MetroCity Bankshares (NASDAQ: MCBS) grows via 2025 First IC acquisition
Rhea-AI Filing Summary
MetroCity Bankshares, Inc., parent of Metro City Bank, reports a growing community banking franchise focused on multi-ethnic markets across eight states. As of December 31, 2025, it had $4.77 billion in total assets, $4.08 billion in loans held for investment and $3.65 billion in deposits, supported by $544.2 million of shareholders’ equity.
During 2025, MetroCity completed the $202.3 million acquisition of First IC Corporation, adding loans, deposits and a sizable SBA portfolio, and issued 3,384,066 shares plus cash to First IC shareholders. The loan book is concentrated in residential real estate and commercial real estate, with construction, commercial and industrial and consumer lending providing additional diversification. The company emphasizes SBA and USDA lending, retains servicing rights on sold loans, and had large third‑party servicing portfolios for government-guaranteed and residential mortgages.
At December 31, 2025, deposits included a high proportion of core relationships and $747.8 million of brokered deposits, with a 2.63% weighted average cost. MetroCity highlights strong human capital metrics, with 317 full-time equivalent employees, most of whom are women and persons of color, and detailed succession, training and benefits programs. Extensive discussion of regulation, capital, liquidity and risk factors underscores sensitivity to interest rates, competition from larger banks and fintechs, inflation and evolving cybersecurity and consumer protection standards.
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Insights
Mid-sized community bank grows via acquisition, with concentrated real estate lending and strong core deposits.
MetroCity Bankshares operates a relationship-focused commercial bank, with
Loan concentration is notable: commercial real estate reached
Funding is anchored by
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Proxy Statement for the 2026 Annual Meeting of Shareholders are incorporated by reference into Part III of this Annual Report on Form 10-K to the extent stated herein. Such Proxy Statement will be filed with the Securities and Exchange Commission within 120 days after the end of the registrant’s fiscal year ended December 31, 2025.
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METROCITY BANKSHARES, INC.
2025 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
| | Page | ||
PART I | ||||
Item 1. | Business | 7 | ||
Item 1A. | Risk Factors | 24 | ||
Item 1B. | Unresolved Staff Comments | 40 | ||
Item 1C. | Cybersecurity | 40 | ||
Item 2. | Properties | 41 | ||
Item 3. | Legal Proceedings | 41 | ||
Item 4. | Mine Safety Disclosures | 41 | ||
PART II | ||||
Item 5. | Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities | 41 | ||
Item 6. | [Reserved] | 43 | ||
Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 43 | ||
Item 7A. | Quantitative and Qualitative Disclosures About Market Risk | 69 | ||
Item 8. | Financial Statements and Supplementary Data | 72 | ||
Item 9. | Changes in Disagreements With Accountants on Accounting and Financial Disclosure | 126 | ||
Item 9A. | Controls and Procedures | 126 | ||
Item 9B. | Other Information | 127 | ||
Item 9C. | Disclosure Regarding Foreign Jurisdictions that Prevents Inspections | 127 | ||
PART III | ||||
Item 10. | Directors, Executive Officers, and Corporate Governance | 127 | ||
Item 11. | Executive Compensation | 127 | ||
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters | 128 | ||
Item 13. | Certain Relationships and Related Transactions, and Director Independence | 128 | ||
Item 14. | Principal Accounting Fees and Services | 128 | ||
PART IV | ||||
Item 15. | Exhibits, Financial Statement Schedules | 128 | ||
Item 16. | Form 10-K Summary | 130 | ||
SIGNATURES | 131 | |||
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K 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,” and “annualized”,” 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 annual report and the following:
| ● | general economic and business conditions in our local markets, including conditions affecting employment levels, interest rates, inflation, the threat of recession, volatile equity capital markets, property and casualty insurance costs, collateral values, customer income, creditworthiness and confidence, spending and savings that may affect customer bankruptcies, defaults, charge-offs and deposit activity; and the impact of the foregoing on customer and client behavior (including the velocity and levels of deposit withdrawals and loan repayment); |
| ● | changes in the interest rate environment (including changes to the federal funds rate and the impact on, the level and composition of deposits (as well as the cost of, and competition for, deposits), loan demand, liquidity and the values of loan collateral, securities and market fluctuations, and interest rate sensitive assets and liabilities), and competition in our markets may result in increased funding costs or reduced earning assets yields, thus reducing our margins and net interest income; |
| ● | uncertainties surrounding geopolitical events, trade policy, taxation policy, and monetary policy which continue to impact the outlook for future economic growth, including U.S. imposition of tariffs and consideration of responsive actions by these nations or the expansion of import fees and tariffs among a larger group of nations, which is bringing greater ambiguity to the outlook for future economic growth |
| ● | adverse developments in the banking industry and the impact of such developments on customer confidence, liquidity and regulatory responses to these developments (including increases in the cost of our deposit insurance assessments and increased regulatory scrutiny), our ability to effectively manage our liquidity risk and any growth plans and the availability of capital and funding; |
| ● | our ability to comply with applicable capital and liquidity requirements, including our ability to generate liquidity internally or raise capital on favorable terms, including continued access to the debt and equity capital markets; |
| ● | the risk that a future economic downturn and contraction could have a material adverse effect on our capital, financial condition, credit quality, results of operations and future growth, including the risk that the strength of the current economic environment could be weakened by the continued impact of elevated or rising interest rates and inflation; |
| ● | factors that can impact the performance of our loan portfolio, including real estate values and liquidity in our primary market areas, the financial health of our borrowers and the success of various projects that we finance; |
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| ● | concentration of our loan portfolio in real estate loans; |
| ● | changes in the prices, values and sales volumes of commercial and residential real estate, especially as they relate to the value of collateral supporting the Company’s loans; |
| ● | weakness in the real estate market, including the secondary residential mortgage market, which can affect, among other things, the value of collateral securing mortgage loans, mortgage loan originations and delinquencies, profits on sales of mortgage loans, and the value of mortgage servicing rights; |
| ● | credit and lending risks associated with our construction and development, commercial real estate, commercial and industrial, residential real estate and Small Business Administration (“SBA”) loan portfolios; |
| ● | negative impact on our mortgage banking services, including declines in our mortgage originations or profitability due to prolonged elevated or rising interest rates and increased competition and regulation, the Bank’s or third party’s failure to satisfy mortgage servicing obligations, loan modifications, the effects of judicial or regulatory requirements or guidance, and the possibility of the Bank being required to repurchase mortgage loans or indemnify buyers; |
| ● | the impact of prolonged elevated interest rates on our financial projections, models and guidance; |
| ● | our ability to attract sufficient loans that meet prudent credit standards; |
| ● | our ability to attract and maintain business banking relationships with well-qualified businesses, real estate developers and investors with proven track records in our market areas; |
| ● | our ability to successfully manage our credit risk and the sufficiency of our allowance for credit losses (“ACL”); |
| ● | the adequacy of our reserves (including ACL) and the appropriateness of our methodology for calculating such reserves; |
| ● | our ability to successfully execute our business strategy to achieve profitable growth; |
| ● | the concentration of our business within our geographic areas of operation and to the general Asian-American population within our primary market areas; |
| ● | our ability to manage our growth; |
| ● | the risks related to the First IC Corporation merger including, without limitation: (i) the diversion of management’s time on issues related to the merger; (ii) unexpected transaction costs, including the costs of integrating operations; (iii) the risks that the businesses will not be integrated successfully or that such integration may be more difficult, time-consuming or costly than expected; (iv) the potential failure to fully or timely realize expected revenues and revenue synergies; (v) the risk of deposit and customer attrition and changes in deposit mix; (vi) unexpected operating and other costs, which may differ or change from expectations; (vii) the risks of customer and employee loss and business disruptions, including, without limitation, as the result of difficulties in maintaining relationships with employees; and (viii) increased competitive pressures and solicitations of customers by competitors, and similar risks associated with any future acquisitions or business combinations; |
| ● | potential delays or other problems in implementing and executing our growth, expansion and acquisition or divestment strategies, including delays in obtaining regulatory or other necessary approvals or the failure to realize any anticipated benefits or synergies from any acquisitions or growth strategies; |
| ● | our ability to increase our operating efficiency; |
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| ● | significant turbulence or a disruption in the capital or financial markets and the effect of a fall in stock market prices on our investment securities; |
| ● | risks that our cost of funding could increase, in the event we are unable to continue to attract stable, low-cost deposits and reduce our cost of deposits; |
| ● | inability of our risk management framework (including internal controls) to effectively mitigate credit risk, interest rate risk, liquidity risk, price risk, compliance risk, operational risk (including by virtue of our relationships with third-party business partners, as well as our relationships with third-party vendors and other service providers), strategic risk, reputational risk and other risks inherent to the business of banking; |
| ● | our ability to maintain expenses in line with current projections; |
| ● | the makeup of our asset mix and investments; |
| ● | external economic, political and/or market factors, such as changes in monetary and fiscal policies and laws, including those that impact the value of the U.S. Dollar in relation to the currencies of other advanced and emerging market countries and the money supply, and also including the interest rate policies of the Federal Reserve, inflation or deflation, changes in the demand for loans, and fluctuations in consumer spending, borrowing and savings habits, which may have an adverse impact on our financial condition; |
| ● | the institution and outcome of litigation and other legal proceedings against us or to which we may become subject to and the potential effect on our reputation; |
| ● | the impact of recent and future legislative and regulatory changes and changes to supervisory examinations and enfocement priorities; |
| ● | the potential implementation of a regulatory reform agenda under the new presidential administration that is significantly different than that of the prior administration, impacting rulemaking, supervision, examination and enforcement priorities of the federal banking agencies; |
| ● | examinations by our regulatory authorities; |
| ● | continued or increasing competition from other financial institutions, credit unions, and non-bank financial services companies (including fintech companies), many of which are subject to different regulations than we are; |
| ● | challenges arising from unsuccessful attempts to expand into new geographic markets, products, or services; |
| ● | restraints on the ability of the Bank to pay dividends to us, which could limit our liquidity; |
| ● | increased capital requirements imposed by banking regulators, which may require us to raise capital at a time when capital is not available on favorable terms or at all; |
| ● | inaccuracies in our assumptions about future events, which could result in material differences between our financial projections and actual financial performance; |
| ● | changes in our management personnel or our inability to retain motivate and hire qualified management personnel; |
| ● | the dependence of our operating model on our ability to attract and retain experienced and talented bankers in each of our markets, which may be impacted as a result of labor shortages; |
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| ● | our ability to identify and address cyber-security risks, fraud and systems errors, including the impact on our reputation and the costs and effects required to address such risks, fraud and systems errors; |
| ● | disruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, our information technology systems, which may be exacerbated by the continued development and implementation of generative artificial intelligence, including risks arising from reliance on third‑party AI tools, model limitations, data integrity issues or regulatory uncertainty, and the cost of defending against them and any reputational or other financial risks following such a cybersecurity incident; |
| ● | our business relationships with, and reliance upon, third parties that have strategic partnerships with us or that provide key components of our business infrastructure, including the costs of services and products provided to us by third parties, and disruptions in service, security breaches, financial difficulties with or other adverse events affecting a third-party vendor or business relationship; |
| ● | an inability to keep pace with the rate of technological advances due to a lack of resources to invest in new technologies; |
| ● | fraudulent and negligent acts by our clients, employees or vendors and our ability to identify and address such acts; |
| ● | risks related to potential acquisitions; |
| ● | the impact of any claims or legal actions to which we may be subject, including any effect on our reputation; |
| ● | compliance with governmental and regulatory requirements, including the Dodd-Frank Act and others relating to banking, consumer protection, securities and tax matters, and our ability to maintain licenses required in connection with commercial mortgage origination, sale and servicing operations; |
| ● | changes in the scope and cost of Federal Deposit Insurance Corporation (“FDIC”) insurance and other coverage; |
| ● | changes in our accounting standards; |
| ● | changes in tariffs and trade barriers; |
| ● | changes in federal tax law or policy; |
| ● | the effects of war or other conflicts, regime change, civil unrest, acts of terrorism, acts of God, natural disasters, health emergencies, epidemics or pandemics, climate changes, or other catastrophic events that may affect general economic conditions or cause other disruptions and/or increase costs, including, but not limited to, property and casualty and other insurance cost; |
| ● | a deterioration of the credit rating for U.S. long-term sovereign debt, actions that the U.S. government may take to avoid exceeding the debt ceiling, and uncertainties surrounding the debt ceiling and the federal budget; |
| ● | the effects of the current U.S. government shutdown, including the impact of prolonged closures or staffing reductions at government agencies effecting our business or our customers; and |
| ● | other risks and factors identified in this Form 10-K under the heading “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section herein. |
The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this Annual Report on Form 10‑K. 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
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forward‑looking statements in this Annual Report on Form 10‑K. 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.
PART I
Item 1. Business
Our Company
MetroCity Bankshares, Inc. (the “Company”), a bank holding company incorporated in 2014 and headquartered in the Atlanta metropolitan area. We primarily operate through our wholly-owned banking subsidiary, Metro City Bank, a Georgia state-chartered commercial bank that was founded in 2006 (the “Bank”). We currently operate 29 full-service branch locations in multi-ethnic communities in Alabama, California, Florida, Georgia, New York, New Jersey, Texas and Virginia. As of December 31, 2025, we had total assets of $4.77 billion, total loans held for investment of $4.08 billion, total deposits of $3.65 billion and total shareholders’ equity of $544.2 million.
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, including many customers in diverse and multi-ethnic communities in growing metropolitan markets in the Eastern U.S., Texas and California. We offer a suite of loan and deposit products tailored to meet the needs of the businesses of our customers. 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.
We have successfully grown our franchise since our founding primarily through de novo branch openings in vibrant, diverse markets where we feel our banking products and services will be well-received, as well as our recent acquisition of First IC Corporation. We have a proven track record of opening these new branches in a disciplined, cost efficient manner, without compromising the quality of our customer service or our profitability. Our consistent expansion efforts have given us the know-how and expertise to lower the cost of opening and operating de novo branches, allowing each of these branches to quickly become profitable.
We believe that our culturally familiar approach to banking, our tailored lending products, our branch network located in attractive multi-ethnic communities, and our highly replicable growth model have laid the foundation for achieving sustainable, profitable growth.
Our common stock is listed on the Nasdaq Global Select Market under the symbol “MCBS”.
Acquisition of First IC Corporation and First IC Bank
After the close of business on December 1, 2025, the Company completed the acquisition of First IC Corporation. (“First IC”), a Georgia corporation and the parent company of First IC Bank. Under the terms of the Agreement and Plan of Reorganization, dated as of March 16, 2025 (“Reorganization Agreement”), for each share of First IC common stock, First IC shareholders had the right to receive 0.3729 shares of the Company's common stock and $12.00 in cash, with cash also paid in lieu of fractional shares. Total consideration was approximately $202.3 million and consisted of $90.5 million of equity (3,384,066 shares) in the form of the Company’s 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 shareholders 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 the acquisition will provide more expansive products to its customers, as well as benefit from increased operating synergies, improving the long-term operating and financial results of the Company.
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Our Markets
We are located primarily in the Atlanta metropolitan area with our headquarters in Doraville, Georgia. Our 29 full-service branch locations in Alabama, California Florida, Georgia, New York, New Jersey, Texas and Virginia are located in growing multi-ethnic communities. Additionally, we continue to monitor attractive markets where we would consider expanding our presence.
Lending Activities
We maintain a diversified loan portfolio based on the type of customer (i.e., businesses compared to individuals), type of loan product (e.g., construction and development loans, commercial real estate loans (both owner occupied and non-owner occupied), commercial and industrial loans, residential mortgage loans, SBA loans, etc.), geographic location and industries in which our business customers are engaged (e.g., retail, hospitality, etc.). We principally focus our lending activities on loans that we originate from borrowers located in our market areas. We seek to be the premier provider of lending products to the small to medium-sized businesses and individual borrowers in the communities that we serve. Lending activities primarily originate from the relationships and efforts of our bankers, with an emphasis on providing banking solutions tailored to meet our customers’ needs while maintaining our underwriting standards.
The sections below discuss our general loan categories. As of December 31, 2025 and 2024 our loan portfolio held for investment consisted of the following:
December 31, 2025 | December 31, 2024 |
| |||||||||
(Dollars in thousands) | | Amount | | % of Total | | Amount | | % of Total |
| ||
Construction and Development | $ | 41,796 |
| 1.0 | % | $ | 21,569 |
| 0.7 | % | |
Commercial Real Estate |
| 1,560,728 |
| 38.3 |
| 762,033 |
| 24.1 | |||
Commercial and Industrial |
| 96,360 |
| 2.4 |
| 78,220 |
| 2.5 | |||
Residential Real Estate |
| 2,378,311 |
| 58.3 |
| 2,303,234 |
| 72.7 | |||
Consumer and other |
| 627 |
| — |
| 260 |
| — | |||
Gross loans | $ | 4,077,822 |
| 100.0 | $ | 3,165,316 |
| 100.0 | |||
Less unearned income | (6,621) | (7,381) | |||||||||
Less loan discounts |
| (19,804) |
| |
| — |
| | |||
Total loans held for investment | $ | 4,051,397 |
| | $ | 3,157,935 |
| | |||
Construction and Development Loans. Our construction and development loans are comprised of commercial construction and land acquisition and development construction loans. As of December 31, 2025, the outstanding balance of our construction and development loans was $41.8 million, or 1.0%, of our total loan portfolio held for investment, compared to $21.6 million, or 0.7%, of our total loan portfolio held for investment at December 31, 2024. As of December 31, 2025, $19.9 million, or 47.5%, of construction and development loans were for the construction of hotels; $9.6 million, or 23.0%, were for the construction of office buildings and commercial rental properties; $3.4 million, or 8.2%, were for the construction of physician’s offices and nursing homes; $2.6 million, or 6.3%, were for the construction of car washes; $2.2 million, or 5.1%, were for the construction of gas stations; and the remaining $4.1 million, or 9.9%, were loans distributed amongst various industries and sectors.
Interest reserves are generally established on real estate construction loans. These loans typically carry a fixed interest rate and have maturities of less than 18 months. Our loan-to-value, or LTV, policy limit for our construction and development loans is 65%. The risks inherent in construction lending may adversely affect our results of operations. Such risks include, among other things, the possibility that contractors may fail to complete, or complete on a timely basis, construction of the relevant properties; substantial cost overruns in excess of original estimates and financing; market deterioration during construction; and lack of permanent take-out financing. Loans secured by such properties also involve additional risk because they have no operating history. Advances on construction loans are made relative to the overall percentage of completion on the project in an effort to remain adequately secured.
We had no construction and development loans that were classified as nonaccrual as of December 31, 2025 and 2024.
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Commercial Real Estate Loans. We offer commercial real estate loans collateralized by real estate, which may be owner occupied or non-owner occupied real estate. Commercial real estate loans made up $1.56 billion, or 38.3%, of our total loan portfolio held for investment at December 31, 2025, compared to $762.0 million, or 24.1%, of our total loan portfolio held for investment as of December 31, 2024. This increase was mainly due to the $719.1 million of commercial real estate loans acquired from First IC coupled with organic growth of $79.6 million of newly originated and renewed legacy commercial real estate loans. As of December 31, 2025, $769.6 million, or 49.3%, of our commercial real estate loans were secured by owner occupied properties and the remaining $791.2 million, or 50.7%, of loans in this category were secured by non-owner occupied properties. Within our commercial real estate loans, $600.3 million, or 38.5%, were to hotels (attributable to 78.0% of non-owner occupied properties); $199.2 million, or 12.8%, were made to wholesalers or retailers; $197.4 million, or 12.6%, were to commercial rental properties; $118.3, or 7.6%, were to gas stations and convenience stores; $86.3 million, or 5.5%, were to car washes; $49.5 million, or 3.2%, were to restaurants; $26.9 million, or 1.7%, were to general service business; and the remaining $282.8 million, or 18.1%, were distributed amongst various sectors and industries.
Commercial real estate lending typically involves higher loan principal amounts relative to our other lending products, and the repayment is dependent, in large part, on sufficient cash flow from the properties securing the loans. We believe our management team and board of directors has put in place comprehensive and robust underwriting guidelines, and takes a conservative approach to commercial real estate lending, focusing on what we believe to be high quality credits with low LTV ratios and income-producing properties with strong cash flow characteristics, and strong collateral profiles.
We require our commercial real estate loans to be secured by what we believe to be well-managed property with adequate margins and we generally obtain a personal guarantee from responsible parties. Our commercial real estate loans are secured by a wide variety of property types, such as retail operations, hospitality, specialty service operations and warehouses for wholesale distribution. We originate both fixed-rate and adjustable-rate loans with terms up to 25 years. All loans have provisions which allow us to call the loan after three to five years. Adjustable-rate loans are generally based on the Wall Street Journal Prime Rate (“WSJPR”) or the Secured Overnight Financing Rate (“SOFR”), and as of December 31, 2025, most of our loans were based on WSJPR. At December 31, 2025, approximately 21.6% of the commercial real estate loan portfolio consisted of fixed rate loans. Our conventional commercial real estate loans, or non-SBA guaranteed commercial real estate loans, carried a weighted average maturity of 5.16 years as of December 31, 2025. Non-SBA commercial real estate loan amounts generally do not exceed 65% of the lesser of the appraised value or the purchase price depending on the property appraisals we utilize. Our LTV policy limits are 85% for commercial real estate loans.
The total balance of commercial real estate loans on nonaccrual status was $14.8 million and $3.3 million as of December 31, 2025 and 2024, respectively. Included in the increase from December 31, 2024 to December 31, 2025 were nonaccrual commercial real estate loans of $6.5 million acquired from First IC.
Commercial and Industrial Loans. We provide a mix of variable and fixed rate commercial and industrial loans. Commercial and industrial loans represented $96.4 million, or 2.4%, of our total loan portfolio held for investment as of December 31, 2025, compared to $78.2 million, or 2.5%, of our total loan portfolio held for investment at December 31, 2024. This increase was mainly due to the $22.8 million of commercial and industrial loans acquired from First IC. As of December 31, 2025, $27.1 million, or 28.1%, of our commercial and industrial loans were extended to businesses in financial services; $14.1 million, or 14.6%, were made to restaurants, $11.8 million, or 12.2%, were made to medical and other health services; $8.3 million, or 8.6%, were loans extended to wholesalers or retailers; $5.5 million, or 5.7%, were loans made to supermarkets and other groceries; and the remaining $29.6 million, or 30.8%, of loans were distributed across various industries and sectors. We had approximately $1.3 million and $526,000 of commercial and industrial loans on nonaccrual status as of December 31, 2025 and 2024, respectively.
Our commercial and industrial loans are typically made to small and medium-sized businesses for working capital needs, business expansions and for trade financing. We extend commercial business loans on an unsecured and secured basis advanced for working capital, accounts receivable and inventory financing, machinery and equipment purchases, and other business purposes. Generally, short-term loans have maturities ranging from six months to one year, and “term loans” have maturities ranging from five to ten years. Loans are generally intended to finance current transactions and typically provide for periodic principal payments, with interest payable monthly. Term loans generally provide for floating interest rates, with monthly payments of both principal and interest. Repayment of secured and unsecured commercial loans
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depends substantially on the borrower’s underlying business, financial condition and cash flows, as well as the sufficiency of the collateral. Compared to real estate, the collateral may be more difficult to monitor, evaluate and sell. When the borrower is a corporation, partnership or other entity, we typically require personal guarantees from significant equity holders. Our LTV policy limits on commercial and industrial loans range from a maximum LTV of 75% when secured by new machinery and equipment down to 5% when only secured by leasehold improvements.
We also provide trade finance-related services to our customers such as domestic and international letters of credit, international collection (documents against acceptance and documents against payment) and export advice. We issue standby letters of credit on behalf of our customers to facilitate trade and other financial guarantees. All trade finance related services are denominated in U.S. currency and all facilities are fully collateralized with no foreign exchange or credit exposure.
In general, commercial and industrial loans may involve increased credit risk and, therefore, typically yield a higher return. The increased risk in commercial and industrial loans derives from the expectation that such loans generally are serviced principally from the operations of the business, and those operations may not be successful. Any interruption or discontinuance of operating cash flows from the business, which may be influenced by events not under the control of the borrower such as economic events and changes in governmental regulations, including tariffs, could materially affect the ability of the borrower to repay the loan. In addition, the collateral securing commercial and industrial loans generally includes moveable property such as equipment and inventory, which may decline in value more rapidly than we anticipate exposing us to increased credit risk. As a result of these additional complexities, variables and risks, commercial and industrial loans require extensive monitoring and servicing.
SBA Loans. A significant portion of our commercial real estate portfolio consists of SBA and USDA loans. Our SBA loans are typically made to retail businesses including, car wash stations, grocery stores, poultry farms, warehouses, convenience stores, hospitality and service businesses, car dealers, beauty supplies, restaurants, and beer, wine, and liquor stores for acquisition of business properties, working capital needs and business expansions. Our SBA loans are typically secured by commercial real estate and can have any maturity up to 25 years. Depending on the loan amount, each loan is typically guaranteed 75% by the SBA, with a maximum gross loan amount to any one small business borrower of $5 million and a maximum SBA guaranteed amount of $3.75 million.
As of December 31, 2025, our commercial real estate SBA and USDA portfolio, net of any sold portions, totaled $439.8 million. This represents an increase of $191.2 million, or 76.9%, when compared to the December 31, 2024 balance of $248.6 million. This large increase is mainly due to the SBA loan portfolio acquired from First IC. Of the balance outstanding at December 31, 2025, $190.6 million, or 43.3%, of the loans in this portfolio carried an SBA guarantee while the remaining $249.1 million, or 56.7%, of the portfolio not guaranteed.
In addition, as part of our commercial and industrial loan product offering, we originate SBA loans to provide working capital and to finance inventory, equipment and machinery purchases and acquisitions. As of December 31, 2025 and 2024, the outstanding balance of our commercial and industrial SBA loans was $42.4 million and $28.5 million respectively. Of the balance outstanding as of December 31, 2025, $20.8 million, or 49.0%, of our commercial and industrial SBA portfolio carried a guarantee from the SBA while the remaining $21.6 million, or 51.0%, of the portfolio was unguaranteed. We are willing to maintain higher LTVs on our SBA portfolio than the remainder of our commercial loans because the effect of the SBA guarantee is to lower overall risk.
We retain the servicing rights on the sold portions of the SBA and USDA loans we originate. As of December 31, 2025, we serviced $685.5 million in SBA/USDA loans for others, an increase of $205.8 million, or 42.9%, when compared to December 31, 2024. This large increase to our servicing portfolio is attributable to the $239.8 million of SBA loans serviced for others acquired from First IC. We recognized servicing income on SBA loans of $3.6 million, $4.2 million, and $4.8 million for the years ended December 31, 2025, 2024 and 2023, respectively.
Residential Real Estate Loans. We originate mainly non-conforming residential mortgage loans through our branch network. During 2025, our primary loan products offered were a three-year, five-year and ten-year hybrid adjustable rate mortgages which reprice annually after the initial term based on the weekly average of the one year constant maturity treasury (CMT) plus a fixed spread, as well as 15-year and 30-year fixed rate products. Loans collateralized by single-
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family residential real estate generally are originated in amounts of no more than 70% of appraised value. In connection with such loans, we retain a valid first lien on real estate, obtain a title insurance policy that insures that the property is free from material encumbrances and require hazard insurance. Loan fees, interest rates and other provisions of mortgage loans are determined by us on the basis of our own pricing criteria and competitive market conditions.
We take a comprehensive and conservative approach to our mortgage underwriting, allowing a maximum LTV ratio of 70%. As of December 31, 2025, we had $2.38 billion of residential real estate loans, representing 58.3% of our total loan portfolio held for investment compared to $2.30 billion, or 72.7%, of our total loan portfolio held for investment at December 31, 2024. Included in the $2.38 billion total loans held for investment balance as of December 31, 2025 were $265.4 million of residential real estate loans acquire from First IC, offset by the $310.2 million of residential real estate loans sold to investors during the year. We had no residential mortgage loans held for sale as of December 31, 2025 and 2024. Nonaccrual residential mortgage loans were $9.1 million and $14.2 million at December 31, 2025 and 2024, respectively.
On occasion, we sell a portion of our non-conforming residential mortgage loans to third party investors. The loans are sold with no representation or warranties if the loan is paid off early. During 2025, we originated $464.6 million of non-conforming residential mortgage loans and sold $310.2 million residential mortgage loans to investors during this period. During 2024, we originated $413.7 million of non-conforming residential mortgage loans and sold $187.5 million residential mortgage loans to investors during this period. Residential mortgage loans held for sale are sold with the servicing rights retained by the Bank. As of December 31, 2025, the amount of residential mortgage loans serviced for others rose to $702.6 million representing an increase of $175.5 million, or 33.3%, when compared to December 31, 2024. We recognized servicing income on residential mortgage loans of $2.4 million, $2.4 million and $193,000 (expense balance) for the years ended December 31, 2025, 2024 and 2023, respectively. The servicing income recognized is net of amortization of our mortgage servicing rights which caused the expense balance for the year ended December 31, 2023.
Consumer and Other Loans. These loans represent a very small portion of our overall portfolio and primarily consists of overdrafts and consumer lines of credit. Consumer loans carry a greater amount of risk and collections are dependent on the borrower’s continuing financial stability and thus are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy. Furthermore, the application of various federal and state laws may limit the amount which can be recovered on such loans.
Other Products and Services
We offer banking products and services that are competitively priced with a focus on convenience and accessibility. We offer a full suite of online banking solutions including access to account balances, online transfers, online bill payment and electronic delivery of customer statements, mobile banking solutions for iPhone and Android phones, including remote check deposit with mobile bill pay. We offer ATMs and banking by telephone, mail and personal appointment. We offer debit cards with no ATM surcharges or foreign ATM fees for checking customers, direct deposit, cashier’s checks, as well as treasury management services, wire transfer services and automated clearing house (“ACH”) services.
We offer a full array of commercial treasury management services designed to be competitive with banks of all sizes. Treasury management services include balance reporting (including current day and previous day activity), transfers between accounts, wire transfer initiation, ACH origination and stop payments. Cash management deposit products consist of remote deposit capture, positive pay, zero balance accounts and sweep accounts.
We evaluate our services on an ongoing basis, and will add or remove services based upon the perceived needs and financial requirements of our customers, competitive factors and our financial and other capabilities. Future services may also be significantly influenced by improvements and developments in technology and evolving state and federal laws and regulations.
Securities
We manage our securities portfolio to balance the market and credit risks of our other assets and the Bank’s liability structure, with a secondary focus of profitably deploying funds which are not needed to fulfill current loan demand, deposit
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redemptions or other liquidity purposes. Our investment portfolio is comprised primarily of U.S. government agency securities, mortgage-backed securities backed by government-sponsored entities, and taxable and tax exempt municipal securities. We also have equity securities that consist of our investment in a 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.
Our investment policy is reviewed annually by our board of directors. Overall investment goals are established by our board of directors and members of our Asset-Liability Committee (“ALCO”). Day-to-day activities pertaining to the securities portfolio are conducted under the supervision of our Chief Executive Officer. During its quarterly ALCO meetings, the committee reviews the Bank’s investment portfolio for any significant changes or risks. We actively monitor our investments on an ongoing basis to identify any material changes in the securities. We also review our securities for potential other-than-temporary impairment at least quarterly.
Deposits
We offer traditional depository products, including checking, savings, money market and certificates of deposits, to individuals, businesses and other entities through our branch network throughout our market areas. Deposits at the Bank are insured by the FDIC up to statutory limits. Our ability to gather deposits, particularly core deposits, is an important aspect of our business and we believe core deposits are a significant driver of value as a cost efficient and stable source of funding to support our growth. As of December 31, 2025, we had $3.65 billion of total deposits with a total weighted average deposit cost of 2.63%. Of our total deposits as of December 31, 2025, $911.0 million, or 25.0%, of total deposits were held in demand deposit accounts.
