Table of Contents
1
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, 2026
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 ofincorporation)
(I.R.S. EmployerIdentification No.)
5114 Buford HighwayDoraville, 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 4, 2026, the registrant had 28,660,042 shares of common stock, par value $0.01 per share, issued and outstanding.
Quarterly Report on Form 10-Q
March 31, 2026
TABLE OF CONTENTS
Page
Part I.
Financial Information
Item l.
Financial Statements:
Consolidated Balance Sheets as of March 31, 2026 (unaudited) and December 31, 2025
3
Consolidated Statements of Income (unaudited) for the Three Months Ended March 31, 2026 and 2025
4
Consolidated Statements of Comprehensive Income (unaudited) for the Three Months Ended March 31, 2026 and 2025
5
Consolidated Statements of Shareholders’ Equity (unaudited) for the Three Months Ended March 31, 2026 and 2025
6
Consolidated Statements of Cash Flows (unaudited) for the Three Months Ended March 31, 2026 and 2025
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
53
Item 4.
Controls and Procedures
54
Part II.
Other Information
Item 1.
Legal Proceedings
55
Item 1A.
Risk Factors
Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities
Defaults Upon Senior Securities
56
Mine Safety Disclosures
Item 5.
Item 6.
Exhibits
Signatures
58
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
March 31,
December 31,
2026
2025
(Unaudited)
Assets:
Cash and due from banks
$
373,956
370,832
Federal funds sold
13,645
12,844
Cash and cash equivalents
387,601
383,676
Equity securities
18,564
18,646
Securities available for sale
26,616
47,179
Loans held for sale
—
9,741
Loans, less allowance for credit losses of $26,700 and $27,843, respectively
3,974,414
4,023,554
Accrued interest receivable
20,299
20,298
Federal Home Loan Bank stock
23,487
27,565
Premises and equipment, net
29,633
29,879
Operating lease right-of-use asset
14,412
15,193
Foreclosed real estate, net
1,147
208
SBA and USDA servicing asset
11,267
10,601
Mortgage servicing asset, net
1,484
1,660
Bank owned life insurance
76,424
75,786
Goodwill
56,048
Core deposit intangible
12,309
12,627
Interest rate derivatives
4,970
6,343
Other assets
29,672
29,396
Total assets
4,688,347
4,768,400
Liabilities:
Deposits:
Non-interest-bearing demand
799,190
780,828
Interest-bearing
2,827,484
2,865,173
Total deposits
3,626,674
3,646,001
Federal Home Loan Bank advances
425,000
510,000
Operating lease liability
14,516
15,306
Accrued interest payable
10,200
10,731
Other liabilities
57,801
42,178
Total liabilities
4,134,191
4,224,216
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, 28,660,042 and 28,817,967 shares issued and outstanding as of March 31, 2026 and December 31, 2025, respectively
286
1,159
Additional paid-in capital
135,531
138,675
Retained earnings
417,750
402,684
Accumulated other comprehensive income
589
1,666
Total shareholders’ equity
554,156
544,184
Total liabilities and shareholders’ equity
See accompanying notes to unaudited consolidated financial statements.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended
Interest and dividend income:
Loans, including fees
67,139
50,253
Other investment income
3,730
2,126
121
140
Total interest income
70,990
52,519
Interest expense:
Deposits
22,077
17,977
FHLB advances and other borrowings
4,426
3,988
Total interest expense
26,503
21,965
Net interest income
44,487
30,554
Provision for credit losses:
Provision for loan losses
(869)
17
Provision for unfunded commitments
118
Provision for credit losses
(813)
135
Net interest income after provision for credit losses
45,300
30,419
Noninterest income:
Service charges on deposit accounts
848
500
Other service charges, commissions and fees
1,581
1,596
Gain on sale of residential mortgage loans
399
Mortgage servicing income, net
306
618
Gain on sale of SBA loans
1,045
658
SBA servicing income, net
1,905
913
Other income
672
772
Total noninterest income
6,357
5,456
Noninterest expense:
Salaries and employee benefits
11,501
8,493
Occupancy and equipment
2,434
1,417
Data processing
682
345
Advertising
223
167
Merger-related expenses
1,676
262
Other expenses
4,922
3,115
Total noninterest expense
21,438
13,799
Income before provision for income taxes
30,219
22,076
Provision for income taxes
7,905
5,779
Net income available to common shareholders
22,314
16,297
Earnings per share:
Basic
0.78
0.64
Diluted
0.77
0.63
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(Dollars in thousands)
Net income
Other comprehensive loss:
Unrealized holding gains on securities available for sale
(422)
41
Realized gain on sale of securities available for sale
(10)
Net changes in fair value of cash flow hedges
(1,064)
(5,634)
Tax effect
419
1,374
Other comprehensive loss
(1,077)
(4,219)
Comprehensive income
21,237
12,078
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)
Accumulated
Common Stock
Additional
Other
Number of
Paid-in
Retained
Comprehensive
Shares
Amount
Capital
Earnings
Income (Loss)
Total
Three Months Ended:
Balance, January 1, 2026
28,817,967
Adjustment for shares issued related to the First IC acquisition
(871)
871
Stock based compensation expense
426
Repurchase of common stock
(157,925)
(2)
(4,441)
(4,443)
Dividends declared on common stock ($0.25 per share)
(7,248)
Balance, March 31, 2026
28,660,042
Balance, January 1, 2025
25,402,782
254
49,216
358,704
13,179
421,353
429
Dividends declared on common stock ($0.23 per share)
(5,891)
Balance, March 31, 2025
49,645
369,110
8,960
427,969
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended March 31,
Cash flow from operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion
686
832
Provision (recovery) for credit losses
Unrealized gains recognized on equity securities
82
(140)
Gain on sale of securities
Write-down of foreclosed real estate
30
Gain on sale of residential real estate loans
(399)
Origination of SBA loans held for sale
(8,947)
(8,154)
Proceeds from sales of SBA loans held for sale
19,733
10,113
(1,045)
(658)
Increase in cash value of bank owned life insurance
(638)
(615)
Increase in accrued interest receivable
(1)
(640)
(Increase) decrease in SBA and USDA servicing rights
(666)
107
(Increase) decrease in mortgage servicing rights
176
(67)
Increase in state tax credits
(12,600)
(Increase) decrease in other assets
143
(928)
Decrease in accrued interest payable
(531)
(11)
Increase (decrease) in other liabilities
14,871
8,210
Net cash flow provided by operating activities
45,810
11,911
Cash flow from investing activities:
Purchases of equity securities
(8,000)
Proceeds from maturities, calls or paydowns of securities available for sale
909
1,991
Proceeds from sales of securities available for sale
19,328
Purchase of Federal Home Loan Bank stock
4,078
(2,442)
Proceeds from sales of residential real estate loans
40,450
Decrease (increase) in loans, net
49,040
(51,933)
Purchases of premises and equipment
733
(70)
Net cash flow (used) provided by investing activities
74,088
(20,004)
Cash flow from financing activities:
Dividends paid on common stock
(7,203)
(5,843)
Repurchases of common stock
(Decrease) increase in deposits, net
(19,327)
232
Premiums paid for interest rate caps
(1,116)
Proceeds from Federal Home Loan Bank advances
50,000
Repayments of Federal Home Loan Bank advances
(85,000)
Net cash flow (used) provided by financing activities
(115,973)
43,273
Continued to following page.
Net change in cash and cash equivalents
3,925
35,180
Cash and cash equivalents at beginning of period
249,875
Cash and cash equivalents at end of period
285,055
Supplemental schedule of noncash investing and financing activities:
Transfer of loans held for investment to loans held for sale
75,884
Transfer of loan principal to foreclosed real estate, net of write-downs
969
1,280
Supplemental disclosures of cash flow information - Cash paid during the year for:
Interest
27,034
21,976
Income taxes
557
1,063
8
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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 months ended March 31, 2026 are not necessarily indicative of the results that may be expected for the year ending December 31, 2026. These statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2025.
The Company’s significant accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements for the year ended December 31, 2025, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025(the “Company’s 2025 Form 10-K”). There were no new accounting policies or changes to existing policies adopted during the first three months of 2026 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, 2026. Although the ultimate outcome of all claims and lawsuits outstanding as of March 31, 2026 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 Segments
Our Chief Executive Officer is our designated chief operating decision maker. While the chief operating decision maker monitors the revenue streams of the various products and services, our operations are managed and financial performance is evaluated on a Company-wide basis. Operating segments are aggregated into one segment as operating results for all segments are similar. Accordingly, all of the financial service operations are considered by management to be aggregated in one reportable operating segment.
The chief operating decision maker uses income before income taxes as the measure of segment profit or loss to assess the performance of and allocate resources to the Company’s one reportable operating segment. Interest income and noninterest income generated from our residential real estate and SBA loans provide the primary revenue in the operating
segment. Interest expense, provision for credit losses, salaries, commissions and employee benefits, as well as occupancy and equipment expenses, provide the significant expenses in the operating segment. These figures are regularly provided to the chief operating decision maker and are monitored through budget-to-actual variance review.
The Company has evaluated the Accounting Standards Updates issued during 2026 to date but does not expect those updates to have a material impact on the Company’s consolidated financial statements.
NOTE 2 – BUSINESS COMBINATIONS
After the close of business on December 1, 2025, the Company completed the acquisition of First IC Corporation. (“First IC”). For each share of First IC common stock, First IC stockholders had the right to receive 0.3729 shares of the Company's common stock and $12.00 in cash, with cash paid in lieu of fractional shares. Total consideration was $202.3 million and consisted of $90.5 million of equity (3,384,066 shares) in the form of MetroCity Bankshares, Inc. common stock, plus $111.9 million in cash, including cash paid for stock option cancellations and fractional shares. The transaction qualified as a tax-free reorganization for federal income tax purposes and provided a tax-free exchange for First IC stockholders for the portion of the transaction consideration consisting of the Company’s common stock. In addition to increasing its loan and deposit base, the Company believes it will be able to provide a deeper product set to First IC customers, as well as benefit from increased operating synergies, improving the long-term operating and financial results of the Company.
The Company accounted for the First IC acquisition using the acquisition method pursuant to the Business Combinations Topic of the FASB ASC. The acquisition method requires the acquirer to recognize the assets acquired and the liabilities assumed at their fair values as of the acquisition date. The excess of consideration paid over the estimated fair value of the net assets acquired totaled $56.0 million and was recorded to goodwill, none of which is anticipated to be deductible for tax purposes. The purchase consideration allocation is considered preliminary as certain estimates related to the assets acquired and liabilities assumed are subject to continuing refinement. Valuations subject to refinement include, but are not limited to, loans, certain deposits, certain other assets, and the core deposit intangible asset. The measurement period may not exceed one year from the acquisition date.
An adjustment was made in the first quarter of 2026 for $871,000 from common stock to additional paid in capital related to shares issued in the acquisition.
The following table summarizes the merger paid for First IC and the amounts of the estimated fair value of the assets acquired and liabilities assumed as of the date of the acquisition:
Consideration:
Cash
111,855
Equity
90,456
Fair value of total consideration transferred
202,311
Recognized amounts of identifiable assets acquired and liabilities assumed:
121,008
Investment securities
31,931
Loans held for investment
1,026,049
Allowance for credit losses on PCD loans and PSLs
(9,885)
Premises and equipment
12,184
7,421
12,733
SBA servicing asset
3,851
12,118
Total assets acquired
1,217,410
960,976
85,000
10
7,543
17,628
Total liabilities assumed
1,071,147
Total identifiable net assets
146,263
The selected unaudited proforma financial information is presented as if the Company had acquired First IC on January 1, 2025 and is for illustrative purposes and is not necessarily indicative of the financial results of the combined company had the acquisition actually been completed at the beginning of the period presented, nor does it indicate future results for any other interim or full-year period. The net interest income, noninterest income, net income and net income attributable to First IC at March 31, 2025 would have been $45.7 million, $7.5 million, $20.3 million, and $3.2 million, respectively.
