equity

$

3,511,027

$

3,427,239

See accompanying notes to unaudited consolidated financial statements.

3

METROCITY BANKSHARES, INC.

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(Dollars in thousands, except per share data)

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

    

2023

    

2022

    

2023

    

2022

Interest and dividend income:

  

  

  

Loans, including fees

$

45,695

$

37,263

$

134,516

$

101,032

Other investment income

 

2,979

 

1,011

 

7,500

 

2,214

Federal funds sold

 

35

 

23

 

140

 

29

Total interest income

 

48,709

 

38,297

 

142,156

 

103,275

Interest expense:

Deposits

 

21,736

 

6,964

 

58,916

 

10,487

FHLB advances and other borrowings

 

2,819

 

1,545

 

7,883

 

2,127

Total interest expense

 

24,555

 

8,509

 

66,799

 

12,614

Net interest income

 

24,154

 

29,788

 

75,357

 

90,661

Provision for credit losses

 

(381)

 

(1,703)

 

(797)

 

(1,599)

Net interest income after provision for credit losses

 

24,535

 

31,491

 

76,154

 

92,260

Noninterest income:

Service charges on deposit accounts

 

490

 

509

 

1,403

 

1,508

Other service charges, commissions and fees

 

1,478

 

2,676

 

3,618

 

8,482

Gain on sale of residential mortgage loans

 

 

 

 

2,017

Mortgage servicing income, net

 

(85)

 

(358)

 

(232)

 

(262)

Gain on sale of SBA loans

 

244

 

500

 

3,267

 

2,068

SBA servicing income, net

 

270

 

1,330

 

3,472

 

1,897

Other income

 

505

 

444

 

2,151

 

1,700

Total noninterest income

 

2,902

 

5,101

 

13,679

 

17,410

Noninterest expense:

Salaries and employee benefits

 

6,864

 

7,756

 

20,333

 

22,781

Occupancy and equipment

 

1,272

 

1,167

 

3,525

 

3,594

Data processing

 

300

 

270

 

928

 

808

Advertising

 

143

 

158

 

454

 

434

Other expenses

 

3,206

 

3,337

 

8,758

 

10,369

Total noninterest expense

 

11,785

 

12,688

 

33,998

 

37,986

Income before provision for income taxes

 

15,652

 

23,904

 

55,835

 

71,684

Provision for income taxes

 

4,224

 

7,011

 

15,569

 

19,262

Net income available to common shareholders

$

11,428

$

16,893

$

40,266

$

52,422

Earnings per share:

Basic

$

0.45

$

0.66

$

1.60

$

2.06

Diluted

$

0.45

$

0.66

$

1.58

$

2.04

See accompanying notes to unaudited consolidated financial statements.

4

METROCITY BANKSHARES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(Dollars in thousands)

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

    

2023

    

2022

    

2023

    

2022

Net income

$

11,428

$

16,893

$

40,266

$

52,422

Other comprehensive gain:

 

 

  

 

 

  

Unrealized holding losses on securities available for sale

 

(803)

 

(893)

 

(587)

 

(3,707)

Net changes in fair value of cash flow hedges

7,249

19,332

18,595

31,113

Tax effect

 

(1,805)

 

(4,610)

 

(5,764)

 

(6,852)

Other comprehensive gain

 

4,641

 

13,829

 

12,244

 

20,554

Comprehensive income

$

16,069

$

30,722

$

52,510

$

72,976

See accompanying notes to unaudited consolidated financial statements.

5

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, July 1, 2023

 

25,279,846

$

253

$

45,516

$

301,752

$

25,642

$

373,163

Net income

 

 

 

 

11,428

 

 

11,428

Stock based compensation expense

 

 

 

825

 

 

 

825

Repurchase of common stock

(38,689)

(1)

(761)

(762)

Other comprehensive income

 

 

 

 

 

4,641

 

4,641

Dividends declared on common stock ($0.18 per share)

 

 

 

(4,591)

 

 

(4,591)

Balance, September 30, 2023

 

25,241,157

$

252

$

45,580

$

308,589

$

30,283

$

384,704

Balance, July 1, 2022

 

25,451,125

$

255

$

49,831

$

266,426

$

6,557

$

323,069

Net income

 

 

 

 

16,893

 

 

16,893

Stock based compensation expense

 

 

 

689

 

 

 

689

Repurchase of common stock

(80,708)

(1)

(1,606)

(1,607)

Other comprehensive income

 

 

 

 

13,829

 

13,829

Dividends declared on common stock ($0.15 per share)

 

 

 

(3,844)

 

 

(3,844)

Balance, September 30, 2022

 

25,370,417

$

254

$

48,914

$

279,475

$

20,386

$

349,029

Nine Months Ended:

 

  

 

  

 

  

 

  

 

  

 

  

Balance, January 1, 2023

 

25,169,709

$

252

$

45,298

$

285,832

$

18,039

$

349,421

Net income

 