As a bank focusing on successful businesses and their owners, many of our depositors choose to leave large deposits with us. We consider a deposit relationship to be core by considering the following factors: (i) relationships with us (as a director or shareholder); (ii) deposits within our market area; (iii) additional non-deposit services with us; (iv) electronic banking services with us; (v) active demand deposit account with us; (vi) loans; and (vii) longevity of the relationship with us. We calculate core deposits by adding demand and savings deposits plus time deposits less than $250,000 plus deposits that are over $250,000, if such depositors meet the relationship criteria listed above. As many of our customers have more than $250,000 on deposit with us, we believe that using this method reflects a more accurate assessment of our deposit base. As of December 31, 2025, 75.2%, or $2.74 billion, of our deposits were considered core deposits.
While we are focused on growing our low-cost deposits, we also utilize 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. 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 funding is needed to support strong loan demand or when they are less costly than issuing internet certificates of deposit or borrowing from the Federal Home Loan Bank. As of December 31, 2025, we had brokered deposits of $747.8 million compared to $721.8 million of brokered deposits at December 31, 2024. All of our brokered deposits have interest rates tied to the Federal Funds Effective rate.
We use interest rate swap and cap agreements to hedge our deposit accounts that are indexed to the Federal Funds Effective rate (includes all of our brokered deposits). These swap agreements are designated as cash flow hedges. As of December 31, 2025, the total amount of deposits tied to the Federal Funds Effective rate was $1.07 billion. See Note 11 of our consolidated financial statements as of December 31, 2025, included elsewhere in this Annual Report on Form 10-K, for additional information.
As of December 31, 2025, our fifteen largest depositor relationships, excluding brokered deposits, totaled $475.2 million, or 13.0%, of total deposits. Our deposits with directors and affiliated entities totaled $16.2 million for the same period.
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Competition
We operate in a highly competitive market. Competitors include other banks, credit unions, mortgage companies, personal and commercial financing companies, investment brokerage and advisory firms, mutual fund companies and insurance companies. Competitors range in both size and geographic footprint. We operate throughout Georgia and the Southeast, as well as New York, New Jersey, California, Texas, and Virginia. The Bank's competition includes not only other banks of comparable or larger size in the same markets, but also various other nonbank financial institutions, including savings and loan associations, credit unions, mortgage companies, personal and commercial financial companies, peer to peer lending businesses, fintech companies, investment brokerage and financial advisory firms and mutual fund companies. The Bank competes for deposits, commercial, fiduciary and investment services and various types of loans and other financial services. The Bank also competes for interest-bearing funds with a number of other financial intermediaries, including brokerage and insurance firms, as well as investment alternatives, including mutual funds, governmental and corporate bonds, and other securities. Continued consolidation and rapid technological changes within the financial services industry will likely change the nature and intensity of competition, but also will create opportunities for the Company to demonstrate and leverage its competitive advantages. The continuing consolidation within the financial services industry is leading to larger, better capitalized and geographically diverse institutions with enhanced product and technology capabilities. Additionally, competition from fintechs is increasing. In addition to fintechs, certain technology companies are working to provide financial services directly to their customers. These nontraditional financial service providers have been successful in developing digital and other products and services that effectively compete with traditional banking services, but are in some cases subject to fewer regulatory restrictions than banks and bank holding companies, allowing them to operate with greater flexibility and lower cost structures. Although digital products and services have been important competitive features of financial institutions for some time, the COVID-19 pandemic accelerated the move toward digital financial services products and we expect that trend to continue.
Competitors include not only financial institutions based in Georgia, but also a number of large out-of-state and foreign banks, bank holding companies and other financial institutions that have an established market presence in Georgia or that offer internet-based products. Many of the Company's competitors are engaged in local, regional, national and international operations and have greater assets, personnel and other resources. Some of these competitors are subject to less regulation and/or more favorable tax treatment. Many of these institutions have greater resources, broader geographic markets and higher lending limits, and may offer services that the Company does not offer. In addition, these institutions may be able to better afford and make broader use of media advertising, support services, and electronic and other technology. To offset these potential competitive disadvantages, the Company depends on its reputation for superior service, ability to make credit and other business decisions quickly, and the delivery of an integrated distribution of traditional branches and bankers, with digital technology.
Liquidity
Our deposit base consists primarily of business accounts and deposits from the principals of such businesses. As a result, we have many depositors with balances over $250,000. We manage liquidity based upon factors that include the amount of core deposit relationships as a percentage of total deposits, net loans to total deposits, the level of diversification of our funding sources, the allocation and amount of our deposits among deposit types, the short-term funding sources used to fund assets, the amount of non-deposit funding used to fund assets such as fed funds and account receivables, the availability of unused funding sources, off-balance sheet obligations, the availability of assets to be readily converted into cash without undue loss, the amount of cash and liquid securities we hold, and the re-pricing characteristics and maturities of our assets when compared to the re-pricing characteristics of our liabilities and other factors.
We evaluate our net loans to total assets and net loans (excluding loans held for sale) to total deposit ratios as a method to monitor our liquidity position. Our board of directors has limited our net loans to a maximum of 90% of total Bank assets and our net loans to a maximum of 125% of total Bank deposits. As of December 31, 2025, our net loans were 84.4% of total assets and net loans were 110.4% of total deposits. As of December 31, 2024, our net loans were 87.3% of total assets and net loans were 114.7% of total deposits. We were in compliance with both limits for each period presented.
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Human Capital Resources
We recognize that our most valuable asset is our people. One of our top strategic priorities is the retention and development of our talent. This includes providing career development opportunities for all associates; increasing our inclusivity and recognizing that diverse perspectives, backgrounds, and experiences strengthen our ability to meet the needs of our associates, communities, clients and shareholders; training our next generation of leaders; and succession planning.
As of December 31, 2025, we had approximately 317 full-time equivalent employees. None of our employees are represented by any collective bargaining unit or is a party to a collective bargaining agreement. We consider our relationship with our employees to be good and have not experienced interruptions of operations due to labor disagreements.
Of the 317 full-time equivalent employees as of December 31, 2025, 80.8% identify as a female and 95.0% are persons of color. Included in the 317 full-time equivalent employees are 71 employees who have management roles. Of these 71 management roles, 64.8% of the managers identify as a female and 88.7% are persons of color. All of our employees are chosen on the basis of their qualifications and merit.
Talent Acquisition, Development, and Retention
Our culture emphasizes our longstanding dedication to being respectful to others and having a workforce that is representative of the communities we serve. Our future success depends on our ability to attract, retain and develop employees. Our talent acquisition teams partner with hiring managers in sourcing and presenting a diverse slate of qualified candidates to strengthen our organization. Professional development is a key priority, which is facilitated through our many corporate development initiatives including training programs, corporate mentoring, and educational reimbursement. Our talent acquisition, development and retention focus was on rewarding merit and achievement while nurturing and progressing skilled talent across various business segments.
Our board of directors recognizes the importance of succession planning for our chief executive officer and other key executives. The board of directors annually reviews our succession plans for senior leadership roles, with the goal of ensuring we will continue to have the right leadership talent in place to execute the organization's long-term strategic plans.
Health and Welfare
As part of our effort to attract and retain employees, we offer a broad range of benefits, including health, dental and vision insurance, life and disability insurance, cell phone reimbursement, educational tuition reimbursement, 401(k) retirement plan, and generous paid time off. We believe our compensation package and benefits are competitive with others in our industry.
Corporate Information
Our principal executive offices are located at 5114 Buford Highway, Doraville, Georgia 30340, and our telephone number at that address is (770) 455-4989. Our website address is www.metrocitybank.bank. The information contained on or accessible from our website does not constitute a part of this Annual Report on Form 10-K and is not incorporated by reference herein.
Public Information
Persons interested in obtaining information on the Company may read and copy any materials that we file with the U.S. Securities and Exchange Commission ("SEC"). The Commission maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov. We make available, free of charge, on or through our website, https://www.metrocitybank.bank/investor-relations/sec-filings, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K,
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and other filings pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and amendments to such filings, as soon as reasonably practicable after each is electronically filed with, or furnished to, the SEC.
Also available on the Company's website are its Code of Business Conduct and Ethics, the charter of each active committee of the Board of Directors, and other materials outlining the Company's corporate governance practices.
Regulation and Supervision
General
We are extensively regulated under federal and state law. The following is a brief summary that does not purport to be a complete description of all regulations that affect us or all aspects of those regulations. This discussion is qualified in its entirety by reference to the particular statutory and regulatory provisions described below and is not intended to be an exhaustive description of the statutes or regulations applicable to the Company’s and the Bank’s business. In addition, proposals to change the laws and regulations governing the banking industry are frequently raised at both the state and federal levels. The likelihood and timing of any changes in these laws and regulations, and the impact such changes may have on us and the Bank, are difficult to predict. In addition, bank regulatory agencies may issue enforcement actions, policy statements, interpretive letters and similar written guidance applicable to us or the Bank. Changes in applicable laws, regulations or regulatory guidance, or their interpretation by regulatory agencies or courts may have a material adverse effect on our and the Bank’s business, operations, and earnings. Supervision and regulation of banks, their holding companies and affiliates is intended primarily for the protection of depositors and customers, the Deposit Insurance Fund (“DIF”) of the Federal Deposit Insurance Corporation (“FDIC”), and the U.S. banking and financial system rather than holders of our capital stock.
Regulation of the Company
We are registered as a bank holding company with the Federal Reserve under the Bank Holding Company Act of 1956, as amended (the “BHC Act”). As such, we are subject to comprehensive supervision and regulation by the Federal Reserve and are subject to its regulatory reporting requirements. Federal law subjects bank holding companies, such as the Company, to particular restrictions on the types of activities in which they may engage, and to a range of supervisory requirements and activities, including regulatory enforcement actions for violations of laws and regulations. Violations of laws and regulations, or other unsafe and unsound practices, may result in regulatory agencies imposing fines or penalties, cease and desist orders, or taking other enforcement actions. Under certain circumstances, these agencies may enforce these remedies directly against officers, directors, employees and other parties participating in the affairs of a bank or bank holding company.
Activity Limitations. Bank holding companies are generally restricted to engaging in the business of banking, managing or controlling banks and certain other activities determined by the Federal Reserve to be closely related to banking. In addition, the Federal Reserve has the power to order a bank holding company or its subsidiaries to terminate any nonbanking activity or terminate its ownership or control of any nonbank subsidiary, when it has reasonable cause to believe that continuation of such activity or such ownership or control constitutes a serious risk to the financial safety, soundness, or stability of any bank subsidiary of that bank holding company.
Source of Strength Obligations. A bank holding company is required to act as a source of financial and managerial strength to its subsidiary bank and to maintain resources adequate to support its bank. The term “source of financial strength” means the ability of a company, such as us, that directly or indirectly owns or controls an insured depository institution, such as the Bank, to provide financial assistance to such insured depository institution in the event of financial distress. The appropriate federal banking agency for the depository institution (in the case of the Bank, this agency is the FDIC) may require reports from us to assess our ability to serve as a source of strength and to enforce compliance with the source of strength requirements by requiring us to provide financial assistance to the Bank in the event of financial distress. If we were to enter bankruptcy or become subject to the orderly liquidation process established by the Dodd-Frank Act, any commitment by us to a federal bank regulatory agency to maintain the capital of the Bank would be assumed by the bankruptcy trustee or the FDIC, as appropriate, and entitled to a priority of payment.
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Acquisitions. The BHC Act permits acquisitions of banks by bank holding companies, such that we and any other bank holding company, whether located in Georgia or elsewhere, may acquire a bank located in any other state, subject to certain deposit-percentage, age of bank charter requirements, and other restrictions. The BHC Act requires that a bank holding company obtain the prior approval of the Federal Reserve before (i) acquiring direct or indirect ownership or control of more than 5% of the voting shares of any additional bank or bank holding company, (ii) taking any action that causes an additional bank or bank holding company to become a subsidiary of the bank holding company, or (iii) merging or consolidating with any other bank holding company. The Federal Reserve may not approve any such transaction that would result in a monopoly or would be in furtherance of any combination or conspiracy to monopolize or attempt to monopolize the business of banking in any section of the United States, or the effect of which may be substantially to lessen competition or to tend to create a monopoly in any section of the country, or that in any other manner would be in restraint of trade, unless the anticompetitive effects of the proposed transaction are clearly outweighed by the public interest in meeting the convenience and needs of the community to be served. The Federal Reserve is also required to consider: (1) the financial and managerial resources of the companies involved, including pro forma capital ratios; (2) the risk to the stability of the United States banking or financial system; (3) the convenience and needs of the communities to be served, including performance under the Community Reinvestment Act, further described below; and (4) the effectiveness of the companies in combatting money laundering.
Change in Control. Federal law restricts the amount of voting stock of a bank holding company or a bank that a person may acquire without the prior approval of banking regulators. Under the Change in Bank Control Act and the regulations thereunder, a person or group must give advance notice to the Federal Reserve before acquiring control of any bank holding company, such as the Company, and the FDIC before acquiring control of the Bank. Upon receipt of such notice, the bank regulatory agencies may approve or disapprove the acquisition. The Change in Bank Control Act creates a rebuttable presumption of control if a person or group acquires the power to vote 10% or more of our outstanding common stock. The overall effect of such laws is to make it more difficult to acquire a bank holding company and a bank by tender offer or similar means than it might be to acquire control of another type of corporation. Consequently, shareholders of the Company may be less likely to benefit from the rapid increases in stock prices that may result from tender offers or similar efforts to acquire control of other companies. Investors should be aware of these requirements when acquiring shares of our stock.
Sarbanes-Oxley Act of 2002. As a public company that files periodic reports with the SEC, under the Exchange Act, the Company is subject to the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”), which addresses, among other issues, corporate governance, auditing and accounting, executive compensation and enhanced and timely disclosure of corporate information. The Sarbanes-Oxley Act represents significant federal involvement in matters traditionally left to state regulatory systems, such as the regulation of the accounting profession, and to state corporate law, such as the relationship between a board of directors and management and between a board of directors and its committees. Our policies and procedures are designed to comply with the requirements of the Sarbanes-Oxley Act.
Incentive Compensation. The Dodd-Frank Act required the banking agencies and the SEC to establish joint rules or guidelines for financial institutions with more than $1.0 billion in assets, such as us and the Bank, which prohibit incentive compensation arrangements that the agencies determine to encourage inappropriate risks by the institution. The federal banking agencies issued proposed rules in 2011 and previously issued guidance on sound incentive compensation policies. In 2016, the federal banking agencies also proposed rules that would, depending upon the assets of the institution, directly regulate incentive compensation arrangements and would require enhanced oversight and recordkeeping. As of December 31, 2025, these rules have not been implemented, although the SEC did adopt final rules implementing the clawback provisions of the Dodd-Frank Act in 2022. We and the Bank have undertaken efforts to ensure that our incentive compensation plans do not encourage inappropriate risks, consistent with three key principles - that incentive compensation arrangements should appropriately balance risk and financial rewards, be compatible with effective controls and risk management, and be supported by strong corporate governance.
Shareholder Say-On-Pay Votes. The Dodd-Frank Act requires public companies to take shareholders’ votes on proposals addressing compensation (known as say-on-pay), the frequency of a say-on-pay vote, and the golden parachutes available to executives in connection with change-in-control transactions. Public companies must give shareholders the opportunity to vote on the compensation at least every three years and the opportunity to vote on frequency at least every six years, indicating whether the say-on-pay vote should be held annually, biennially, or triennially. The say-on-pay, the
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say-on-parachute and the say-on-frequency votes are explicitly nonbinding and cannot override a decision of our board of directors.
Other Regulatory Matters. We and our subsidiaries are subject to oversight by the SEC, the Financial Industry Regulatory Authority (“FINRA”), the PCAOB, the Nasdaq Stock Market and various state securities regulators. We and our subsidiaries have from time to time received requests for information from regulatory authorities in various states, including state attorneys general, securities regulators and other regulatory authorities, concerning our business practices. Such requests are considered incidental to the normal conduct of business.
Capital Requirements
The Company and the Bank are each 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 in assessing an institution’s overall capital adequacy. The following is a brief description of the relevant provisions of these capital rules and their potential impact on our capital levels.
The Company and the Bank are subject to the following risk-based capital ratios: a common equity Tier 1 (“CET1”) risk-based capital ratio, a Tier 1 risk-based capital ratio, which includes CET1 and additional Tier 1 capital, and a total risk-based capital ratio, which includes Tier 1 and Tier 2 capital. CET1 is primarily comprised of the sum of common stock instruments and related surplus net of treasury stock, plus retained earnings, and certain qualifying minority interests, less certain adjustments and deductions, including with respect to goodwill, intangible assets, mortgage servicing assets and deferred tax assets subject to temporary timing differences. Additional Tier 1 capital is primarily comprised of noncumulative perpetual preferred stock, tier 1 minority interests and grandfathered trust preferred securities. Tier 2 capital consists of instruments disqualified from Tier 1 capital, including qualifying subordinated debt, other preferred stock and certain hybrid capital instruments, and a limited amount of loan loss reserves up to a maximum of 1.25% of risk-weighted assets, subject to certain eligibility criteria. The capital rules also define the risk-weights assigned to assets and off-balance sheet items to determine the risk-weighted asset components of the risk-based capital rules, including, for example, certain “high volatility” commercial real estate, past due assets, structured securities and equity holdings.
The leverage capital ratio, which serves as a minimum capital standard, is the ratio of Tier 1 capital to quarterly average total consolidated assets net of goodwill, certain other intangible assets, and certain required deduction items. The required minimum leverage ratio for all banks is 4%.
In addition, as of January 1, 2019, the capital rules require a capital conservation buffer of 2.5%, constituted of CET1, above each of the minimum risk-based capital ratio requirements (CET1, Tier 1, and total risk-based capital), which is designed to absorb losses during periods of economic stress. These buffer requirements must be met for a bank or bank holding company to be able to pay dividends, engage in share buybacks or make discretionary bonus payments to executive management without restriction.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”), among other things, requires the federal bank regulatory agencies to take “prompt corrective action” regarding depository institutions that do not meet minimum capital requirements. FDICIA establishes five regulatory capital tiers: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized.” A depository institution’s capital tier will depend upon how its capital levels compare to various relevant capital measures and certain other factors, as established by regulation. FDICIA generally prohibits a depository institution from making any capital distribution (including payment of a dividend) or paying any management fee to its holding company if the depository institution would thereafter be undercapitalized.
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To be well-capitalized, the Bank must maintain at least the following capital ratios:
| ● | 6.5% CET1 to risk-weighted assets; |
| ● | 8.0% Tier 1 capital to risk-weighted assets; |
| ● | 10.0% Total capital to risk-weighted assets; and |
| ● | 5.0% leverage ratio. |
The Federal Reserve has not yet revised the well-capitalized standard for bank holding companies to reflect the higher capital requirements imposed under the current capital rules. If the Federal Reserve were to apply the same or a similar well-capitalized standard to bank holding companies as that applicable to the Bank, the Company’s capital ratios as of December 31, 2025 would exceed such revised well-capitalized standard. Also, the Federal Reserve may require bank holding companies, including the Company, to maintain capital ratios substantially in excess of mandated minimum levels, depending upon general economic conditions and a bank holding company’s particular condition, risk profile and growth plans.
Failure to be well-capitalized or to meet minimum capital requirements could result in certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have an adverse material effect on our operations or financial condition. For example, only a well-capitalized depository institution may accept brokered deposits without prior regulatory approval. Failure to be well-capitalized or to meet minimum capital requirements could also result in restrictions on the Bank’s ability to pay dividends or otherwise distribute capital or to receive regulatory approval of applications or other restrictions on its growth.
As of December 31, 2025 and 2024, the Bank’s regulatory capital ratios were above the applicable well-capitalized standards and met the capital conservation buffer.
The Economic Growth, Regulatory Relief, and Consumer Protection Act (the “Economic Growth Act”) signed into law in May 2018 scaled back certain requirements of the Dodd-Frank Act and provided other regulatory relief. Among the provisions of the Economic Growth Act was a requirement that the Federal Reserve raise the asset threshold for those bank holding companies subject to the Federal Reserve’s Small Bank Holding Company Policy Statement (“Policy Statement”) to $3.0 billion. As a result, as of the effective date of that change in 2018, the Company was no longer required to comply with the risk-based capital rules applicable to the Bank as described above. However, in the fourth quarter of 2021, the Company’s assets exceeded $3.0 billion for the first time, such that the Company started being subject to consolidated risk-based capital requirements beginning in 2022.
As a result of the Economic Growth Act, the federal banking agencies were also required to develop a “Community Bank Leverage Ratio” (the ratio of a bank’s Tier 1 capital to average total consolidated assets) for financial institutions with assets of less than $10 billion. A “qualifying community bank” that exceeds this ratio will be deemed to be in compliance with all other capital and leverage requirements, including the capital requirements to be considered “well capitalized” under prompt corrective action statutes. The federal banking agencies may consider a financial institutions risk profile when evaluation whether it qualifies as a community bank for purposes of the capital ratio requirement. The federal banking agencies set the minimum capital for the new Community Bank Leverage Ratio at 9%. The Bank has not opted into the Community Bank Leverage Ratio Framework.
Payment of Dividends
We are a legal entity separate and distinct from the Bank and our other subsidiaries. Our primary source of cash, other than securities offerings, is dividends from the Bank. Under the laws of the State of Georgia, we, as a business corporation, may declare and pay dividends in cash or property unless the payment or declaration would be contrary to restrictions contained in our Articles of Incorporation, or unless, after payment of the dividend, we would not be able to pay our debts when they become due in the usual course of our business or our total assets would be less than the sum of our total
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liabilities. In addition, we are also subject to federal regulatory capital requirements that effectively limit the amount of cash dividends that we may pay.
The primary sources of funds for our payment of dividends to our shareholders are cash on hand and dividends from the Bank. Various federal and state statutory provisions and regulations limit the amount of dividends that the Bank and our non-bank subsidiaries may pay. The Bank is a Georgia bank. Under the regulations of the Georgia Department of Banking & Finance (“GA DBF”), a Georgia bank must have approval of the GA DBF to pay cash dividends if, at the time of such payment:
| ● | the ratio of Tier 1 capital to average total assets is less than 6 percent; |
| ● | the aggregate amount of dividends to be declared or anticipated to be declared during the current calendar year exceeds 50 percent of its net after-tax profits before dividends for the previous calendar year; or |
| ● | its total adversely classified assets in its most recent regulatory examination exceeded 80 percent of its Tier 1 capital plus its allowance for loan and lease losses. |
The Georgia Financial Institutions Code contains restrictions on the ability of a Georgia bank to pay dividends other than from retained earnings without the approval of the GA DBF. As a result of the foregoing restrictions, the Bank may be required to seek approval from the GA DBF to pay dividends.
In addition, we and the Bank are subject to various general regulatory policies and requirements relating to the payment of dividends, including requirements to maintain adequate capital above regulatory minimums. The appropriate federal bank regulatory authority may prohibit the payment of dividends where it has determined that the payment of dividends would be an unsafe or unsound practice and to prohibit payment thereof. The FDIC and the Federal Reserve have indicated that paying dividends that deplete a bank’s capital base to an inadequate level would be an unsafe and unsound banking practice. The FDIC and the Federal Reserve have each indicated that depository institutions and their holding companies should generally pay dividends only out of current operating earnings. Prior approval by the FDIC is required if the total of all dividends declared by a bank in any calendar year exceeds the bank’s profits for that year combined with its retained net profits for the preceding two calendar years.
Under a Federal Reserve policy adopted in 2009, the board of directors of a bank holding company must consider different factors to ensure that its dividend level is prudent relative to maintaining a strong financial position, and is not based on overly optimistic earnings scenarios, such as potential events that could affect its ability to pay, while still maintaining a strong financial position. As a general matter, the Federal Reserve has indicated that the board of directors of a bank holding company should consult with the Federal Reserve and eliminate, defer or significantly reduce the bank holding company’s dividends if:
| ● | its net income available to shareholders for the past four quarters, net of dividends previously paid during that period, is not sufficient to fully fund the dividends; |
| ● | its prospective rate of earnings retention is not consistent with its capital needs and overall current and prospective financial condition; or |
| ● | it will not meet, or is in danger of not meeting, its minimum regulatory capital adequacy ratios. |
Regulation of the Bank
The Bank is subject to comprehensive supervision and regulation by the FDIC and is subject to its regulatory reporting requirements. The Bank also is subject to certain Federal Reserve regulations. In addition, as discussed in more detail below, the Bank and any other of our subsidiaries that offer consumer financial products and services are subject to regulation and potential supervision by the CFPB. Authority to supervise and examine the Company and the Bank for compliance with federal consumer laws remains largely with the Federal Reserve and the FDIC, respectively. However,
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the CFPB may participate in examinations on a “sampling basis” and may refer potential enforcement actions against such institutions to their primary regulators. The CFPB also may participate in examinations of our other direct or indirect subsidiaries that offer consumer financial products or services. In addition, the Dodd-Frank Act permits states to adopt consumer protection laws and regulations that are stricter than those regulations promulgated by the CFPB, and state attorneys general are permitted to enforce certain federal consumer financial protection rules adopted by the CFPB.
Broadly, regulations applicable to the Bank include limitations on loans to a single borrower and to its directors, officers and employees; restrictions on the opening and closing of branch offices; the maintenance of required capital and liquidity ratios; the granting of credit under equal and fair conditions; the disclosure of the costs and terms of such credit; requirements to maintain reserves against deposits and loans; limitations on the types of investment that may be made by the Bank; and requirements governing risk management practices. The Bank is permitted under federal law to branch on a de novo basis across state lines where the laws of that state would permit a bank chartered by that state to open a de novo branch.
Transactions with Affiliates and Insiders. The Bank is subject to restrictions on extensions of credit and certain other transactions between the Bank and the Company or any nonbank affiliate. Generally, these covered transactions with either the Company or any affiliate are limited to 10% of the Bank’s capital and surplus, and all such transactions between the Bank and the Company and all of its nonbank affiliates combined are limited to 20% of the Bank’s capital and surplus. Loans and other extensions of credit from the Bank to the Company or any affiliate generally are required to be secured by eligible collateral in specified amounts. In addition, any transaction between the Bank and the Company or any affiliate are required to be on an arm’s length basis. Federal banking laws also place similar restrictions on certain extensions of credit by insured banks, such as the Bank, to their directors, executive officers and principal shareholders.
Reserves. Federal Reserve rules require depository institutions, such as the Bank, to maintain reserves against their transaction accounts, primarily interest bearing and non-interest bearing checking accounts. Effective March 26, 2020, reserve requirement ratios were reduced to zero percent. These reserve requirements are subject to annual adjustment by the Federal Reserve.
FDIC Insurance Assessments and Depositor Preference. The Bank’s deposits are insured by the FDIC’s DIF up to the limits under applicable law, which currently are set at $250,000 per depositor, per insured bank, for each account ownership category. The Bank is subject to FDIC assessments for its deposit insurance. The FDIC calculates quarterly deposit insurance assessments based on an institution’s average total consolidated assets less its average tangible equity, and applies one of four risk categories determined by reference to its capital levels, supervisory ratings, and certain other factors. The assessment rate schedule can change from time to time, at the discretion of the FDIC, subject to certain limits.
As of September 30, 2025, the DIF reserve ratio reached 1.40%, exceeding the statutory minimum of 1.35%. The FDIC, as required under the Federal Deposit Insurance Act, established a plan on September 15, 2020 to restore the DIF reserve ratio to meet or exceed the statutory minimum of 1.35% within eight years. On October 18, 2022, the FDIC adopted a final plan and increased the initial base deposit insurance assessment rate schedules uniformly by 2 basis points, beginning in the first quarterly assessment period of 2023. The FDIC could further increase the deposit insurance assessments for certain insured depository institutions, including the Bank, if the DIF reserve ratio is not maintained.
Insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition imposed by a bank’s federal regulatory agency. In addition, the Federal Deposit Insurance Act provides that, in the event of the liquidation or other resolution of an insured depository institution, the claims of depositors of the institution, including the claims of the FDIC as subrogee of insured depositors, and certain claims for administrative expenses of the FDIC as a receiver, will have priority over other general unsecured claims against the institution, including those of the parent bank holding company.
Standards for Safety and Soundness. The Federal Deposit Insurance Act requires the federal bank regulatory agencies to prescribe, by regulation or guideline, operational and managerial standards for all insured depository institutions relating to: (1) internal controls; (2) information systems and audit systems; (3) loan documentation; (4) credit underwriting; (5) interest rate risk exposure; and (6) asset quality. The federal banking agencies have adopted regulations and Interagency
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Guidelines Establishing Standards for Safety and Soundness to implement these required standards. These guidelines set forth the safety and soundness standards used to identify and address problems at insured depository institutions before capital becomes impaired. Under the regulations, if a regulator determines that a bank fails to meet any standards prescribed by the guidelines, the regulator may require the bank to submit an acceptable plan to achieve compliance, consistent with deadlines for the submission and review of such safety and soundness compliance plans.
Anti-Money Laundering. A continued focus of governmental policy relating to financial institutions in recent years has been combating money laundering and terrorist financing. The USA PATRIOT Act broadened the application of anti-money laundering regulations to apply to additional types of financial institutions such as broker-dealers, investment advisors and insurance companies, and strengthened the ability of the U.S. Government to help prevent, detect and prosecute international money laundering and the financing of terrorism. The principal provisions of Title III of the USA PATRIOT Act require that regulated financial institutions, including state member banks: (i) establish an anti-money laundering program that includes training and audit components; (ii) comply with regulations regarding the verification of the identity of any person seeking to open an account; (iii) take additional required precautions with non-U.S. owned accounts; and (iv) perform certain verification and certification of money laundering risk for their foreign correspondent banking relationships. Failure of a financial institution to comply with the USA PATRIOT Act’s requirements could have serious legal and reputational consequences for the institution. The Bank has augmented its systems and procedures to meet the requirements of these regulations and will continue to revise and update its policies, procedures and controls to reflect changes required by law.
The Financial Crimes Enforcement Network of the U.S. Treasury Department (“FinCEN”) has adopted rules that require financial institutions to obtain beneficial ownership information with respect to legal entities with which such institutions conduct business, subject to certain exclusions and exemptions. Bank regulators are focusing their examinations on anti-money laundering compliance, and we continue to monitor and augment, where necessary, our anti-money laundering compliance programs.
Banking regulators will consider compliance with the Act’s money laundering provisions in acting upon acquisition and merger proposals. Bank regulators routinely examine institutions for compliance with these obligations and have been active in imposing cease and desist and other regulatory orders and money penalty sanctions against institutions found to be violating these obligations. Sanctions for violations of the Act can be imposed in an amount equal to twice the sum involved in the violating transaction, up to $1 million. On January 1, 2021, Congress passed federal legislation that made sweeping changes to federal anti-money laundering laws, subject to pending implementation by regulatory rulemaking. In 2024, US federal regulators proposed amendments to modernize Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) program requirements. Aligned with the Anti-Money Laundering Act of 2020, the rules mandate a risk-based approach requiring institutions to identify, evaluate, and document risks based on business activities and national priorities.
Economic Sanctions. The Office of Foreign Assets Control (“OFAC”) is responsible for helping to ensure that U.S. entities do not engage in transactions with certain prohibited parties, as defined by various Executive Orders and acts of Congress. OFAC publishes, and routinely updates, lists of names of persons and organizations suspected of aiding, harboring or engaging in terrorist acts, including the Specially Designated Nationals and Blocked Persons List. If we find a name on any transaction, account or wire transfer that is on an OFAC list, we must undertake certain specified activities, which could include blocking or freezing the account or transaction requested, and we must notify the appropriate authorities.
Concentrations in Lending. During 2006, the federal bank regulatory agencies released guidance on “Concentrations in Commercial Real Estate Lending” (the “Guidance”) and advised financial institutions of the risks posed by commercial real estate (“CRE”) lending concentrations. The Guidance requires that appropriate processes be in place to identify, monitor and control risks associated with real estate lending concentrations. Higher allowances for credit losses and capital levels may also be required. The Guidance is triggered when CRE loan concentrations exceed either:
| ● | Total reported loans for construction, land development, and other land of 100% or more of a bank’s total risk based capital; or |
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| ● | Total reported loans secured by multifamily and nonfarm nonresidential properties and loans for construction, land development, and other land of 300% or more of a bank’s total risk based capital. |
The Guidance also applies when a bank has a sharp increase in CRE loans or has significant concentrations of CRE secured by a particular property type. We have always had exposures to loans secured by commercial real estate due to the nature of our markets and the loan needs of both retail and commercial customers. We believe our long term experience in CRE lending, underwriting policies, internal controls, and other policies currently in place, as well as our loan and credit monitoring and administration procedures, are generally appropriate to managing our concentrations as required under the Guidance.