NOTE 3 – INVESTMENT SECURITIES
The amortized costs, gross unrealized gains and losses, and estimated fair values of securities available for sale as of March 31, 2026 and December 31, 2025 are summarized as follows:
Gross
Estimated
Amortized
Unrealized
Fair
Cost
Gains
Losses
Value
Obligations of U.S. Government entities and agencies
2,438
94
2,532
States and political subdivisions
7,961
(1,506)
6,455
Mortgage-backed GSE residential
19,408
(1,779)
17,629
29,807
(3,285)
December 31, 2025
12,393
149
12,542
11,574
15
(1,445)
10,144
25,971
20
(1,498)
24,493
49,938
184
(2,943)
The amortized costs and estimated fair values of investment securities available for sale at March 31, 2026 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
Fair Value
Due in one year or less
862
864
Due after one year but less than five years
375
Due after five years but less than ten years
Due in more than ten years
9,162
7,748
11
Accrued interest receivable for securities available for sale totaled $256,000 and $214,000 as of March 31, 2026 and December 31, 2025, respectively. This accrued interest receivable is included in the “accrued interest receivable” line item on the Company’s Consolidated Balance Sheets.
As of both March 31, 2026 and December 31, 2025, the Company had securities pledged to the Federal Reserve Bank Discount Window with a carrying amount of $12.4 million and $12.8 million, respectively. For the three months ended March 31, 2026, the Company had proceeds from the sale of investment securities of $19.3 million which resulted in gross gains of $10,000. There were no securities sold during the three months ended March 31, 2025.
Information pertaining to securities with gross unrealized losses at March 31, 2026 and December 31, 2025 aggregated by investment category and length of time that individual securities have been in a continuous loss position, are summarized in the table below.
Twelve Months or Less
Over Twelve Months
(1,505)
6,080
(274)
11,646
5,983
12,021
(3,011)
12,063
(23)
1,283
(1,422)
6,177
(48)
12,034
(1,450)
6,228
(71)
13,317
(2,872)
12,405
At March 31, 2026 the thirty-one securities available for sale (11 municipal securities and 20 mortgage-backed securities) with an unrealized loss have depreciated 12.00% from the Company’s amortized cost basis. Eighteen of these securities have been in a loss position for greater than twelve months.
The Company does not believe that the securities available for sale that were in an unrealized loss position as of March 31, 2026 represent a credit loss impairment. As of March 31, 2026, there have been no payment defaults, nor do we currently expect any future payment defaults. Furthermore, the Company does not intend to sell these securities, and it is not more likely than not that the Company will be required to sell the investment securities before recovery of their amortized cost basis, which may be at maturity.
Equity Securities
As of March 31, 2026 and December 31, 2025, the Company had equity securities with carrying values totaling $18.6 million. 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, 2026 and 2025, we recognized unrealized losses of $82,000 and unrealized gains of $140,000, respectively, in net income on our equity securities. These unrealized gains and losses are recorded in “Other Income” on the Consolidated Statements of Income.
12
NOTE 4 – LOANS AND ALLOWANCE FOR CREDIT LOSSES
Major classifications of loans held for investment at March 31, 2026 and December 31, 2025 are summarized as follows:
Construction and development
52,452
41,796
Commercial real estate
1,492,703
1,560,728
Commercial and industrial
91,877
96,360
Residential real estate
2,392,444
2,378,311
Consumer and other
643
627
Total loans receivable
4,030,119
4,077,822
Unearned income
(10,093)
(6,621)
Loan discounts
(18,912)
(19,804)
Allowance for credit losses
(26,700)
(27,843)
Loans held for investment, net
The Company is not committed to lend additional funds to borrowers with nonaccrual 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. Commercial loan participations are sold as needed 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.
The Company elected to exclude accrued interest receivable from the amortized cost basis of loans disclosed throughout this note. As of March 31, 2026 and December 31, 2025, accrued interest receivable for loans totaled $20.0 million and $20.0 million, respectively, and is included in the “accrued interest receivable” line item on the Company’s Consolidated Balance Sheets.
Allowance for Credit Losses
A summary of changes in the allowance for credit losses by portfolio segment for the three months ended March 31, 2026 and 2025 is as follows:
Three Months Ended March 31, 2026
Construction
and
Commercial
Residential
Consumer
Development
Real Estate
and Industrial
and Other
Allowance for credit losses:
Beginning balance
65
15,716
1,586
10,472
27,843
Charge-offs
(190)
(92)
(282)
Recoveries
(4)
(800)
(28)
(36)
Ending balance
61
14,731
1,469
10,436
26,700
13
Three Months Ended March 31, 2025
31
7,265
1,380
10,066
18,744
(173)
1
276
(8)
(263)
44
7,542
1,202
9,803
18,592
The allowance for credit losses was $26.7 million as of March 31, 2026 compared to $27.8 million as of December 31, 2025, a decrease of $1.1 million. The decrease was primarily driven by lower loan balances and reduced reserves on individually analyzed loans.
Allowance for Unfunded Commitments
The Company records an allowance for credit losses on unfunded loan commitments, unless the commitments to extend credit are unconditionally cancelable, through a charge to provision for unfunded commitments in the Company’s Consolidated Statements of Income. The allowance for credit losses on off-balance sheet credit exposures is estimated by loan segment using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur. The allowance for unfunded commitments totaled $345,000, $287,000 and $282,000 as of March 31, 2026, December 31, 2025 and March 31, 2025, respectively, and is included in “Other Liabilities” on the Company’s Consolidated Balance Sheets.
14
Collateral-Dependent Loans
Collateral-dependent loans are loans for which foreclosure is probable or loans for which the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. The estimated credit losses for these loans are based on the collateral’s fair value, less selling costs. In most cases, the Company records a partial charge-off to reduce the loan’s carrying value to the collateral’s fair value, less selling costs, at the time of foreclosure. As of March 31, 2026, there were $46.3 million, $8.5 million and $1.7 million of collateral-dependent loans which were secured by commercial real estate, commercial equipment, and residential real estate, respectively. As of December 31, 2025, there were $46.4 million, $10.3 million and $1.4 million of collateral-dependent loans which were secured by commercial real estate, commercial equipment, and residential real estate, respectively. The allowance for credit losses allocated to these loans as of March 31, 2026 and December 31, 2025 was $2.5 million and $2.3 million, respectively.
Past Due and Nonaccrual Loans
A primary credit quality indicator for financial institutions is delinquent balances. Delinquencies are updated on a daily basis and are continuously monitored. Loans are placed on nonaccrual status as needed based on repayment status and consideration of accounting and regulatory guidelines. Nonaccrual balances are updated and reported on a daily basis.
The following summarizes the Company’s past due and nonaccrual loans, by portfolio segment, as of March 31, 2026 and December 31, 2025:
Accruing
Greater than
Financing
Current
30-59 Days
60-89 Days
90 Days
Past Due
Nonaccrual
Receivables
50,758
982
51,740
1,442,333
18,886
1,796
20,699
8,785
1,471,817
88,933
668
1,179
90,780
2,354,364
24,148
762
24,910
6,860
2,386,134
493
150
3,936,881
44,834
2,558
47,409
16,824
4,001,114
40,319
800
41,119
1,520,769
5,446
1,485
6,931
14,776
1,542,476
94,025
1,301
95,632
2,341,189
17,736
3,490
21,226
9,136
2,371,551
619
3,996,921
24,288
4,975
29,263
25,213
4,051,397
The following table presents an analysis of nonaccrual loans with and without a related allowance for credit losses as of March 31, 2026 and December 31, 2025:
Loans With a
Loans Without a
Related ACL
Nonaccrual Loans
7,626
197
2,141
14,683
4,601
10,175
858
443
5,459
19,754
All payments received while a loan is on nonaccrual status are applied against the principal balance of the loan. The Company does not recognize interest income while loans are on nonaccrual status.
Credit Quality Indicators
The Company utilizes a ten grade loan risk rating system for its loan portfolio as follows:
Loan grades are monitored regularly and updated as necessary based upon review of repayment status and consideration of periodic updates regarding the borrower’s financial condition and capacity to meet contractual requirements.
16
The following tables present the loan portfolio’s amortized cost by loan type, risk rating and year of origination as of March 31, 2026 and December 31, 2025. There were no loans with a risk rating of Doubtful or Loss at March 31, 2026 and December 31, 2025.
Term Loan by Origination Year
Revolving
2024
2023
2022
Prior
Loans
Total Loans
Pass
22,598
23,733
4,933
476
Special Mention
Substandard
Total construction and development
8,182
303,235
287,265
199,972
295,953
309,130
2,520
1,406,257
14,461
7,225
122
21,808
1,193
30,329
12,230
43,752
Total commercial real estate
215,626
333,507
321,482
Commercial real estate:
Current period gross write offs
74
116
190
1,925
13,992
8,609
19,604
8,794
9,265
26,406
88,595
484
512
463
726
1,701
Total commercial and industrial
20,116
9,257
10,475
Commercial and industrial:
92
101,221
402,360
130,895
140,844
632,983
969,502
2,377,805
863
354
1,377
5,735
8,329
Total residential real estate
131,758
141,198
634,360
975,237
325
318
Total consumer and other
Total loans
111,653
742,185
451,365
376,940
982,057
1,307,670
29,244
2021
11,568
24,045
141
4,886
180
299
329,091
290,439
213,509
299,971
148,006
177,640
3,020
1,461,676
14,152
6,915
114
21,181
1,121
31,544
12,396
14,558
59,619
228,782
338,430
160,402
192,312
9,527
8,481
20,771
11,244
4,824
7,356
31,095
93,298
553
196
638
1,850
21,324
11,707
5,020
8,478
98
294
417,993
137,770
148,861
648,433
686,010
322,444
2,361,511
837
1,098
2,067
425
5,613
10,040
138,607
149,959
650,500
686,435
328,057
324
295
768,503
461,867
400,206
1,005,523
852,037
529,146
34,115
Loan Modifications to Borrowers Experiencing Financial Difficulty.
Modifications to borrowers experiencing financial difficulty may include interest rate reductions, principal or interest forgiveness, payment deferrals, term extensions, and other actions intended to minimize economic loss and to avoid foreclosure or repossession of collateral.
During the three months ended March 31, 2026, no loan modification were made to borrowers experiencing financial difficulty.
During the three months ended March 31, 2025, there was one commercial real estate loan modification totaling $12.2 million made to a borrower experiencing financial difficulty. The borrower of this loan modification was granted P&I payment deferrals totaling $324,000 so no payments were required to be made during the deferral period, which ended in May 2025.
18
The following table presents the amortized cost basis of loan modifications made to borrowers experiencing financial difficulty during the three months ended March 31, 2025.
% of Total
Term
Payment
Rate
Extension
Delay
Reduction
Receivable
%
12,298
1.76
The following table presents the financial effect of the loan modifications made to borrowers experiencing financial difficulty during the three months ended March 31, 2025.
Weighted/Average
Months of
Interest Rate
Term Extension
Deferral
289
No charge-offs of previously modified loans were recorded during the three months ended March 31, 2026 and 2025.
NOTE 5 – SBA AND USDA LOAN SERVICING
The Company sells the guaranteed portion of certain SBA and USDA loans it originates and continues to service the sold portion of the loan. The portion of the loans sold are not included in the financial statements of the Company. As of March 31, 2026 and December 31, 2025, the unpaid principal balances of serviced loans totaled $699.0 million and $685.5 million, respectively.
Activity for SBA and USDA loan servicing rights are as follows:
For the Three Months Ended March 31,
Beginning of period
7,274
Change in fair value
666
(107)
End of period, fair value
7,167
Fair value at March 31, 2026 and December 31, 2025 was determined using discount rates ranging from 4.93% to 10.48% and 5.75% to 11.09%, respectively, and prepayment speeds ranging from 6.76% to 20.44% and 6.42% to 21.78%, respectively, depending on the stratification of the specific right. Average default rates are based on the industry average for the applicable NAICS/SIC code.