 

 

40,266

 

 

40,266

Stock based compensation expense

 

 

 

1,596

 

 

 

1,596

Vesting of restricted stock

 

136,171

 

1

 

(1)

 

 

 

Repurchase of common stock

(64,723)

(1)

(1,313)

(1,314)

Impact of adoption of new accounting standard, net of tax(1)

(3,801)

(3,801)

Other comprehensive income

 

 

 

 

12,244

 

12,244

Dividends declared on common stock ($0.54 per share)

 

 

 

(13,708)

 

 

(13,708)

Balance, September 30, 2023

 

25,241,157

$

252

$

45,580

$

308,589

$

30,283

$

384,704

Balance, January 1, 2022

 

25,465,236

$

255

$

51,559

$

238,577

$

(168)

$

290,223

Net income

 

 

 

52,422

 

 

52,422

Stock based compensation expense

 

 

 

1,242

 

 

 

1,242

Vesting of restricted stock

 

101,097

 

1

 

(1)

 

 

 

Repurchase of common stock

(195,916)

(2)

(3,886)

(3,888)

Other comprehensive income

 

 

 

 

20,554

 

20,554

Dividends declared on common stock ($0.45 per share)

 

 

(11,524)

 

 

(11,524)

Balance, September 30, 2022

 

25,370,417

$

254

$

48,914

$

279,475

$

20,386

$

349,029

(1)Represents the impact of the adoption of Accounting Standards Update ("ASU") No. 2016-13: CECL.

See accompanying notes to unaudited consolidated financial statements.

6

METROCITY BANKSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Dollars in thousands)

Nine Months Ended September 30, 

    

2023

    

2022

Cash flow from operating activities:

 

  

 

  

Net income

$

40,266

$

52,422

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation, amortization and accretion

 

1,960

 

2,665

Provision for credit losses

 

(797)

 

(1,599)

Stock based compensation expense

 

1,596

 

1,242

Unrealized losses recognized on equity securities

187

934

(Gain) loss on sale of foreclosed real estate

 

(547)

 

15

Writedown of foreclosed real estate

240

Proceeds from sales of residential real estate loans

 

 

96,932

Gain on sale of residential mortgages

 

 

(2,017)

Origination of SBA loans held for sale

 

(73,038)

 

(32,077)

Proceeds from sales of SBA loans held for sale

 

76,305

 

34,145

Gain on sale of SBA loans

 

(3,267)

 

(2,068)

Increase in cash value of bank owned life insurance

 

(1,332)

 

(1,260)

Increase in accrued interest receivable

 

(1,441)

 

(680)

(Increase) decrease in SBA servicing rights

 

(22)

 

1,910

Decrease in mortgage servicing rights

 

2,150

 

2,772

Decrease (increase) in other assets

 

462

 

(9,175)

Increase in accrued interest payable

 

1,176

 

1,285

Increase (decrease) in other liabilities

 

46,503

 

(1,839)

Net cash flow provided by operating activities

 

90,401

 

143,607

Cash flow from investing activities:

 

  

 

  

Proceeds from maturities, calls or paydowns of securities available for sale

 

943

 

1,992

(Purchase) redemption of Federal Home Loan Bank stock

 

(353)

 

4,082

Decrease (increase) in loans, net

25,077

 

(569,300)

Purchases of premises and equipment

 

(3,988)

 

(1,429)

Proceeds from sales of foreclosed real estate owned

4,109

41

Purchase of bank owned life insurance

(8,000)

Net cash flow provided (used) by investing activities

 

25,788

 

(572,614)

Cash flow from financing activities:

 

  

 

  

Dividends paid on common stock

 

(13,661)

 

(11,493)

Repurchases of common stock

(1,314)

(3,888)

Increase in deposits, net

 

51,750

 

307,833

Decrease in other borrowings, net

 

(392)

 

(63)

Proceeds from Federal Home Loan Bank advances

275,000

475,000

Repayments of Federal Home Loan Bank advances

 

(325,000)

 

(600,000)

Net cash flow used by financing activities

 

(13,617)

 

167,389

Continued to following page.

7

METROCITY BANKSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Dollars in thousands)

Nine Months Ended September 30, 

    

2023

    

2022

Net change in cash and cash equivalents

 

102,572

 

(261,618)

Cash and cash equivalents at beginning of period

 

179,485

 

441,341

Cash and cash equivalents at end of period

$

282,057

$

179,723

Supplemental schedule of noncash investing and financing activities:

Transfer of residential real estate loans to loans held for sale

$

$

94,915

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

$

235

$

766

Initial recognition of operating lease right-of-use assets

$

$

1,273

Initial recognition of operating lease liabilities

$

$

1,273

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

Interest

$

65,623

$

11,329

Income taxes

$

13,765

$

23,432

See accompanying notes to unaudited consolidated financial statements.

8

METROCITY BANKSHARES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023