Community Reinvestment Act. The Bank is subject to the provisions of the Community Reinvestment Act (“CRA”), which imposes a continuing and affirmative obligation, consistent with their safe and sound operation, to help meet the credit needs of entire communities where the bank accepts deposits, including low- and moderate-income neighborhoods. The FDIC’s assessment of the Bank’s CRA record is made available to the public. Further, a less than satisfactory CRA rating will slow, if not preclude, expansion of banking activities. Following the enactment of the Gramm-Leach-Bliley Act (“GLB”), CRA agreements with private parties must be disclosed and annual CRA reports must be made to a bank’s primary federal regulator. Federal CRA regulations require, among other things, that evidence of discrimination against applicants on a prohibited basis, and illegal or abusive lending practices be considered in the CRA evaluation. The Bank has a rating of “Satisfactory” in its most recent CRA evaluation.
In 2023 the Federal Reserve, OCC, and FDIC issued a final rule to modernize their respective CRA regulations. The revised rules would substantially alter the methodology for assessing compliance with the CRA, with material aspects taking effect January 1, 2026 and revised data reporting requirements taking effect January 1, 2027. The revised CRA regulations have been subject to an injunction since March 29, 2024. On July 16, 2025, the Federal Reserve, OCC, and FDIC issued a joint proposal to rescind the 2023 modernization rule. The agencies continue to apply the CRA rules as they existed before the 2023 modernization, considering the injunction and pending finalization of the recission of the modernization rule.
Privacy and Data Security. The GLB generally prohibits disclosure of consumer information to non-affiliated third parties unless the consumer has been given the opportunity to object and has not objected to such disclosure. Financial institutions are further required to disclose their privacy policies to customers annually. Financial institutions, however, will be required to comply with state law if it is more protective of consumer privacy than the GLB. The GLB also directed federal regulators, including the FDIC, to prescribe standards for the security of consumer information. The Bank is subject to such standards, as well as standards for notifying customers in the event of a security breach. Under federal law, the Bank must disclose its privacy policy to consumers, permit customers to opt out of having nonpublic customer information disclosed to third parties in certain circumstances, and allow customers to opt out of receiving marketing solicitations based on information about the customer received from another subsidiary. States may adopt more extensive privacy protections. We are similarly required to have an information security program to safeguard the confidentiality and security of customer information and to ensure proper disposal. Customers must be notified when unauthorized disclosure involves sensitive customer information that may be misused. The federal banking agencies require banks to notify their regulators within 36 hours of a “computer-security incident” that rises to the level of a “notification incident.”
Consumer Regulation. Activities of the Bank are subject to a variety of statutes and regulations designed to protect consumers. These laws and regulations include, among numerous other things, provisions that:
| ● | limit the interest and other charges collected or contracted for by the Bank, including new rules respecting the terms of credit cards and of debit card overdrafts; |
| ● | govern the Bank’s disclosures of credit terms to consumer borrowers; |
| ● | require the Bank to provide information to enable the public and public officials to determine whether it is fulfilling its obligation to help meet the housing needs of the community it serves; |
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| ● | prohibit the Bank from discriminating on the basis of race, creed or other prohibited factors when it makes decisions to extend credit; |
| ● | govern the manner in which the Bank may collect consumer debts; and |
| ● | prohibit unfair, deceptive or abusive acts or practices in the provision of consumer financial products and services. |
Mortgage Regulation. The CFPB has issued rules to implement requirements of the Dodd-Frank Act pertaining to mortgage loan origination (including with respect to loan originator compensation and loan originator qualifications) as well as integrated mortgage disclosure rules. In addition, the CFPB has issued rules that require servicers to comply with new standards and practices with regard to: error correction; information disclosure; force-placement of insurance; information management policies and procedures; requiring information about mortgage loss mitigation options be provided to delinquent borrowers; providing delinquent borrowers access to servicer personnel with continuity of contact about the borrower’s mortgage loan account; and evaluating borrowers’ applications for available loss mitigation options. These rules also address initial rate adjustment notices for adjustable-rate mortgages (ARMs), periodic statements for residential mortgage loans, and prompt crediting of mortgage payments and response to requests for payoff amounts.
In 2020, the CARES Act granted certain forbearance rights and protection against foreclosure to borrowers with a “federally backed mortgage loan,” including certain first or subordinate lien loans designed principally for the occupancy of one to four families. These consumer protections under the CARES Act continued during the COVID 19 pandemic emergency, and while most of these protections expired in 2022, on January 18, 2023, in its revised Mortgage Servicing Examination Procedures, the CFPB stated it expected servicers to continue to utilize these safeguards, regardless of their expiration.
Non-Discrimination Policies. The Bank is also subject to, among other things, the provisions of the Equal Credit Opportunity Act (the “ECOA”) and the Fair Housing Act (the “FHA”), both of which prohibit discrimination based on race or color, religion, national origin, sex, and familial status in any aspect of a consumer or commercial credit or residential real estate transaction. The Department of Justice (the “DOJ”), and the federal bank regulatory agencies have issued an Interagency Policy Statement on Discrimination in Lending that provides guidance to financial institutions in determining whether discrimination exists, how the agencies will respond to lending discrimination, and what steps lenders might take to prevent discriminatory lending practices. The DOJ has increased its efforts to prosecute what it regards as violations of the ECOA and FHA.
Cybersecurity: The federal banking regulators regularly issue new guidance and standards, and update existing guidance and standards, regarding cybersecurity intended to enhance cyber risk management among financial institutions. Financial institutions are expected to comply with such guidance and standards and to accordingly develop appropriate security controls and risk management processes. If we fail to observe such regulatory guidance or standards, we could be subject to various regulatory sanctions, including financial penalties. The SEC has adopted a rule that requires disclosure of material cybersecurity incidents, as well as cybersecurity risk management, strategy and governance. Under this rule, banking organizations that are SEC registrants must generally disclose information about a material cybersecurity incident within four business days of determining it is material with periodic updates as to the status of the incident in subsequent filings as necessary.
Federal banking agencies additionally require banking organizations to notify their primary banking regulator within 36 hours of determining that a “computer-security incident” has materially disrupted or degraded, or is reasonably likely to materially disrupt or degrade, the banking organization’s ability to carry out banking operations or deliver banking products and services to a material portion of its customer base, its businesses and operations that would result in material loss, or its operations that would impact the stability of the United States.
State regulators have also been increasingly active in implementing privacy and cybersecurity standards and regulations. Recently, several states have adopted regulations requiring certain financial institutions to implement cybersecurity programs and many states, including Georgia, have also recently implemented or modified their data breach notification, information security and data privacy requirements. We expect this trend of state-level activity in those areas to continue and are continually monitoring developments in the states in which our customers are located.
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Risks and exposures related to cybersecurity attacks, including litigation and enforcement risks, are expected to be elevated for the foreseeable future due to the rapidly evolving nature and sophistication of these threats, as well as due to the expanding use of Internet banking, mobile banking and other technology-based products and services by us and our customers.
See Item 1A. Risk Factors for a further discussion of risks related to cybersecurity and Item 1C. Cybersecurity for a further discussion of risk management strategies and governance processes related to cybersecurity.
Item 1A. Risk Factors
In addition to the other information contained in this Form 10-K, you should carefully consider the risks described below, as well as the risk factors and uncertainties discussed in our other public filings with the SEC under the caption “Risk Factors” in evaluating us and our business and making or continuing an investment in our stock. Our operations and financial results are subject to various risks and uncertainties, including, but not limited to, the material risks described below. Many of these risks are beyond our control although efforts are made to manage those risks while simultaneously optimizing operational and financial results. The occurrence of any of the following risks, as well as risks of which we are currently unaware or currently deem immaterial, could materially and adversely affect our assets, business, cash flows, condition (financial or otherwise), liquidity, prospects, results of operations and the trading price of our common stock. It is impossible to predict or identify all such factors and, as a result, you should not consider the following factors to be a complete discussion of the risks, uncertainties and assumptions that could materially and adversely affect our assets, business, cash flows, condition (financial or otherwise), liquidity, prospects, results of operations and the trading price of our common stock.
In addition, certain statements in the following risk factors constitute forward-looking statements. Please refer to the section entitled “Cautionary Note Regarding Forward-Looking Statements” beginning on page 3 of this Annual Report.
Risks Related to Our Business
A decline in general business and economic conditions and any regulatory responses to such conditions could have a material adverse effect on our business, financial position, results of operations and growth prospects.
Our business and operations are sensitive to general business and economic conditions in the United States, generally, and particularly in the states of Alabama, Florida, Georgia, New Jersey, New York, Texas and Virginia. Unfavorable or uncertain economic and market conditions could lead to credit quality concerns related to borrower repayment ability and collateral protection as well as reduced demand for the products and services we offer. If the national, regional and local economies experience worsening economic conditions (including persistent inflation), elevated levels of unemployment, adverse effects of the U.S. government’s failure to raise its debt ceiling (including defaulting on its debt obligations or experiencing credit downgrades) or as a result of trade wars and/or tariffs, fluctuations in debt and equity capital markets, increased delinquencies on mortgage, commercial and consumer loans, residential and commercial real estate price declines, and lower home sales and commercial activity, our growth and profitability could be constrained. In addition, economic stress may result in heightened regulatory and supervisory scrutiny or more conservative regulatory expectations, which could limit our ability to grow, deploy capital or return capital to shareholders.
We face strong competition from financial services companies and other companies that offer commercial and retail banking services, which could harm our business.
Many of our competitors offer the same, or a wider variety of, the banking and related financial services we offer within our market areas. These competitors include national banks, regional banks and other community banks, including banks similar to us that primarily serve distinct or multi-ethnic communities. In many instances these national and regional banks have greater resources than we do, and the smaller community banks may have stronger ties in local markets than we do, which may put us at a competitive disadvantage. We also face competition from many other types of financial institutions, including fintech companies, savings associations, finance companies, brokerage firms, insurance companies,
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credit unions, mortgage banks and other financial intermediaries. Further, our credit union competitors benefit from competitive advantages, including the credit union exemption from paying federal income tax and can, therefore, more aggressively price many products and services. In addition, a number of out-of-state financial intermediaries have opened production offices or otherwise solicit deposits in our market areas. We also compete with many forms of payments offered by both bank and non-bank providers, including a variety of new and evolving alternative payment mechanisms, systems and products, such as aggregators and web-based and wireless payment platforms or technologies, digital or “crypto” currencies, prepaid systems and payment services targeting users of social networks, communications platforms and online gaming. Competition is increasingly focused on digital capabilities, customer experience, speed, and convenience, and failure to meet evolving customer expectations may adversely affect our competitive position. Some competitors may be willing to accept lower returns, assume greater risk, or offer more favorable pricing and terms than we are willing or able to provide, which could place downward pressure on our margins. In addition, some competitors may offer banking and payment services through embedded or platform-based models that reduce the need for customers to maintain traditional banking relationships. Our future success may depend, in part, on our ability to use technology competitively to offer products and services that provide convenience to customers and create additional efficiencies in our operations. If we are unable to match the pace of technological change or the level of investment made by larger or more technologically advanced competitors, we may experience customer attrition or reduced growth opportunities. Further, as a result of the GENIUS Act, passed in 2025 to provide a regulatory framework for stablecoins in the U.S., increased competition may emerge from issuers of stablecoins and providers of related technology.
Increased competition in our markets may result in reduced loans, deposits and commissions and brokers’ fees, gains on sales, servicing fees, as well as reduced net interest margin and profitability. Competition may also increase pressure on compensation and make it more difficult to attract and retain experienced banking and mortgage lending personnel. If we are unable to attract and retain banking and mortgage loan customers and expand our sales market for such loans, we may be unable to continue to grow our business, and our financial condition and results of operations may be adversely affected.
Fluctuations in interest rates have impacted net interest income and may otherwise negatively impact our financial condition and results of operations.
Our earnings and financial condition are dependent to a large degree upon net interest income, which is the difference, or spread, between interest earned on loans, securities and other interest-earning assets and interest paid on deposits, borrowings and other interest-bearing liabilities. When market rates of interest change, the interest we receive on our assets and the interest we pay on our liabilities fluctuates. This may cause decreases in our spread and may adversely affect our earnings and financial condition.
Interest rates are highly sensitive to many factors including, without limitation: the rate of inflation; economic conditions; federal monetary policies; and stability of domestic and foreign markets. Interest rates remained elevated during 2024, with the Federal Reserve slowly decreasing interest rates beginning in the fourth quarter of 2024 through the fourth quarter of 2025. Further changes in interest rates and monetary policy reportedly are dependent upon the Federal Reserve’s assessment of economic data as it becomes available. Increasing interest rates can have a negative impact on our business by reducing the amount of money our customers borrow or by adversely affecting their ability to repay outstanding loan balances that may increase due to adjustments in their variable rates which may lead to an increase in nonperforming assets and a reduction of income recognized, which could compress our net interest margin and adversely affect liquidity
In addition, in a rising interest rate environment we may have to offer more attractive interest rates to depositors to compete for deposits, or pursue other sources of liquidity, such as wholesale funds. Conversely, decreasing interest rates reduce our yield on our variable rate loans and on our new loans, which reduces our net interest income. In addition, lower interest rates may reduce our realized yields on investment securities which would reduce our net interest income and cause downward pressure on net interest margin in future periods. Higher income volatility from changes in interest rates and spreads to benchmark indices could result in a decrease in net interest income and a decrease in current fair market values of our assets. Fluctuations in interest rates impact both the level of income and expense recorded on most of our assets and liabilities and the market value of all interest-earning assets and interest-bearing liabilities, which in turn could have a material adverse effect on our net income, operating results, or financial condition.
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Although we have implemented procedures we believe will reduce the potential effects of changes in interest rates on our net interest income, these procedures may not always be successful as some of these effects are outside of our control. Our interest rate risk management models and assumptions may not accurately predict or fully mitigate the impact of future interest rate changes, particularly during periods of elevated volatility, and a prolonged period of volatile and unstable market conditions would likely increase our funding costs and negatively affect market risk mitigation strategies.
Inflation could negatively impact our business, our profitability and our stock price.
Prolonged periods of inflation may impact our profitability by negatively impacting our fixed costs and expenses, including increasing funding costs and expense related to talent acquisition and retention, and negatively impacting the demand for our products and services. Additionally, inflation may lead to a decrease in consumer and clients purchasing power and negatively affect the need or demand for our products and services. If significant inflation continues, our business could be negatively affected by, among other things, increased default rates leading to credit losses which could decrease our appetite for new credit extensions. These inflationary pressures could result in missed earnings and budgetary projections causing our stock price to suffer. Additionally, the timing and magnitude of inflation’s effects may be difficult to predict and could persist or intensify depending on economic conditions and policy responses
Negative developments in the banking industry could adversely affect our current and projected business operations and our financial condition and results of operations.
Bank failures and related negative media attention may generate significant market trading volatility among publicly traded bank holding companies and, in particular, regional banks like the Company. These developments have and may continue to negatively impact customer confidence in regional banks, which could prompt customers to maintain their deposits with larger financial institutions or otherwise relocate funds. Rapid changes in customer behavior, including accelerated deposit withdrawals facilitated by digital banking channels, could increase liquidity pressures. If we were required to sell a portion of our securities portfolio to address liquidity needs, we may incur losses, including as a result of the negative impact of rising interest rates on the value of our securities portfolio, which could negatively affect our earnings and our capital. While we have taken actions to improve our funding, there is no guarantee that such actions will be successful or sufficient in the event of sudden liquidity needs.
Negative developments in the banking industry may also prompt changes in regulatory and supervisory expectations or actions, including increased examination scrutiny, higher capital or liquidity requirements, or restrictions on growth or capital distributions, which could further constrain our operations and financial flexibility. In addition, bank failures have and could in the future prompt the FDIC to increase deposit insurance costs. Increases in funding, deposit insurance, or other costs as a result of these types of events have and could in the future materially adversely affect our financial condition and results of operations. Further, the disruption following these types of events have and could in the future generate significant market trading volatility among publicly traded bank holdings companies and, in particular, regional banks like the Company.
Liquidity risks could affect operations and jeopardize our business, financial condition, and results of operations.
Liquidity is essential to our business. An inability to raise funds through deposits, borrowings, the sale of loans and/or investment securities and through other sources could have a substantial negative effect on our liquidity. Our most important source of funds consists of our customer deposits. Such deposit balances can decrease when customers perceive alternative investments, such as the stock market, as providing a better risk/return tradeoff. If customers move money out of bank deposits and into other investments, we could lose a relatively low cost source of funds, which would require us to seek wholesale funding alternatives in order to continue to grow, thereby increasing our funding costs and reducing our net interest income and net income. Moreover, competition among U.S. banks and non-banks for customer deposits is intense and may increase the cost of deposits (particularly in an elevated rate environment) or prevent new deposits and may otherwise negatively affect our ability to grow our deposit base. In addition, our access to deposits may be affected by the liquidity and/or cash flow needs of depositors, which may be exacerbated in an inflationary, recessionary, or elevated rate environment. This may cause our deposit accounts to decrease in the future, and any such decrease could have a material adverse impact on our sources of funding.
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Other primary sources of funds consist of cash from operations, paydown of our existing loan portfolio and sale of loans to investors. Additional liquidity is provided by our ability to borrow from the Federal Reserve Bank of Atlanta and the Federal Home Loan Bank of Atlanta. Recently proposed changes to the Federal Home Loan Bank system could adversely impact the Company’s access to Federal Home Loan Bank borrowings or increase the cost of such borrowings. We also may borrow from third-party lenders from time to time. Our access to funding sources in amounts adequate to finance or capitalize our activities or on terms that are acceptable to us could be impaired by factors that affect us directly or the financial services industry or economy in general, such as disruptions in the financial markets or negative views and expectations about the prospects for the financial services industry. Our access to funding sources could also be affected by a decrease in the level of our business activity as a result of a downturn in our primary market area or by one or more adverse regulatory actions against us..
Any decline in available funding could adversely impact our ability to continue to implement our strategic plan, including our ability to originate loans, invest in securities, meet our expenses, or to fulfill obligations such as repaying our borrowings or meeting deposit withdrawal demands, any of which could have a material adverse impact on our liquidity, business, financial condition and results of operations.
Our business depends on our ability to successfully manage our asset quality and credit risk.
We are subject to the risk of losses resulting from the failure of borrowers, guarantors and related parties to pay us the interest and principal amounts due on their loans. Although we maintain well-defined credit policies and credit underwriting and monitoring and collection procedures, these policies and procedures may not prevent losses, as some of these risks are outside of our control, particularly during periods in which the local, regional or national economy suffers a general decline. The future effects of the continued elevated inflationary and interest rate environment on economic activity could negatively affect the collateral values associated with our existing loans, the ability to liquidate the real estate collateral securing our residential and commercial real estate loans, our ability to maintain loan origination volume and to obtain additional financing, the future demand for or profitability of our lending and services, and the financial condition and credit risk of our customers. Further, in the event of delinquencies, regulatory changes and policies designed to protect borrowers may slow or prevent us from making our business decisions or may result in a delay in our taking certain remediation actions, such as foreclosure. If borrowers fail to repay their loans, our financial condition and results of operations would be adversely affected. Additionally, potential future actions such as the proposed consumer credit card interest rate cap may lead to unprofitable products, especially for riskier borrowers, and could lead to cutting credit lines or eliminating cards, increased reliance on fees and increased debt burdens for those needing credit the most, thereby having the potential to negatively impact bank asset quality
Because a significant portion of our loan portfolio is comprised of commercial and residential real estate loans, negative changes in the economy affecting real estate values and liquidity could impair the value of collateral securing our real estate loans and result in loan and other losses.
At December 31, 2025, approximately 97.6% of our loan portfolio was comprised of loans with real estate as a primary or secondary component of collateral. As a result, adverse developments affecting real estate values in our market areas could increase the credit risk associated with our real estate loan portfolio. The market value of real estate can fluctuate significantly in a short period of time as a result of market conditions in the geographic area in which the real estate is located. Adverse changes affecting real estate values and the liquidity of real estate in one or more of our markets could increase the credit risk associated with our loan portfolio, significantly impair the value of property pledged as collateral on loans and affect our ability to sell the collateral upon foreclosure without a loss or additional losses, which could result in losses that would adversely affect credit quality, profitability, financial condition, and results of operations. Such declines and losses would have a material adverse impact on our business, results of operations and growth prospects. In addition, if hazardous or toxic substances are found on properties pledged as collateral, the value of the real estate could be impaired. If we foreclose on and take title to such properties, we may be liable for remediation costs, as well as for personal injury and property damage. Environmental laws may also require us to incur substantial expenses to address unknown liabilities and may materially reduce the affected property’s value or limit our ability to use or sell the affected property.
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The residential mortgage loans that we originate consist primarily of non-conforming residential mortgage loans which may be considered less liquid and riskier.
The residential mortgage loans that we originate consist primarily of non-conforming residential mortgage loans, which are typically considered to have a higher degree of risk and are less liquid than conforming residential mortgage loans. We attempt to address this enhanced risk through our underwriting process, including requiring larger down payments and, in some cases, six months principal, interest, taxes and insurance reserves for individuals with no credit score.
Small Business Administration lending is an important part of our business. Our SBA lending program is dependent upon the U.S. federal government, and we face specific risks associated with originating SBA loans.
Our SBA lending program is dependent upon the U.S. federal government. As an approved participant in the SBA Preferred Lender’s Program (an “SBA Preferred Lender”), we enable our clients to obtain SBA loans more efficiently. The SBA periodically reviews the lending operations of participating lenders to assess, among other things, whether the lender exhibits prudent risk management. When weaknesses are identified, the SBA may request corrective actions or impose enforcement actions, including revocation of the lender’s SBA Preferred Lender status. If we lose our status as an SBA Preferred Lender, we may lose some or all of our customers to lenders who are SBA Preferred Lenders, and as a result we could experience a material adverse effect to our financial results. Any changes to the SBA program, including but not limited to changes to the level of guarantee provided by the federal government on SBA loans, changes to program specific rules impacting volume eligibility under the guaranty program, as well as changes to the program amounts authorized by Congress or funding for the SBA program may also have a material adverse effect on our business. Because a significant portion of our SBA lending activity depends on government guarantees and program support, changes in policy, funding priorities or political conditions could disproportionately affect this line of business. In addition, any default by the U.S. government on its obligations or any prolonged government shutdown could, among other things, impede our ability to originate SBA loans or sell such loans in the secondary market, which could materially and adversely affect our business, results of operations and financial condition.
The SBA’s 7(a) Loan Program is the SBA’s primary program for helping start-up and existing small businesses, with financing guaranteed for a variety of general business purposes. Typically, we sell the guaranteed portion of our SBA 7(a) loans in the secondary market. These sales result in premium income for us at the time of sale and create a stream of future servicing income, as we retain the servicing rights to these loans. For the reasons described above, we may not be able to continue originating these loans or selling them in the secondary market. Furthermore, even if we are able to continue to originate and sell SBA 7(a) loans in the secondary market, we might not continue to realize premiums upon the sale of the guaranteed portion of these loans or the premiums may decline due to economic and competitive factors. When we originate SBA loans, we incur credit risk on the non-guaranteed portion of the loans, and if a customer defaults on a loan, we share any loss and recovery related to the loan pro-rata with the SBA. If the SBA establishes that a loss on an SBA guaranteed loan is attributable to significant technical deficiencies in the manner in which the loan was originated, funded or serviced by us, the SBA may seek recovery of the principal loss related to the deficiency from us. Generally, we do not maintain reserves or loss allowances for such potential claims and any such claims could materially and adversely affect our business, financial condition or results of operations.
The non-guaranteed portion of SBA loans that we retain on our balance sheet, as well as the guaranteed portion of SBA loans that we sell, could expose us to various credit and default risks.
We generally retain the non-guaranteed portions of the SBA loans that we originate. The non-guaranteed portion of SBA loans have a higher degree of credit risk and risk of loss as compared to the guaranteed portion of such loans. When we sell the guaranteed portion of SBA loans in the ordinary course of business, we are required to make certain representations and warranties to the purchaser about the SBA loans and the manner in which they were originated. Under these agreements, we may be required to repurchase the guaranteed portion of the SBA loan if we have breached any of these representations or warranties, in which case we may record a loss. In addition, if repurchase and indemnity demands increase on loans that we sell from our portfolio, our liquidity, results of operations and financial condition could be adversely affected.
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We may not be able to meet our unfunded credit commitments, or adequately reserve for losses associated with our unfunded credit commitments.
A commitment to extend credit is a formal agreement to lend funds to a client as long as there is no violation of any condition established under the agreement. The actual borrowing needs of our customers under these credit commitments have historically been lower than the contractual amount of the commitments. A significant portion of these commitments expire without being drawn upon. Because of the credit profile of our customers, we typically have a substantial amount of total unfunded credit commitments, which is not reflected on our balance sheet. Actual borrowing needs of our customers may exceed our expected funding requirements, especially during a challenging economic environment when our client companies may be more dependent on our credit commitments due to the lack of available credit elsewhere, the increasing costs of credit, or the limited availability of financings from other sources. Such conditions could result in multiple borrowers drawing on their commitments at the same time, increasing our funding needs and placing additional pressure on our liquidity. The timing and amount of draws on unfunded commitments are difficult to predict and may be correlated with periods of economic stress, when our access to funding sources may also be constrained. Any failure to meet our unfunded credit commitments in accordance with the actual borrowing needs of our customers may have a material adverse effect on our business, financial condition, results of operations or reputation.
We use brokered deposits which may be an unstable and/or expensive deposit source to fund earning asset growth.
We use brokered deposits, as a source of funding to support our asset growth and augment deposits generated from our branch network, which are our principal source of funding. We have established policies and procedures with respect to the use of brokered deposits, which require, among other things, that (i) we limit the amount of brokered deposits as a percentage of total assets, and (ii) our asset liability committee monitors our use of brokered deposits on a regular basis, including interest rates and the total volume of such deposits in relation to our total assets. In the event that our funding strategies call for the use of brokered deposits, there can be no assurance that such sources will be available, or will remain available, or that the cost of such funding sources will be reasonable. Additionally, if the Bank is no longer considered well-capitalized, our ability to access new brokered deposits or retain existing brokered deposits could be affected by market conditions, regulatory requirements or a combination thereof, which could result in most, if not all, brokered deposit sources being unavailable. The inability to utilize brokered deposits as a source of funding could have an adverse effect on our financial position, results of operations and liquidity. In addition, significant reliance on brokered deposits could be perceived negatively by customers, counterparties or investors, which could further affect our funding costs or access to alternative sources of liquidity.
We are highly dependent on our management team, and the loss of our senior executive officers or other key employees could harm our ability to implement our strategic plan, impair our relationships with customers and adversely affect our business, results of operations and growth prospects.
Our success depends, in large part, on our ability to attract and retain key personnel. Competition for the best personnel in most activities we engage in can be intense, as we compete with both smaller banks that may be able to offer bankers with more responsibility and autonomy and larger banks that may be able to offer bankers with higher compensation, resources and support, and we may not be able to hire personnel or to retain them. The unexpected loss of services of one or more of our key personnel could have a material adverse impact on our business because of their skills, knowledge of our market, relationships in the communities we serve, years of industry experience and the difficulty of promptly finding qualified replacement personnel. Although we have employment agreements with certain of our executive officers, there is no guarantee that these officers and other key personnel will remain employed with the Company. If we are unable to successfully plan for and execute the transition or replacement of key members of our management team, our operations and strategic initiatives could be adversely affected.
Nonperforming assets take significant time to resolve and adversely affect our results of operations and financial condition, and could result in further losses in the future.
Our nonperforming assets adversely affect our net income in various ways. We do not record interest income on nonaccrual loans or OREO, thereby adversely affecting our net interest income, net income and returns on assets and equity, and our loan administration costs increase, which together with reduced interest income adversely affects our
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efficiency ratio. When we take collateral in foreclosure and similar proceedings, we are required to mark the collateral to its then-fair market value, which may result in a loss. These nonperforming loans and OREO also increase our risk profile and the level of capital our regulators believe is appropriate for us to maintain in light of such risks. The resolution of nonperforming assets requires significant time commitments from management and can be detrimental to the performance of their other responsibilities. If we experience increases in nonperforming loans and nonperforming assets, our net interest income may be negatively impacted and our loan administration costs could increase, each of which would have an adverse effect on our net income and related ratios, such as return on assets and equity.
Our provision and allowance for credit losses may prove to be insufficient to absorb potential losses in our loan portfolio.
We make various assumptions and judgments about the collectability of our loan and lease portfolio and utilize these assumptions and judgments when determining the provision and allowance for credit losses. The determination of the appropriate level of the provision for credit losses inherently involves a high degree of subjectivity and requires us to make significant estimates of current credit risks and future trends, all of which may undergo material changes, as we have experienced. Deterioration in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors both within and outside of our control, may require an increase in the amount reserved in the allowance for credit losses. In addition, bank regulatory agencies periodically review our provision and the total allowance for credit losses and may require an increase in the allowance for credit losses or future provisions for credit losses, based on judgments different than those of management. Any increases in the provision or allowance for credit losses will result in a decrease in our net income and, potentially, capital, and could increase earnings volatility or constrain our ability to deploy capital, and may have a material adverse effect on our financial condition or results of operations.
Decreased residential mortgage origination, volume and pricing decisions of competitors may adversely affect our profitability.
Our mortgage operation originates and sells residential mortgage loans and services residential mortgage loans. Changes in interest rates, housing prices, financial stress on borrowers as a result of economic conditions, regulations by the applicable governmental authorities and pricing decisions by our loan competitors may adversely affect demand for our residential mortgage loan products, the revenue realized on the sale of loans, revenues received from servicing such loans for others, and ultimately reduce our net income. New regulations, increased regulatory reviews, and/or changes in the structure of the secondary mortgage markets which we would utilize to sell mortgage loans may be introduced and may increase costs and make it more difficult to operate a residential mortgage origination business.
We could recognize losses on securities held in our securities portfolio, particularly if interest rates increase or economic and market conditions deteriorate.
Changes in interest rates may negatively affect both the returns on and market value of our investment securities. Interest rate volatility can reduce unrealized gains or increase unrealized losses in our portfolio. Interest rates are highly sensitive to many factors including monetary policies, domestic and international economic and political issues, and other factors beyond our control. These changes can negatively impact our other comprehensive income and equity levels through accumulated other comprehensive income, which includes net unrealized gains and losses on our investment securities. Further, such losses could be realized into earnings should liquidity and/or business strategy necessitate the sales of securities in a loss position. Periods of market stress or deposit outflows could increase the likelihood that we would need to sell securities at unfavorable prices. Additionally, actual investment income and cash flows from investment securities that carry prepayment risk, such as mortgage-backed securities and callable securities, may materially differ from those anticipated at the time of investment or subsequently as a result of changes in interest rates and market conditions. In a rising‑rate environment, slower prepayments or extensions of expected maturities could increase interest rate sensitivity and reduce portfolio liquidity. These occurrences could have a material adverse effect on our net interest income or our results of operations.
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New lines of business or new products and services may subject us to additional risks.
From time to time, we may implement or acquire new lines of business or offer new products and services within existing lines of business. In developing and marketing new lines of business and new products and services we may invest significant time and resources. We may not achieve target timetables for the introduction and development of new lines of business and new products or services and price and profitability goals may not prove feasible. External factors, such as regulatory compliance obligations, competitive alternatives, and shifting market preferences, may also impact the successful implementation of a new line of business or a new product or service.