Comparable market values and a valuation model that calculates the present value of future cash flows were used to estimate fair value. For purposes of fair value measurement, risk characteristics including product type and interest rate, were used to stratify the originated loan servicing rights.
19
NOTE 6 – RESIDENTIAL MORTGAGE LOAN SERVICING
Residential mortgage loans serviced for others are not reported as assets. The outstanding principal of these loans at March 31, 2026 and December 31, 2025 was $496.6 billion and $702.6 million, respectively.
Activity for mortgage loan servicing rights and the related valuation allowance are as follows:
Mortgage loan servicing rights:
1,409
Additions
228
Amortization expense
(176)
(118)
Valuation allowance
(43)
End of period, carrying value
1,476
Valuation allowance:
Additions expensed
43
Reductions credited to operations
Direct write-downs
63
The fair value of servicing rights was $5.8 million and $5.7 million at March 31, 2026 and December 31, 2025, respectively. Fair value at March 31, 2026 was determined by using a discount rate of 12.62%, prepayment speeds of 17.14%, and a weighted average default rate of 2.10%. Fair value at December 31, 2025 was determined by using a discount rate of 12.62%, prepayment speeds of 18.58%, and a weighted average default rate of 1.96%.
NOTE 7 – FEDERAL HOME LOAN BANK ADVANCES & OTHER BORROWINGS
Advances from the Federal Home Loan Bank (“FHLB”) at March 31, 2026 and December 31, 2025 are summarized as follows:
Daily rate credit advance maturing on December 2, 2026; fixed rate of 3.88%
Convertible advance maturing December 4, 2026; fixed rate of 3.739%
Convertible advance maturing April 22, 2027; fixed rate of 4.174%
25,000
Convertible advance maturing April 23, 2027; fixed rate of 4.177%
Convertible advance maturing April 26, 2027; fixed rate of 4.193%
Convertible advance maturing May 7, 2027; fixed rate of 4.089%
100,000
Convertible advance maturing May 13, 2027; fixed rate of 4.099%
Convertible advance maturing May 14, 2027; fixed rate of 4.100%
75,000
Convertible advance maturing June 24, 2027; fixed rate of 3.993%
Total FHLB advances
The FHLB advances outstanding at all have a conversion feature that allows the FHLB to call the advances every three months. At March 31, 2026 and December 31, 2025, the Company had a line of credit with the FHLB, set as a percentage of total assets, with maximum borrowing capacity of $1.41 billion and $1.09 billion, respectively. The available borrowing amounts are collateralized by the Company’s FHLB stock and pledged residential real estate loans, which totaled $2.36 billion and $2.35 billion at March 31, 2026 and December 31, 2025, respectively.
At March 31, 2026, the Company had unsecured federal funds lines available with correspondent banks of approximately $67.5 million. There were no advances outstanding on these lines at March 31, 2026.
At March 31, 2026 and December 31, 2025, the Company had Federal Reserve Discount Window funds available of approximately $618.1 million and $600.4 million, respectively. The funds are collateralized by a pool of construction and development, commercial real estate and commercial and industrial loans with carrying balances totaling $746.4 million and $765.7 million as of March 31, 2026 and December 31, 2025, respectively, as well as all of the Company’s municipal and mortgage-backed securities. There were no outstanding borrowings on this line as of March 31, 2026.
NOTE 8 – OPERATING LEASES
The Company has entered into various operating leases for certain branch locations with terms extending through April 2036. Generally, these leases have initial lease terms of ten years or less. Many of the leases have one or more renewal options which typically are for five years at the then fair market rental rates. We assessed these renewal options using a threshold of reasonably certain. For leases where we were reasonably certain to renew, those option periods were included within the lease term, and therefore, the measurement of the right-of-use (“ROU”) asset and lease liability. None of our leases include options to terminate the lease and none have initial terms of 12 months or less (i.e. short-term leases). Operating leases in which the Company is the lessee are recorded as operating lease ROU assets and operating lease liabilities on the Consolidated Balance Sheets. The Company currently does not have any finance leases.
Operating lease ROU assets represent the Company’s right to use an underlying asset during the lease term and operating lease liabilities represent its obligation to make lease payments arising from the lease. ROU assets and operating lease liabilities are recognized at lease commencement based on the present value of the remaining lease payments using a discount rate that represents the Company’s incremental collateralized borrowing rate provided by the FHLB at the lease commencement date. ROU assets are further adjusted for lease incentives, if any. Operating lease expense, which is comprised of amortization of the ROU asset and the implicit interest accreted on the operating lease liability, is recognized on a straight-line basis over the lease term, and is recorded in “Occupancy and Equipment” expense in the Consolidated Statements of Income.
The components of lease cost for the three months ended March 31, 2026 and 2025 were as follows:
Operating lease cost
923
570
Variable lease cost
60
Short-term lease cost
77
Sublease income
Total net lease cost
1,060
623
Future maturities of the Company’s operating lease liabilities are summarized as follows:
Twelve Months Ended:
Lease Liability
March 31, 2027
2,923
March 31, 2028
3,595
March 31, 2029
3,148
March 31, 2030
2,386
March 31, 2031
1,776
After March 31, 2031
3,376
Total lease payments
17,204
Less: interest discount
(2,688)
Present value of lease liabilities
21
Supplemental Lease Information
Weighted-average remaining lease term (years)
5.8
Weighted-average discount rate
3.95
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases (cash payments)
931
554
Operating cash flows from operating leases (lease liability reduction)
790
480
Operating lease right-of-use assets obtained in exchange for leases entered into during the period
502
NOTE 9 – INTEREST RATE DERIVATIVES
At March 31, 2026, the Company had seven separate interest rate swap agreements with notational amounts totaling $375.0 million. Six of the interest rate swaps are two-year forward three-year term swaps (five-year total term) where cash settlements began in October 2023, January 2024 or April 2024. The other interest rate swap is a one-year forward three-year term swap (four-year term total) where cash settlements began in May 2023. The swap agreements were designated as cash flow hedges of our deposit accounts that are indexed to the Federal Funds Effective Rate. The swaps are determined to be highly effective since inception and therefore no amount of ineffectiveness has been included in net income. The aggregate fair value of the swaps amounted to an unrealized gain of $4.3 million and $5.5 million and an unrealized loss of $0 and $0 at March 31, 2026 and, December 31, 2025 respectively. These unrealized gains and losses are recorded in “Interest Rate Derivatives” and “Other Liabilities” on the Consolidated Balance Sheets. The Company expects the hedges to remain highly effective during the remaining terms of the swaps.
During January 2025, the Company entered into three interest rate cap agreements with notional amounts totaling $200.0 million, all with a cap rate of 4.50%. One of these interest rate caps is a two-year spot cap where cash settlements began in February 2025. The other two interest rate caps are forward starting two-year term caps where cash settlements began in June 2025 or July 2025. During October 2021, the Company entered into an interest rate cap agreement with a notional amount of $50.0 million at a cap rate of 2.50%. This interest rate cap is a two-year forward three-year term (five-year total term) where cash settlements began in November 2023. The interest rate cap agreements were designated as cash flow hedges of our deposit accounts that are indexed to the Federal Funds Effective Rate. The rate cap premium paid by the Company at inception will be amortized on a straight line basis to deposit interest expense over the total term of the interest rate cap agreement. The aggregate fair value of the interest rate caps, inclusive of unamortized interest rate cap premiums, amounted to an unrealized gain of $649,000 and $819,000 and an unrealized loss of $312,000 and $451,000 at March 31, 2026 and December 31, 2025, respectively. These unrealized gains and losses are recorded in “Interest Rate Derivatives” and “Other Liabilities” on the Consolidated Balance Sheets.
The Company is exposed to credit related losses in the event of the nonperformance by the counterparties to the interest rate swaps. The Company performs an initial credit evaluation and ongoing monitoring procedures for all counterparties and currently anticipates that all counterparties will be able to fully satisfy their obligation under the contracts. In addition, the Company may require collateral from counterparties in the form of cash deposits in the event that the fair value of the contracts are positive and such fair value for all positions with the counterparty exceeds the credit support thresholds specified by the underlying agreement. Conversely, the Company is required to post cash deposits as collateral in the event the fair value of the contracts are negative and are below the credit support thresholds. At March 31, 2026, there were no cash deposits pledged as collateral by the Company. At March 31, 2026, the Company had $4.9 million of restricted cash obtained from the counterparties as collateral for the significant unrealized gains on our interest rate derivatives.
22
Summary information for the interest rate swaps designated as cash flow hedges is as follows:
As of or for the
Year Ended
Notional amounts
375,000
575,000
Weighted-average pay rate
1.90%
1.98%
Weighted-average receive rate
2.78%
4.21%
Weighted-average maturity
4.8 years
4.5 years
Weighted-average remaining maturity
0.6 years
2,295
Summary information for the interest rate caps designated as cash flow hedges is as follows:
250,000
Rate cap premiums
649
819
Weighted-average cap rate
4.10%
2.2 years
2.8 years
1 year
1.2 years
NOTE 10 – LOAN COMMITMENTS AND RELATED FINANCIAL INSTRUMENTS
The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheets. The contract amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.
The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit written is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. Financial instruments where contract amounts represent credit risk as of March 31, 2026 and December 31, 2025 include:
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit
132,097
120,078
Standby letters of credit
17,519
14,490
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments to extend credit includes $132.1 million of unused lines of credit and $17.5 million for standby letters of credit as of March 31, 2026. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by the Company upon extension of credit is based on management’s credit evaluation of the counterparty.
Standby letters of credit written are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan commitments to customers.
23
The Company maintains cash deposits with a financial institution that during the year are in excess of the insured limitation of the Federal Deposit Insurance Corporation. If the financial institution were not to honor its contractual liability, the Company could incur losses. Management is of the opinion that there is not material risk because of the financial strength of the institution.
NOTE 11 – FAIR VALUE
Financial Instruments Measured at Fair Value
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:
Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access.
Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates and yield curves that are observable at commonly quoted intervals.
Level 3 inputs are unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety.
The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
24
The following presents the assets and liabilities as of March 31, 2026 and December 31, 2025 which are measured at fair value on a recurring basis, aggregated by the level in the fair value hierarchy within which those measurements fall, and the financial instruments carried on the consolidated balance sheet by caption and by level in the fair value hierarchy, for which a nonrecurring change in fair value has been recorded:
Total Gains
Level 1
Level 2
Level 3
(Losses)
Assets
Recurring fair value measurements:
Securities available for sale:
Total securities available for sale
24,084
61,417
29,054
Nonrecurring fair value measurements:
Collateral-dependent loans
12,145
(377)
Liabilities
312
9,947
2,595
44,584
82,769
50,927
13,196
1,658
231
Interest rate swaps
451
25
The Company used the following methods and significant assumptions to estimate fair value:
Securities, Available for Sale: The Company carries securities available for sale at fair value. For securities where quoted prices are not available (Level 2), the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things. The investments in the Company’s portfolio are generally not quoted on an exchange but are actively traded in the secondary institutional markets.
The Company owns certain SBA investments for which the fair value is determined using Level 3 hierarchy inputs and assumptions as the trading market for such securities was determined to be “not active.” This determination was based on the limited number of trades or, in certain cases, the existence of no reported trades. Discounted cash flows are calculated by a third party using interest rate curves that are updated to incorporate current market conditions, including prepayment vectors and credit risk. During time when trading is more liquid, broker quotes are used to validate the model.
Equity Securities: The Company carries equity securities at fair value. Equity securities are measured at fair value using quoted market prices on nationally recognized and foreign securities exchanges (Level 1).
SBA and USDA Servicing Assets: The fair values of the Company’s servicing assets are determined using Level 3 inputs. All separately recognized servicing assets and servicing liabilities are initially measured at fair value and at each reporting date and changes in fair value are reported in earnings in the period in which they occur.