In addition, the development or acquisition of new products, services or business lines may involve operational, technological or integration challenges, including reliance on third‑party vendors or strategic partners, which could increase costs or delay implementation. Furthermore, any new line of business and/or new product or service could have a significant impact on the effectiveness of our system of internal controls. If our risk management, compliance or internal control processes do not scale effectively to support new activities, we may be exposed to increased operational, legal or regulatory risk. Failure to successfully manage these risks in the development and implementation of new lines of business or new products or services could have a material adverse effect on our business, results of operations and financial condition. In addition, unsuccessful product launches or new business initiatives could adversely affect our reputation and divert management attention from existing operations.
We focus on marketing our services to a limited segment of the population and any adverse change impacting such segment is likely to have an adverse impact on us.
Our marketing focuses primarily on the banking needs of small- and medium-sized businesses, professionals and residents in the markets that we serve, primarily communities with large Asian-American populations. This demographic concentration makes us more prone to circumstances that particularly affect this segment of the population. As a result, our financial condition and results of operations are subject to changes in the economic conditions affecting these communities. Our success depends upon the business activity, population, income levels, deposits and real estate activity in these communities. Although our customers’ business and financial interests may extend well beyond these communities, adverse economic conditions that affect these communities could reduce our growth rate, affect the ability of our customers to repay their loans to us and generally affect our financial condition and results of operations. Because of our geographic concentration, we are less able than regional or national financial institutions to diversify our credit risks across multiple markets. In addition, larger institutions with similar focuses are targeting our market areas. As we grow, we face entrenched multi-ethnic-oriented banks with larger resources in our new markets, which may be able to offer broader product offerings, more aggressive pricing or greater technological capabilities, placing us at a competitive disadvantage.
The costs and effects of litigation, investigations or similar matters, or adverse facts and developments related thereto, could materially affect our business, operating results and financial condition.
We may be involved from time to time in a variety of litigation, investigations or similar matters arising out of our business, including regulatory, supervisory and civil proceedings. The outcome of such matters is inherently difficult to predict, and we may not prevail in any particular matter. Any claims asserted against us, regardless of merit or ultimate outcome, may require significant management time and financial resources and could harm our reputation. Adverse judgments, settlements or civil money penalties in litigation or investigations could result in substantial costs, including damages, fines, penalties, remediation expenses or restrictions on our business activities, and could materially adversely affect our business, financial condition and results of operations. Our insurance coverage may not be sufficient to cover all claims, losses or liabilities, and insurance coverage may become more costly or less available over time. Banking institutions are also increasingly subject to private litigation, including class action lawsuits and claims based on evolving legal theories relating to lending practices, account terms, employment matters or other aspects of their operations. We may also be subject to regulatory investigations, examinations or enforcement actions that could result in fines, penalties, customer remediation requirements, or other supervisory actions. Such matters could expose us to significant liability, increased regulatory scrutiny, ongoing compliance or reporting obligations, or reputational harm. Although we seek to manage litigation risk through internal controls, compliance programs, training, insurance and active litigation
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management, the commencement, outcome and magnitude of litigation or investigations cannot be predicted with certainty.
Our ability to maintain our reputation is critical to the success of our business, and the failure to do so may materially adversely affect our business and the value of our common stock.
We are a community bank, and our reputation is one of the most valuable components of our business. Threats to our reputation can come from many sources, including adverse sentiment about financial institutions generally, unethical practices, employee misconduct, failure to deliver minimum standards of service or quality, compliance deficiencies, security breaches, litigation, investigations and other proceedings, and questionable or fraudulent activities of our customers. Negative publicity regarding our business, employees, or customers, with or without merit, may result in the loss of customers, investors and employees, costly litigation, a decline in revenues and increased government regulation. If our reputation is negatively affected, by the actions of our employees or otherwise, our business and, therefore, our operating results and the value of our common stock may be materially adversely affected.
Our risk management framework may not be effective in mitigating risks and/or losses to us.
Our risk management framework is comprised of various processes, systems and strategies, and is designed to manage the types of risk to which we are subject, including, among others, credit, market, liquidity, operational, interest rate and compliance. Our framework also includes financial or other modeling methodologies that involve management assumptions and judgment. Our risk management framework may not be effective under all circumstances and may not adequately mitigate any risk or loss to us. If our risk management framework is not effective, we could suffer unexpected losses and our business, financial condition, results of operations or growth prospects could be materially and adversely affected. We may also be subject to potentially adverse regulatory consequences.
We have a continuing need for technological change, and we may not have the resources to effectively implement new technology or we may experience operational challenges when implementing new technology.
The financial services industry is continually undergoing rapid technological changes with frequent introductions of new technology-driven products and services (including those related to or involving artificial intelligence, machine learning, blockchain and other distributed ledger technologies), and an established and growing demand for mobile and other phone and computer banking applications. In addition to better serving customers, the effective use of technology increases efficiency and enables financial institutions to reduce costs. Our future success will depend in part upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands for convenience as well as to create additional efficiencies in our operations as we continue to grow and expand our market area.
Many of our larger competitors have substantially greater resources to invest in technological improvements. As a result, they may be able to offer additional or more convenient products compared to those that we will be able to provide, which would put us at a competitive disadvantage. We may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers, and even if we implement such products and services, we may incur substantial costs in doing so. The implementation of new technologies may also require changes to existing systems, processes and controls and may increase our reliance on third‑party vendors, which could expose us to additional operational, regulatory or compliance risks. Failure to successfully keep pace with technological change affecting the financial services industry could have a material adverse impact on our business, financial condition and results of operations.
System failure or compromises of our network security could subject us to increased operating costs as well as litigation and other liabilities.
The computer systems and network infrastructure we use, including those we maintain with our service providers and vendors, could be vulnerable to hardware and cyber security issues. Our operations are dependent upon our ability to protect our computer equipment against damage from fire, power loss, telecommunications failure, natural disasters such as earthquakes, tornadoes and hurricanes, or a similar catastrophic event. We could also experience a cybersecurity incident
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by intentional or negligent conduct on the part of employees or other internal or external sources, including our third-party vendors and cyber criminals through, for example, phishing attempts, brute force attacks, denial of service attacks, viruses or other malicious code, exploiting software vulnerabilities (including “zero-day attacks”), ransomware or other malware and supply chain attacks and other disruptive problems caused by criminal threat actors. Any damage or failure that causes an interruption in our operations could have an adverse effect on our financial condition and results of operations. In addition, our operations are dependent upon our ability to protect the computer systems and network infrastructure utilized by us, including our internet banking activities, against damage from physical break-ins, cyberattacks and other disruptive problems caused by criminal threat actors. Such cyberattacks and other technology disruptions would jeopardize the security of information stored in and transmitted through our computer systems and network infrastructure, and those maintained by our service providers and vendors, which may result in significant liability, reputational damage and inhibit the use of our internet banking services by current and potential customers, any of which may result in a material adverse impact on our financial condition, results of operations or the market price of our common stock. As cyber threats continue to evolve and become more frequent, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities. In addition, as the regulatory environment related to information security, data collection and use, and privacy becomes increasingly rigorous, with new and constantly changing requirements applicable to our business, compliance with those requirements could also result in additional costs.
We and our third-party vendors are under continuous threat of loss due to hacking and cyberattacks especially as we continue to expand client capabilities to utilize internet and other remote channels to transact business. These cyber risks include increased phishing, malware, and other cybersecurity attacks described above, vulnerability to disruptions of our and our third-party vendors’ information technology infrastructure and telecommunications systems for remote operations, increased risk of unauthorized dissemination of confidential information, limited ability to restore the systems in the event of a systems failure or interruption, greater risk of a cybersecurity incident resulting in destruction or misuse of valuable information, and potential impairment of our ability to perform critical functions, including wiring funds, all of which could expose us to risks of data or financial loss, litigation and liability and could seriously disrupt our operations and the operations of any impacted customers.
To date, none of foregoing types of attacks have had a material effect on our business or operations and we maintain a system of internal controls and insurance coverage to mitigate against operational risks, including data processing system failures and errors and customer or employee fraud. However, no assurances can be provided that we (or our third-party vendors) may not suffer from such an attack in the future that may cause us material harm, especially in light of the risks being posed by the proliferation of new technologies, including artificial intelligence, the use of the Internet and telecommunications technologies to conduct financial transactions, and the increased sophistication and activities of cybercriminals and other external parties..
Our operations could be interrupted if our third-party service providers experience difficulty, terminate their services or fail to comply with banking regulations.
We depend to a significant extent on a number of relationships with third-party service providers. Specifically, we receive core systems processing, essential web hosting, deposit processing and other processing services from third-party service providers. If these third-party service providers experience financial, operational, or technological difficulties or terminate their services and we are unable to replace them with other suitable service providers, our operations could be interrupted. If an interruption were to continue for a significant period of time, our business, financial condition and results of operations could be adversely affected, perhaps materially. Even if we are able to replace our service providers, it may be at a higher cost to us, which could adversely affect our business, financial condition and results of operations.
The developments and use of artificial intelligence (“AI”) presents risks and challenges that may adversely impact our business.
The Company or its third-party (or fourth party) vendors, clients or counterparties may develop or incorporate AI technology in certain business processes, services, or products. The development and use of AI presents a number of risks and challenges to the Company’s business. The legal and regulatory environment relating to AI is uncertain and rapidly evolving, both in the U.S. and internationally, and includes regulatory schemes targeted specifically at AI as well as
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provisions in intellectual property, privacy, security, consumer protection, employment, and other laws applicable to the use of AI. These evolving laws and regulations could require changes in the Company’s implementation of AI technology and increase the Company’s compliance costs and the risk of non-compliance. AI models, particularly generative AI models, may produce output or take action that is incorrect, that reflects biases included in the data on which they are trained, that results in the release of private, confidential, or proprietary information, that infringes on the intellectual property rights of others, or that is otherwise harmful. In addition, the complexity of many AI models makes it difficult to understand why they are generating particular outputs. This limited transparency increases the challenges associated with assessing the proper operation of AI models, understanding and monitoring the capabilities of the AI models, reducing erroneous output, eliminating bias, and complying with regulations that require documentation or explanation of the basis on which decisions are made. Further, the Company may rely on AI models developed by third parties, and, to that extent, would be dependent in part on the manner in which those third parties develop and train their models, including risks arising from the inclusion of any unauthorized material in the training data for their models and the effectiveness of the steps these third parties have taken to limit the risks associated with the output of their models, matters over which the Company may have limited visibility. Any of these risks could expose the Company to liability or adverse legal or regulatory consequences, harm the Company’s reputation and the public perception of its business or the effectiveness of its security measures and risk‑management practices, or place us at a competitive disadvantage if we are unable to adopt or govern AI technologies effectively relative to our peers.
We depend on the accuracy and completeness of information provided by customers and counterparties and any misrepresented information could adversely affect our business, financial condition and results of operations.
In deciding whether to extend credit or to enter into other transactions with customers and counterparties, we rely on information furnished to us by or on behalf of such customers and counterparties, including financial statements and other financial information. We also rely on representations of customers and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors. Such information could turn out to be inaccurate, including as a result of fraud on behalf of our customers, counterparties or other third parties. In times of increased economic stress, we are at an increased risk of fraud losses. We cannot make assurances that our underwriting and operational controls will prevent or detect such fraud or that we will not experience fraud losses or incur costs or other damages related to such fraud. Our customers may also experience fraud in their businesses which could adversely affect their ability to repay their loans or make use of our services. Our exposure and the exposure of our customers to fraud may increase our financial risk and reputation risk as it may result in unexpected credit losses that exceed those that have been provided for in our allowance for credit losses. Reliance on inaccurate or misleading information from our customers, counterparties and other third parties, including as a result of fraud, could have a material adverse impact on our business, financial condition and results of operations.
Our accounting estimates and risk management processes rely on analytical and forecasting models.
Processes that management uses to estimate our current expected credit losses and to measure the fair value of financial instruments, as well as the processes used to estimate the effects of changing interest rates and other market measures on our financial condition and results of operations, depend upon the use of analytical and/or forecasting models. These models reflect assumptions that may not be accurate, particularly in times of market stress or other unforeseen circumstances. Even if these assumptions are accurate, the models may prove to be inadequate or inaccurate because of other flaws in their design or their implementation.
If the models that management uses for interest rate risk and asset liability management are inadequate, we may incur increased or unexpected losses upon changes in market interest rates or other market measures. If the models that management uses for determining our expected credit losses are inadequate, the ACL may not be sufficient to support future charge offs. If the models that management uses to measure the fair value of financial instruments are inadequate, the fair value of such financial instruments may fluctuate unexpectedly or may not accurately reflect what we could realize upon sale or settlement of such financial instruments. Any such failure in management’s analytical or forecasting models could have a material adverse effect on our business, financial condition and results of operations.
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Changes in accounting standards could materially impact our financial statements.
From time to time, the FASB or the Securities and Exchange Commission, or SEC, may change the financial accounting and reporting standards that govern the preparation of our financial statements. Such changes may result in us being subject to new or changing accounting and reporting standards. In addition, the bodies that interpret the accounting standards (such as banking regulators or outside auditors) may change their interpretations or positions on how these standards should be applied. These changes may be beyond our control, can be hard to predict and can materially impact how we record and report our financial condition and results of operations. In some cases, we could be required to apply a new or revised standard retrospectively, or apply an existing standard differently, also retrospectively, in each case resulting in our needing to revise or restate prior period financial statements.
Failure to maintain effective internal controls over financial reporting could have a material adverse effect on our business and stock price.
Management regularly monitors, reviews and updates our disclosure controls and procedures, including our internal control over financial reporting. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable assurances that the controls will be effective. The effectiveness of our internal controls also depends on the performance of individuals, and human error, misconduct or changes in personnel could compromise the effectiveness of our controls. Any failure or circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on our business, results of operations and financial condition. Failure to achieve and maintain an effective internal control environment could prevent us from accurately reporting our financial results, preventing or detecting fraud or providing timely and reliable financial information pursuant to our reporting obligations, which could result in a material weakness in our internal controls over financial reporting and the restatement of previously filed financial statements and could have a material adverse effect on our business, financial condition and results of operations. Further, ineffective internal controls could cause our investors to lose confidence in our financial information, which could affect the trading price of our common stock.
Risks Related to Legislative and Regulatory Events
We are subject to extensive government regulation that could limit or restrict our activities, which in turn may adversely impact our ability to increase our assets and earnings.
We operate in a highly regulated environment and are subject to supervision and regulation by a number of governmental regulatory agencies, including the Federal Reserve, the DBF and the FDIC. Regulations adopted by these agencies, which are generally intended to provide protection for depositors and customers rather than for the benefit of shareholders, govern a comprehensive range of matters relating to ownership and control of our shares, our acquisition of other companies and businesses, permissible activities for us to engage in, maintenance of adequate capital levels, and other aspects of our operations. These bank regulators possess broad authority to prevent or remedy unsafe or unsound practices or violations of law. Regulatory authorities also have significant discretion in the interpretation, application and enforcement of laws and regulations, and may impose supervisory expectations or informal actions that are not codified in statute or regulation. The laws and regulations applicable to the banking industry could change at any time and we cannot predict the effects of these changes on our business, profitability or growth strategy. Increased regulation could increase our cost of compliance and adversely affect profitability. Moreover, certain of these regulations contain significant punitive sanctions for violations, including monetary penalties and limitations on a bank’s ability to implement components of its business plan, such as expansion through mergers and acquisitions or the opening of new branch offices. In addition, changes in regulatory requirements may add costs associated with compliance efforts. Furthermore, government policy and regulation, particularly as implemented through the Federal Reserve System, significantly affect credit conditions. Negative developments in the financial industry and the impact of new legislation and regulation in response to those developments could negatively impact our business operations and adversely impact our financial performance. In addition, the potential erosion of Federal Reserve independence could negatively impact financial markets and impact our profitability. See Supervision and Regulation above for an additional discussion of the extensive regulation and supervision that the Company and the Bank are subject to.
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Federal and state regulators periodically examine our business, and we may be required to remediate adverse examination findings.
The Federal Reserve, the FDIC, and the DBF periodically examine our business, including our compliance with laws and regulations. If, as a result of an examination, a banking agency were to determine that our financial condition, capital resources, asset quality, earnings prospects, management, liquidity, interest rate sensitivity or other aspects of any of our operations had become unsatisfactory, or that we were in violation of any law or regulation, they may take a number of different remedial actions as they deem appropriate. These actions include the power to enjoin “unsafe or unsound” practices, to require affirmative action to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in our capital, to restrict our growth, to assess civil money penalties, to fine or remove officers and directors and, if it is concluded that such conditions cannot be corrected or there is an imminent risk of loss to depositors, to terminate our deposit insurance and place us into receivership or conservatorship. Any regulatory action against us could have an adverse effect on our business, financial condition and results of operations. Additionally, significant transactions, such as the recently-completed transaction with First IC Corporation, may result in heightened regulatory or supervisory scrutiny, increased examination activity or additional remediation expectations, which could increase compliance costs or limit management flexibility during the integration period.
Changes to monetary policy by the Federal Reserve could adversely impact our results of operations.
The Federal Reserve is responsible for regulating the supply of money in the United States, including through open market operations and other tools used to influence economic activity and price stability, as well as setting monetary policy. Changes in monetary policy, including the pace, timing and magnitude of interest rate increases or decreases, as well as changes in liquidity conditions, may be volatile and difficult to predict. These actions strongly influence our rate of return on certain investments, our hedge effectiveness for mortgage servicing and our mortgage origination pipeline, as well as our cost of funds for lending and investing. Monetary policy actions may also affect asset valuations, deposit pricing and availability, borrower behavior and overall credit conditions, all of which could adversely impact our liquidity, results of operations, financial condition and capital position. In addition, changes in monetary policy may negatively affect the financial condition of our customers by increasing borrowing costs or reducing access to credit, which could result in increased delinquencies, reduced loan demand or lower profitability. We cannot predict the nature or timing of future changes in monetary, economic or other policies or the effect that they may have on our business activities, financial condition or results of operations.
We are subject to federal and state fair lending laws, and failure to comply with these laws could lead to material penalties.
Federal and state fair lending laws and regulations, such as the Equal Credit Opportunity Act and the Fair Housing Act, impose nondiscriminatory lending requirements on financial institutions. The Department of Justice, CFPB and other federal and state agencies are responsible for enforcing these laws and regulations. Private parties may also have the ability to challenge an institution’s performance under fair lending laws in private class action litigation. A successful challenge to our performance under the fair lending laws and regulations could adversely impact our rating under the Community Reinvestment Act and result in a wide variety of sanctions, including the required payment of damages and civil money penalties, injunctive relief, imposition of restrictions on merger and acquisition activity and restrictions on expansion activity, which could negatively impact our reputation, business, financial condition and results of operations.
The Federal Reserve may require us to commit capital resources to support the Bank.
The Federal Reserve, which examines us and the Bank, requires a bank holding company to act as a source of financial and managerial strength to a subsidiary bank and to commit resources to support such subsidiary bank. Under the “source of strength” doctrine, the Federal Reserve may require a bank holding company to make capital injections into a troubled subsidiary bank and may charge the bank holding company with engaging in unsafe and unsound practices for failure to commit resources to such a subsidiary bank. In addition, The Bank is subject to capital adequacy guidelines and other regulatory requirements specifying minimum amounts and types of capital which the Bank must maintain. From time to time, the regulators implement changes to these regulatory capital adequacy guidelines. If the Bank fails to meet these
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minimum capital guidelines and other regulatory requirements, our financial condition would be materially and adversely affected. We may also be required to satisfy additional capital adequacy standards as determined by the Federal Reserve. These requirements, and any other new regulations, could adversely affect our ability to pay dividends, service holding‑company obligations, pursue growth initiatives or return capital to shareholders, and could require us to raise additional capital or reallocate resources in ways that may not be favorable to our shareholders, including at times when market conditions are adverse.
We could face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations.
The Bank Secrecy Act of 1970, the USA PATRIOT Act and other laws and regulations require financial institutions, among other duties, to institute and maintain effective anti-money laundering programs and file suspicious activity and currency transaction reports as appropriate. FinCEN, established by the U.S. Department of the Treasury to administer the Bank Secrecy Act, is authorized to impose significant civil money penalties for violations of those requirements and engages in coordinated enforcement efforts with the individual federal banking regulators, as well as the U.S. Department of Justice, Drug Enforcement Administration and IRS. There is also increased scrutiny of compliance with the rules enforced by OFAC related to U.S. sanctions regimes. If our policies, procedures and systems are deemed deficient or the policies, procedures and systems of the financial institutions that we have already acquired or may acquire in the future are deficient, we would be subject to liability, including fines and regulatory actions such as restrictions on our ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of our business plan, including our acquisition plans, which would negatively impact our business, financial condition and results of operations. Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us.
Our deposit insurance premiums could be substantially higher in the future, which could have a material adverse effect on our future earnings.
The FDIC insures deposits at FDIC-insured depository institutions, such as the Bank, up to applicable limits. The amount of a particular institution’s deposit insurance assessment is based on that institution’s risk classification under an FDIC risk-based assessment system. An institution’s risk classification is assigned based on its capital levels and the level of supervisory concern the institution poses to its regulators. We are generally unable to control the amount of premiums that we are required to pay for FDIC insurance. Any future additional assessments, increases or required prepayments in FDIC insurance premiums could reduce our profitability, place additional pressure on pricing of loans and deposits, limit our ability to pursue certain business opportunities, or otherwise negatively impact our operations. The timing and magnitude of any such assessments may be difficult to predict and could adversely affect our earnings in the periods in which they are imposed.
Risks Related to Our Common Stock
The Company’s directors may have interests that differ from other shareholders, and such directors have ownership interests in the Company that, when aggregated with holdings of their extended families and their affiliated entities, may allow such individuals and entities to take certain corporate actions without the consent of other shareholders.
As of December 31, 2025, our directors and their families and affiliated entities collectively had a 24.6% ownership interest in the Company. As a result, our directors may have significant influence over the election of board of directors, control the management and policies of the Company and, in general, determine the outcome of any corporate transaction or other matter submitted to the shareholders for approval, including mergers, consolidations and the sale of all or substantially all of the assets of the Company, and will be able to prevent or cause a change in control of the Company.
An investment in our common stock is not an insured deposit and may lose value.
Securities that we issue, including our common stock, are not savings or deposit accounts or other obligations of any bank, insured by the FDIC, any other governmental agency or instrumentality, or any private insurer, and are subject to investment risk, including the possible loss of our shareholders’ investments. Investment in our common stock is inherently
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risky for the reasons described herein, and is subject to the same market forces that affect the price of common stock in any company. As a result, if you acquire our common stock, you could lose some or all of your investment.
Environmental, social and governance (“ESG”) and diversity, equity and inclusion (“DEI”) risks could adversely affect our reputation and shareholder, employee, client and third party relationships and may negatively affect our stock price.
Public expectations, investor preferences, regulatory developments and stakeholder views regarding environmental, social and governance related matters continue to evolve and may be inconsistent or conflicting. Our responses to these matters, including decisions regarding business practices, customer relationships, disclosures or policies, may be perceived negatively by certain stakeholders, regardless of intent. In addition, adverse publicity or stakeholder reactions related to our clients, counterparties or business partners, including through traditional or social media, could harm our reputation and negatively affect our ability to attract and retain customers, employees and investors. Changes in laws, regulations or public policy affecting the consideration of ESG related factors could also increase compliance costs, restrict certain business activities or adversely affect our growth strategies. Any of these factors could adversely affect our business, reputation and the market price of our common stock.
Our dividend policy may change, and consequently, your only opportunity to achieve a return on your investment may be if the price of our common stock appreciates.
We have paid quarterly dividends to our shareholders for the past twelve years. However, past payment of dividends is not a guarantee of future dividend payments. We have no obligation to pay dividends and we may change our dividend policy at any time without notice to our shareholders. Holders of our common stock are only entitled to receive such cash dividends as our board of directors, in its discretion, may declare out of funds legally available for such payments. Furthermore, consistent with our strategic plans, growth initiatives, capital availability and requirements, projected liquidity needs, financial condition, and other factors, we have made, and will continue to make, capital management decisions and policies that could adversely impact the amount of dividends paid to our shareholders.
We are a separate and distinct legal entity from our subsidiary, the Bank. We receive substantially all of our revenue from dividends from the Bank, which we use as the principal source of funds to pay our expenses. Various federal and/or state laws and regulations limit the amount of dividends that the Bank may pay us. Such limits are also tied to the earnings of our subsidiary. If the Bank does not receive regulatory approval or if the Bank’s earnings are not sufficient to make dividend payments to us while maintaining adequate capital levels, our ability to pay our expenses and our business, financial condition or results of operations could be materially and adversely impacted.
We may need to raise additional capital in the future.
We are required to meet certain regulatory capital requirements and maintain sufficient liquidity. We are generally not restricted from issuing additional shares of our common stock up to the authorized number of shares set forth in our charter. We may need to raise additional capital in the future to provide us with sufficient capital resources and liquidity to meet our commitments and business needs, which could include the possibility of financing acquisitions. Our ability to raise additional capital depends on conditions in the capital markets, economic conditions and a number of other factors, including investor perceptions regarding the banking industry, market conditions and governmental activities, and on our financial condition and performance. We cannot predict the size, timing or terms of future issuances of our common stock or other capital instruments, or the effect that any such issuances may have on the market price of our common stock. Any issuance of additional equity securities could result in dilution to existing shareholders, and the issuance of debt or other capital instruments could increase our leverage and interest expense. Accordingly, we may be unable to raise additional capital if needed, or on terms acceptable to us. If we or the Bank fail to maintain capital at levels required by regulators, or at levels deemed appropriate by supervisory authorities, our financial condition, liquidity and results of operations could be materially and adversely affected, and we could be subject to restrictions on growth, capital distributions or other aspects of our business.
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We have the ability to incur debt and pledge our assets, including our stock in the Bank, to secure that debt.
We have the ability to incur debt and pledge our assets to secure that debt. Absent special and unusual circumstances, a holder of indebtedness for borrowed money has rights that are superior to those of holders of common stock. For example, interest must be paid to the lender before dividends can be paid to the shareholders, and loans must be paid off before any assets can be distributed to shareholders if we were to liquidate. Furthermore, we would have to make principal and interest payments on our indebtedness, which could reduce our profitability or result in net losses on a consolidated basis even if the Bank were profitable.
Merger-Related Risks
If we fail to successfully integrate our acquisitions or to realize the anticipated benefits of them, our financial condition and results of operations could be negatively affected.
We intend to continue to regularly evaluate potential acquisitions and expansion opportunities. To the extent we grow through acquisition, we cannot assure you that we will be able to manage this growth adequately or profitably. Acquiring other banks, branches or businesses, as well as other geographic and product expansion activities, involve various risks including: (i) risk of unknown, undisclosed or contingent liabilities that could arise after the closing of an acquisition and for which there is no indemnification obligation or other price protection mechanism associated with the acquisition; (ii) unanticipated costs and delays, including as a result of enhanced regulatory scrutiny; (iii) risks that acquired new businesses do not perform consistently with our growth and profitability expectations; (iv) risks of entering new market or product areas where we have limited experience; (v) risks that growth will strain our infrastructure, staff, internal controls and management, which may require additional personnel, time and expenditures; (vi) exposure to potential asset quality issues with acquired institutions; (vii) difficulties, expenses and delays of integrating the operations and personnel of acquired institutions, and start-up delays and costs of other expansion activities; (viii) inaccurate estimates of value assigned to acquired assets; (ix) potential disruptions to our business; (x) possible loss of key employees and customers of acquired institutions; (xi) potential short-term decrease in profitability; (xii) potential dilution of our current shareholders or a decline in our share price resulting from the issuance in connection with an acquisition of equity securities or securities convertible into equity securities, any of which may be senior to our common stock as to distributions and in liquidation; (xiii) litigation; and (xiv) diversion of our management’s time and attention from our existing operations and businesses.
Our future success is largely dependent upon our ability to successfully execute our business strategy.
Our future success, including our ability to achieve our growth and profitability goals, depends largely on the ability of our management team to execute our long‑term business strategy. This strategy requires us, among other things, to maintain and enhance our reputation; attract and retain experienced personnel; maintain stable, low‑cost funding sources; strengthen market penetration and competitive positioning; improve operating efficiency; implement new technologies; grow prudent lending and noninterest income; manage credit, interest rate and liquidity risks; comply with regulatory requirements; oversee third‑party service providers; and control expenses.
Failure to achieve these objectives could impair our ability to execute our strategy and adversely affect our business, growth prospects, financial condition and results of operations. In addition, ineffective growth management, technology implementation challenges, cost overruns or service disruptions involving third‑party providers could hinder our ability to achieve our strategic objectives. Pursuing multiple strategic initiatives simultaneously, including acquisitions, technology investments or geographic expansion, may place additional strain on management, personnel, systems and controls. Our ability to execute our strategic objectives depends, in part, on the successful integration of First IC Corporation following the completion of the Company’s acquisition on December 1, 2025. The integration process will require significant management attention and resources and may divert focus from other initiatives. We may encounter challenges integrating systems, processes, controls, personnel and cultures, and there can be no assurance that the anticipated benefits or efficiencies of the transaction will be realized on the expected timeline or at all. Failure to successfully integrate the businesses could adversely affect our growth prospects, financial condition and results of operations
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Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
Cybersecurity Risk Management and Strategy
Our risk management program is designed to identify, assess, and mitigate risks across various aspects of our company, including financial, operational, regulatory, reputational, and legal. Cybersecurity is a critical component of this program, given the increasing reliance on technology and potential of cyber threats. Our Information Security Officer is primarily responsible for the cybersecurity component of our risk management program and is a key member of the risk management organization, reporting directly to the Chief Executive Officer and, as discussed below, periodically to the
Our objective for managing cybersecurity risk is to avoid or minimize the impacts of external threat events or other efforts to penetrate, disrupt or misuse our systems or information. The structure of our information security program is designed around the National Institute of Standards and Technology (“NIST”) Cybersecurity Framework, regulatory guidance, and other industry standards. In addition, we leverage certain industry and government associations, third-party benchmarking, audits, and threat intelligence feeds to facilitate and promote program effectiveness. Our Information Security Officer, who reports directly to our Chief Executive Officer, along with key members of the Information Security Officer’s team, regularly collaborate with peer banks, industry groups, and policymakers to discuss cybersecurity trends and issues and identify best practices. The information security program is periodically reviewed by the Informaiton Security Officer, as well as the Information Technology Committee of our board of directors, with the goal of addressing changing threats and conditions.
We have established
We maintain an Incident Response Plan that provides a documented framework for responding to actual or potential cybersecurity incidents, including timely notification of and escalation to senior management and the Information Technology Committee of our board of directors, as well as the full board of directors. The Incident Response Plan is coordinated through the Information Security Officer and key members of management are embedded into the Incident Response Plan by its design. The Incident Response Plan facilitates coordination across multiple parts of our organization and is evaluated at least annually.
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see the section captioned “System failures or breaches of our network security could subject us to increased operating costs as well as litigation and other liabilities” in Item 1A. Risk Factors.
Cybersecurity Governance
Our
The Information Technology Committee of our board of directors has primary responsibility for overseeing our information security and technology programs, including management’s actions to identify, assess, mitigate, and remediate or prevent material cybersecurity issues and risks.
Item 2. Properties
The Company’s corporate headquarters and Metro City Bank’s main office is located at 5114 Buford Highway NE, Atlanta, GA 30340. Metro City Bank owns this property. We also currently operate 29 additional full service-branches, which are all leased, located in multi-ethnic communities in Alabama, California, Florida, Georgia, New York, New Jersey, Texas and Virginia. We believe that our banking offices are in good condition and are suitable and adequate to our needs.
Item 3. Legal Proceedings
We are subject to various legal actions that arise from time to time in the ordinary course of business. While the ultimate outcome of pending procedures cannot be predicted with certainty, at this time management does not expect that any such proceedings, either individually or in the aggregate, would have a material adverse effect on our consolidated financial position or results of operations. However, one or more unfavorable outcomes in any legal action against us could have a material adverse effect for the period in which they are resolved. In addition, regardless of their merits or their ultimate outcomes, such matters are costly, divert management’s attention and may materially adversely affect our reputation, even if resolved in our favor.
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
Market Information and Holders of Record
Our common stock is listed on the Nasdaq Global Select Market under the symbol “MCBS”.
As of March 9, 2026, there were 28,755,228 shares of common stock outstanding held by approximately 399 shareholders of record of our common stock as reported by our transfer agent.
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Dividends
It has been our policy to pay quarterly dividends to holders of our common stock. We have paid quarterly dividends to our shareholders in amounts up to 40% of our net income over the past twelve years. We have no obligation to pay dividends and we may change our dividend policy at any time without notice to our shareholders. 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.
As a Georgia corporation, the Company is subject to certain restrictions on dividends under the Georgia Business Corporation Code. We are also subject to certain restrictions on the payment of cash dividends as a result of banking laws, regulations and policies. See “Item 1. Business - Regulation and Supervision - Regulation of the Company - Payment of Dividends.”
Equity Compensation Plan Information
Please see Item 12 of this Annual Report for information with respect to shares of common stock that are authorized for issuance under the Company’s equity compensation plans as of December 31, 2025.
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 December 31, 2025.
Total Number of |
| ||||||||
Shares Repurchased | Maximum Number of | ||||||||
as Part of Publicly | Shares That May Yet Be | ||||||||
Total Number of | Average Price Paid | Announced | Purchased Under | ||||||
| Shares Repurchased | | Per Share | | Plans or Programs |
| the Plans or Programs | ||
October 1, 2025 to October 31, 2025 |
| 46,621 |
| $ | 25.95 |
| 46,621 | 877,355 | |
November 1, 2025 to November 30, 2025 | 57,224 | $ | 26.02 | 57,224 | 820,131 | ||||
December 1, 2025 to December 31, 2025 |
| — |
| $ | — |
| — | 820,131 | |
Total |
| 103,845 | $ | 25.98 | 103,845 | 820,131 | |||
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Stock Performance Graph
The following graph compares the cumulative total return on our common stock with the cumulative total return of the Nasdaq Composite Index and the S&P U.S. Small Cap Bank Index for the period beginning on December 31, 2021 through December 31, 2025. The following reflects index values as of close of trading, assumes $100.00 invested on December 31, 2021, in our common stock, the Nasdaq Composite Index and the S&P U.S. Small Cap Bank Index, and assumes the reinvestment of dividends, if any. The historical price of our common stock represented in this graph represents past performance and is not necessarily indicative of future performance.
Index | | 2021 | | 2022 | | 2023 | | 2024 | | 2025 | |||||
MetroCity Bankshares, Inc. | $ | 100.00 | $ | 80.75 | $ | 93.16 | $ | 127.74 | $ | 109.81 | |||||
Nasdaq Composite Index |
| 100.00 |
| 66.90 |
| 95.95 |
| 123.43 |
| 148.56 | |||||
S&P U.S. Small Cap Bank Index |
| 100.00 |
| 88.17 |
| 88.61 |
| 104.75 |
| 115.20 | |||||
Item 6. [Reserved]
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion and analysis contains forward-looking statements that involve risk, uncertainties and assumptions. Certain risks, uncertainties and other factors, including but not limited to those set forth under “Cautionary Note Regarding Forward-Looking Statements,” “Risk Factors,” and elsewhere in this Annual Report on Form 10-K, may cause actual results to differ materially from those projected in the forward looking statements. We assume no obligation to update any of these forward-looking statements.
Overview
We are MetroCity Bankshares, Inc., a bank holding company headquartered in the Atlanta, Georgia 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 29 full-service branch locations in multi-ethnic communities in Alabama, California, Florida, Georgia, New York, New Jersey, Texas and Virginia. We are focused on delivering full-service banking services in diverse multi-ethnic markets, including Asian-American communities in growing metropolitan markets in the Eastern U.S. and Texas
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Prior to December 2014, the Bank operated without a holding company structure. In December 2014, the Bank formed MetroCity Bankshares, Inc. as its holding company, and on, December 31, 2014, MetroCity Bankshares, Inc. acquired all of the outstanding common stock of Metro City Bank in connection with the holding company formation transaction.
We are a bank holding company and we conduct all of our material business operations through the Bank. Accordingly, the discussion and analysis herein relates primarily to activities primarily conducted at the Bank level.
Acquisition of First IC Corporation and First IC Bank
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 approximately $202.3 million and consisted of $90.5 million of equity (3,384,066 shares) in the form of the Company’s common stock, plus $111.9 million in cash, including cash paid for stock option cancellations and fractional shares. As of December 31, 2025, First IC had approximately $1.13 billion in total assets, $1.01 billion in total loans and $878.4 million in deposits.
Critical Accounting Policies and Estimates
Our accounting and reporting policies conform to accounting principles generally accepted in the United States of America (“GAAP”) and conform to general practices within the industry in which we operate. To prepare financial statements in conformity with GAAP, management makes estimates, assumptions and judgments based on available information. These estimates, assumptions and judgments affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the financial statements and, as this information changes, actual results could differ from the estimates, assumptions and judgments reflected in the financial statement. In particular, management has identified several accounting policies that, due to the estimates, assumptions and judgments inherent in those policies, are critical in understanding our financial statements.
The following is a discussion of the critical accounting policies and significant estimates that require us to make complex and subjective judgments. Additional information about these policies can be found in Note 1 of our consolidated financial statements as of December 31, 2025, included elsewhere in this Annual Report on Form 10-K.
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 including, among others, volatility in 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. We estimate the reserve for credit losses using the Current Expected Credit Losses (“CECL”) model, which is based on an expected loss methodology. The estimate of expected credit losses under the CECL approach 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 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
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estimate as it requires 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, included elsewhere in this Annual Report on Form 10-K, for additional information on the reserve and allowance for credit losses.
Business Combinations
In accordance with applicable accounting guidance, the Company recognizes assets acquired and liabilities assumed at their respective fair values as of the date of acquisition, with the related transaction costs expensed in the period incurred. The Company may use third party valuation specialists to assist in the determination of fair value of certain assets and liabilities at the acquisition date, including loans, core deposit intangibles and time deposits. While the Company uses its best estimates and assumptions to accurately value assets acquired and liabilities assumed on the acquisition date, the estimates are inherently uncertain. The allowance for credit losses on purchased seasoned loans (PSLs) and purchased credit deteriorated (PCD) loans are recognized within business combination accounting.
See Note 1 and Note 2 of our consolidated financial statements as of December 31, 2025, included elsewhere in this Annual Report on Form 10-K, for additional information on the Company’s accounting policies for estimating credit losses on acquired loans and details regarding our acquisition of First IC.
Goodwill and Core Deposit Intangible
The Company has increased its market share through the acquisition of entire financial institutions accounted for under the acquisition method of accounting. For all acquisitions, the Company is required to record assets acquired and liabilities assumed at their fair value, which is an estimate determined by the use of internal or other valuation techniques, which may include the use of third-party specialists. Goodwill is evaluated for impairment at least annually, or more often if warranted, using a combined qualitative and quantitative impairment approach. The initial qualitative approach assesses whether the existence of events or circumstances led to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events and circumstances, the Company determines it is more likely than not that the fair value is less than carrying value, a quantitative impairment test is performed to compare carrying value to the fair value of the reporting unit. If the carrying amount of the reporting unit exceeds its fair value, an impairment loss will be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. The Company’s goodwill relates to acquisitions that are fully integrated into the retail banking operations, which management does not consider to be at risk of failing step one in the near future.
The Company’s core deposit intangibles arise from the acquisition of deposits and represent the fair value of the expected cost savings from a stable, low-cost funding source compared to alternative market funding. Core deposit intangible assets are amortized on a straight-line method over their estimated useful life of 10 years.
Results of Operations
Net Income
Year ended December 31, 2025 compared to year ended December 31, 2024
We recorded net income of $68.5 million for the year ended December 31, 2025 compared to $64.5 million for the year ended December 31, 2024, an increase of $4.0 million, or 6.2%. The increase was due to an increase in net interest income of $12.3 million, an increase in noninterest income of $2.1 million and a decrease in provision for credit losses of
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$834,000, offset by an increase in noninterest expense of $9.9 million and an increase in income tax expense of $1.4 million.
Basic and diluted earnings per common share for the year ended December 31, 2025 was $2.66 and $2.64, respectively, compared to $2.55 and $2.52 for the basic and diluted earnings per common share for the year ended December 31, 2024.
Year ended December 31, 2024 compared to year ended December 31, 2023
We recorded net income of $64.5 million for the year ended December 31, 2024 compared to $51.6 million for the year ended December 31, 2023, an increase of $12.9 million, or 25.0%. The increase was due to an increase in net interest income of $16.7 million and an increase in noninterest income of $4.9 million, offset by an increase in noninterest expense of $5.7 million, an increase in income tax expense of $2.5 million and an increase in provision for credit losses of $531,000.
Basic and diluted earnings per common share for the year ended December 31, 2024 was $2.55 and $2.52, respectively, compared to $2.05 and $2.02 for the basic and diluted earnings per common share for the year ended December 31, 2023.
Financial Performance Ratios
The following table sets forth our return on average assets, return on average equity, dividend payout ratio and average shareholders’ equity to average assets ratio for the periods indicated:
Years Ended December 31, | |||||||||
| 2025 | 2024 | 2023 | ||||||
Return on average assets | 1.85 | % | 1.81 | % | 1.50 | % | |||
Return on average shareholders' equity | 15.60 | % | 16.16 | % | 14.10 | % | |||
Adjusted return on average shareholders' equity (non-GAAP)(1) | 16.79 | % | 17.01 | % | 15.00 | % | |||
Efficiency ratio | 40.64 | % | 37.80 | % |
| 39.88 | % | ||
Adjusted efficiency ratio (non-GAAP)(1) | 37.61 | % | 37.80 | % | 39.88 | % | |||
Book value per share | 18.88 | % | 16.59 | % | 15.14 | % | |||
Tangible book value per share (non-GAAP)(1) | 16.50 | % | 16.59 | % | 15.14 | % | |||
Dividend payout ratio | 35.94 | % | 32.80 | % | 35.43 | % | |||
Average shareholders' equity to average assets | 11.84 | % | 11.18 | % | 10.63 | % | |||
| (1) | Non-GAAP measure, see “Non-GAAP Financial Measures” section below for more information and for a reconciliation to GAAP. |
Non-GAAP Financial Measures
This document contains financial information determined by methods other than in accordance with GAAP. The measures entitled adjusted return on average shareholder’s equity, adjusted efficiency ratio and tangible book value per share are not measures recognized under GAAP and therefore are considered non-GAAP financial measures. The most comparable GAAP measures are return on average shareholder’s equity, efficiency ratio and book value per share, respectively. Adjusted return on average shareholder’s equity excludes average accumulated other comprehensive income and merger-related expenses. Adjusted efficiency ratio excludes merger-related expenses. Tangible book value per share excludes goodwill and core deposit intangibles.
Management uses these non-GAAP financial measures in its analysis of the Company's performance and believes these presentations provide useful supplemental information, and a clearer understanding of the Company's performance, and if not provided would be requested by the investor community. The Company believes the non-GAAP measures enhance investors' understanding of the Company's business and performance. These measures are also useful in understanding performance trends and facilitate comparisons with the performance of other financial institutions. The limitations associated with operating measures are the risk that persons might disagree as to the appropriateness of items comprising these measures and that different companies might calculate these measures differently.
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These disclosures should not be considered an alternative to GAAP. The computations of adjusted return on average shareholder’s equity, adjusted efficiency ratio and tangible book value per share and the reconciliation of these measures to return on average shareholder’s equity, efficiency ratio and book value per share are set forth in the table below.
As of or For the Year Ended December 31, |
| |||||||||
(Dollars in thousands) | | 2025 | | 2024 | | 2023 | | |||
Return on average shareholder's equity reconciliation | ||||||||||
Average shareholder’s equity (GAAP) | $ | 439,436 | $ | 399,170 | $ | 366,163 | ||||
Less: average accumulated other comprehensive income | (7,711) | (19,894) | (22,093) | |||||||
Adjusted average shareholder’s equity (non-GAAP) | $ | 431,725 | $ | 379,276 | $ | 344,070 | ||||
Net income (GAAP) | $ | 68,532 | $ | 64,504 | $ | 51,613 | ||||
Add: First IC-merger related expenses (net of tax effect) | 3,950 | — | — | |||||||
Adjusted net income (non-GAAP) | $ | 72,482 | $ | 64,504 | $ | 51,613 | ||||
Return on average shareholder’s equity (GAAP) |
| 15.60 | % |
| 16.16 | % |
| 14.10 | % | |
Adjusted return on average shareholder’s equity (non-GAAP) |
| 16.79 | % |
| 17.01 | % |
| 15.00 | % | |
Efficiency ratio reconciliation | ||||||||||
Net interest income (GAAP) | $ | 130,449 | $ | 118,146 | $ | 101,479 | ||||
Noninterest income GAAP) | 25,184 | 23,063 | 18,204 | |||||||
Total revenue (GAAP) | $ | 155,633 | $ | 141,209 | $ | 119,683 | ||||
Noninterest expense (GAAP) | 63,257 | 53,379 | 47,726 | |||||||
Less: First IC merger-related expenses | (4,729) | — | — | |||||||
Adjusted noninterest expense (non-GAAP) | $ | 58,528 | $ | 53,379 | $ | 47,726 | ||||
Efficiency ratio (GAAP) | 40.64 | % | 37.80 | % | 39.88 | % | ||||
Adjusted efficiency ratio (non-GAAP) | 37.61 | % | 37.80 | % | 39.88 | % | ||||
Tangible book value per share reconciliation | ||||||||||
Total shareholder's equity (GAAP) | $ | 544,184 | $ | 421,353 | $ | 381,517 | ||||
Less: goodwill and core deposit intangibles | (68,675) | — | — | |||||||
Adjust total shareholder's equity (non-GAAP) | $ | 475,509 | $ | 421,353 | $ | 381,517 | ||||
Shares of common stock outstanding | 28,817,967 | 25,402,782 | 25,205,506 | |||||||
Book value per share (GAAP) | $ | 18.88 | $ | 16.59 | $ | 15.14 | ||||
Tangible book value per share (non-GAAP) | $ | 16.50 | $ | 16.59 | $ | 15.14 | ||||
Net Interest Income
The management of interest income and expense is fundamental to our financial performance. Net interest income, the difference between interest income and interest expense, is the largest component of the Company’s total revenue. Management closely monitors both total net interest income and the net interest margin (net interest income divided by average earning assets). We seek to maximize net interest income without exposing the Company to an excessive level of interest rate risk through our asset and liability policies. Interest rate risk is managed by monitoring the pricing, maturity and repricing options of all classes of interest-bearing assets and liabilities.
Year ended December 31, 2025 compared to year ended December 31, 2024
Net interest income for the year ended December 31, 2025 was $130.4 million compared to $118.1 million for the year ended December 31, 2024, an increase of $12.3 million, or 10.4%. Interest income totaled $220.8 million for the year ended December 31, 2025, an increase of $7.9 million, or 3.7%, from the year ended December 31, 2024, primarily due to a $119.1 million increase in average loans coupled with a four basis points increase in the yield on average loans. Average earning assets increased by $148.9 million, due to increases of $119.1 million in average loans, $22.4 million in average fed funds sold and interest-bearing cash accounts and $7.5 million in average investment securities. The increase
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in average loans included increases of $127.7 million in average commercial real estate loans, $11.9 million in average construction and development loans and $5.9 million in average commercial and industrial loans, offset by a decrease of $26.5 million in average residential real estate loans.
Interest expense for the year ended December 31, 2025 decreased $4.4 million, or 4.6%, to $90.4 million compared to interest expense of $94.8 million for the year ended December 31, 2024. This decrease was primarily attributable to decreases of 66 basis points and 18 basis points in time deposits and money market costs, respectively. These decreases to deposit interest expense were offset by a 20 basis points increase to the yield on interest-bearing demand deposits coupled with a $47.3 million increase in average interest-bearing demand deposits. Average borrowings outstanding for the year ended December 31, 2025 increased by $57.9 million with an increase in rate of 10 basis points compared to the year ended December 31, 2024.
The Company has interest rate derivative agreements totaling $825.0 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 2.62%. During the year ended December 31, 2025, we recorded a credit to interest expense of $15.1 million from the benefit received on these interest rate derivatives compared to a credit to interest expense of $22.1 million recorded during the year ended December 31, 2024. Based on the Federal Funds Effective rate as of December 31, 2025 (3.64%), the Company would estimate to record a credit to interest expense of $5.9 million during 2026 from the benefit received on these interest rate derivatives. See Note 11 of our consolidated financial statements as of December 31, 2025, included elsewhere in this Annual Report on Form 10-K, for additional information on these interest rate derivatives.
The net interest margin for the year ended December 31, 2025 was 3.72% compared to 3.51% for the year ended December 31, 2024, an increase of 21 basis points. The cost of interest-bearing liabilities decreased by 31 basis points to 3.41% from 3.72% for the previous year while the yield on interest-earning assets decreased by four basis points to 6.29% from 6.33%, for the previous year. Average earning assets increased by $148.9 million, primarily due to an increase of $119.1 million in average loans and an increase of $29.8 million in average total investments. Average interest-bearing liabilities increased by $99.9 million as average interest-bearing deposits increased by $42.0 million and average borrowings increased by $57.9 million.
Year ended December 31, 2024 compared to year ended December 31, 2023
Net interest income for the year ended December 31, 2024 was $118.1 million compared to $101.5 million for the year ended December 31, 2023, an increase of $16.7 million, or 16.4%. Interest income totaled $212.9 million for the year ended December 31, 2024, an increase of $20.1 million, or 10.4%, from the year ended December 31, 2023, primarily due to a 41 basis points increase in the yield on average loans coupled with a $99.8 million increase in average loans. Average earning assets increased by $117.5 million, due to increases of $99.8 million in average loans and $18.7 million in average fed funds sold and interest-bearing cash accounts, offset by a decrease of $957,000 in average investment securities. The increase in average loans included increases of $78.8 million in average commercial real estate loans, $21.8 million in average residential real estate loans and $13.9 million in average commercial and industrial loans, offset by a decrease of $14.8 million in average construction and development loans.
Interest expense for the year ended December 31, 2024 increased $3.4 million, or 3.7%, to $94.8 million compared to interest expense of $91.3 million for the year ended December 31, 2023. This increase is primarily attributable to a $91.0 million increase in average time deposit balances coupled with an 84 basis points increase in time deposit costs, as well as a 101 basis points increase to interest-bearing demand deposit costs. These increases to deposit interest expense were offset by a 141 basis points decrease to the yield on average money market accounts from the benefit received on the Company’s interest rate derivatives (see further discussion in next paragraph). Average borrowings outstanding for the year ended December 31, 2024 increased by $12.8 million with an increase in rate of 98 basis points compared to the year ended December 31, 2023.
The Company currently has interest rate derivative agreements totaling $850.0 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 2.29%. During the year ended December 31, 2024, we recorded a credit to interest expense of
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$22.1 million from the benefit received on these interest rate derivatives compared to a credit to interest expense of $5.4 million recorded during the year ended December 31, 2023.
The net interest margin for the year ended December 31, 2024 was 3.51% compared to 3.13% for the year ended December 31, 2023, an increase of 38 basis points. The yield on interest-earning assets increased by 39 basis points to 6.33% from 5.94%, while the cost of interest-bearing liabilities decreased by one basis point to 3.72% from 3.73% for the previous year. Average earning assets increased by $117.5 million, primarily due to an increase of $99.8 million in average loans and an increase of $17.7 million in average total investments. Average interest-bearing liabilities increased by $102.1 million as average interest-bearing deposits increased by $89.3 million and average borrowings increased by $12.8 million.
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Average Balances, Interest and Yields
The following tables present, for the years ended December 31, 2025, 2024 and 2023, 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.
Year Ended December 31, |
| ||||||||||||||||||||||||
2025 | 2024 |
| 2023 |
| |||||||||||||||||||||
Average | Interest and | Yield / | Average | Interest and | Yield / |
| Average | Interest and | Yield / |
| |||||||||||||||
(Dollars in thousands) | | Balance | | Fees | | Rate | | Balance | | Fees | | Rate |
| Balance | | Fees | | Rate |
| ||||||
Earning Assets: |
| |
| |
| |
| |
| |
| | |
| |
| | ||||||||
Federal funds sold and other investments(1) | $ | 208,059 | $ | 10,257 |
| 4.93 | % | $ | 185,696 | $ | 11,289 |
| 6.08 | % | $ | 167,024 | $ | 9,995 |
| 5.98 | % | ||||
Investment securities |
| 38,826 |
| 1,072 |
| 2.76 |
| 31,373 |
| 854 |
| 2.72 |
| 32,330 |
| 949 |
| 2.94 | |||||||
Total investments |
| 246,885 |
| 11,329 |
| 4.59 |
| 217,069 |
| 12,143 |
| 5.59 |
| 199,354 |
| 10,944 |
| 5.49 | |||||||
Construction and development |
| 29,061 |
| 2,365 |
| 8.14 |
| 17,148 |
| 1,511 |
| 8.81 |
| 31,955 |
| 1,864 |
| 5.83 | |||||||
Commercial real estate |
| 865,860 |
| 73,725 |
| 8.51 |
| 738,200 |
| 66,751 |
| 9.04 |
| 659,432 |
| 57,710 |
| 8.75 | |||||||
Commercial and industrial |
| 73,896 |
| 6,462 |
| 8.74 |
| 67,964 |
| 6,597 |
| 9.71 |
| 54,100 |
| 5,110 |
| 9.45 | |||||||
Residential real estate |
| 2,294,620 |
| 126,744 |
| 5.52 |
| 2,321,075 |
| 125,737 |
| 5.42 |
| 2,299,246 |
| 117,071 |
| 5.09 | |||||||
Consumer and Other |
| 353 |
| 203 |
| 57.51 |
| 304 |
| 174 |
| 57.24 |
| 195 |
| 128 |
| 65.64 | |||||||
Gross loans(2) |
| 3,263,790 |
| 209,499 |
| 6.42 |
| 3,144,691 |
| 200,770 |
| 6.38 |
| 3,044,928 |
| 181,883 |
| 5.97 | |||||||
Total earning assets |
| 3,510,675 |
| 220,828 |
| 6.29 |
| 3,361,760 |
| 212,913 |
| 6.33 |
| 3,244,282 |
| 192,827 |
| 5.94 | |||||||
Noninterest-earning assets |
| 199,348 |
| |
|
| 209,058 |
| |
|
| 198,938 |
| |
| ||||||||||
Total assets |
| 3,710,023 |
| |
|
| 3,570,818 |
| |
|
| 3,443,220 |
| |
| ||||||||||
Interest-bearing liabilities: |
| |
| |
|
| |
| |
|
| |
| |
| ||||||||||
NOW and savings deposits |
| 186,114 | 5,119 |
| 2.75 |
| 138,827 | 3,537 |
| 2.55 |
| 146,543 | 2,264 |
| 1.54 | ||||||||||
Money market deposits |
| 1,011,090 | 26,512 |
| 2.62 |
| 1,012,309 | 28,331 |
| 2.80 |
| 1,006,360 | 42,347 |
| 4.21 | ||||||||||
Time deposits |
| 1,027,849 | 41,264 |
| 4.01 |
| 1,031,942 | 48,192 |
| 4.67 |
| 940,911 | 35,996 |
| 3.83 | ||||||||||
Total interest-bearing deposits |
| 2,225,053 |
| 72,895 |
| 3.28 |
| 2,183,078 |
| 80,060 |
| 3.67 |
| 2,093,814 |
| 80,607 |
| 3.85 | |||||||
Borrowings |
| 423,883 | 17,484 |
| 4.12 |
| 365,990 | 14,707 |
| 4.02 |
| 353,149 | 10,741 |
| 3.04 | ||||||||||
Total interest-bearing liabilities |
| 2,648,936 |
| 90,379 |
| 3.41 |
| 2,549,068 |
| 94,767 |
| 3.72 |
| 2,446,963 |
| 91,348 |
| 3.73 | |||||||
Noninterest-bearing liabilities: |
| |
| |
|
| |
| |
|
| |
| |
| ||||||||||
Noninterest-bearing deposits |
| 549,337 |
| |
|
| 536,084 |
| |
|
| 555,840 |
| |
| ||||||||||
Other noninterest-bearing liabilities |
| 72,314 |
|
|
| 86,496 |
|
|
| 74,254 |
| |
| ||||||||||||
Total noninterest-bearing liabilities |
| 621,651 |
| |
|
| 622,580 |
| |
|
| 630,094 |
| |
| ||||||||||
Shareholders' equity |
| 439,436 |
| |
|
| 399,170 |
| |
|
| 366,163 |
| |
| ||||||||||
Total liabilities and shareholders' equity | $ | 3,710,023 |
| |
| $ | 3,570,818 |
| |
| $ | 3,443,220 |
| |
| ||||||||||
Net interest income |
| | $ | 130,449 |
|
| | $ | 118,146 |
|
| | $ | 101,479 |
| ||||||||||
Net interest spread |
| |
| |
| 2.88 |
| |
| |
| 2.61 |
| |
| |
| 2.21 | |||||||
Net interest margin |
| |
| |
| 3.72 |
| |
| |
| 3.51 |
| |
| |
| 3.13 | |||||||
| (1) | Includes income and average balances for term federal funds, interest-earning cash accounts, and other miscellaneous earning assets. |
| (2) | Average loan balances include nonaccrual loans and loans held for sale. |
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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.
Year Ended December 31, | ||||||||||||||||||
2025 Compared to 2024 | 2024 Compared to 2023 | |||||||||||||||||
Increase (Decrease) Due to Change in: | Increase (Decrease) Due to Change in: | |||||||||||||||||
(Dollars in thousands) | | Volume | | Yield/Rate | | Total Change | | Volume | | Yield/Rate | | Total Change | ||||||
Earning assets: |
| |
| |
| |
| |
| |
| | ||||||
Federal funds sold and other investments(1) | $ | 997 | $ | (2,029) |
| $ | (1,032) | $ | 1,190 | $ | 104 |
| $ | 1,294 | ||||
Investment securities |
| 735 |
| (517) |
|
| 218 |
| (330) |
| 235 |
|
| (95) | ||||
Total investments |
| 1,732 |
| (2,546) |
|
| (814) |
| 860 |
| 339 |
|
| 1,199 | ||||
Construction and development |
| 893 | (39) |
|
| 854 |
| (938) | 585 |
|
| (353) | ||||||
Commercial real estate |
| 12,316 | (5,342) |
|
| 6,974 |
| 7,173 | 1,868 |
|
| 9,041 | ||||||
Commercial and industrial |
| 536 | (671) |
|
| (135) |
| 1,361 | 126 |
|
| 1,487 | ||||||
Residential real estate |
| (2,814) | 3,821 |
|
| 1,007 |
| 1,408 | 7,258 |
|
| 8,666 | ||||||
Consumer and Other |
| 26 | 3 |
|
| 29 |
| 26 | 20 |
|
| 46 | ||||||
Gross loans(2) |
| 10,957 |
| (2,228) |
|
| 8,729 |
| 9,030 |
| 9,857 |
|
| 18,887 | ||||
Total earning assets |
| 12,689 |
| (4,774) |
|
| 7,915 |
| 9,890 |
| 10,196 |
|
| 20,086 | ||||
Interest-bearing liabilities: |
| |
| |
|
| |
| |
| |
|
| | ||||
NOW and savings deposits |
| 652 | 930 |
|
| 1,582 |
| (221) | 1,494 |
|
| 1,273 | ||||||
Money market deposits |
| (1,696) | (123) |
|
| (1,819) |
| 481 | (14,497) |
|
| (14,016) | ||||||
Time deposits |
| (550) | (6,378) |
|
| (6,928) |
| 3,851 | 8,345 |
|
| 12,196 | ||||||
Total interest-bearing deposits |
| (1,594) |
| (5,571) |
|
| (7,165) |
| 4,111 |
| (4,658) |
|
| (547) | ||||
Borrowings |
| 2,327 | 450 |
|
| 2,777 |
| 390 | 3,576 |
|
| 3,966 | ||||||
Total interest-bearing liabilities |
| 733 |
| (5,121) |
|
| (4,388) |
| 4,501 |
| (1,082) |
|
| 3,419 | ||||
Net interest income | $ | 11,956 | $ | 347 |
| $ | 12,303 | $ | 5,389 | $ | 11,278 |
| $ | 16,667 | ||||
| (1) | Includes income and average balances for term federal funds, interest-earning cash accounts, and other miscellaneous earning assets. |
| (2) | Loan balances include nonaccrual loans and loans held for sale. |
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. The adoption of ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments” or “CECL” and most recently ASU No. 2025-08, “Purchased Loans” significantly changed the methodology of how we measure credit losses (see Note 1 to the Consolidated Financial Statements for more information). 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.
See the section captioned “Allowance for Credit Losses” elsewhere in this document for further analysis of our provision for credit losses.
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Year ended December 31, 2025 compared to year ended December 31, 2024
We recorded a credit to the provision for credit losses of $318,000 during the year ended December 31, 2025 compared to provision expense of $516,000 recorded during the year ended December 31, 2024. The credit provision recorded during the year ended December 31, 2025 was primarily due to the decrease in the general reserves allocated to our residential real estate and commercial and industrial legacy loan portfolios due to lower loan balances, as well as the decrease in reserves allocated to individually analyzed legacy loans, offset by an increase in the general reserves allocated to our commercial real estate legacy loans due to higher balances. Our allowance for credit losses as a percentage of gross loans for the periods ended December 31, 2025 and 2024 was 0.68% and 0.59%, respectively. Our allowance for credit losses as a percent 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.
Year ended December 31, 2024 compared to year ended December 31, 2023
We recorded a provision for credit losses of $516,000 during the year ended December 31, 2024 compared to a credit provision of $15,000 recorded during the year ended December 31, 2023. The provision expense recorded during the year ended December 31, 2024 was primarily due to the increase in reserves allocated to individually analyzed loans, as well as an increase in the general reserves allocated to our commercial real estate and commercial and industrial loan portfolios due to higher loan balances. Our allowance for credit losses as a percentage of gross loans for the periods ended December 31, 2024 and 2023 was 0.59% and 0.57%, respectively. Our allowance for credit losses as a percent 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.
Noninterest Income
Noninterest income is an important component of our total revenues. An important portion of our noninterest income is associated with SBA and residential mortgage lending activity, consisting of gains on the sale of loans sold in the secondary market and servicing income from loans sold with servicing rights retained. Other sources of noninterest income include service charges on deposit accounts and other service charges, commissions and fees.
The following table sets forth the major components of our noninterest income for the years ended December 31, 2025, 2024 and 2023:
Years Ended December 31, | 2025 vs. 2024 | 2024 vs. 2023 | ||||||||||||||||||
(Dollars in thousands) | | 2025 | | 2024 | | 2023 | | $ Change | | % Change | | $ Change | | % Change | ||||||
Noninterest Income: |
| |
| |
| |
| |
| | |
| ||||||||
Service charges on deposit accounts | $ | 2,328 | $ | 2,073 | $ | 1,918 |
| $ | 255 |
| 12.3 | % | $ | 155 |
| 8.1 | % | |||
Other service charges, commissions and fees |
| 7,340 |
| 6,848 |
| 5,657 |
|
| 492 |
| 7.2 |
| 1,191 |
| 21.1 | |||||
Gain on sale of residential mortgage loans |
| 3,952 |
| 1,914 |
| — |
|
| 2,038 |
| 106.5 |
| 1,914 |
| 100.0 | |||||
Mortgage servicing income, net |
| 2,419 |
| 2,448 |
| (193) |
|
| (29) |
| 1.2 |
| 2,641 |
| 1368.4 | |||||
Gain on sale of SBA loans | 2,322 | 2,945 | 3,299 | (623) | (21.2) | (354) | (10.7) | |||||||||||||
SBA servicing income, net | 3,558 | 4,243 | 4,796 | (685) | (16.1) | (553) | (11.5) | |||||||||||||
Other income | 3,265 | 2,592 | 2,727 | 673 | 26.0 | (135) | (5.0) | |||||||||||||
Total noninterest income | $ | 25,184 | $ | 23,063 | $ | 18,204 |
| $ | 2,121 |
| 9.2 | % | $ | 4,859 |
| 26.7 | % | |||
Year ended December 31, 2025 compared to year ended December 31, 2024
Service charges on deposit accounts were $2.3 million for the year ended December 31, 2025 compared to $2.1 million for the year ended December 31, 2024, an increase of $255,000, or 12.3%. The increase was primarily attributable to increased overdraft fees and analysis charges.