Interest Rate Derivatives: Exchange-traded derivatives are valued using quoted prices and are classified within Level 1 of the valuation hierarchy. However, few classes of derivative contracts are listed on an exchange; thus, the Company’s derivative positions are valued by third parties using their valuation models and confirmed by the Company. Since the model inputs can be observed in a liquid market and the models do not require significant judgement, such derivative contracts are classified within Level 2 of the fair value hierarchy. The Company’s interest rate derivatives contracts (designated as cash flow hedges) are classified within Level 2.
Under certain circumstances we make adjustments to fair value for our assets and liabilities although they are not measured at fair value on an ongoing basis.
Collateral-dependent loans: Collateral-dependent loans are loans where repayment is expected to be provided solely by the sale of the underlying collateral and there are no other available and reliable sources of repayment. Fair value for both collateral-dependent loans are measured based on the value of the collateral securing these loans and are classified at a Level 3 in the fair value hierarchy. Collateral may include real estate, or business assets including equipment, inventory and accounts receivable. The value of real estate collateral is determined based on an appraisal by qualified licensed appraisers hired by the Company. The value of business equipment is based on an appraisal by qualified licensed appraisers hired by the Company if significant, or the equipment’s net book value on the business’ financial statements. Inventory and accounts receivable collateral are valued based on independent field examiner review or aging reports. Appraisals may utilize a single valuation approach or a combination or approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available for similar loans and collateral underlying such loans. Appraised values are reviewed by management using historical knowledge, market considerations, and knowledge of the client and client’s business.
26
Changes in level 3 fair value measurements
The table below presents a reconciliation of assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2026 and 2025:
Obligations of
SBA and USDA
U.S. Government
Servicing
Entities and Agencies
Asset
Fair value, January 1, 2026
Total losses included in income
1,206
Settlements
Prepayments/paydowns
(63)
Transfers in and/or out of Level 3
Fair value, March 31, 2026
11,807
Fair value, January 1, 2025
4,467
Total gains included in income
(1,904)
Fair value, March 31, 2025
2,563
There were no gains or losses included in earnings for securities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the periods presented above. The only activity for these securities were prepayments. There were no purchases, sales, or transfers into and out of Level 3. The following table presents quantitative information about recurring Level 3 fair value measures at March 31, 2026 and December 31, 2025:
Valuation
Unobservable
General
Technique
Input
Range
March 31, 2026:
Recurring:
Discounted cash flows
Discount rate
3%-5%
Prepayment speed
6.76%-20.44%
4.93%-10.48%
Nonrecurring:
Appraised value less estimated selling costs
Estimated selling costs
6%
December 31, 2025:
6.42%-21.78%
5.75%-11.09%
27
The carrying amounts and estimated fair values of the Company’s financial instruments at March 31, 2026 and December 31, 2025 are as follows:
Carrying
Estimated Fair Value at March 31, 2026
Financial Assets:
Cash, due from banks, and federal funds sold
45,180
18,605
12,861
2,504
33,970
Loans, net
3,954,542
59
20,240
Mortgage servicing asset
5,804
Financial Liabilities:
3,620,509
426,573
Estimated Fair Value at December 31, 2025
65,825
3,964,005
344
19,954
SBA and USDA servicing assets
Mortgage servicing assets
5,659
3,645,272
51,000
513,060
NOTE 12 – REGULATORY MATTERS
Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. Under the Basel Committee on Banking Supervision’s capital guidelines for U.S. banks (“Basel III rules”), the Bank must hold a capital conservation buffer of 2.50% above the adequately capitalized risk-based capital ratios. The net unrealized gain or loss on available for sale securities, if any, is not included in computing regulatory capital. Management believes as of March 31, 2026 the Company and Bank meet all capital adequacy requirements to which they are subject.
Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At March 31, 2026 and December 31, 2025 the most recent regulatory notifications categorized the Bank as well
28
capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution’s category.
The table below summarizes the capital requirements applicable to the Company and the Bank in order to be considered “well-capitalized” from a regulatory perspective, as well as the Company’s and the Bank’s capital ratios as of March 31, 2026 and December 31, 2025. The Bank exceeded all regulatory capital requirements and was considered to be “well-capitalized” as of March 31, 2026 and December 31, 2025.
To Be Well Capitalized
Minimum Capital Required -
Under Prompt Corrective
Actual
Basel III
Action Provisions:
Ratio
Amount ≥
Ratio ≥
As of March 31, 2026:
Total Capital (to Risk Weighted Assets)
Consolidated
512,255
17.44
308,486
10.5
N/A
Bank
511,873
17.42
308,464
293,775
10.0
Tier I Capital (to Risk Weighted Assets)
485,210
16.52
249,727
8.5
484,828
16.50
249,709
235,020
8.0
Common Tier 1 (CET1)
205,657
7.0
205,643
190,954
6.5
Tier 1 Capital (to Average Assets)
10.47
185,437
4.0
10.46
185,366
231,707
5.0
As of December 31, 2025:
501,973
16.85
312,741
499,580
16.77
312,726
297,835
473,843
15.91
253,171
471,450
15.83
253,159
238,268
208,494
208,484
193,592
10.00
189,572
9.84
191,629
239,536
NOTE 13 – STOCK BASED COMPENSATION
The Company adopted the MetroCity Bankshares, Inc. 2018 Stock Option Plan (the “Prior Option Plan”) effective as of April 18, 2018, and the Prior Option Plan was approved by the Company’s shareholders on May 30, 2018. The Prior Option Plan provided for awards of stock options to officers, employees and directors of the Company. The Board of Directors of the Company determined that it was in the best interests of the Company and its shareholders to amend and restate the Prior Option Plan to provide for the grant of additional types of awards. Acting pursuant to its authority under the Prior Option Plan, the Board of Directors approved and adopted the MetroCity Bankshares, Inc. 2018 Omnibus Incentive Plan (the “2018 Incentive Plan”), which constitutes the amended and restated version of the Prior Option Plan. The Board of Directors has reserved 2,400,000 shares of Company common stock for issuance pursuant to awards granted under the 2018 Incentive Plan, any or all of which may be granted as nonqualified stock options, incentive stock options, restricted stock, restricted stock units, performance awards and other stock-based awards. In the event all or a portion of a stock award is forfeited, cancelled, expires, or is terminated before becoming vested, paid, exercised, converted, or otherwise settled in full, any unissued or forfeited shares again become available for issuance pursuant to awards granted under the 2018 Incentive Plan and do not count against the maximum number of reserved shares. In addition, shares of
29
common stock deducted or withheld to satisfy tax withholding obligations will be added back to the share reserve and will again be available for issuance pursuant to awards granted under the plan. The 2018 Incentive Plan is administered by the Compensation Committee of our Board of Directors (the “Committee”). The determination of award recipients under the 2018 Incentive Plan, and the terms of those awards, will be made by the Committee. At March 31, 2026, 240,000 stock options had been granted and 985,783 shares of restricted stock had been issued under the 2018 Incentive Plan.
Stock Options
A summary of stock option activity for the three months ended March 31, 2026 presented below:
Weighted
Average
Exercise Price
Outstanding at January 1, 2026
169,134
12.70
Outstanding at March 31, 2026
The Company recognized no compensation expense for stock options during the three months ended March 31, 2026 and 2025. As of March 31, 2026 and December 31, 2025, all of the cost related to the outstanding stock options had been recognized.
Restricted Stock Units
The Company has periodically issued restricted stock units to its directors, executive officers and certain employees under the 2018 Incentive Plan. Compensation expense for restricted stock is based upon the grant date fair value of the shares and is recognized over the vesting period of the units. Shares of restricted stock units issued to officers and employees vest in equal annual installments on the first three anniversaries of the grant date. Shares of restricted stock units issued to directors vest 25% on the grant date and 25% on each of the first three anniversaries of the grant date.
A summary of restricted stock activity for the three months ended March 31, 2026 is presented below:
Weighted-
Average Grant-
Nonvested Shares
Date Fair Value
Nonvested at January 1, 2026
178,509
23.99
Nonvested at March 31, 2026
During the three months ended March 31, 2026 and 2025, the Company recognized compensation expense for restricted stock of $426,000 and $429,000, respectively. As of March 31, 2026 and December 31, 2025, there was $1.7 million and $3.0 million, respectively, of total unrecognized compensation cost related to nonvested shares granted under the 2018 Incentive Plan. As of March 31, 2026, the cost is expected to be recognized over a weighted-average period of 1.9 years.
NOTE 14 – EARNINGS PER SHARE
The following table presents the calculation of basic and diluted earnings per common share for the periods indicated:
Basic earnings per share
Net Income
Weighted average common shares outstanding
28,779,534
Basic earnings per common share
Diluted earnings per share
Weighted average common shares outstanding for basic earnings per common share
Add: Dilutive effects of restricted stock and options
271,527
305,207
Average shares and dilutive potential common shares
29,051,061
25,707,989
Diluted earnings per common share
There were no stock options or restricted stock excluded from the computation of diluted earnings per common share since they were antidilutive for the three months ended March 31, 2026 and 2025.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The purpose of this discussion and analysis is to focus on significant changes in the financial condition of MetroCity Bancshares, Inc. and our wholly owned subsidiary, Metro City Bank, from December 31, 2025 through March 31, 2026 and on our results of operations for the three months ended March 31, 2026 and 2025. This discussion and analysis should be read in conjunction with our audited consolidated financial statements and notes thereto for the year ended December 31, 2025 included in our Annual Report on Form 10-K, and information presented elsewhere in this Quarterly Report on Form 10-Q, particularly the unaudited consolidated financial statements and related notes appearing in Item 1.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “might,” “should,” “could,” “predict,” “potential,” “believe,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “strive,” “projection,” “goal,” “target,” “outlook,” “aim,” “would,” “annualized” and “outlook,” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, estimates and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.
A number of important factors could cause our actual results to differ materially from those indicated in these forward-looking statements, including those factors discussed elsewhere in this quarterly report and the following:
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34
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The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this Quarterly Report on Form 10-Q. Because of these risks and other uncertainties, our actual future results, performance or achievement, or industry results, may be materially different from the results indicated by the forward looking statements in this Quarterly Report on Form 10-Q. In addition, our past results of operations are not necessarily indicative of our future results. You are cautioned not to place undue reliance on these forward looking statements, which represent our beliefs, assumptions and estimates only as of the dates on which they were made. 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 revise any forward-looking statement, whether as a result of new information, future events, changes in assumptions or otherwise, except as required by law.
Critical Accounting Policies and Estimates
Our accounting and reporting estimates conform with U.S. GAAP and general practices within the financial services industry. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. We consider accounting estimates that can (1) be replaced by other reasonable estimates and/or (2) changes to an estimate from period to period that have a material impact on the presentation of our financial condition, changes in financial condition or results of operations as well as (3) those estimates that require significant and complex assumptions about matters that are highly uncertain to be critical accounting estimates. We consider our critical accounting policies to include the allowance for credit losses, servicing assets, fair value of financial instruments and income taxes.
Critical accounting estimates include a high degree of uncertainty in the underlying assumptions. Management bases its estimates on historical experience, current information and other factors deemed relevant. The development, selection and disclosure of our critical accounting estimates are reviewed with the Audit Committee of the Company’s Board of Directors. Actual results could differ from these estimates. For additional information regarding critical accounting policies, refer to “Part II - Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates” and Note 1 of our consolidated financial statements as of December 31, 2025 in the Company’s 2025 Form 10-K. There have been no significant changes in the Company’s application of critical accounting policies since December 31, 2025.
Reserve for Credit Losses
A consequence of lending activities is that we may incur credit losses. The amount of such losses will vary depending upon the risk characteristics of the loan lease portfolio as affected by economic conditions such as rising interest rates and the financial performance of borrowers.
The reserve for credit losses consists of the allowance for credit losses (“ACL”) and the allowance for unfunded commitments. The estimate of expected credit losses under the current expected credit loss (“CECL”) methodology is based on relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. Historical loss experience is generally the starting point for estimating expected credit losses. We then consider whether the historical loss experience should be adjusted for loan-specific risk characteristics or current conditions at the reporting date that did not exist over the period from which historical experience was used. Finally, we consider forecasts about future economic conditions that are reasonable and supportable. The
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allowance for unfunded commitments represents the expected credit losses on off-balance sheet commitments such as unfunded commitments to extend credit. This allowance is estimated by loan segment at each balance sheet date under the CECL model using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur.