Other service charges, commissions and fees increased $492,000, or 7.2%, to $7.3 million for the year ended December 31, 2025 compared to $6.8 million for the year ended December 31, 2024. The increase is mainly attributable to higher underwriting, processing and origination fees earned from our origination of residential mortgage loans as
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mortgage volume increased during the year ended December 31, 2025 compared to the year ended December 31, 2024. Mortgage loan originations totaled $464.6 million during the year ended December 31, 2025 compared to $413.7 million during the year ended December 31, 2024.
Total gain on sale of loans was $6.3 million for the year ended December 31, 2025 compared to $4.9 million for the year ended December 31, 2024, an increase of $1.4 million, or 29.1%.
Gain on sale of residential loans totaled $4.0 million for the year ended December 31, 2025 as we sold $310.2 million in residential mortgage loans during the period with an average premium of 1.35% compared to the sale of $187.5 million in residential mortgage loans with an average premium of 1.05% during the year ended December 31, 2024.
Gain on sale of SBA loans totaled $2.3 million for the year ended December 31, 2025 compared to $2.9 million for the year ended December 31, 2024. We sold $60.5 million in SBA loans during the year ended December 31, 2025 with average premiums of 6.08% compared to the sale of $72.2 million in SBA loans with an average premium of 6.57% in the year ended December 31, 2024.
Mortgage loan servicing income was $2.4 million for both the year ended December 31, 2025 and 2024. Included in mortgage loan servicing income for the year ended December 31, 2025 was $2.2 million in mortgage servicing fees compared to $2.3 million for 2024, and capitalized mortgage servicing assets of $812,000 for the year ended December 31, 2025 compared to $1.2 million for 2024. These amounts were offset by mortgage loan servicing asset amortization of $581,000 for the year ended December 31, 2025 compared to $1.1 million for the year ended December 31, 2024. During the year ended December 31, 2025, we recorded a fair value impairment recovery of $20,000 on our mortgage servicing assets compared to a fair value impairment of $20,000 on our mortgage servicing assets recorded during 2024. Our total residential mortgage loan servicing portfolio was $702.6 million at December 31, 2025 compared to $527.0 million at December 31, 2024. The increase in the residential mortgage servicing portfolio is due to the sale of $310.2 million of residential mortgage loans during the year. There were no residential mortgage loans serviced for others acquired from First IC.
SBA servicing income was $3.6 million for the year ended December 31, 2025 compared to $4.2 million for the year ended December 31, 2024, a decrease of $685,000, or 16.1%. Our total SBA and USDA loan servicing portfolio was $685.5 million as of December 31, 2025 compared to $479.7 million as of December 31, 2024. The increase in our SBA and USDA loan servicing portfolio is attributable to the SBA loans acquired from First IC. SBA servicing fees totaled $4.1 million for the year ended December 31, 2025 compared to $4.2 million for the year ended December 31, 2024. Our SBA servicing rights are carried at fair value and inputs used to calculate fair value change from period to period. During the year ended December 31, 2025, we recorded a $521,000 fair value loss on our SBA servicing rights compared to a $29,000 fair value gain on our SBA servicing rights during the year ended December 31, 2024.
Other noninterest income was $3.3 million for the year ended December 31, 2025 compared to $2.6 million for the year ended December 31, 2024, an increase of $673,000, or 26.0%. The largest component of other noninterest income is the income on bank owned life insurance, which totaled $2.5 million and $2.3 million, respectively, for the years ended December 31, 2025 and 2024. Also included in other noninterest income are fair value gains/losses on our equity securities, which totaled $346,000 (gain) and $35,000 (loss), respectively, for the years ended December 31, 2025 and 2024.
Year ended December 31, 2024 compared to year ended December 31, 2023
Service charges on deposit accounts were $2.1 million for the year ended December 31, 2024 compared to $1.9 million for the year ended December 31, 2023, an increase of $155,000, or 8.1%. The increase was primarily attributable to increased overdraft fees and wire transfer fees.
Other service charges, commissions and fees increased $1.2 million, or 21.1%, to $6.9 million for the year ended December 31, 2024 compared to $5.7 million for the year ended December 31, 2023. The increase is mainly attributable to higher underwriting, processing and origination fees earned from our origination of residential mortgage loans as mortgage volume increased during the year ended December 31, 2024 compared to the year ended December 31, 2023.
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Mortgage loan originations totaled $413.7 million during the year ended December 31, 2024 compared to $337.0 million during the year ended December 31, 2023.
Total gain on sale of loans was $4.9 million for the year ended December 31, 2024 compared to $3.3 million for the year ended December 31, 2023, an increase of $1.6 million, or 47.3%.
Gain on sale of residential loans totaled $1.9 million for the year ended December 31, 2024 as we sold $187.5 million in residential mortgage loans during the period with an average premium of 1.05%. We recorded no gain on sale of residential mortgage loans during the year ended December 31, 2023 as no residential mortgage loans were sold during the period.
Gain on sale of SBA loans totaled $2.9 million for the year ended December 31, 2024 compared to $3.3 million for the year ended December 31, 2023. We sold $72.2 million in SBA loans during the year ended December 31, 2024 with average premiums of 6.57% compared to the sale of $72.9 million in SBA loans with an average premium of 6.09% in the year ended December 31, 2023.
Mortgage loan servicing income was $2.4 million for the year ended December 31, 2024 compared to mortgage loan servicing expense of $193,000 for the year ended December 31, 2023, an increase of $2.6 million year over year. The change in mortgage loan servicing income was primarily due to the decrease in mortgage servicing amortization and an increase in capitalized mortgage servicing assets, partially offset by the decrease in mortgage servicing fees. Included in mortgage loan servicing income for the year ended December 31, 2024 was $2.3 million in mortgage servicing fees compared to $2.5 million for 2023, and capitalized mortgage servicing assets of $1.2 million for the year ended December 31, 2024 compared to $0 for 2023. These amounts were offset by mortgage loan servicing asset amortization of $1.1 million for the year ended December 31, 2024 compared to $2.7 million for the year ended December 31, 2023. During the year ended December 31, 2024, we recorded a fair value impairment of $20,000 on our mortgage servicing assets compared to no fair value impairment recorded during 2023. Our total residential mortgage loan servicing portfolio was $527.0 million at December 31, 2024 compared to $443.1 million at December 31, 2023.
SBA servicing income was $4.2 million for the year ended December 31, 2024 compared to $4.8 million for the year ended December 31, 2023, a decrease of $553,000, or 11.5%. Our total SBA and USDA loan servicing portfolio was $479.7 million as of December 31, 2024 compared to $508.0 million as of December 31, 2023. SBA servicing fees totaled $4.2 million for the year ended December 31, 2024 compared to $4.6 million for the year ended December 31, 2023. Our SBA servicing rights are carried at fair value and inputs used to calculate fair value change from period to period. During the year ended December 31, 2024, we recorded a $29,000 fair value gain on our SBA servicing rights compared to a $201,000 fair value gain on our SBA servicing rights during the year ended December 31, 2023.
Other noninterest income was $2.6 million for the year ended December 31, 2024 compared to $2.7 million for the year ended December 31, 2023, a decrease of $135,000, or 5.0%. The largest component of other noninterest income is the income on bank owned life insurance, which totaled $2.3 million and $1.8 million, respectively, for the years ended December 31, 2024 and 2023. Also included in other noninterest income are fair value gains/losses on our equity securities, which totaled $35,000 (loss) and $35,000 (gain), respectively, for the years ended December 31, 2024 and 2023.
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Noninterest Expense
The following table sets forth the major components of our noninterest expense for the years ended December 31, 2025, 2024 and 2023:
Years Ended December 31, | 2025 vs. 2024 | 2024 vs. 2023 | ||||||||||||||||||
(Dollars in thousands ) | | 2025 | | 2024 | | 2023 | | $ Change | | % Change | | $ Change | | % Change | ||||||
Noninterest Expense: |
| |
| |
| |
| |
| | |
| | |||||||
Salaries and employee benefits | $ | 36,674 | $ | 33,207 | $ | 29,304 |
| $ | 3,467 |
| 10.4 | % | $ | 3,903 |
| 13.3 | % | |||
Occupancy and equipment |
| 5,788 |
| 5,524 |
| 4,893 |
|
| 264 |
| 4.8 |
| 631 |
| 12.9 | |||||
Data processing |
| 1,534 |
| 1,293 |
| 1,229 |
|
| 241 |
| 18.6 |
| 64 |
| 5.2 | |||||
Advertising |
| 657 |
| 634 |
| 614 |
|
| 23 |
| 3.6 |
| 20 |
| 3.3 | |||||
Merger-related expenses | 4,729 | — | — | 4,729 | 100.0 | — | — | |||||||||||||
Other expenses |
| 13,875 |
| 12,721 |
| 11,686 |
|
| 1,154 |
| 9.1 |
| 1,035 |
| 8.9 | |||||
Total noninterest expense | $ | 63,257 | $ | 53,379 | $ | 47,726 |
| $ | 9,878 |
| 18.5 | % | $ | 5,653 |
| 11.8 | % | |||
Year ended December 31, 2025 compared to year ended December 31, 2024
Salaries and employee benefits expense for the year ended December 31, 2025 was $36.7 million compared to $33.2 million for the year ended December 31, 2024, an increase of $3.5 million, or 10.4%. This increase was primarily attributable to higher employee salaries partially due annual salary adjustments and the addition of the First IC employees, higher commissions paid from higher loan volume, and increased employee insurance costs and stock based compensation. The average number of full-time equivalent employees was 252 for the year ended December 31, 2025 compared to 240 for the year ended December 31, 2024.
Occupancy expense for the year ended December 31, 2025 was $5.8 million compared to $5.5 million for the year ended December 31, 2024, an increase of $264,000, or 4.8%. This increase was primarily due to higher expenses related to depreciation, rent, and maintenance and repairs.
Data processing expense for the year ended December 31, 2025 was $1.5 million compared to $1.3 million for the year ended December 31, 2024, an increase of $241,000, or 18.6%. The increase was partially attributable to the First IC acquisition.
Advertising expense for the year ended December 31, 2025 was $657,000 compared to $634,000 for the year ended December 31, 2024, a slight increase of $23,000, or 3.6%. The increase was consistent with the continued growth of our loans and deposits.
Merger-related expenses for the year ended December 31, 2025 were $4.7 million compared to $0 during the year ended December 31, 2024 as no business combinations occurred during 2024. Included in the $4.7 million of merger-related expenses are professional and legal fees, severance payments, systems termination costs and other integration costs.
Other expenses for the year ended December 31, 2025 were $13.9 million compared to $12.7 million for the year ended December 31, 2024, an increase of $1.2 million, or 9.1%. The increase was primarily due to higher expenses related to security, loans and professional services, partially offset by lower other real estate owned expenses. Included in other expenses were directors’ fees of $761,000 and $645,000 for the years ended December 31, 2025 and 2024, respectively.
Year ended December 31, 2024 compared to year ended December 31, 2023
Salaries and employee benefits expense for the year ended December 31, 2024 was $33.2 million compared to $29.3 million for the year ended December 31, 2023, an increase of $3.9 million, or 13.3%. This increase was primarily attributable to higher employee salaries and benefits due to the increase in the overall number of employees necessary to support our continued growth and annual salary adjustments, higher commissions from higher loan volume, and increased employee insurance costs and stock based compensation. The average number of full-time equivalent employees was 240 for the year ended December 31, 2024 compared to 220 for the year ended December 31, 2023.
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Occupancy expense for the year ended December 31, 2024 was $5.5 million compared to $4.9 million for the year ended December 31, 2023, an increase of $631,000, or 12.9%. This increase was primarily due to higher expenses related to depreciation, rent, and maintenance and repairs.
Data processing expense for the year ended December 31, 2024 was $1.3 million compared to $1.2 million for the year ended December 31, 2023, an increase of $64,000, or 5.2%. The increase was consistent with the continued growth of our loans and deposits.
Advertising expense for the year ended December 31, 2024 was $634,000 compared to $614,000 for the year ended December 31, 2023, a slight increase of $20,000, or 3.3%. The increase was consistent with the continued growth of our loans and deposits.
Other expenses for the year ended December 31, 2024 were $12.7 million compared to $11.7 million for the year ended December 31, 2023, an increase of $1.0 million, or 8.9%. The increase was primarily due to higher expenses related to security, audit and accounting services, business taxes, other real estate owned and FDIC insurance premiums. Included in other expenses were directors’ fees of $645,000 and $617,000 for the years ended December 31, 2024 and 2023, respectively.
Income Tax Expense
Income tax expense for the years ended December 31, 2025, 2024 and 2023 was $24.2 million, $22.8 million and $20.4 million, respectively. The Company’s effective tax rates for the years ended December 31, 2025, 2024 and 2023 were 26.1%, 26.1% and 28.3%, respectively. The decrease in the effective tax rate during 2024 compared to 2023 was partially due to a tax provision to tax return adjustment recorded for our 2023 state tax returns filed during the third and fourth quarter of 2024.
We had a net deferred tax asset of $6.0 million at December 31, 2025, a net deferred tax asset of $158,000 at December 31, 2024 and net deferred tax liability of $2.3 million at December 31, 2023.
Financial Condition
Total assets increased $1.17 billion, or 32.7%, to $4.77 billion at December 31, 2025 as compared to $3.59 billion at December 31, 2024. This increase was mainly due to the $1.19 billion of assets acquired from First IC as of December 31, 2025, including goodwill and core deposit intangibles. Exlcuding these acquired assets, legacy total assets were $3.57 billion at December 31, 2025, a decrease of $21.2 million, 0.6% compared to December 31, 2024. The $21.1 million decrease in total assets at December 31, 2025 compared to December 31, 2024 was primarily due to decreases in loans held for investment of $99.6 million and interest rate derivatives of $15.4 million, partially offset by increases in cash and due from banks of $64.5 million, other assets of $13.4 million, loans held for sale of $5.9 million, equity securities of $8.4 million, bank owned life insurance of $2.5 million and Federal Home Loan Bank stock of $2.4 million
Our investment securities portfolio made up only 1.38% of our total assets at December 31, 2025 compared to 0.77% at December 31, 2024. The increase in our securities portfolio during 2025 was due to the securities acquired from First IC.
Loans
Our loans represent the largest portion of our earning assets, substantially greater than the securities portfolio or any other asset category, and the quality and diversification of the loan portfolio is an important consideration when reviewing our financial condition.
Our gross loans held for investment increased $912.5 million, or 28.8%, to $4.08 billion as of December 31, 2025 compared to $3.17 billion as of December 31, 2024, primarily due to the $1.01 billion of loans acquired from First IC as of December 31, 2025. Excluding acquired loans, our legacy loans held for investment decreased by $96.5 million, or 3.0%, compared to 2024. The decline in our legacy loan portfolio during the year ended December 31, 2025 was made up
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of an increase of $18.9 million, or 87.7%, in construction and development loans, an increase of $79.6 million, or 10.4%, in commercial real estate loans, a decrease of $4.6 million, or 5.9%, in commercial and industrial loans, a decrease of $190.3 million, or 8.3%, in residential real estate loans and an increase of $10,000, or 3.8%, in consumer and other loans. There were no loans classified as held for sale as of December 31, 2025 or 2024. Loans classified as held for sale totaled $22.3 million as of December 31, 2023.
The following table presents the ending balance of each major category in our loan portfolio held for investment as of the dates indicated.
December 31, | ||||||||||||||||||||||||||
2025 | 2024 | 2023 | 2022 | 2021 | ||||||||||||||||||||||
(Dollars in thousands) | | Amount | | % of Total | | Amount | | % of Total | | Amount | | % of Total | | Amount | | % of Total | | Amount | | % of Total | ||||||
Construction and Development | $ | 41,796 | 1.0 | % | $ | 21,569 | 0.7 | % | $ | 23,262 | 0.7 | % | $ | 47,779 | 1.6 | % | $ | 38,857 | 1.6 | % | ||||||
Commercial Real Estate |
| 1,560,728 | 38.3 |
| 762,033 | 24.1 |
| 711,177 | 22.6 |
| 657,246 | 21.4 |
| 520,488 | 20.7 | |||||||||||
Commercial and Industrial |
| 96,360 | 2.4 |
| 78,220 | 2.5 |
| 65,904 | 2.1 |
| 53,173 | 1.7 |
| 73,072 | 2.9 | |||||||||||
Residential Real Estate |
| 2,378,311 | 58.3 |
| 2,303,234 | 72.7 |
| 2,350,299 | 74.6 |
| 2,306,915 | 75.3 |
| 1,879,012 | 74.8 | |||||||||||
Consumer and other |
| 627 | 0.0 |
| 260 | 0.0 |
| 319 | 0.0 |
| 216 | 0.0 |
| 79 | 0.0 | |||||||||||
Total gross loans | 4,077,822 |
| 100.0 | % | 3,165,316 |
| 100.0 | % | 3,150,961 |
| 100.0 | % | 3,065,329 |
| 100.0 | % | 2,511,508 |
| 100.0 | % | ||||||
Unearned income |
| (6,621) |
| |
| (7,381) |
| |
| (8,856) |
| |
| (9,640) |
| |
| (6,438) |
| | ||||||
Loan Discounts | (19,804) | — | — | — | — | |||||||||||||||||||||
Allowance for credit losses | (27,843) | (18,744) | (18,112) | (13,888) | (16,952) | |||||||||||||||||||||
Total loans, net | $ | 4,023,554 |
| | $ | 3,139,191 |
| | $ | 3,123,993 |
| | $ | 3,041,801 |
| | $ | 2,488,118 |
| | ||||||
The following table presents the maturity distribution of our loans held for investment as of December 31, 2025. The table also shows the distribution of such loans between those loans with predetermined (fixed) interest rates and those with variable (floating) interest rates.
December 31, 2025 | ||||||||||||||||||
(Dollars in thousands) | | One Year or Less | | One to Five Years | | Five to Ten Years | Ten to Fifteen Years | | Over Fifteen Years | | Total | |||||||
Construction and Development | $ | 25,067 |
| $ | 13,121 | $ | 980 | $ | — | $ | 2,628 | $ | 41,796 | |||||
Commercial Real Estate |
| 109,725 |
|
| 713,144 |
| 214,586 | 41,115 |
| 482,158 |
| 1,560,728 | ||||||
Commercial and Industrial |
| 18,966 |
|
| 33,661 |
| 42,367 | 1,119 |
| 247 |
| 96,360 | ||||||
Residential Real Estate |
| — |
|
| 204 |
| 84,826 | 649,553 |
| 1,643,728 |
| 2,378,311 | ||||||
Consumer and other |
| 627 |
|
| — |
| — | — |
| — |
| 627 | ||||||
Total gross loans | $ | 154,385 |
| $ | 760,130 | $ | 342,759 | $ | 691,787 | $ | 2,128,761 | $ | 4,077,822 | |||||
Amounts with fixed rates | $ | 60,708 | $ | 258,044 | $ | 103,214 | $ | 652,929 | $ | 188,622 | $ | 1,263,517 | ||||||
Amounts with floating or adjustable rates | 93,677 | 502,086 | 239,545 | 38,858 | 1,940,139 | 2,814,305 | ||||||||||||
Total gross loans | $ | 154,385 | $ | 760,130 | $ | 342,759 | $ | 691,787 | $ | 2,128,761 | $ | 4,077,822 | ||||||
Our loan portfolio is concentrated in commercial real estate and residential mortgage loans with the remaining balance in construction and development, commercial and industrial, and consumer loans. 97.6% of our gross loans held for investment were secured by real property as of December 31, 2025, compared to 97.5% as of December 31, 2024 and 97.9% as of December 31, 2023.
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We have established concentration limits in the loan portfolio for commercial real estate loans, commercial and industrial loans, and unsecured lending, among others. All loan types are within established limits. We use underwriting guidelines to assess the borrowers’ historical cash flow to determine debt service, and we further stress test the debt service under higher interest rate scenarios. Financial and performance covenants are used in commercial lending agreements to allow us to react to a borrower’s deteriorating financial condition, should that occur. For more information, see “Item 1 – Business – Lending Activities.”
The principal categories of our loan portfolios are discussed below:
Construction and development loans. Our construction and development loans are comprised of commercial construction and land acquisition and development construction. Interest reserves are generally established on real estate construction loans. These loans typically carry a fixed interest rate and have maturities of less than 18 months. Our LTV policy limits are 65% for construction and development loans. Additionally, we impose limits on the total dollar amount of this category of our portfolio. The risks inherent in construction lending may affect adversely our results of operations. Such risks include, among other things, the possibility that contractors may fail to complete, or complete on a timely basis, construction of the relevant properties; substantial cost overruns in excess of original estimates and financing; market deterioration during construction; and lack of permanent take-out financing. Loans secured by such properties also involve additional risk because they have no operating history. Advances on construction loans are made relative to the overall percentage of completion on the project in an effort to remain adequately secured. Such properties may not be sold or leased so as to generate the cash flow anticipated by the borrower.
As of December 31, 2025, our construction and development loans comprised $41.8 million, or 1.0%, of total loans held for investment, compared to $21.6 million, or 0.7%, of total loans held for investment as of December 31, 2024. This compares to $23.3 million, or 0.7%, of total loans held for investment as of December 31, 2023.
Commercial real estate loans. Commercial real estate loans include owner-occupied and non-owner occupied commercial real estate. We require our commercial real estate loans to be secured by what we believe to be well-managed property with adequate margins and we generally obtain a personal guarantee from responsible parties. We originate both fixed-rate and adjustable-rate loans with terms up to 25 years.
As of December 31, 2025, our loans secured by commercial real estate were $1.56 billion, or 38.3%, of total loans held for investment compared to $762.0 million, or 24.1%, as of December 31, 2024. This increase was mainly due to the $719.1 million of commercial real estate loans acquired from First IC coupled with organic growth of $79.6 million of newly originated and renewed legacy commercial real estate loans. Commercial real estate loans were $711.2 million, or 22.6%, of our portfolio as of December 31, 2023. Our non-owner occupied commercial real estate loans has historically made up a small percentage of our overall commercial real estate loan portfolio. Non-owner occupied commercial real estate loans were 8.0%, and 7.6%, as a percentage of commercial real estate loans for the years ending December 31, 2024 and 2023, respectively. During 2025, our non-owner occupied commercial real estate increased to 49.3% as a percentage of commercial real estate loans as of December 31, 2025. This increase was partially due to the reclassification of our legacy hotel loan portfolio from owner occupied to non-owner occupied coupled with the $347.4 million of non-owner occupied commercial real estate acquired from First IC. Of the $769.6 million of non-owner occupied commercial real estate loans as of December 31, 2025, $600.3 million, or 78.0% were hotel loans, which carried a weighted average LTV of 55.6%. At December 31, 2025, approximately 50.7% of our commercial real estate loans were owner-occupied compared to 92.0% at December 31, 2024.
We originate both fixed and adjustable rate loans. Adjustable rate loans are based on the prime rate, SOFR or constant maturity treasury (“CMT”). At December 31, 2025 and 2024, approximately 21.6% and 12.0% of the commercial real estate portfolio consisted of fixed-rate loans, respectively. Our policy maximum LTV is 85% for commercial real estate loans. However, our weighted average LTV is well below this policy maximum. Newly originated and renewed non-SBA commercial real estate loans for the years ending December 31, 2025 and 2024 carried a weighted average LTV of 51.8% and 53.5%, respectively.
Commercial and industrial loans. We provide a mix of variable and fixed rate commercial and industrial loans. The loans are typically made to small and medium-sized businesses for working capital needs, business expansions and for
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trade financing. We extend commercial business loans on an unsecured and secured basis for working capital, accounts receivable and inventory financing, machinery and equipment purchases, and other business purposes. Generally, short-term loans have maturities ranging from six months to one year, and “term loans” have maturities ranging from five to ten years. Loans are generally intended to finance current transactions and typically provide for periodic principal payments, with interest payable monthly. Term loans generally provide for floating interest rates, with monthly payments of both principal and interest.
As of December 31, 2025, our commercial and industrial loans comprised $96.4 million, or 2.4%, of total loans held for investment, compared to $78.2 million, or 2.5% of total loans held for investment as of December 31, 2024. This increase was mainly due the $22.8 million of commercial and industrial loans acquired from First IC. This compares to $65.9 million, or 2.1%, of total loans held for investment as of December 31, 2023.
A large portion of both our commercial real estate and commercial and industrial loans are SBA loans. We are designated an SBA Preferred Lender under the SBA Preferred Lender Program. We offer mostly SBA 7(a) variable-rate loans. We have historically sold the guaranteed portion (typically 75%) of the SBA loans that we originate. Our SBA loans are typically made to small-sized retail, hotel/motel, service and distribution businesses for working capital needs or business expansions. SBA loans have maturities up to 25 years. Typically, non-real estate secured loans mature in less than 10 years. Collateral may also include inventory, accounts receivable and equipment, and may include personal guarantees. Our unguaranteed SBA loans collateralized by real estate are monitored by collateral type and included in our CRE Concentration Guidance. As of December 31, 2025, our SBA and USDA portfolio totaled $482.2 million, compared to $277.0 million as of December 31, 2024. This increase was primarily attributed to $208.7 million of SBA loans acquired from First IC. We originated and sold $100.1 million and $60.5 million of SBA loans during the year ended December 31, 2025 compared to originations and sales of $90.8 million and $72.2 million for the year ended December 31, 2024. We originated and sold $88.1 million and $72.9 million of SBA loans during the year ended December 31, 2023.
From our total SBA and USDA loan portfolio of $482.2 million at December 31, 2025, $439.8 million is secured by real estate and $42.4 million is unsecured or secured by business assets, which we classify as commercial and industrial loans.
Residential real estate loans. We originate mainly non-conforming single-family residential mortgage loans through our branch network, without the use of any third party originator. During 2025, our primary loan products were a three-year, five-year or ten-year hybrid adjustable rate mortgage which reprice after three, five or ten years to the one-year CMT plus certain spreads, as well as 15-year and 30-year fixed rate products. We originate the residential mortgage loans to hold for investment and also sell on the secondary market when premiums are elevated or for liquidity purposes.
As of December 31, 2025, our residential real estate loans comprised $2.38 billion, or 58.3%, of total loans held for investment, compared to $2.30 billion, or 72.7%, of total loans held for investment as of December 31, 2024. This compares to $2.35 billion, or 74.6%, of total loans held for investment as of December 31, 2023. Included in the $2.38 billion total loans held for investment balance as of December 31, 2025 were $265.4 million of residential real estate loans acquired from First IC. The increase in 2025 was due to $265.4 million of residential real estate loans acquired from First IC, offset by the significant amount of residential real estate loans sold to investors during the year. During the years ended December 31, 2025 and 2024, we originated $465.6 million and $413.7 million and sold $310.2 million and $187.5, respectively, in residential mortgage loans. During the year ended December 31, 2023, we originated $337.0 million and sold $0 in residential mortgage loans.
Consumer and other loans. These loans represent a small portion of our overall portfolio and primarily consists of overdrafts and consumer lines of credit. Consumer loans carry a greater amount of risk and collections are dependent on the borrower’s continuing financial stability and thus are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy. Furthermore, the application of various federal and state laws may limit the amount which can be recovered on such loans.
As of December 31, 2025, our consumer and other loans totaled $627,000 compared to $260,000 as of December 31, 2024. This compares to $319,000 as of December 31, 2023.
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Nonperforming Assets
Loans are considered delinquent when principal or interest payments are past due 30 days or more. Delinquent loans may remain on accrual status between 30 days and 90 days past due. Loans on which the accrual of interest has been discontinued are designated as nonaccrual loans. Typically, the accrual of interest on loans is discontinued when principal and interest payments are past due 90 days or more or when, in the opinion of management, there is a reasonable doubt as to collectability in the normal course of business. When loans are placed on nonaccrual status, all interest previously accrued but not collected is reversed against current period interest income. 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. Loans are restored to accrual status when loans become well-secured and management believes full collectability of principal and interest is probable.
Real estate acquired as a result of foreclosure or by deed-in-lieu of foreclosure is classified as foreclosed real estate until sold, and is carried at the balance of the loan at the time of foreclosure or at estimated fair value less estimated costs to sell, whichever is less.
Nonperforming loans include nonaccrual loans and loans 90 days or more past due and still accruing. Nonperforming assets consist of nonperforming loans plus foreclosed real estate.
Nonperforming loans were $25.2 million at December 31, 2025 compared to $18.0 million at December 31, 2024 and $14.7 million at December 31, 2023. The increase from December 31, 2024 to December 31, 2025 was attributable to increase of $11.5 million in nonaccrual commercial real estate loans and $775,000 in nonaccrual commercial and industrial loans, offset by a $5.0 million decrease in nonaccrual residential real estate loans. Included in the increase from December 31, 2024 to December 31, 2025 were nonaccrual commercial real estate, commercial and industrial and residential real estate loans of $6.5 million, $183,000 and $468,000, respectively, acquired from First IC. The increase from December 31, 2023 to December 31, 2024 was attributable to a $2.3 million increase in both nonaccrual commercial real estate loans and nonaccrual residential real estate loans, offset by a $760,000 decrease in commercial and industrial loans and a $548,000 decrease in nonaccrual construction and development loans. We did not recognize any interest income on nonaccrual loans during the years ended December 31, 2025, 2024 and 2023.
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. At December 31, 2025, included in nonaccrual loans were $14.8 million of commercial real estate loans, $1.3 million in commercial and industrial loans and $9.1 million in residential real estate loans. Nonaccrual loans at December 31, 2024 consisted of $3.3 million of commercial real estate loans, $526,000 in commercial and industrial loans and $14.2 million in residential real estate loans.
December 31, | ||||||||||||||||
(Dollars in thousands) | | 2025 | | 2024 | | 2023 | | 2022 | | 2021 |
| |||||
Nonaccrual loans | $ | 25,213 | $ | 18,010 | $ | 14,682 | $ | 10,065 | $ | 8,759 | ||||||
Past due loans 90 days or more and still accruing |
| — |
| — |
| — |
| 180 |
| 342 | ||||||
Total nonperforming loans |
| 25,213 |
| 18,010 |
| 14,682 |
| 10,245 |
| 9,101 | ||||||
Foreclosed real estate |
| 208 |
| 427 |
| 1,466 |
| 4,328 |
| 3,618 | ||||||
Total nonperforming assets | $ | 25,421 | $ | 18,437 | $ | 16,148 | $ | 14,573 | $ | 12,719 | ||||||
Nonperforming loans to gross loans |
| 0.62 | % |
| 0.57 | % |
| 0.47 | % |
| 0.33 | % |
| 0.36 | % | |
Nonperforming assets to total assets |
| 0.53 | % |
| 0.51 | % |
| 0.46 | % |
| 0.43 | % |
| 0.41 | % | |
Allowance for credit losses to nonperforming loans |
| 110.43 | % |
| 104.08 | % |
| 123.36 | % |
| 135.56 | % |
| 186.27 | % | |
Allowance for credit losses
The allowance for credit losses was $27.8 million at December 31, 2025 compared to $18.7 million at December 31, 2024, an increase of $9.1 million, or 48.5%. The allowance for credit losses was $18.1 million as of December 31, 2023.
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The increase from December 31, 2024 to December 31, 2025 was due to the $9.9 million in initial allowance reserves recorded on the acquired First IC loan portfolio, including $7.9 million and $2.0 million attributable to purchased seasoned loans and PCD loans, respectively, as well as additional reserves allocated to our construction and development, commercial real estate and commercial and industrial loan portfolios.These increases were offset by a decrease in the reserves allocated to our residential real estate loan portfolio. The increase from December 31, 2023 to December 31, 2024 was primarily due to the increase in reserves allocated to individually analyzed loans, partially offset by $130,000 in charge-offs recorded during the year ended December 31, 2024. The CECL approach requires an estimate of the credit losses expected over the life of an exposure (or pool of exposures). It removes the incurred loss approach’s threshold that delayed the recognition of a credit loss until it was probable a loss event was incurred.