Management’s evaluation of the appropriateness of the reserve for credit losses is often the most critical of accounting estimates for a financial institution. Our determination of the amount of the reserve for credit losses is a critical accounting estimate as it requires significant reliance on the credit risk rating we assign to individual borrowers, the use of estimates and significant judgment as to the amount and timing of expected future cash flows, reliance on historical loss rates on homogenous portfolios, consideration of our quantitative and qualitative evaluation of economic factors, and the reliance on our reasonable and supportable forecasts. The reserve for credit losses attributable to each portfolio segment also includes an amount for inherent risks not reflected in the historical analyses. Relevant factors include, but are not limited to, concentrations of credit risk (geographic, large borrower, and industry), changes in underwriting standards, changes in collateral values, experience and depth of lending staff, trends in delinquencies, and the volume and terms of loans.
See Note 1 and Note 4 of our consolidated financial statements as of December 31, 2025 in the Company’s 2025 Form 10-K and Note 1 and Note 4 of our consolidated financial statements as of March 31, 2026, included elsewhere in this Form 10-Q, for additional information on the reserve and allowance for credit losses.
Overview
MetroCity Bankshares, Inc. is a bank holding company headquartered in the Atlanta metropolitan area. We operate through our wholly-owned banking subsidiary, Metro City Bank, a Georgia state-chartered commercial bank that was founded in 2006. We currently operate 30 full-service branch locations in multi-ethnic communities in Alabama, Florida, Georgia, New York, New Jersey, Texas and Virginia. As of March 31, 2026, we had total assets of $4.69 billion, total loans of $3.97 billion, total deposits of $3.63 billion and total shareholders’ equity of $554.2 million.
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We are a full-service commercial bank focused on delivering personalized service in an efficient and reliable manner to the small to medium-sized businesses and individuals in our markets, predominantly Asian-American communities in growing metropolitan markets in the Eastern U.S. and Texas. We offer a suite of loan and deposit products tailored to meet the needs of the businesses and individuals already established in our communities, as well as first generation immigrants who desire to establish and grow their own businesses, purchase a home, or educate their children in the United States. Through our diverse and experienced management team and talented employees, we are able to speak the language of our customers and provide them with services and products in a culturally competent manner.
Selected Financial Data
The following table sets forth unaudited selected financial data for the most recent five quarters. This data should be read in conjunction with the unaudited consolidated financial statements and accompanying notes included in Item 1 and the information contained in this Item 2.
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As of or for the Three Months Ended
September 30,
June 30,
Selected income statement data:
Interest income
60,257
54,003
54,049
Interest expense
24,332
22,211
21,871
35,925
31,792
32,178
(39)
(543)
129
Noninterest income
7,817
6,178
5,733
Noninterest expense
20,671
14,674
14,113
Income tax expense
4,971
6,569
6,843
18,139
17,270
16,826
Per share data:
Basic income per share
0.69
0.68
0.66
Diluted income per share
0.67
0.65
Dividends per share
0.29
0.25
0.23
Book value per share (at period end)
19.34
18.89
17.46
17.08
Tangible book value per share (at period end)(1)
16.95
16.51
Shares of common stock outstanding
25,537,746
Weighted average diluted shares
26,806,181
25,811,422
25,715,206
Performance ratios:
Return on average assets
1.96
1.80
1.89
1.87
1.85
Return on average equity
18.28
15.45
15.69
15.74
15.67
Adjusted return on average equity (1)
19.36
17.83
16.10
16.31
16.37
Dividend payout ratio
32.49
35.42
37.23
35.01
36.14
Yield on total loans
6.74
6.42
6.37
6.49
6.40
Yield on average earning assets
6.51
6.26
6.24
6.34
6.31
Cost of average interest bearing liabilities
3.25
3.36
3.42
3.39
3.48
Cost of deposits
3.12
3.22
3.28
Net interest margin
4.08
3.73
3.68
3.77
3.67
Efficiency ratio(2)
42.16
46.71
38.65
38.32
Efficiency ratio - operating (1)(2)
38.87
37.95
37.85
36.35
37.59
Asset quality data (at period end):
Net charge-offs/(recoveries) to average loans held for investment
0.03
(0.00)
0.01
0.02
Nonperforming assets to gross loans and OREO
0.42
0.47
0.49
0.59
ACL to nonperforming loans
158.54
107.48
137.66
129.76
110.52
ACL to loans held for investment
0.60
Balance sheet and capital ratios:
Gross loans held for investment to deposits
111.12
111.84
110.43
116.34
114.73
Noninterest bearing deposits to deposits
22.04
21.42
20.22
20.41
19.73
Investment securities to assets
0.96
1.38
0.94
0.93
Common equity to assets
10.52
10.12
12.29
12.06
11.69
Leverage ratio
12.21
11.91
11.76
Common equity tier 1 ratio
15.90
19.93
19.91
19.23
Tier 1 risk-based capital ratio
Total risk-based capital ratio
16.84
20.74
20.78
20.09
Mortgage and SBA loan data:
Mortgage loans serviced for others
496,552
702,586
538,675
559,112
537,590
Mortgage loan production
101,948
111,717
168,562
93,156
91,122
Mortgage loan sales
197,553
18,248
54,309
40,051
SBA loans serviced for others
699,028
685,481
460,720
480,867
474,143
SBA loan production
20,816
32,575
17,727
29,337
20,012
SBA loan sales
9,792
13,415
20,707
16,579
Non-GAAP Financial Measures
This Form 10-Q includes financial information determined by methods other than in accordance with generally accepted accounting principles (“GAAP”). This financial information includes “return on average equity”, which excludes average accumulated other comprehensive income and merger-related expenses and tangible book value per shares , which excludes goodwill and core deposit intangible and “efficiency ratio - operation which excludes merger expenses from
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noninterest expense. These measures should be viewed in addition to, and not as an alternative to or substitute for, measures determined in accordance with GAAP, and are not necessarily comparable to non-GAAP measures that may be presented by other companies.
The following table reconciles the non-GAAP financial measurement for return on average equity, tangible book value per share and efficiency ratio – operating to their respective most directly comparable GAAP measurements for the three months ended March 31, 2026 and 2025:
For the Three Months Ended March 31
Return on average shareholder's equity reconciliation
Average shareholder’s equity (GAAP)
494,937
421,679
Less: average accumulated other comprehensive income
(1,679)
(13,089)
Adjusted average shareholder’s equity (non-GAAP)
493,258
408,590
Net income (GAAP)
Add: First IC-merger related expenses (net of tax effect)
1,238
194
Adjusted net income (non-GAAP)
23,552
16,491
Return on average shareholder’s equity (GAAP)
Adjusted return on average shareholder’s equity (non-GAAP)
Tangible book value per share reconciliation
Total shareholder's equity (GAAP)
Less: goodwill and core deposit intangible
(68,357)
Adjusted total shareholder's equity (non-GAAP)
485,799
Book value per share (GAAP)
Tangible book value per share (non-GAAP)
Noninterest expense reconciliation
Efficiency ratio (GAAP)
Impact of First IC-merger related expenses included in noninterest expense
(3.29)
(0.73)
Efficiency ratio - operating (non-GAAP)
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Results of Operations
We recorded net income of $22.3 million for the three months ended March 31, 2026 compared to $16.3 million for the three months ended March 31, 2025, an increase of $6.0 million, or 36.9%. This increase was due to an increase in net interest income of $13.9 million, an increase in noninterest income of $901,000, and a decrease in provision for credit losses of $948,000, offset by increases in noninterest expense of $7.6 million and income tax expense of $2.1 million.
Basic and diluted earnings per common share for the three months ended March 31, 2026 was $0.78 and $0.77, respectively, compared to $0.64 and $0.63 for the basic and diluted earnings per common share for the three months ended March 31, 2025.
Interest Income
Interest income totaled $71.0 million for the three months ended March 31, 2026, an increase of $18.5 million, or 35.2%, from the three months ended March 31, 2025, primarily due to an increase in average balance of gross loans of $856.2 million, and an increase in average balance of investments of $188.0 million, and a 34 basis points increase in the loan yield, along with $892,000 in accretion income on purchase credit deteriorated loans from the First IC merger that occurred in fourth quarter of 2025. The increase in average loans is due to an increase of $510.4 million in average commercial real estate loans, and an increase of $311.7 million in average residential real estate loans.
Interest Expense
Interest expense for the three months ended March 31, 2026 increased $4.5 million, or 20.7%, to $26.5 million compared to interest expense of $22.0 million for the three months ended March 31, 2025, primarily due to a $695.3 million increase in average deposit balances, coupled with a $46.3 million increase in the average borrowings balance offset by a 23 basis points decrease in interest bearing liabilities costs. Average time deposits and money market deposits increased by $410.9 million and $165.4 million, respectively, and average interest-bearing demand deposits and savings accounts increased by $118.9 million primarily from the First IC merger in fourth quarter of 2025.
The Company currently has effective interest rate derivative agreements totaling $625.0 million that are designated as cash flow hedges of our deposit accounts indexed to the Federal Funds Effective rate. The weighted average pay rate for these interest rate derivatives is 3.16%. During the three months ended March 31, 2026, we recorded a credit to interest expense of $2.3 million, respectively, from the benefit received on these interest rate derivatives compared to a credit to interest expense of $4.1 million recorded during the three month periods ended March 31, 2025, respectively. Based on the Federal Funds Effective rate as of March 31, 2026 (3.64%), the Company would estimate to record a credit to interest expense of approximately $9.3 million for the remainder of 2026 from the benefit received on these interest rate derivatives, however actual results may vary based on changes in market and hedge performance. See Note 9 of our consolidated financial statements as of March 31, 2026 included elsewhere in this Form 10-Q, for additional information on these interest rate derivatives.
Net Interest Margin
The net interest margin for the three months ended March 31, 2026 increased by 41 basis points to 4.08% from 3.67% for the three months ended March 31, 2025, primarily due to a 23 basis points decrease in the cost of average interest-bearing liabilities of $3.30 billion, and a 20 basis points increase in the yield on average interest-earning assets of $4.42 billion. Average earning assets for the three months ended March 31, 2026 increased by $1.04 billion from the three months ended March 31, 2025, due to a $856.2 million increase in average loans and a $188.0 million increase in average total investments. Average interest-bearing liabilities for the three months ended March 31, 2026 increased by $741.6 million from the three months ended March 31, 2025, driven by increases in average interest-bearing deposits of $695.3 million and average borrowings of $46.3 million.
Net interest margin and net interest income are influenced by internal and external factors. Internal factors include balance sheet changes on both volume and mix and pricing decisions, and external factors include changes in market interest rates, competition and the shape of the interest rate yield curve. The increase in our net interest margin is
primarily driven by a reduction of funding cost, reflecting improved deposit pricing and the benefit of interest rate derivative hedges, partially offset by modest compression in asset yields.
Average Balances, Interest and Yields
The following tables present, for the three months ended March 31, 2026 and 2025, information about: (i) weighted average balances, the total dollar amount of interest income from interest-earning assets and the resultant average yields; (ii) average balances, the total dollar amount of interest expense on interest-bearing liabilities and the resultant average rates; (iii) net interest income; (iv) the interest rate spread; and (v) the net interest margin.
Interest and
Yield /
Balance
Fees
Earning Assets:
Federal funds sold and other investments(1)
318,318
3,329
4.24
159,478
2,098
5.34
61,169
522
3.46
32,034
168
2.13
Total investments
379,487
4.12
191,512
2,266
4.80
43,100
794
7.47
23,321
8.35
1,290,296
29,836
9.38
779,884
16,157
8.40
86,547
1,572
7.37
72,799
1,588
8.85
2,619,786
34,922
5.41
2,308,071
31,986
5.62
847
7.18
42
61.71
Gross loans(2)
4,040,576
3,184,351
Total earning assets
4,420,063
3,375,863
Noninterest-earning assets
202,774
197,272
4,622,837
3,573,135
Interest-bearing liabilities:
NOW and savings deposits
272,645
1,552
2.31
153,739
952
2.51
Money market deposits
1,175,909
7,506
2.59
1,010,471
6,321
2.54
Time deposits
1,417,623
13,019
3.72
1,006,677
10,704
4.31
Total interest-bearing deposits
2,866,177
2,170,887
Borrowings
436,344
4.11
390,000
4.15
Total interest-bearing liabilities
3,302,521
2,560,887
Noninterest-bearing liabilities:
Noninterest-bearing deposits
774,905
519,125
Other noninterest-bearing liabilities
50,474
71,444
Total noninterest-bearing liabilities
825,379
590,569
Shareholders’ equity
Net interest spread
3.26
2.83
Rate/Volume Analysis
Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average interest rates. The following table sets forth the effects of changing rates and volumes on our net interest income during the period shown. Information is provided with respect to (i) effects on interest income attributable to changes in volume (change in volume multiplied by prior rate) and (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume). Change applicable to both volumes and rate have been allocated to volume.
Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025
Increase (Decrease) Due to Change in:
Volume
Yield/Rate
Total Change
Earning assets:
1,649
(418)
1,231
292
62
1,941
(356)
1,585
365
(51)
314
10,572
3,107
13,679
392
(408)
(16)
5,363
(2,427)
2,936
Consumer and Other
(27)
16,665
221
16,886
18,606
(135)
18,471
244
356
600
1,124
1,185
3,927
(1,612)
2,315
5,295
(1,195)
4,100
438
4,538
12,873
13,933
Provision for Credit Losses
The provision for credit losses reflects our internal calculation and judgment of the appropriate amount of the allowance for credit losses. We maintain the allowance for credit losses at levels we believe are appropriate to cover our estimate of expected credit losses over the life of loans in the portfolio as of the end of the reporting period. The allowance for credit losses is determined through detailed quarterly analyses of our loan portfolio. The allowance for credit losses is based on our loss experience, changes in the economic environment, reasonable and supportable forecasts, as well as an ongoing assessment of credit quality and environmental factors not reflective in historical loss rates. Additional qualitative factors that are considered in determining the amount of the allowance for credit losses are concentrations of credit risk (geographic, large borrower, and industry), changes in underwriting standards, changes in collateral value, experience and depth of lending staff, trends in delinquencies, and the volume and terms of loans.
We recorded a recovery for credit losses of $813,000 during the three months ended March 31, 2026 compared to a provision for credit losses of $135,000 recorded during the three months ended March 31, 2025. The recovery for credit loss recorded during the three months ended March 31, 2026 was primarily driven by lower loan balances and reduced reserves on individually analyzed loans. Our ACL as a percentage of gross loans for the periods ended March 31, 2026, December 31, 2025 and March 31, 2025 was 0.66%, 0.68% and 0.59%, respectively. Our ACL as a percentage of gross
loans is relatively lower than our peers due to our high percentage of residential mortgage loans, which tend to have lower allowance for credit loss ratios compared to other commercial or consumer loans due to their low LTVs.
See the section captioned “Allowance for Credit Losses” elsewhere in this document for further analysis of our provision for credit losses.
Noninterest Income
Noninterest income for the three months ended March 31, 2026 was $6.4 million, an increase of $901,000, or 16.5%, compared to $5.5 million for the three months ended March 31, 2025.
The following table sets forth the major components of our noninterest income for the three months ended March 31, 2026 and 2025
$ Change
% Change
348
69.6
(15)
(0.9)
(100.0)
(312)
(50.5)
387
58.8
992
108.7
(100)
(13.0)
901
16.5
Service charges on deposit accounts increased $348,000, or 69.6%, to $848,000 for the three months ended March 31, 2026 compared to $500,000 for the three months ended March 31, 2025. These increases were primarily attributable to higher service charges on business checking accounts, analysis fees, overdraft fees and charge back fees as a result of the First IC acquisition that occurred in fourth quarter of 2025.
Other service charges, commissions and fees decreased $15,000, or 0.9%, to $1.6 million for the three months ended March 31, 2026 compared to $1.6 million for the three months ended March 31, 2025.
Gain on sale of residential mortgage loans totaled $0 for the three months ended March 31, 2026. Gain on sale of residential mortgage loans totaled $399,000 for the three months ended March 31, 2025, as we sold $40.1 million in residential mortgage loans during these periods with an average premium of 1.06%.
Gain on sale of SBA loans totaled $1.0 million for the three months ended March 31, 2026 compared to $658,000 for the three months ended March 31, 2025. We sold $19.7 million in SBA loans during the three ended March 31, 2026 with average premiums of 7.68%. We sold $16.6 million in SBA loans during the three months ended March 31, 2025 with average premiums of 5.97%.
Mortgage loan servicing income, net of amortization, decreased by $312,000, or 50.5%, to $306,000 during the three months ended March 31, 2026 compared to $618,000 for the three months ended March 31, 2025. The changes in mortgage loan servicing income were primarily due to decreases in servicing fees, increases in mortgage servicing amortization, and decreases in capitalized mortgage servicing assets. Included in mortgage loan servicing income for the three months ended March 31, 2026 was $482,000 in mortgage servicing fees compared to $566,000 for the three months ended March 31, 2025 and capitalized mortgage servicing assets of $126,000 for the three months ended March 31, 2026 compared to $310,000 for the three months ended March 31, 2025. These amounts were offset by mortgage loan servicing asset amortization of $176,000 for the three months ended March 31, 2026 compared to $118,000 during the three months ended March 31, 2025. Our total residential mortgage loan servicing portfolio was $496.6 million at March 31, 2026 compared to $537.6 million at March 31, 2025.
SBA servicing income increased by $992,000, or 108.7%, to $1.9 million for the three months ended March 31, 2026 compared to $913,000 for the three months ended March 31, 2025. Our total SBA and USDA loan servicing portfolio was $699.0 million as of March 31, 2026 compared to $474.1 million as of March 31, 2025. Included in SBA servicing income for the three months ended March 31, 2026 was $1.2 million in SBA servicing fees compared to $1.0 million for the three months ended March 31, 2025. Our SBA servicing rights are carried at fair value and the inputs used to calculate fair value change from period to period. During the three months ended March 31, 2026, we recorded a $666,000 fair value increase to our SBA servicing rights compared to a $104,000 fair value charge to our SBA servicing rights during the three months ended March 31, 2025.
Other noninterest income decreased by $100,000, or 13.0%, to $672,000 for the three months ended March 31, 2026 compared to $772,000 for the three months ended March 31, 2025. The largest component of other noninterest income is the income on bank owned life insurance which totaled $638,000 for the three months ended March 31, 2026 compared to $615,000 for the three months ended March 31, 2025. Also included in other noninterest income are fair value gains/losses on our equity securities, which totaled $82,000 (loss) for the three months ended March 31, 2026, respectively, compared to $140,000 (gain) for the three months ended March 31, 2025.
Noninterest Expense
Noninterest expense for the three months ended March 31, 2026 was $21.4 million compared to $13.8 million for the three months ended March 31, 2025, an increase of $7.6 million, or 55.4%.
The following table sets forth the major components of our noninterest expense for the three months ended March 31, 2026 and 2025:
Noninterest Expense:
3,008
35.4
1,017
71.8
337
97.7
33.5
1,414
539.7
1,807
58.0
7,639
55.4
Salaries and employee benefits expense for the three months ended March 31, 2026 was $11.5 million compared to $8.5 million for the three months ended March 31, 2025, an increase of $3.0 million, or 35.4%. These increases were primarily driven by higher personnel, occupancy, and data processing costs, as well as $1.7 million of merger related expenses. Excluding merger related expenses, noninterest expense reflects the full quarter impact of the acquisition and is expected to stabilize as integration activities progress and operational efficiencies are realized.
Occupancy and equipment expense for the three months ended March 31, 2026 was $2.4 million, an increase of $1.0 million, or 71.8%, compared to the three months ended March 31, 2025. These increases were primarily due to higher property taxes, utilities, maintenance expense, rent expense, and depreciation expense from the acquisition of First IC that occurred in fourth quarter of 2025.
Data processing expense for the three months ended March 31, 2026 was $682,000 compared to $345,000 for the three months ended March 31, 2025, an increase of $337,000, or 97.7%. These increases were primarily due to the continued growth in our loans and deposits from the acquisition of First IC that occurred in fourth quarter of 2025, as well as enhancements to our existing systems.
Advertising expenses for the three months ended March 31, 2026 remained relatively flat compared to the same periods in 2025.
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Merger-related expenses for the three months ended March 31, 2026 was $1.7 million compared to $262,000 for the three months ended March 31, 2025. The increase is related to the acquisition of First IC being completed in fourth quarter of 2025 with legal fees, integration fees and conversion expenses in the first quarter of 2026.
Other expenses for the three months ended March 31, 2026 were $4.9 million compared to $3.1 million for the three months ended March 31, 2025, an increase of $1.8 million, or 58.0%. This increase was primarily due to core deposit amortization, additional banking costs from First IC merger quarter merger, FDIC insurance premiums, security expenses, loan-related expenses.
Income Tax Expense
Income tax expense for the three months ended March 31, 2026 and 2025 was $7.9 million and $5.8 million, respectively. The Company’s effective tax rates were 26.2% for the three months ended March 31, 2026 and 2025, respectively.
Financial Condition
Total assets decreased $80.0 million, or 1.7%, to $4.69 billion at March 31, 2026 as compared to $4.77 billion at December 31, 2025. The decrease in total assets was primarily attributable to decreases of $20.6 million in securities, $50.3 million in loans, $9.7 million in loans held for sale, and $4.1 million in Federal Home Loan Bank stock offset by an increase in cash and cash equivalents of $3.9 million.
Our investment securities portfolio made up 0.96% of our total assets at March 31, 2026 compared to 1.38% at December 31, 2025.
Gross loans held for investment decreased $50.3 million, or 1.2%, to $4.00 billion as of March 31, 2026 as compared to $4.05 billion as of December 31, 2025. Our loan decrease during the three months ended March 31, 2026 was comprised of an increase of $10.7 million, or 25.5%, in construction and development loans, an increase of $14.1 million, or 0.6%, in residential real estate loans, an increase of $16,000, or 2.6%, in consumer and other loans, offset by a decrease of $4.5 million, or 4.7%, in commercial and industrial loans, and a decrease of $68.0 million, or 4.4%, in commercial real estate loans. We had loans held for sale of $0 as of March 31, 2026 compared to $9.7 million in loans held for sale as of December 31, 2025.
The following table presents the ending balance of each major category in our loan portfolio held for investment at the dates indicated.
1.3
1.0
37.0
38.3
2.3
2.4
59.4
58.3
Gross loans
100.0
Loan Discounts
Total loans, net
46
SBA and USDA Loan Servicing
As of March 31, 2026 and December 31, 2025, we serviced $699.0 million and $685.5 million, respectively, in SBA and USDA loans for others. We carried a servicing asset of $11.3 million and $10.6 million at March 31, 2026 and December 31, 2025, respectively. See Note 5 of our consolidated financial statements as of March 31, 2026, included elsewhere in this Form 10-Q, for additional information on the activity for SBA and USDA loan servicing rights for the three months ended March 31, 2026 and 2025.
Residential Mortgage Loan Servicing
As of March 31, 2026, we serviced $496.5 million in residential mortgage loans for others compared to $537.6 million as of December 31, 2025. We carried a servicing asset, net of amortization, of $1.5 million and $1.7 million at March 31, 2026 and December 31, 2025. Amortization relating to the mortgage loan servicing asset was $176,000 for the three months ended March 31, 2026 compared to $118,000 for the three months ended March 31, 2025, respectively. During the three months ended March 31, 2026 and March 31, 2025, we recorded fair value impairment recoveries of $0 and $42,000, respectively, on our mortgage servicing asset. See Note 6 of our consolidated financial statements as of March 31, 2026, included elsewhere in this Form 10-Q, for additional information on the activity for mortgage loans servicing rights for the three months ended March 31, 2026 and 2025.