We maintain a reserve for credit losses that consist of two components, the allowance for credit losses (ACL) on funded loans and the ACL 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 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 was created upon adoption of CECL on January 1, 2023 and had a balance of $287,000 and $165,000 as of December 31, 2025 and 2024, respectively.
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 December 31, 2025, included elsewhere in this Annual Report on Form 10-K, for additional information on the on the allowance for credit losses and the allowance for unfunded commitments.
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.
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Analysis of the Allowance for Credit Losses. The following table provides an analysis of the allowance for credit losses, provision for loan losses and net charge-offs for the periods presented below:
December 31, |
| |||||||||||||||
(Dollars in thousands) | | 2025 | | 2024 | | 2023 | | 2022 | | 2021 | ||||||
Balance, beginning of period | $ | 18,744 | $ | 18,112 | $ | 13,888 | $ | 16,952 | $ | 10,135 | ||||||
Initial allowance on First IC acquired loans | 9,885 | — | — | — | — | |||||||||||
CECL adoption (Day 1) impact | — | — | 5,055 | — | — | |||||||||||
Charge-offs: |
| |
| |
| |
| |
| | ||||||
Construction and development |
| — |
| — |
| — |
| — |
| — | ||||||
Commercial real estate |
| 172 |
| — |
| 455 |
| — |
| 67 | ||||||
Commercial and industrial |
| 294 |
| 130 |
| 309 |
| 390 |
| 64 | ||||||
Residential real estate |
| — |
| — |
| — |
| — |
| — | ||||||
Consumer and other |
| — |
| — |
| — |
| — |
| — | ||||||
Total charge-offs |
| 466 |
| 130 |
| 764 |
| 390 |
| 131 | ||||||
Recoveries: |
| |
| |
| |
| |
| | ||||||
Construction and development |
| — |
| — |
| — |
| — |
| — | ||||||
Commercial real estate |
| 2 |
| 83 |
| 5 |
| 7 |
| 12 | ||||||
Commercial and industrial |
| 14 |
| 11 |
| 20 |
| 81 |
| — | ||||||
Residential real estate |
| — |
| — |
| — |
| — |
| — | ||||||
Consumer and other |
| — |
| — |
| — |
| 5 |
| 7 | ||||||
Total recoveries |
| 16 |
| 94 |
| 25 |
| 93 |
| 19 | ||||||
Net charge-offs/(recoveries) |
| 450 |
| 36 |
| 739 |
| 297 |
| 112 | ||||||
Provision for credit losses |
| (336) |
| 668 |
| (92) |
| (2,767) |
| 6,929 | ||||||
Balance, end of period | $ | 27,843 | $ | 18,744 | $ | 18,112 | $ | 13,888 | $ | 16,952 | ||||||
Total loans at end of period | $ | 4,077,822 | $ | 3,165,316 | $ | 3,150,961 | $ | 3,065,329 | $ | 2,511,508 | ||||||
Average loans(1) |
| 3,202,087 |
| 3,125,389 |
| 3,039,361 |
| 2,761,195 |
| 2,109,249 | ||||||
Net charge-offs to average loans |
| 0.01 | % |
| 0.00 | % |
| 0.02 | % |
| 0.01 | % |
| 0.01 | % | |
Allowance for credit losses to total loans |
| 0.68 | % |
| 0.59 | % |
| 0.57 | % |
| 0.45 | % |
| 0.67 | % | |
| (1) | Excludes loans held for sale. |
Management believes the allowance for credit losses is adequate to provide for losses inherent in the loan portfolio as of December 31, 2025.
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The following table presents a summary of the allocation of the allowance for credit losses by loan portfolio segment for the periods indicated:
December 31, | ||||||||||||||||||||||||||
2025 | 2024 | 2023 | 2022 | 2021 | ||||||||||||||||||||||
Allowance for | % of Loans to | Allowance for | % of Loans to | Allowance for | % of Loans to | Allowance for | % of Loans to | Allowance for | % of Loans to | |||||||||||||||||
(Dollars in thousands) | | Credit Losses | | Total Loans | | Credit Losses | | Total Loans | | Credit Losses | | Total Loans | | Credit Losses | | Total Loans | | Credit Losses | | Total Loans | ||||||
Construction and Development | $ | 65 |
| 1.0 | % | $ | 31 |
| 0.7 | % | $ | 46 |
| 0.7 | % | $ | 124 |
| 1.6 | % | $ | 100 |
| 1.6 | % | |
Commercial Real Estate |
| 15,716 |
| 38.3 |
| 7,265 |
| 24.1 |
| 6,876 |
| 22.6 |
| 2,811 |
| 21.4 |
| 4,146 |
| 20.7 | ||||||
Commercial and Industrial |
| 1,586 |
| 2.4 |
| 1,380 |
| 2.5 |
| 588 |
| 2.1 |
| 1,326 |
| 1.7 |
| 4,989 |
| 2.9 | ||||||
Residential Real Estate |
| 10,472 |
| 58.3 |
| 10,066 |
| 72.7 |
| 10,597 |
| 74.6 |
| 9,626 |
| 75.3 |
| 7,717 |
| 74.8 | ||||||
Consumer and other | 4 | — | 2 | — | 5 | — | 1 | — | — | — | ||||||||||||||||
Total allowance for credit losses | $ | 27,843 |
| 100.0 | % | $ | 18,744 |
| 100.0 | % | $ | 18,112 |
| 100.0 | % | $ | 13,888 |
| 100.0 | % | $ | 16,952 |
| 100.0 | % | |
Investment Securities
Our securities portfolio is the third largest component of our interest earning assets. The portfolio serves the following purposes: (i) to optimize the Bank’s income consistent with the investment portfolio’s liquidity and risk objectives; (ii) to balance market and credit risks of other assets and the Bank’s liability structure; (iii) to profitably deploy funds which are not needed to fulfill loan demand, deposit redemptions or other liquidity purposes; (iv) to provide collateral which the Bank is required to pledge against public funds; and (v) to provide investments for Community Reinvestment Act (CRA) purposes.
We classify our debt securities as either available-for-sale or held-to-maturity at the time of purchase. Accounting guidance requires available-for-sale securities to be marked to fair value with an offset to accumulated other comprehensive income (loss), a component of shareholders’ equity. Monthly adjustments are made to reflect changes in the fair value of our available-for-sale securities.
All of the debt securities in our investment portfolio were classified as available-for-sale as of December 31, 2025. All available-for-sale securities are carried at fair value. Securities available-for-sale consist primarily of U.S. government-sponsored agency securities, home mortgage-backed securities and state and municipal bonds. No issuer of the available-for-sale securities comprised more than ten percent of our shareholders’ equity as of December 31, 2025, 2024 or 2023.
The following table presents the amortized cost and fair value of our available-for-sale securities portfolio as of the dates presented.
Year Ended December 31, | ||||||||||||||||||
2025 | 2024 | 2023 | ||||||||||||||||
(Dollars in thousands) | | Amortized Cost | | Fair Value | | Amortized Cost | | Fair Value | | Amortized Cost | | Fair Value | ||||||
Obligations of U.S. Government entities and agencies | $ | 12,393 | $ | 12,542 | $ | 4,467 | $ | 4,467 | $ | 4,637 | $ | 4,637 | ||||||
States and political subdivisions | 11,574 |
| 10,144 | 8,022 |
| 6,537 | 8,072 |
| 6,782 | |||||||||
Mortgage-backed GSE residential |
| 25,971 |
|
| 24,493 |
| 8,186 |
|
| 6,387 |
| 8,669 |
|
| 7,074 | |||
Total securities available for sale | $ | 49,938 |
| $ | 47,179 | $ | 20,675 |
| $ | 17,391 | $ | 21,378 |
| $ | 18,493 | |||
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Certain securities have fair values less than amortized cost and, therefore, contain unrealized losses. The Company does not believe that the securities available for sale that were in an unrealized loss position as of December 31, 2025 represent a credit loss impairment. As of December 31, 2025, 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.
The following table sets forth certain information regarding contractual maturities and the weighted average tax-equivalent yields of our investment securities available for sale as of the dates presented. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.
As of December 31, 2025 | ||||||||||||||||||||||||||
One Year or Less | More Than One Year | More Than Five Years | More Than Ten Years | Total | ||||||||||||||||||||||
Weighted | Weighted | Weighted | Weighted | Weighted | ||||||||||||||||||||||
(Dollars in thousands) | | Fair Value | | Average Yield | | Fair Value | | Average Yield | | Fair Value | | Average Yield | | Fair Value | | Average Yield | | Fair Value | | Average Yield | ||||||
Obligations of U.S. Government entities and agencies | $ | 3,171 | 4.24 | % | $ | 9,371 | 4.14 | % | $ | — | — | % | $ | — | — | % | $ | 12,542 | 4.16 | % | ||||||
States and political subdivisions |
| 1,234 | 2.33 |
| 1,026 | 3.59 |
| 1,284 | 4.17 |
| 6,600 | 2.60 |
| 10,144 | 2.87 | |||||||||||
Mortgage-backed GSE residential |
| 2,486 | 3.50 |
| 7,298 | 3.73 |
| 6,914 | 3.91 |
| 7,795 | 3.15 |
| 24,493 | 3.57 | |||||||||||
Total securities available for sale | $ | 6,891 | 3.63 | % | $ | 17,695 | 3.94 | % | $ | 8,198 | 3.95 | % | $ | 14,395 | 2.90 | % | $ | 47,179 | 3.51 | % | ||||||
We have not used interest rate swaps or other derivative instruments to hedge fixed rate loans or securities to otherwise mitigate our interest rate risk.
Equity Securities
As of December 31, 2025 and 2024, the Company had equity securities with carrying values totaling $18.6 million and $10.3 million, respectively. The equity securities consist of our investment in a 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 years ended December 31, 2025, 2024 and 2023, we recognized an unrealized gain of $346,000, an unrealized loss of $35,000 and an unrealized gain of $35,000, respectively, in net income on our equity securities.
Deposits
Deposits represent the Bank’s primary source of funds, and we gather deposits primarily through our branch locations, as well as the use of wholesale and brokered deposits. We offer a variety of deposit products including demand deposit accounts, interest-bearing products, money market and savings accounts and certificate of deposits. We put continued
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effort into gathering noninterest-bearing demand deposits accounts through marketing to our existing and new loan customers, customer referrals, and expansion into new markets.
Total deposits increased $909.2 million, or 33.2%, to $3.65 billion at December 31, 2025 compared to $2.74 billion at December 31, 2024. The increase in deposit balances was primarily driven by $878.4 million in deposit balances acquired from First IC as of December 31, 2025. As of December 31, 2025, 21.4% of total deposits were comprised of noninterest-bearing demand accounts and 78.6% of interest-bearing deposit accounts compared to 19.6% and 80.4% as of December 31, 2024, respectively. Total deposits increased $5.9 million, or 0.2%, to $2.74 billion at December 31, 2024 compared to $2.73 billion at December 31, 2023. Our noninterest-bearing demand accounts were 18.7% of total deposits and our interest-bearing deposits accounted for the remaining 81.3% of our deposits as of December 31, 2023.
As of December 31, 2025 and 2024, the Company had estimated uninsured deposits of $1.09 billion and $666.4 million, respectively. These estimates were derived using the same methodologies and assumptions used for the Bank's regulatory reporting. Uninsured deposits were 29.6% of total deposits at December 31, 2025 compared to 24.1% at December 31, 2024. The increase in uninsured deposit balances was driven by the deposits acquired from First IC. As of December 31, 2025, we had $1.23 billion of available borrowing capacity at the Federal Home Loan Bank ($577.9 million), Federal Reserve Discount Window ($600.4 million) and various other financial institutions (fed fund lines totaling $52.5 million).
We had brokered deposits of $747.8 million, or 20.5% of total deposits, at December 31, 2025 compared to $721.8 million, or 26.4% of total deposits, at December 31, 2024 and $766.3 million, or 28.1% of total deposits, at December 31, 2023. 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, or to help fund our loan demand when necessary.
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 December 31, 2025, the total amount of deposits tied to the Federal Funds Effective rate was $1.07 billion. See Note 11 of our consolidated financial statements as of December 31, 2025, included elsewhere in this Annual Report on Form 10-K, for additional information.
The following table summarizes our average deposit balances and weighted average rates for the years ended December 31, 2025, 2024 and 2023:
Year Ended December 31, | ||||||||||||||||
2025 | 2024 | 2023 | ||||||||||||||
Weighted | Weighted | Weighted | ||||||||||||||
Average | Average | Average | Average | Average | Average | |||||||||||
(Dollars in thousands) | | Balance | | Rate | | Balance | | Rate | | Balance | | Rate | ||||
Noninterest-bearing demand deposits | $ | 549,337 | — | % | $ | 536,084 | — | % | $ | 555,840 | — | % | ||||
Interest-bearing demand deposits | 105,823 |
| 1.98 | 127,882 |
| 2.74 | 132,033 |
| 1.70 | |||||||
Savings and money market deposits |
| 396,932 | 3.55 |
| 315,721 | 3.91 |
| 509,443 | 2.82 | |||||||
Brokered money market deposits | 694,449 | 2.22 | 707,533 | 2.26 | 511,427 | 5.47 | ||||||||||
Time deposits |
| 1,027,849 | 4.01 |
| 1,031,942 | 4.67 |
| 940,911 | 3.83 | |||||||
Total interest-bearing deposits | 2,225,053 | 3.28 | 2,183,078 | 3.67 | 2,093,814 | 3.85 | ||||||||||
Total deposits | $ | 2,774,390 |
| 2.63 | % | $ | 2,719,162 |
| 2.94 | % | $ | 2,649,654 |
| 3.04 | % | |
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The following table sets forth the scheduled maturities of time deposits of $250,000 or greater as of December 31, 2025:
(Dollars in thousands) | | December 31, 2025 | |
Remaining maturity: |
| ||
Three months or less | $ | 283,801 | |
Over three through six months |
| 305,113 | |
Over six through twelve months |
| 203,453 | |
Over twelve months |
| 4,848 | |
Total time deposits $250,000 or greater | $ | 797,215 | |
Borrowed Funds
Other than deposits, the Company utilizes FHLB advances as a supplementary funding source to finance our operations. The advances from the FHLB are collateralized by our residential real estate loans. At December 31, 2025 and December 31, 2024, we had available borrowing capacity from the FHLB of $577.9 million and $692.6 million, respectively. At December 31, 2025 and 2024, we had $510.0 million and $375.0 million, respectively, of outstanding advances from the FHLB.
The following table provides information related to our FHLB Advances for the periods indicated:
As of or for the Year Ended December 31, | ||||||||||
(Dollars in thousands) | | 2025 | | 2024 | | 2023 | ||||
Maximum amount outstanding at any month-end during the period | $ | 510,000 | $ | 375,000 | $ | 425,000 | ||||
Balance outstanding at end of period | 510,000 | 375,000 | 325,000 | |||||||
Average outstanding balance during the period | 423,750 | 368,750 | 350,000 | |||||||
Weighted average interest rate during the period | 4.06 | % | 3.97 | % | 3.06 | % | ||||
Weighted average interest rate at end of period |
| 4.03 |
| 4.11 |
| 3.66 | ||||
In addition to our advances with the FHLB, we maintain federal funds agreements with our correspondent banks. Our available borrowings under these agreements were $52.5 and $47.5 million at December 31, 2025 and 2024, respectively. We did not have any advances outstanding under these agreements for any of the periods presented. We also have access to the Federal Reserve’s discount window in the amount of $600.4 million and $551.6 million at December 31, 2025 and 2024, respectively. No discount window borrowings were outstanding as of December 31, 2025 and 2024. We also maintain relationships in the capital markets with brokers to issue certificates of deposit and money market accounts.
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
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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 December 31, 2025 and 2024, we had $52.5 million and $47.5 million, respectively, of unsecured federal funds lines with no amounts advanced. In addition, the Company had Federal Reserve Discount Window funds available of approximately $600.4 million and $551.6 million at December 31, 2025 and 2024, 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 December 31, 2025, as well as all of the Company’s municipal and mortgage backed securities. There were no outstanding borrowings on this line as of December 31, 2025 and 2024.
At December 31, 2025 and 2024, we had $510.0 million and $375.0 million, respectively, of outstanding advances from the FHLB. Based on the values of residential mortgage loans pledged as collateral, we had $577.9 million and $692.6 million of additional borrowing availability with the FHLB as of December 31, 2025 and 2024, respectively. We also maintain relationships in the capital markets with brokers to issue certificates of deposit and money market accounts.
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. For more information, see “Item 1. Business – Regulation and Supervision – Regulation of the Company – Capital Requirements.”
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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 December 31, 2025 and 2024. The Bank exceeded all regulatory capital requirements and was considered to be “well-capitalized” as of December 31, 2025 and 2024. 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.
To Be Well Capitalized |
| |||||||||||||
Minimum Capital Required | Under Prompt Corrective |
| ||||||||||||
(Dollars in thousands) | Actual | Basel III | Action Provisions: |
| ||||||||||
| Amount | | Ratio | | Amount ≥ | | Ratio ≥ | | Amount ≥ | | Ratio ≥ |
| ||
As of December 31, 2025 | ||||||||||||||
Total Capital (to Risk Weighted Assets) | ||||||||||||||
Consolidated | $ | 501,973 | 16.85 | % | 312,741 | 10.50 | % | N/A |
| N/A | ||||
Bank |
| 499,580 | 16.77 | % | 312,726 |
| 10.50 | 297,835 |
| 10.00 | % | |||
Tier I Capital (to Risk Weighted Assets) | ||||||||||||||
Consolidated |
| 473,843 | 15.91 | % | 253,171 | 8.50 | % | N/A |
| N/A | ||||
Bank |
| 471,450 | 15.83 | % | 253,159 |
| 8.50 | 238,268 |
| 8.00 | % | |||
Common Tier 1 (CET1) | ||||||||||||||
Consolidated |
| 473,843 | 15.91 | % | 208,494 | 7.00 | % | N/A |
| N/A | ||||
Bank |
| 471,450 | 15.83 | % | 208,484 |
| 7.00 | 193,592 |
| 6.50 | % | |||
Tier 1 Capital (to Average Assets) | ||||||||||||||
Consolidated |
| 473,843 | 10.00 | % | 189,572 | 4.00 | % | N/A |
| N/A | ||||
Bank |
| 471,450 | 9.84 | % | 191,629 |
| 4.00 | 239,536 |
| 5.00 | % | |||
As of December 31, 2024 | ||||||||||||||
Total Capital (to Risk Weighted Assets) | ||||||||||||||
Consolidated | $ | 427,083 | 20.05 | % | 223,622 | 10.50 | % | N/A |
| N/A | ||||
Bank |
| 424,383 | 19.93 | % | 223,616 |
| 10.50 | 212,968 |
| 10.00 | % | |||
Tier I Capital (to Risk Weighted Assets) | ||||||||||||||
Consolidated |
| 408,174 | 19.17 | % | 181,027 | 8.50 | % | N/A |
| N/A | ||||
Bank |
| 405,474 | 19.04 | % | 181,023 |
| 8.50 | 170,374 |
| 8.00 | % | |||
Common Tier 1 (CET1) | ||||||||||||||
Consolidated |
| 408,174 | 19.17 | % | 149,081 | 7.00 | % | N/A |
| N/A | ||||
Bank |
| 405,474 | 19.04 | % | 149,077 |
| 7.00 | 138,429 |
| 6.50 | % | |||
Tier 1 Capital (to Average Assets) | ||||||||||||||
Consolidated |
| 408,174 | 11.57 | % | 141,149 | 4.00 | % | N/A |
| N/A | ||||
Bank |
| 405,474 | 11.49 | % | 141,127 |
| 4.00 | 176,409 |
| 5.00 | % | |||
Contractual Obligations
The Company has entered into various contractual obligations in the normal course of business, certain of which require future payments that could impact our liquidity and capital resources. These include payments related to operating lease obligations (see Note 6 in Item 8.), time deposits with stated maturity dates (See Note 9 in Item 8.) and FHLB advances (see Note 10 in item 8.). We believe that we will be able to meet our contractual obligations as they come due through the maintenance of adequate cash levels. We expect to maintain adequate cash levels through profitability, loan and securities repayment and maturity activity and continued deposit gathering activities. We have in place various borrowing mechanisms for both short-term and long-term liquidity needs.
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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.
The following table presents outstanding financial commitments whose contractual amount represents credit risks as of the dates indicated:
| December 31, | |||||
(Dollars in thousands) |
| 2025 |
| 2024 | ||
Commitments to extend credit |
| $ | 120,078 | $ | 47,369 | |
Standby letters of credit | 14,490 | 5,782 | ||||
Total off-balance sheet commitments | $ | 134,568 | $ | 53,151 | ||
Item 7A. 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.
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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 IRR. 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 December 31, 2025, 2024 and 2023 are presented in the following table:
Net Interest Income Sensitivity |
| ||||||||
12 Month Projection | 24 Month Projection | ||||||||
(Ramp in basis points) | | +200 | | -200 | | +200 | | -200 |
|
December 31, 2025 |
| (1.70) | % | 1.20 | % | (6.60) | % | 6.50 | % |
December 31, 2024 |
| (0.20) | % | (1.30) | % | (7.00) | % | 2.50 | % |
December 31, 2023 |
| (0.90) | % | 0.00 | % | 1.50 | % | 7.80 | % |
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
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and liabilities. Our simulation model incorporates interest rate shocks of +/- 100, 200, 300 and 400 basis points. The results of the model for rate shakes of +/- 100, 200, 300 and 400 basis points are presented in the table below:
Economic Value of Equity Sensitivity |
| ||||||||||||||||
(Shock in basis points) | | +400 | +300 | +200 | | +100 | | -100 | -200 | | -300 | | -400 |
| |||
December 31, 2025 | (28.20) | % | (21.10) | % | (14.00) | % | (6.70) | % | 6.40 | % | 12.30 | % | 15.90 | % | 13.20 | % | |
December 31, 2024 |
| (26.30) | % | (19.40) | % | (12.50) | % | (5.80) | % | 4.30 | % | 7.10 | % | 6.20 | % | 4.30 | % |
December 31, 2023 | (28.90) | % | (22.20) | % | (15.00) | % | (7.50) | % | 9.40 | % | 18.60 | % | 26.10 | % | 22.20 | % | |
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.
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Item 8. Financial Statements and Supplementary Data
| Page |
|
|
Report of Independent Registered Public Accounting Firm (PCAOB ID | 73 |
| |
Consolidated Balance Sheets as of December 31, 2025 and 2024 | 76 |
| |
Consolidated Statements of Income for the Years Ended December 31, 2025, 2024 and 2023 | 77 |
| |
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2025, 2024 and 2023 | 78 |
| |
Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2025, 2024 and 2023 | 79 |
| |
Consolidated Statements of Cash Flows for the Years Ended December 31, 2025, 2024 and 2023 | 80 |
| |
Notes to Consolidated Financial Statements | 82 |
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Report of Independent Registered Public Accounting Firm
Shareholders and the Board of Directors of MetroCity Bankshares, Inc.
Doraville, Georgia
Opinion on the Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of MetroCity Bankshares, Inc. (the “Company”) as of December 31, 2025 and 2024, the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2025, and the related notes (collectively referred to as the “financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2025 based on criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2025 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework: (2013) issued by COSO.
Change in Accounting Principle
As discussed in Note 1 to the financial statements, the Company has changed its method of accounting for credit losses effective January 1, 2023 due to the adoption of Financial Accounting Standards Board Accounting Standards Codification No. 326, Financial Instruments – Credit Losses (ASC 326). The Company adopted the new credit loss standard using the modified retrospective method such that prior period amounts are not adjusted and continue to be reported in accordance with previously applicable generally accepted accounting principles.
Basis for Opinions
The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. As permitted, the Company has excluded the operations of First IC Corporation acquired during 2025, which is described in Note 2 of the consolidated financial statements, from the scope of management’s report on internal control over financial
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reporting. As such, it has also been excluded from the scope of our audit of internal control over financial reporting. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Allowance for Credit Losses – Reasonable and Supportable Forecasts
As described in Note 1 - Significant Accounting Policies and Note 4 – Loans and Allowance for Credit Losses to the consolidated financial statements, the Company uses a discounted cash flow method to estimate expected credit losses for each of its originated loan segments. Additionally, as of December 1, 2025 the Company measured and recorded an allowance for credit losses of $9.9 million related to loans acquired as part of the acquisition of First IC Corporation (First IC), which was measured using a non-discounted expected cash flow method. The Company uses regression analysis of peer data to determine suitable loss drivers to utilize when modeling lifetime probability of default and loss given default in their reasonable and supportable forecast, including those loans acquired as part of the acquisition of First IC. The Company uses national data including gross domestic product, unemployment rates and home price indices (residential mortgage loans only) depending on the nature of the underlying loan pool and how well that loss driver correlates to expected future losses. Management leverages economic projections from an independent third party to inform its loss driver forecasts over the four-quarter forecast period, reverting back to a historical loss rate over eight quarters on a straight-line basis.
We identified auditing the reasonable and supportable forecasts, including the regression analysis of peer data to determine loss drivers, as a critical audit matter as it involved significant judgment by management, which results in significant auditor judgement, a high degree of auditor subjectivity and increased audit effort, including the involvement of specialists.
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The primary audit procedures we performed to address this critical audit matter included the following:
| ● | Tested the effectiveness of controls over the regression analysis and reasonable and supportable forecast including: |
| o | Management’s review of the relevance and reliability of the underlying data |
| o | Management’s review of the results of the model validation performed by a third-party specialist. |
| o | Management’s review over the reasonableness of significant assumptions and judgments applied in the forecast and results of the calculation. |
| ● | Performed substantive testing over the regression analysis and reasonable and supportable forecast including: |
| o | Utilized the work of specialists to assist in evaluating the appropriateness and mathematical accuracy of the regression analysis, methodologies applied, and the relevance and reliability of data used in the development of the forecast models. |
| o | Evaluated the reasonableness of significant assumptions and judgments applied in the reasonable and supportable forecasts. |
/s/
We have served as the Company’s auditor since 2014.
March 16, 2026
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METROCITY BANKSHARES, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share and per share data)
December 31, | December 31, | |||||
| 2025 | | 2024 | |||
Assets: |
|
| | |||
Cash and due from banks | $ | | $ | | ||
Federal funds sold |
| |
| | ||
Cash and cash equivalents |
| |
| | ||
Equity securities |
| |
| | ||
Securities available for sale (at fair value) |
| |
| | ||
Loans held for sale |
| |
| — | ||
Loans, less allowance for credit losses of $ |
| |
| | ||
Accrued interest receivable |
| |
| | ||
Federal Home Loan Bank stock |
| |
| | ||
Premises and equipment, net |
| |
| | ||
Operating lease right-of-use asset |
| |
| | ||
Foreclosed real estate, net | | | ||||
SBA and USDA servicing asset, net |
| |
| | ||
Mortgage servicing asset, net |
| |
| | ||
Bank owned life insurance |
| |
| | ||
Goodwill | | — | ||||
Core deposit intangible | | — | ||||
Interest rate derivatives | | | ||||
Other assets |
| |
| | ||
Total assets | $ | | $ | | ||
Liabilities: |
| |||||
Deposits: |
| |
| | ||
Noninterest-bearing demand | $ | | $ | | ||
Interest-bearing |
| |
| | ||
Total deposits |
| |
| | ||
Federal Home Loan Bank advances | | | ||||
Operating lease liability |
| |
| | ||
Accrued interest payable |
| |
| | ||
Other liabilities |
| |
| | ||
Total liabilities |
| |
| | ||
Shareholders' Equity: |
| |
| | ||
Preferred stock, $ | ||||||
Common stock, $ | | | ||||
Additional paid-in capital |
| |
| | ||
Retained earnings |
| |
| | ||
Accumulated other comprehensive income |
| |
| | ||
Total shareholders' equity |
| |
| | ||
Total liabilities and shareholders' equity | $ | | $ | | ||
See accompanying notes to audited consolidated financial statements.
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METROCITY BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except share and per share data)
Years Ended December 31, | |||||||||
| 2025 | | 2024 | | 2023 | ||||
Interest and dividend income: | | | |||||||
Loans, including fees | $ | | $ | | $ | | |||
Other investment income |
| |
| |
| | |||
Federal funds sold |
| |
| |
| | |||
Total interest income |
| |
| |
| | |||
Interest expense: | |||||||||
Deposits |
| |
| |
| | |||
FHLB advances and other borrowings |
| |
| |
| | |||
Total interest expense |
| |
| |
| | |||
Net interest income |
| |
| |
| | |||
Provision for credit losses: |
| ||||||||
Provision for loan losses | ( | | ( | ||||||
Provision for unfunded commitments | | ( | | ||||||
Provision for credit losses |
| ( |
| |
| ( | |||
Net interest income after provision for credit losses |
| |
| |
| | |||
Noninterest income: | |||||||||
Service charges on deposit accounts |
| |
| |
| | |||
Other service charges, commissions and fees |
| |
| |
| | |||
Gain on sale of residential mortgage loans |
| |
| |
| — | |||
Mortgage servicing income, net |
| |
| |
| ( | |||
Gain on sale of SBA loans |
| |
| |
| | |||
SBA servicing income, net |
| |
| |
| | |||
Other income |
| |
| |
| | |||
Total noninterest income |
| |
| |
| | |||
Noninterest expense: | |||||||||
Salaries and employee benefits |
| |
| |
| | |||
Occupancy and equipment |
| |
| |
| | |||
Data processing |
| |
| |
| | |||
Advertising |
| |
| |
| | |||
Merger-related expenses | | — | — | ||||||
Other expenses |
| |
| |
| | |||
Total noninterest expense |
| |
| |
| | |||
Income before provision for income taxes |
| |
| |
| | |||
Provision for income taxes |
| |
| |
| | |||
Net income | $ | | $ | | $ | | |||
Earnings per share: | |||||||||
Basic | $ | | $ | | $ | | |||
Diluted | $ | | $ | | $ | | |||
See accompanying notes to audited consolidated financial statements.
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METROCITY BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
Years Ended December 31, | |||||||||
| 2025 | | 2024 | | 2023 | ||||
Net income | $ | | $ | | $ | | |||
Other comprehensive income: |
| |
| |
| | |||
Unrealized holding gains (losses) on securities available for sale arising during the period |
| |
| ( |
| | |||
Net changes in fair value of cash flow hedges | ( | ( | | ||||||
Tax effect |
| |
| |
| ( | |||
Other comprehensive (loss) income |
| ( |
| ( |
| | |||
Comprehensive income | $ | | $ | | $ | | |||
See accompanying notes to audited consolidated financial statements.
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METROCITY BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Dollars in thousands, except share and per share data)
Accumulated | |||||||||||||||||
Common Stock | Additional | Other | |||||||||||||||
Number of | Paid-in | Retained | Comprehensive | ||||||||||||||
| Shares | | Amount | | Capital | | Earnings | | Income (Loss) | | Total | ||||||
Balance, January 1, 2023 |
| | $ | | $ | | $ | | $ | | $ | | |||||
Net income | — |
| — | — |
| |
| — |
| | |||||||
Stock based compensation expense |
| — |
| — |
| |
| — |
| — |
| | |||||
Vesting of restricted stock | |
| |
| ( |
| — |
| — |
| — | ||||||
Repurchase of common stock | ( | ( | ( | — | — | ( | |||||||||||
Impact of adoption of new accounting standard, net of tax(1) | — | — | — | ( | — | ( | |||||||||||
Other comprehensive income | — |
| — | — |
| — |
| |
| | |||||||
Dividends declared on common stock ($ |
| — |
| — | — |
| ( |
| — |
| ( | ||||||
Balance, December 31, 2023 |
| | $ | | $ | | $ | | $ | | $ | | |||||
Net income |
| — |
| — | — |
| |
| — |
| | ||||||
Stock based compensation expense |
| — |
| — |
| |
| — |
| — |
| | |||||
Exercise of stock options | | | | | |||||||||||||
Vesting of restricted stock |
| |
| |
| ( |
| — |
| — |
| — | |||||
Repurchase of common stock | ( | — | ( | — | — | ( | |||||||||||
Other comprehensive loss |
| — |
| — | — |
| — |
| ( |
| ( | ||||||
Dividends declared on common stock ($ |
| — |
| — | — |
| ( |
| — |
| ( | ||||||
Balance, December 31, 2024 |
| | $ | | $ | | $ | | $ | | $ | | |||||
Net income |
| — |
| — | — |
| |
| — |
| | ||||||
Stock based compensation expense |
| — |
| — |
| |
| — |
| — |
| | |||||
Vesting of restricted stock |
| |
| |
| ( |
| — |
| — |
| — | |||||
Repurchase of common stock | ( | ( | ( | — | — | ( | |||||||||||
Common stock issued for First IC acquisition | | | | — | — | | |||||||||||
Stock issuance costs (S-4 filing) | — | ( | — | — | ( | ||||||||||||
Other comprehensive loss |
| — |
| — | — |
| — |
| ( |
| ( | ||||||
Dividends declared on common stock ($ |
| — |
| — | — |
| ( |
| — |
| ( | ||||||
Balance, December 31, 2025 |
| | $ | | $ | | $ | | $ | | $ | | |||||
| (1) |
See accompanying notes to audited consolidated financial statements.