Asset Quality
Nonperforming Loans
Asset quality remained strong during the first quarter of 2026 as our nonperforming loans to total loans remained low at 0.42% as of March 31, 2026. Nonperforming loans were $16.8 million at March 31, 2026 compared to $25.2 million at December 31, 2025. The decrease from December 31, 2025 to March 31, 2026 was attributable to a $8.4 million decrease in nonaccrual loans. We did not recognize any interest income on nonaccrual loans during the three months ended March 31, 2026 and 2025.
The following table sets forth the allocation of our nonperforming assets among our different asset categories as of the dates indicated. Nonperforming loans include nonaccrual loans and loans past due 90 days or more and still accruing interest. Nonperforming assets consist of nonperforming loans plus foreclosed real estate. Nonaccrual loans at March 31, 2026 comprised of $8.8 million of commercial real estate loans, $1.2 million of commercial and industrial loans and $6.9 million of residential real estate loans. Nonaccrual loans at December 31, 2025 comprised of $14.8 million of commercial real estate loans, $1.3 million of commercial and industrial loans, and $9.1 million of residential real estate loans.
Nonaccrual loans
Past due loans 90 days or more and still accruing
Total nonperforming loans
16,841
Foreclosed real estate
Total nonperforming assets
17,988
25,421
Nonperforming loans to gross loans
0.62
Nonperforming assets to total assets
0.38
0.53
Allowance for credit losses to nonperforming loans
The allowance for credit losses was $26.7 million at March 31, 2026 compared to $27.8 million at December 31, 2025, a decrease of $1.1 million. The decrease was primarily due to the decrease in reserves mainly due to decrease in loan balances and reserves on individually analyzed loans.
47
We maintain a reserve for credit losses that consists of two components, the allowance for credit losses and the allowance for unfunded commitments. The allowance for credit losses provides for the risk of credit losses expected in our loan portfolio and is based on loss estimates derived from a comprehensive quarterly evaluation. The evaluation reflects analyses of individual borrowers for impairment coupled with analysis of historical loss experience in various loan pools that have been grouped based on similar risk characteristics, supplemented as necessary by credit judgment that considers observable trends, conditions, reasonable and supportable forecasts, and other relevant environmental and economic factors. The level of the allowance for credit losses is adjusted by recording an expense or credit through the provision for credit losses. The level of the allowance for unfunded commitments is adjusted by recording an expense or credit in other noninterest expense. The allowance for unfunded commitments had a balance of $345,000 as of March 31, 2026 compared to $282,000 as of March 31, 2025.
Loans that do not share risk characteristics are evaluated on an individual basis. For collateral dependent loans where the Company has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the loan to be provided substantially through the operation or sale of the collateral, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. When repayment is expected to be from the operation of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the loan exceeds the present value of expected cash flows from the operation of the collateral. When repayment is expected to be from the sale of the collateral, expected credit losses are calculated as the amount by which the amortized costs basis of the loan exceeds the fair value of the underlying collateral less estimated cost to sell. The ACL may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the loan.
The impact of utilizing the CECL approach to calculate the allowance for credit losses will be significantly influenced by the composition, characteristics and quality of our loan portfolio, as well as the prevailing economic conditions and forecasts utilized. Material changes to these and other relevant factors may result in greater volatility to the provision for credit losses, and therefore, greater volatility to our reported earnings. See Note 1 and Note 4 of our consolidated financial statements as of March 31, 2026, included elsewhere in this Form 10-Q, and as of in the Company’s 2025 Form 10-K, for additional information on the on the allowance for credit losses and the allowance for unfunded commitments.
It is the policy of management to maintain the allowance for credit losses at a level adequate for risks inherent in the loan portfolio. The FDIC and GA DBF also review the allowance for credit losses as an integral part of their examination process. Based on information currently available, management believes that our allowance for credit losses is adequate. However, the loan portfolio can be adversely affected if economic conditions and the real estate market in our market areas were to weaken. The effect of such events, although uncertain at this time, could result in an increase in the level of nonperforming loans and increased credit losses, which could adversely affect our future growth and profitability. No assurance of the ultimate level of credit losses can be given with any certainty.
48
Analysis of the Allowance for Credit Losses. The following table provides an analysis of the allowance for credit losses, provision for credit losses and net charge-offs for the periods presented below:
Balance, beginning of period
CECL adoption (Day 1) impact
Charge-offs:
173
Total charge-offs
282
Recoveries:
Total recoveries
Net (recoveries)/charge-offs
274
169
Balance, end of period
Total loans at end of period(1)
4,030,129
3,140,165
Average loans(1)
4,035,706
3,167,085
Net charge-offs to average loans
Allowance for credit losses to total loans
Management believes the allowance for credit losses is adequate to provide for losses expected in the loan portfolio as of March 31, 2026.
Deposits were $3.63 billion at March 31, 2026, a decrease of $19.3 million, compared to total deposits of $3.65 billion at December 31, 2025, and an increase of $889.6 million, or 32.5%, compared to total deposits of $2.74 billion at March 31, 2025. The decrease in total deposits at March 31, 2026 compared to December 31, 2025 was due to a $27.4 million decrease in interest-bearing demand deposits, a $66.1 million decrease in time deposits, offset by a $1.1 million increase in savings accounts, $54.7 million increase in money market accounts and a $18.4 million increase in noninterest-bearing demand deposits. Noninterest-bearing deposits were $799.2 million at March 31, 2026, compared to $780.8 million at December 31, 2025 and $540.0 million at March 31, 2025. Noninterest-bearing deposits constituted 22.0% of total deposits at March 31, 2026, compared to 21.4% at December 31, 2025 and 19.7% at March 31, 2025. Interest-bearing deposits were $2.83 billion at March 31, 2026, compared to $2.87 billion at December 31, 2025 and $2.20 billion at March 31, 2025. Interest-bearing deposits constituted 78.0% of total deposits at March 31, 2026, compared to 78.6% at December 31, 2025 and 80.3% at March 31, 2025.
As of March 31, 2026 and December 31, 2025, the Company had estimated uninsured deposits of $1.16 billion and $1.09 billion, respectively. These estimates were derived using the same methodologies and assumptions used for the Bank’s regulatory reporting. Uninsured deposits were 31.9% of total deposits at March 31, 2026, compared to 29.6% at December 31, 2025. As of March 31, 2026, we had $1.69 billion of available borrowing capacity at the Federal Home Loan Bank ($989.1 million), Federal Reserve Discount Window ($629.8 million) and various other financial institutions (fed fund lines totaling $67.5 million).
49
We had $785.0 million of brokered deposits, or 21.6% of total deposits, at March 31, 2026 compared to $747.8 million, or 20.5% of total deposits, at December 31, 2025. We use brokered deposits, subject to certain limitations and requirements, as a source of funding to support our asset growth and augment the deposits generated from our branch network, which are our principal source of funding. Our level of brokered deposits varies from time to time depending on competitive interest rate conditions and other factors and tends to increase as a percentage of total deposits when the brokered deposits are less costly than issuing internet certificates of deposit or borrowing from the Federal Home Loan Bank.
We use interest rate swap and cap agreements to hedge our deposit accounts that are indexed to the Federal Funds Effective Rate. These swap agreements are designated as cash flow hedges. As of March 31, 2026, the total amount of deposits tied to the Federal Funds Effective Rate was $854.9 million. See Note 9 of our consolidated financial statements as of March 31, 2026, included elsewhere in this Form 10-Q, for additional information.
The following tables summarize our average deposit balances and weighted average rates for the three months ended March 31, 2026 and 2025.
Average Rate
Noninterest-bearing demand
Interest-bearing demand deposits
260,526
2.41
144,387
2.66
Savings and money market deposits
446,720
1.51
357,462
3.63
Brokered deposits
741,308
3.20
662,361
1.91
3,641,082
2.46
2,690,012
2.71
The weighted average rates shown in the tables above are inclusive of the benefit received from the interest rate derivatives that hedge our deposit accounts tied to the Federal Funds Effective Rate. During the three months ended March 31, 2026, we recorded a credit to interest expense of $2.3 million from the benefit received on these interest rate derivatives compared to a credit to interest expense of $4.3 million recorded during the three months ended March 31, 2025. These benefits resulted in a 34 basis points reduction to the total deposits weighted average rate for the three months ended March 31, 2026, respectively, compared to a 79 basis points reduction for three months ended March 31, 2025, respectively.
Borrowed Funds
Other than deposits, we also utilized FHLB advances as a supplementary funding source to finance our operations. The advances from the FHLB are collateralized by residential real estate loans. At March 31, 2026 and December 31, 2025, we had available borrowing capacity from the FHLB of $1.41 billion and $1.09 billion, respectively. At March 31, 2026 and December 31, 2025, we had $425.0 million and $510.0 million, respectively, of outstanding advances from the FHLB.
In addition to our advances with the FHLB, we maintain federal funds agreements with our correspondent banks. Our available borrowings under these agreements was $67.5 million and $52.5 million at March 31, 2026 and December 31, 2025. We did not have any advances outstanding under these agreements as of March 31, 2026 and December 31, 2025. We also have access to the Federal Reserve’s discount window in the amount of $618.1 million and $600.4 million at March 31, 2026 and December 31, 2025, respectively. No discount window borrowings were outstanding as of March 31, 2026 and December 31, 2025. We also maintain relationships in the capital markets with brokers to issue certificates of deposit and money market accounts, if necessary.
50
Liquidity and Capital Resources
Liquidity
Liquidity refers to the measure of our ability to meet the cash flow requirements of depositors and borrowers, while at the same time meeting our operating, capital and strategic cash flow needs, all at a reasonable cost. We continuously monitor our liquidity position to ensure that assets and liabilities are managed in a manner that will meet all short-term and long-term cash requirements. We manage our liquidity position to meet the daily cash flow needs of customers, while maintaining an appropriate balance between assets and liabilities to meet the return on investment objectives of our shareholders.
Our liquidity position is supported by management of liquid assets and access to alternative sources of funds. Our liquid assets include cash, interest-bearing deposits in correspondent banks, federal funds sold, and fair value of unpledged investment securities. Other available sources of liquidity include wholesale/brokered deposits, and additional borrowings from correspondent banks, FHLB advances, and the Federal Reserve discount window.
Our short-term and long-term liquidity requirements are primarily met through cash flow from operations, redeployment of prepaying and maturing balances in our loan and investment portfolios, and increases in customer deposits. Other alternative sources of funds will supplement these primary sources to the extent necessary to meet additional liquidity requirements on either a short-term or long-term basis.
As part of our liquidity management strategy, we open federal funds lines with our correspondent banks. As of March 31, 2026 and December 31, 2025, we had $67.5 million and $52.5 million, respectively, of unsecured federal funds lines with no amounts advanced. In addition, the Company had Federal Reserve Discount Window funds available of approximately $618.1 million and $600.4 million at March 31, 2026 and December 31, 2025, respectively. The FRB discount window line is collateralized by a pool of construction and development, commercial real estate and commercial and industrial loans with carrying balances totaling $765.7 million as of March 31, 2026, as well as all of the Company’s municipal and mortgage-backed securities. There were no outstanding borrowings on this line as of March 31, 2026 and December 31, 2025.
At March 31, 2026 and December 31, 2025, we had $425.0 million and $510.0 million, respectively, of outstanding advances from the FHLB. Based on the values of loans pledged as collateral, we had $989.0 million and $577.9 million of additional borrowing availability with the FHLB as of March 31, 2026 and December 31, 2025, respectively. We also maintain relationships in the capital markets with brokers to issue certificates of deposit and money market accounts, if necessary.
Capital Requirements
The Company and the Bank are required under federal law to maintain certain minimum capital levels based on ratios of capital to total assets and capital to risk-weighted assets. The required capital ratios are minimums, and the federal banking agencies may determine that a banking organization, based on its size, complexity or risk profile, must maintain a higher level of capital in order to operate in a safe and sound manner. Risks such as concentration of credit risks and the risk arising from non-traditional activities, as well as the institution’s exposure to a decline in the economic value of its capital due to changes in interest rates, and an institution’s ability to manage those risks are important factors that are to be taken into account by the federal banking agencies in assessing an institution’s overall capital adequacy.
The table below summarizes the capital requirements applicable to the Company and the Bank in order to be considered “well-capitalized” from a regulatory perspective, as well as the Company’s and the Bank’s capital ratios as of March 31, 2026 and December 31, 2025. The Bank exceeded all regulatory capital requirements and was considered to be “well-capitalized” as of March 31, 2026 and December 31, 2025. As of December 31, 2025, the FDIC categorized the Bank as well-capitalized under the prompt corrective action framework. There have been no conditions or events since December 31, 2025 that management believes would change this classification. While the Company believes that it has sufficient capital to withstand an extended economic recession, its reported and regulatory capital ratios could be adversely impacted in future periods.
51
Regulatory
Capital Ratio
Requirements
Minimum
including
Requirement
fully phased-
for “Well
in Capital
Capitalized”
Conservation
Depository
Buffer
Institution
Total capital (to risk-weighted assets)
10.50
Tier 1 capital (to risk-weighted assets)
8.50
8.00
CET1 capital (to risk-weighted assets)
7.00
6.50
Tier 1 capital (to average assets)
4.00
5.00
Dividends
On April 15, 2026, the Company declared a cash dividend of $0.29 per share, payable on May 8, 2026, to common shareholders of record as of April 29, 2026. Any future determination to pay dividends to holders of our common stock will depend on our results of operations, financial condition, capital requirements, banking regulations, contractual restrictions and any other factors that our board of directors may deem relevant.
Off-Balance Sheet Arrangements
We are a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our customers. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in our consolidated balance sheet. The contractual or notional amounts of those instruments reflect the extent of involvement we have in particular classes of financial instruments.
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. We evaluate each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if we deem collateral is necessary upon extension of credit, is based on management’s credit evaluation of the counterparty.
Standby letters of credit are conditional commitments issued by us to guarantee the performance of a customer to a third party. They are intended to be disbursed, subject to certain condition, upon request of the borrower.
See Note 10 of our consolidated financial statements as of March 31, 2026, included elsewhere in this Form 10-Q, for more information regarding our off-balance sheet arrangements as of March 31, 2026 and December 31, 2025.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market Risk
Market risk represents the risk of loss due to changes in market values of assets and liabilities. We incur market risk in the normal course of business through exposures to market interest rates, equity prices, and credit spreads. We have identified interest rate risk as our primary source of market risk.
Interest Rate Risk
Interest rate risk is the risk to earnings and value arising from changes in market interest rates. Interest rate risk arises from timing differences in the repricings and maturities of interest-earning assets and interest-bearing liabilities (repricing risk), changes in the expected maturities of assets and liabilities arising from embedded options, such as borrowers’ ability to prepay home mortgage loans at any time and depositors’ ability to redeem certificates of deposit before maturity (option risk), changes in the shape of the yield curve where interest rates increase or decrease in a nonparallel fashion (yield curve risk), and changes in spread relationships between different yield curves, such as U.S. Treasuries and Federal funds effective (basis risk).
Our board of directors establishes broad policy limits with respect to interest rate risk. As part of this policy, the asset liability committee, or ALCO, establishes specific operating guidelines within the parameters of the board of directors’ policies. In general, the ALCO focuses on ensuring a stable and steadily increasing flow of net interest income through managing the size and mix of the balance sheet. The management of interest rate risk is an active process which encompasses monitoring loan and deposit flows complemented by investment and funding activities. Effective management of interest rate risk begins with understanding the dynamic characteristics of assets and liabilities and determining the appropriate interest rate risk posture given business forecasts, management objectives, market expectations, and policy constraints.
An asset sensitive position refers to a balance sheet position in which an increase in short-term interest rates is expected to generate higher net interest income, as rates earned on our interest-earning assets would reprice upward more quickly than rates paid on our interest-bearing liabilities, thus expanding our net interest margin. Conversely, a liability sensitive position refers to a balance sheet position in which an increase in short-term interest rates is expected to generate lower net interest income, as rates paid on our interest-bearing liabilities would reprice upward more quickly than rates earned on our interest-earning assets, thus compressing our net interest margin.
Interest rate risk measurement is calculated and reported to the ALCO at least quarterly. The information reported includes period-end results and identifies any policy limits exceeded, along with an assessment of the policy limit breach and the action plan and timeline for resolution, mitigation, or assumption of the risk.
Evaluation of Interest Rate Risk
We use income simulations, an analysis of core funding utilization, and economic value of equity (EVE) simulations as our primary tools in measuring and managing interest rate risk. These tools are utilized to quantify the potential earnings impact of changing interest rates over a two year simulation horizon (income simulations) as well as identify expected earnings trends given longer term rate cycles (long term simulations, core funding utilizations, and EVE simulation). A standard gap report and funding matrix will also be utilized to provide supporting detailed information on the expected timing of cashflow and repricing opportunities.
There are an infinite number of potential interest rate scenarios, each of which can be accompanied by differing economic/political/regulatory climates; can generate multiple differing behavior patterns by markets, borrowers, depositors, etc.; and can last for varying degrees of time. Therefore, by definition, interest rate risk sensitivity cannot be predicted with certainty. Accordingly, the Bank’s interest rate risk measurement philosophy focuses on maintaining an appropriate balance between theoretical and practical scenarios; especially given the primary objective of the Bank’s overall asset/liability management process is to facilitate meaningful strategy development and implementation.
Therefore, we model a set of interest rate scenarios capturing the financial effects of a range of plausible rate scenarios, the collective impact of which will enable the Bank to clearly understand the nature and extent of its sensitivity to interest rate changes. Doing so necessitates an assessment of rate changes over varying time horizons and of varying/sufficient degrees such that the impact of embedded options within the balance sheet are sufficiently examined.
We use a net interest income simulation model to measure and evaluate potential changes in our net interest income. We run three standard and plausible simulations comparing current or flat rates with a +/- 200 basis point ramp in rates over 12 and 24 months. These rate scenarios are considered appropriate as we believe they represent a more realistic range of rate movements that could occur in the near to medium term. This analysis also provides the foundation for historical tracking of interest rate risk. The impact of interest rate derivatives, such as interest rate swaps and caps, is included in the model.
Potential changes to our net interest income in hypothetical rising and declining rate scenarios calculated as of March 31, 2026 and December 31, 2025 are presented in the following table:
Net Interest Income Sensitivity
12 Month Projection
24 Month Projection
(Ramp in basis points)
+200
-200
(0.40)
(0.10)
(1.90)
6.30
(1.70)
1.20
(6.60)
We also model the impact of rate changes on our Economic Value of Equity, or EVE. We base the modeling of EVE based on interest rate shocks as shocks are considered more appropriate for EVE, which accelerates future interest rate risk into current capital via a present value calculation of all future cashflows from the Bank’s existing inventory of assets and liabilities. Our simulation model incorporates interest rate shocks of +/- 100, 200, 300, and 400 basis points. The results of the model are presented in the table below:
(Shock in basis points)
+300
+100
-100
-300
(11.60)
(7.00)
(3.00)
2.20
0.30
(21.10)
(14.00)
(6.70)
12.30
Our simulation model incorporates various assumptions, which we believe are reasonable but which may have a significant impact on results such as: (i) the timing of changes in interest rates; (ii) shifts or rotations in the yield curve; (iii) re-pricing characteristics for market-rate-sensitive instruments; (iv) varying loan prepayment speeds for different interest rate scenarios; and (v) the overall growth and mix of assets and liabilities. Because of limitations inherent in any approach used to measure interest rate risk, simulation results are not intended as a forecast of the actual effect of a change in market interest rates on our results but rather as a means to better plan and execute appropriate asset-liability management strategies and manage our interest rate risk.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company’s management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2026. The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2026.
Changes in Internal Control over Financial Reporting
During the quarter ended March 31, 2026, there was no change in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 of the Exchange Act that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. The Company is continually monitoring and assessing changes in processes and activities to determine any potential impact on the design and operating effectiveness of internal controls over financial reporting.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
We are a party to various legal proceedings such as claims and lawsuits arising in the course of our normal business activities. Although the ultimate outcome of all claims and lawsuits outstanding as of March 31, 2026 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 our business, results of operations or financial condition.
Item 1A. Risk Factors
In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors discussed in “Part I – Item 1A – Risk Factors” of the Company’s 2025 Form 10-K, which could materially affect its business, financial position, results of operations, cash flows, or future results. Please be aware that these risks may change over time and other risks may prove to be important in the future. New risks may emerge at any time, and we cannot predict such risks or estimate the extent to which they may affect our business, financial condition or results of operations, or the trading price of our securities.
There are no material changes during the period covered by this Report to the risk factors previously disclosed in the Company’s 2025 Form 10-K.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities
On October 16, 2024, the Company announced the continuation of its share repurchase program that expired on September 30, 2024 (“Prior Share Repurchase Plan”), and authorized the Company to repurchase up to 925,250 shares of the Company’s outstanding shares of common stock, which is the number of remaining shares authorized for repurchase from the Prior Share Repurchase Plan. The share repurchase program began on October 17, 2024 and ended on September 30, 2025.
On September 17, 2025, the Company announced the continuation of its share repurchase program that expired on September 30, 2025 (“2025 Prior Share Repurchase Plan”) and authorized the Company to repurchase up to 923,976 shares of the Company’s outstanding shares of common stock, which is the number of remaining shares authorized for repurchase from the 2025 Prior Share Repurchase Plan. The continuation of the share repurchase program began on October 1, 2025 and will end on September 30, 2026.
The repurchases are made in compliance with all SEC rules, including Rule 10b-18, and other legal requirements and may be made in part under Rule 10b5-1 plans, which permits share repurchases when the Company might otherwise be precluded from doing so. Repurchases can be made from time-to-time in the open market or through privately negotiated transactions depending on market and/or other conditions. The repurchase program may be modified, suspended or discontinued at any time and does not obligate the Company to purchase any shares of its common stock.
The following table summarizes the repurchases of our common shares for the three months ended March 31, 2026 .
Total Number of
Shares Repurchased
Maximum Number of
as Part of Publicly
Shares That May Yet Be
Average Price Paid
Announced
Purchased Under
Per Share
Plans or Programs
the Plans or Programs
January 1, 2026 to January 31, 2026
1,453
26.19
818,678
February 1, 2026 to February 28, 2026
22,783
28.25
795,895
March 1, 2026 to March 28, 2026
133,689
28.06
662,206
157,925
28.07
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable
Item 5. Other Information
During the first quarter of 2026, none of our other executive officers or directors adopted Rule 10b5-1 trading plans and none of our directors or executive officers terminated a Rule 10b5-1 trading plan or adopted or terminated a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K).
Item 6. Exhibits
Exhibit No.
Description of Exhibit
2.1
Agreement and Plan of Reorganization, by and among MetroCity Bankshares, Inc., Metro City Bank, First IC Corporation, and First IC Bank, dated as of March 16, 2025 (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed March 17, 2025)
3.1
Restated Articles of Incorporation of MetroCity Bankshares, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1 filed September 4, 2019 (File No. 333-233625))
3.2
Amended and Restated Bylaws of MetroCity Bankshares, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1 filed September 4, 2019 (File No. 333-233625))
31.1
Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
Certification of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Data File - the cover page has been formatted in Inline XBRL and contained within the Inline XBRL Instance Document in Exhibit 101
57
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: May 8, 2026
By:
/s/ Nack Y. Paek
Nack Y. Paek
Chief Executive Officer
/s/ Farid Tan
Farid Tan
President and Interim Chief Financial Officer