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METROCITY BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Years Ended December 31, | |||||||||
| 2025 | | 2024 | | 2023 | ||||
Cash flow from operating activities: |
| |
| |
| | |||
Net income | $ | | $ | | $ | | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||
Depreciation, amortization and accretion |
| |
| |
| | |||
Provision for credit losses |
| ( |
| |
| ( | |||
Stock based compensation expense |
| |
| |
| | |||
Unrealized (gains) losses recognized on equity securities | ( | | ( | ||||||
(Gain) loss on sale of foreclosed real estate |
| ( |
| |
| ( | |||
Writedown of foreclosed real estate | — | | | ||||||
Deferred income tax expense | | | | ||||||
Gain on sale of residential mortgages |
| ( |
| ( |
| — | |||
Origination of SBA loans held for sale |
| ( |
| ( |
| ( | |||
Proceeds from sales of SBA loans held for sale |
| |
| |
| | |||
Gain on sale of SBA loans |
| ( |
| ( |
| ( | |||
Increase in cash value of bank owned life insurance |
| ( |
| ( |
| ( | |||
Increase in accrued interest receivable |
| ( |
| ( |
| ( | |||
Decrease (increase) in SBA and USDA servicing rights |
| |
| ( |
| ( | |||
(Increase) decrease in mortgage servicing rights |
| ( |
| ( |
| | |||
(Increase) decrease in state tax credits | ( | | ( | ||||||
(Increase) decrease in other assets |
| ( |
| |
| ( | |||
(Decrease) increase in accrued interest payable |
| ( |
| ( |
| | |||
(Decrease) increase in other liabilities |
| ( |
| ( |
| | |||
Net cash flow provided by operating activities |
| |
| |
| | |||
Cash flow from investing activities: |
| |
| |
| | |||
Purchases of equity securities | ( | — | — | ||||||
Proceeds from maturities, calls or paydowns of securities available for sale |
| |
| |
| | |||
Purchase of Federal Home Loan Bank stock |
| ( |
| ( |
| ( | |||
Proceeds from sales of residential real estate loans | | | — | ||||||
Increase in loans, net | ( |
| ( |
| ( | ||||
Purchases of premises and equipment |
| ( |
| ( |
| ( | |||
Proceeds from sales of foreclosed real estate owned | | | | ||||||
Net cash acquired in First IC acquisition |
| |
| — |
| — | |||
Net cash flow provided by (used by) investing activities |
| |
| |
| ( | |||
Cash flow from financing activities: |
| |
| |
| | |||
Premiums paid for interest rate caps | ( | — | — | ||||||
(Decrease) increase in deposits, net |
| ( |
| |
| | |||
Proceeds from Federal Home Loan Bank advances |
| |
| |
| | |||
Repayments of Federal Home Loan Bank advances | ( | ( | ( | ||||||
Decrease in other borrowings, net |
| — |
| — |
| ( | |||
Exercise of stock options | — | | — | ||||||
Repurchase of common stock |
| ( |
| ( |
| ( | |||
Stock issuance costs | ( | — | — | ||||||
Dividends paid on common stock |
| ( |
| ( |
| ( | |||
Net cash flow (used by) provided by financing activities |
| ( |
| |
| ( | |||
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See accompanying notes to audited consolidated financial statements.
METROCITY BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Years Ended December 31, | |||||||||
| 2025 | | 2024 | | 2023 | ||||
Net change in cash and cash equivalents |
| |
| |
| ( | |||
Cash and cash equivalents at beginning of period |
| |
| |
| | |||
Cash and cash equivalents at end of period | $ | | $ | | $ | | |||
Supplemental schedule of noncash investing and financing activities: | |||||||||
Transfer of residential real estate loans to loans held for sale | $ | | $ | | $ | | |||
Transfer of loan principal to foreclosed real estate, net of write-downs | $ | | $ | | $ | | |||
Initial recognition of operating lease right-of-use assets | $ | | $ | | $ | | |||
Initial recognition of operating lease liabilities | $ | | $ | | $ | | |||
In conjunction with the First IC acquisition, assets were acquired and liabilities were assumed as follows: | |||||||||
Common stock issued for First IC acquisition | $ | | $ | — | $ | — | |||
Fair value of assets acquired, net of cash acquired | $ | | $ | — | $ | — | |||
Fair value of liabilities assumed | $ | | $ | — | $ | — | |||
Supplemental disclosures of cash flow information - Cash paid during the year for: | |||||||||
Interest | $ | | $ | | $ | | |||
Income taxes | $ | | $ | | $ | | |||
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See accompanying notes to audited consolidated financial statements.
METROCITY BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
MetroCity Bankshares, Inc. (the “Company”) was formed for the sole purpose of owning and operating its wholly owned subsidiary, Metro City Bank (the “Bank”). The Company acquired all of the outstanding common stock of the Bank in a holding company formation transaction on December 31, 2014. The Bank is a Georgia state-chartered bank and commenced operations in 2006. The Bank’s main office is located in Doraville, Georgia, and it operates branches in Alabama, California, Florida, Georgia, New York, New Jersey, Texas and Virginia. The main emphasis of the Bank is on commercial banking and it offers such customary banking services as consumer and commercial checking accounts, savings accounts, certificates of deposit, commercial and consumer loans, including single family residential loans, money transfers and a variety of other banking services. The Company is subject to the regulations of Federal and State banking agencies and is periodically examined by them.
Basis of Presentation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All intercompany accounts and transactions have been eliminated in consolidation. The Company’s accounting and reporting policies conform to accounting principles generally accepted in the United States of America (“GAAP”) and with general practices within the financial services industry. Certain prior period amounts have been reclassified to conform to the current year presentation. The Company has evaluated subsequent events for recognition and disclosure through the date these consolidated financial statements were issued.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant changes in the near-term relate to the determination of the allowance for expected credit losses on loans held for investment, income taxes and the valuation of goodwill and other intangible assets and their respective analyses of impairment.
Significant Group Concentrations of Credit Risk
A substantial portion of the Company’s loan portfolio is to customers in the Atlanta, Georgia and New York, New York metropolitan areas. The ultimate collectability of a substantial portion of the portfolio is therefore susceptible to changes in the economic and market condition in and around these areas.
The nature of the Company’s business requires that it maintain amounts due from banks, which at times may exceed federally insured limits. The Company has not experienced any losses in such accounts.
Business Combinations
In accordance with applicable accounting guidance, the Company recognizes assets acquired and liabilities assumed at their respective fair values as of the date of acquisition, with the related transaction costs expensed in the period incurred. The Company may use third party valuation specialists to assist in the determination of fair value of certain assets and liabilities at the acquisition date, including loans, core deposit intangibles and time deposits. While the Company uses its
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best estimates and assumptions to accurately value assets acquired and liabilities assumed on the acquisition date, the estimates are inherently uncertain. The allowance for credit losses on purchased credit deteriorated (“PCD”) and purchased seasoned loans (“PSL”) are recognized within business combination accounting.
Cash and Cash Equivalents
For purposes of presentation in the statement of cash flows, cash and cash equivalents are defined as those amounts included in the balance sheet caption “cash and due from banks,” which includes cash on hand, cash items in process of collection, and amounts due from banks. Cash flows from loans, federal funds sold, other borrowings, and deposits are reported net.
As of December 31, 2025 and 2024, the Company had $
Investment Securities
Debt securities that management has the intent and ability to hold to maturity are classified as securities held to maturity and are recorded at amortized cost. Securities not classified as securities held to maturity, are securities available for sale and recorded at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income (loss), net of the related tax effect. There were
Purchase premiums and discounts are recognized in interest income using methods approximating the interest method over the terms of the securities. Realized gains and losses for securities classified as available for sale are included in earnings and are derived using the specific identification method for determining the amortized cost of securities sold.
Equity securities with readily determinable fair values (marketable) are measured at fair value, with changes in the fair value recognized as a component of Other Income in the Consolidated Statements of Income.
Allowance for Credit Losses – Available for Sale Securities
The impairment model for available for sale (“AFS”) securities differs from the current expected credit loss (“CECL”) approach utilized by held-to-maturity (“HTM”) debt securities because AFS debt securities are measured at fair value rather than amortized cost. Although ASU 2016-13 replaced the legacy other-than-temporary impairment (“OTTI”) model with a credit loss model, it retained the fundamental nature of the legacy OTTI model. One notable change from the legacy OTTI model is when evaluating whether credit loss exists, an entity may no longer consider the length of time fair value has been less than amortized cost. For AFS debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either criteria is met, the security’s amortized cost basis is written down to fair value through income. For AFS debt securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income. As of December 31, 2025, the Company determined that the unrealized loss positions in AFS securities were not the result of credit losses, and therefore, an allowance for credit losses was not recorded. See Note 3 below for further details.
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Federal Home Loan Bank Stock
Federal Home Loan Bank (FHLB) stock represents an equity interest in a FHLB. It does not have a readily determinable fair value because its ownership is restricted and it lacks a market. The amount of FHLB stock held by the Company is required by the FHLB to be maintained and is based on membership requirements and terms of advance agreements. Such restricted equity securities without a readily determinable fair value are recorded at cost.
Loans Held for Sale
Mortgage loans intended for sale in the secondary market are carried at the lower of aggregate cost or fair value, as determined by outstanding commitments from investors. Net unrealized losses, if any, are recorded as a valuation allowance and charged to earnings. Loans transferred to the held-for-sale category are transferred at the lower of cost or fair value, with charges made recognized as a realized loss on sale of loans. Increases in fair value are not recognized until the loans are sold.
Realized gains and losses on sales of loans are based upon specific identification of the loan sold and included in noninterest income. Loans held for sale are generally sold with servicing rights retained and recorded at fair value at sale as servicing assets.
The Company sometimes sells the guaranteed portion of SBA loans and retains the unguaranteed portion (“retained interest”). A portion of the premium on sale of SBA loans is recognized as gain on sale of loans at the time of the sale by allocating the carrying amount between the asset sold and the retained interest, including these servicing assets, based on their relative fair values. The remaining portion of the premium is recorded as a discount on the retained interest and is amortized over the remaining life of the loan as an adjustment to yield. The retained interest, net of any discount, are included in loans, less allowance for credit losses in the accompanying consolidated balance sheets.
Loans Held for Investment
Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at their outstanding principal, adjusted for any charge-offs, any deferred fees or costs on originated loans and unamortized premiums or discounts on purchased loans.
Interest on commercial, real estate loans and installment loans is credited to income on a daily basis based upon the principal amount outstanding. Loan origination fees, net of certain direct origination costs, are capitalized and recognized as an adjustment of the yield of the related loan.
Interest income on mortgage and commercial loans is discontinued and placed on non-accrual status at the time the loan is 90 days delinquent unless the loan is well-secured and in process of collection. Mortgage loans are charged off at 180 days past due, and commercial loans are charged off to the extent principal or interest is deemed uncollectible. Consumer loans continue to accrue interest until they are charged off no later than 120 days past due unless the loan is in the process of collection. Past-due status is based on the contractual terms of the loan. In all cases, loans are placed on non-accrual or charged-off at an earlier date if collection of principal or interest is considered doubtful. Non-accrual loans and loans past due 90 days still on accrual include both smaller balance homogeneous loans that are collectively evaluated and individually classified loans.
When interest accrual is discontinued, all unpaid accrued interest is reversed against current interest income. 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. Loans are returned to accrual status when all the principal and interest amounts contractually due are reasonably assured of repayment within a reasonable time frame.
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Allowance for Credit Losses - Loans
Under the current expected credit loss (“CECL”) model, the allowance for credit losses (“ACL”) on loans is a valuation allowance estimated at each balance sheet date in accordance with GAAP that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans.
The Company estimates the ACL on loans based on the underlying loans’ amortized cost basis, which is the amount at which the loan is originated or acquired, adjusted for applicable accretion or amortization of premium, discount, and net deferred fees or costs, collection of cash, and charge-offs. In the event that collection of principal becomes uncertain, the Company has policies in place to reverse accrued interest in a timely manner. Therefore, the Company has made a policy election to exclude accrued interest from the measurement of ACL.
Expected credit losses are reflected in the allowance for credit losses through a charge to provision for credit losses. When the Company deems all or a portion of a loan to be uncollectible the appropriate amount is written off and the ACL is reduced by the same amount. Loans are charged off against the ACL when management believes the collection of the principal is unlikely. Subsequent recoveries of previously charged off amounts, if any, are credited to the ACL when received.
The Company measures expected credit losses of loans on a collective (pool) basis, when the loans share similar risk characteristics. Depending on the nature of the pool of loans with similar risk characteristics, the Company uses the discounted cash flow (“DCF”) method for legacy loan pools and a non-DCF method for acquired loan pools, with all loan pools also using a qualitative approach as discussed further below.
The Company’s methodologies for estimating the ACL consider available relevant information about the collectability of cash flows, including information about past events, current conditions, and reasonable and supportable forecasts. The methodologies apply historical loss information, adjusted for loan-specific characteristics, economic conditions at the measurement date, and forecasts about future economic conditions expected to exist through the contractual lives of the loans that are reasonable and supportable, to the identified pools of loans with similar risk characteristics for which the historical loss experience was observed. The Company’s methodologies revert back to historical loss information on a straight-line basis over eight quarters when it can no longer develop reasonable and supportable forecasts.
The Company has identified the following pools of loans with similar risk characteristics for measuring expected credit losses:
Construction and development – Loans in this segment primarily include real estate development loans for which payment is derived from the sale of the property as well as construction projects in which the property will ultimately be used by the borrower. Credit risk is affected by cost overruns, time to sell at an adequate price, and market conditions.
Commercial real estate – Loans in this segment are primarily income-producing properties. The underlying cash flows generated by the properties are adversely impacted by a downturn in the economy as evidenced by increased vacancy rates, which in turn, will have an effect on the credit quality in this segment. Management monitors the cash flows of these loans. This loan segment includes multifamily and farmland loans.
Commercial and industrial – Loans in this segment are made to businesses and are generally secured by assets of the business. Repayment is expected from the cash flows of the business. A weakened economy, and resultant decreased customer spending, will have an effect on the credit quality in this segment.
Single family residential mortgages – Loans in this segment include loans for residential real estate. Loans in this segment are dependent on credit quality of the individual borrower. The overall health of the economy, including unemployment rates will have an effect on the credit quality of this segment.
Consumer and other – Loans in this segment are made to individuals and are secured by personal assets, as well as loans for personal lines of credit and overdraft protection. Loans in this segment are dependent on the credit quality
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of the individual borrower. The overall health of the economy, including unemployment rates will have an effect on the credit quality in this segment.
Discounted Cash Flow and Non-Discounted Cash Flow Methods
The Company uses the discounted cash flow method to estimate expected credit losses for each of its legacy loan segments and non-discounted cash flow method for acquired loan pools. For all loan pools, the Company generates cash flow projections at the instrument level wherein payment expectations are adjusted for estimated prepayment speed, curtailments, time to recovery, probability of default, and loss given default. The modeling of expected prepayment speeds, curtailment rates, and time to recovery are based on benchmark peer data.
The Company uses regression analysis of peer data to determine suitable loss drivers to utilize when modeling lifetime probability of default and loss given default. This analysis also determines how expected probability of default and loss given default will react to forecasted levels of the loss drivers. For all loan pools utilizing both the DCF and non-DCF method, the Company uses national data including gross domestic product, unemployment rates and home price indices (residential mortgage loans only) depending on the nature of the underlying loan pool and how well that loss driver correlates to expected future losses.
For all DCF and non-DCF models, management has determined that four quarters represents a reasonable and supportable forecast period and reverts back to a historical loss rate over eight quarters on a straight-line basis. Management leverages economic projections from a reputable and independent third party to inform its loss driver forecasts over the four-quarter forecast period. Other internal and external indicators of economic forecasts are also considered by management when developing the forecast metrics.
The combination of adjustments for credit expectations (default and loss) and timing expectations (prepayment, curtailment, and time to recovery) produces an expected cash flow stream at the instrument level. Instrument effective yield is calculated, net of the impacts of prepayment assumptions, and the instrument expected cash flows are then discounted at that effective yield to produce an instrument-level net present value of expected cash flows (“NPV”). An ACL is established for the difference between the instrument’s NPV and amortized cost basis. For acquired loan pools, the instrument expected cash flows are not discounted and the ACL is established for the difference of the instrument’s non-discounted expected cash flows and unpaid principal balance (face value).
Qualitative Factors
The Company also considers qualitative adjustments to the quantitative baseline discussed above. For example, the Company considers the impact of current environmental factors at the reporting date that did not exist over the period from which historical experience was used. Relevant factors include, but are not limited to, 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.
Individually Analyzed Loans
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.
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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 ACL on off-balance sheet credit exposures 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. The allowance for unfunded commitments totaled $
Acquired Loans
Loans acquired through purchase or a business combination are recorded at their fair value at the acquisition date. The Company performs an assessment of acquired loans to first determine if such loans have experienced a more than insignificant deterioration in credit quality since their origination and thus should be classified and accounted for as PCD loans. For loans that have not experienced a more than insignificant deterioration in credit quality since origination, referred to as PSLs, the Company records such loans at fair value, with any resulting discount or premium accreted or amortized into interest income over the remaining life of the loan using the interest method. The initial allowance for credit losses on PSLs is established through an adjustment to the acquired loan balance in the period in which the loans were acquired. The allowance for PSLs is determined based upon the Company’s methodology for estimating the allowance under CECL, and is recorded as an adjustment to the acquired loan balance on the date of acquisition.
Acquired loans that are classified as PCD are acquired at fair value, including any resulting discounts or premiums. Discounts and premiums are accreted or amortized into interest income over the remaining life of the loan using the interest method. The initial allowance for credit losses on PCD loans is established through an adjustment to the acquired loan balance in the period in which the loans were acquired. The allowance for PCD loans is determined based upon the Company’s methodology for estimating the allowance under CECL, and is recorded as an adjustment to the acquired loan balance on the date of acquisition. The Company evaluates acquired loans for deterioration in credit quality based on a variety of characteristics, including, but not limited to non-accrual and delinquency status, downgrades in credit quality since origination, along with any other factors identified by the Company through its initial analysis of acquired loans which may indicate there has been a more than insignificant deterioration in credit quality since origination. At the acquisition date, an estimate of expected credit losses is made for groups of PCD loans with similar risk characteristics and individual PCD loans without similar risk characteristics, if applicable.
Subsequent to acquisition, the allowances for credit losses for both PSLs and PCD loans are determined with the use of the Company’s allowance methodology under CECL, in the same manner as all other loans, with the exception of using a non-DCF method for PSL pools versus the DCF method for legacy loan pools (see above for further details).
Foreclosed Real Estate
Real estate properties acquired through, or in lieu of, loan foreclosure are to be sold and are initially recorded at the lesser of the outstanding loan balance or fair value of the property less selling costs at the date of foreclosure establishing a new cost basis. Any write down to fair value at the time of foreclosure is charged to the allowance for credit losses. After foreclosure, valuations are periodically performed by management and the real estate is carried at the lower of carrying amount or fair value less cost to sell. Costs of improvements are capitalized, whereas costs relating to holding foreclosed real estate and subsequent adjustment to the value are expensed.
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation, computed principally on the straight-line method over the estimated useful lives of the assets. Leasehold improvements have a useful life equal to the shorter of useful life or lease term. Maintenance and repairs that do not extend the useful life of the premises and equipment are
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charged to expense. Expenditures for new or major improvements of premises and equipment (i.e. construction in process) are capitalized until placed in service and then depreciated over their estimated useful lives.
The useful lives of premises and equipment are as follows:
Asset Type | | Useful Life |
Building | ||
Leasehold improvements | ||
Furniture, fixtures, and equipment | ||
Computer equipment | ||
Computer software |
SBA and USDA Loan Servicing Rights
SBA and USDA Loan servicing rights on originated loans that have been sold are capitalized by allocating the total cost of the loans between the loan servicing rights and the loans based on their relative fair values. Capitalized servicing rights are measured at fair value at each reporting date and changes in fair value are reported in earnings in the period they occur. Fair values are estimated using either an independent valuation or by discounted cash flows based on a current market interest rate.
Residential Mortgage Servicing Rights
When residential mortgage loans are sold with servicing retained, servicing rights are initially recorded at fair value with the income statement effect recorded in gains on sales of loans. Fair value is based on market prices for comparable mortgage servicing contracts, when available or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. Residential mortgage servicing assets are subsequently measured using the amortization method which requires servicing rights to be amortized into noninterest income in proportion to, and over the period of, the estimated future net servicing income of the underlying loans.
Residential mortgage servicing rights are evaluated for impairment based upon the fair value of the rights as compared to carrying amount. Impairment is determined by stratifying rights into groupings based on predominant risk characteristics, such as interest rate, loan type and investor type. Impairment is recognized through a valuation allowance for an individual grouping, to the extent that fair value is less than the carrying amount. If the Company later determines that all or a portion of the impairment no longer exists for a particular grouping, a reduction of the allowance may be recorded as an increase to income. The fair values of servicing rights are subject to significant fluctuations as a result of changes in estimated and actual prepayment speeds and default rates and losses.
Residential mortgage servicing fee income is recorded for fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding principal; or a fixed amount per loan and are recorded as income when earned. The amortization of residential mortgage servicing rights is netted against loan servicing fee income.
Bank Owned Life Insurance (BOLI)
The Company has purchased life insurance on the lives of certain key officers and employees of the Company. The Company purchased these life insurance policies to generate income to offset the Company’s cost of providing various employee benefits. BOLI is recorded at its cash surrender value, net of surrender charges and/or early termination charges that are probable at settlement. The increase in cash value is recorded as other income.
Goodwill and Core Deposit Intangible
Goodwill represents the excess of the purchase price over the net fair value of acquired businesses. Goodwill is not amortized and is assigned to
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of the reporting unit is less than its carrying amount. If, after assessing the totality of such events and circumstances, the Company determines it is more-likely-than-not that the fair value is less than carrying value, a quantitative impairment test is performed to compare carrying value to the fair value of the reporting unit. The Company also has an unconditional option to bypass the assessment of qualitative factors for any period and proceed directly to the quantitative goodwill impairment test. If the carrying amount of the reporting unit exceeds its fair value, an impairment loss will be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.
Core deposit intangibles arise from the acquisition of deposits and represent the fair value of the expected cost savings from a stable, low-cost funding source compared to alternative market funding. Core deposit intangible assets are amortized on a straight-line method over their estimated useful life of
Interest Rate Derivatives
The Company may use interest rate swap and cap agreements to hedge various exposures or to modify interest rate characteristics of various financial instruments. The Company utilizes interest rate swap and cap agreements as part of its asset/liability management strategy to help manage its interest-rate risk position. Interest rate swaps are contracts in which a series of interest payments are exchanged over a prescribed time period. The notional amounts of the interest rate swap are correlated to match the underlying asset or liability and do not represent the amount exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements.
The Company determines the effectiveness of cash flow hedges at the inception of the derivative contract based on the Company’s intentions and belief as to the likely effectiveness as a hedge. Cash flow hedges represent a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to the recognized asset or liability. For a cash flow hedge, the gain or loss on the derivative is reported in other comprehensive income (loss) and is reclassified into earnings in the same periods during which the hedged transaction affects earnings. The changes in fair value of derivatives that are not highly effective in hedging the changes in fair value or expected cash flows of the hedged item are recognized immediately in current earnings. Changes in the fair value of derivatives that do not qualify for hedge accounting are reported currently in earnings, as noninterest income. Net cash settlements on derivatives that qualify for hedge accounting are recorded in interest income or interest expense, based on the item being hedged. Net cash settlements on derivatives that do not qualify for hedge accounting are reported in noninterest income. Cash flows on hedges are classified in the cash flow statement the same as the cash flows of the items being hedged.
The Company formally documents the relationship between derivatives and hedge items, as well as the risk management objective and the strategy for undertaking hedge transactions at the inception of the hedging relationship. This documentation includes linking cash flow hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivative instruments that are used are highly effective in offsetting changes in fair value or cash flows of hedged items. The Company will discontinue the hedge accounting when it determines that the derivative is no longer effective in offsetting changes in the fair value or cash flows of the hedged items, the derivative is settled or terminates, a hedged forecasted transaction is no longer probable, a hedged firm commitment is no longer firm, or treatment of the derivative as a hedge is no longer appropriate or intended.
When hedge accounting is discontinued, subsequent changes in fair value of the derivative are recorded as noninterest income. When a cash flow hedge is discontinued but the hedged cash flows or forecasted transactions are still expected to occur, gains or losses that were accumulated in other comprehensive income are amortized into income over the same periods in which the hedged transactions will affect income.
Stock Based Compensation Plan
The Company follows Financial Accounting Standards Board (FASB) ASC 718, Compensation - Stock Compensation, which requires all share-based payments to employees, including grants of employee stock options and restricted stock, to be recognized as compensation expense in the financial statements based on fair value. FASB ASC 718
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requires recognition of expense equal to the fair value of the option or restricted stock share, determined using the calculated value method, over the vesting period of the option.
The fair value of stock options and warrants used to compute the recognized expense is estimated using the Black-Scholes option pricing model. This model requires input of subjective assumptions, including the expected price volatility of the underlying stock. Projected data related to the expected volatility and expected life of the stock option is based upon historical and other information. Changes in these subjective assumptions can materially affect the fair value estimates. Prior to becoming a public company in October 2019, FASB ASC 718 allowed non-public companies to use calculated value to determine the expected price volatility of underlying stock for use in the model. For options granted prior to 2019, the calculated value for the Company was obtained by determining the historical volatility of public companies in the Company’s industry sector.
Income Taxes
The provision for income taxes is based on income and expense reported for financial statement purposes after the adjustment for permanent differences such as tax-exempt income. Deferred income tax assets and liabilities are determined using the balance sheet method, reflecting a net deferred tax asset or liability based on the tax effects of the temporary differences between the book and tax bases of assets and liabilities, giving recognition to changes in tax rates and laws. A net deferred tax asset is evaluated for realization, and reduced by a valuation allowance when determined it is more likely than not that the asset will not be fully realized.
In accordance with ASC 740-10 Income Taxes it is the Company’s policy to recognize interest and penalties associated with uncertain tax positions as components of income taxes and to disclose the recognized interest and penalties, if material. Management has evaluated all tax positions that could have a significant effect on the financial statements and determined the Company had
Earnings Per Share
Basic earnings per common share is net income divided by the weighted average number of common shares outstanding during the period. All outstanding unvested share-based payment awards that contain rights to non-forfeitable dividends are considered participating securities for this calculation. Diluted earnings per common share includes the dilutive effect of additional potential common shares issuable under stock options. Earnings and dividends per share are restated for all stock splits and stock dividends through the date of issuance of the financial statements.
Comprehensive Income
Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities and cash flow hedges, are reported as a separate component of the equity section of the balance sheet, such items, along with net income, are components of comprehensive income.
Loan Commitments and Related Financial Instruments
In the ordinary course of business, the Company has entered into off balance sheet financial instruments, which are not reflected in the financial statements and consist of commitments to extend credit, commercial letters of credit and standby letters of credit. Such financial instruments are recorded in the financial statements when they become payable. The Company uses the same credit policies for these off-balance-sheet financial instruments as it does for other instruments that are recorded in the financial statements.
The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Quoted market prices, if available, are utilized as estimates of the fair values of financial instruments. Since no quoted market prices exist for a significant part of the Company's financial instruments, the fair values of such instruments have been derived based on management's assumptions, the estimated amount and timing of future cash flows and estimated discount rates.
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Loss Contingencies
Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there now are such matters which will have a material effect on the financial statements.
Fair Value of Financial Instruments
Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in Note 18. Fair value estimates involve uncertainties and matters of significant judgement regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect these estimates.
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, operations are managed and financial performance is evaluated on a Company-wide basis. Operating segments are aggregated into
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
Recently Adopted Accounting Pronouncements
In January 2023, the Company adopted ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. This ASU significantly changed how entities measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The standard replaced the incurred loss approach with an expected loss model, referred to as the current expected credit loss (“CECL”) model. The new standard applies to financial assets subject to credit losses and measured at amortized cost and certain off-balance-sheet credit exposures, which include, but are not limited to, loans, leases, held-to-maturity securities, loan commitments and financial guarantees. ASU 2016-13 simplifies the accounting for purchased credit-impaired debt securities and loans and expands the disclosure requirements regarding an entity’s assumptions, models and methods for estimating the allowance for credit losses. In addition, under the new standard, entities are required to disclose the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination. ASU No. 2016-13 was effective for interim and annual reporting periods beginning after December 15, 2022. With its adoption, ASU 2016-13 provided for a modified retrospective transition by means of a cumulative effect adjustment to equity as of the beginning of the period in which the guidance was effective.
The Company adopted ASU 2016-13 and all related subsequent amendments thereto effective January 1, 2023 using the modified retrospective approach. The adoption of this standard resulted in an increase to the allowance for credit losses on loans of $
For available for sale (“AFS”) securities, the new CECL methodology replaced the other-than-temporary impairment model and required the recognition of an allowance for reductions in a security’s fair value attributable to declines in credit quality, instead of a direct write-down of the security, when a valuation decline was determined to be other-than-temporary. There was no financial impact related to this implementation since the credit risk associated with our securities portfolio
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was minimal. The Company has made a policy election to exclude accrued interest from the amortized cost basis of AFS securities.
In January 2023, the Company adopted ASU 2022-02, “Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures”, which eliminated the accounting guidance for troubled debt restructurings (“TDRs”) while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty. This guidance was applied on a prospective basis. Upon adoption of this guidance, the Company no longer establishes a specific reserve for modifications to borrowers experiencing financial difficulty, unless those loans do not share the same risk characteristics with other loans in the portfolio. Provided that is not the case, these modifications are included in their respective cohort and the allowance for credit losses is estimated on a pooled basis consistent with the other loans with similar risk characteristics. See Note 3 below for further details.
In March 2023, the FASB issued ASU 2023-01, “Leases (Topic 842): Common Control Arrangements.” This ASU requires entities to amortize leasehold improvements associated with common control leases over the useful life to the common control group. ASU 2023-01 also provides certain practical expedients applicable to private companies and not-for-profit organizations. ASU 2023-01 was effective for us on January 1, 2024 and its adoption did not have a significant effect on our consolidated financial statements.
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” The amendments in this update are intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses. This ASU requires disclosures to include significant segment expenses that are regularly provided to the chief operating decision maker, a description of other segment items by reportable segment, and any additional measures of a segment's profit or loss used by the chief operating decision maker when deciding how to allocate resources. The ASU also requires all annual disclosures currently required by Topic 280, “Segment Reporting,” to be included in interim periods. The Company adopted this standard effective December 31, 2024, for annual financial statements and subsequent interim periods beginning in 2025, and retrospectively updated its disclosures (see ‘Operating Segments” in Note 1 above). The adoption of this standard did not have a significant impact on our consolidated financial statements.
In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” This ASU requires public business entities to disclose in their rate reconciliation table additional categories of information about federal, state and foreign income taxes and to provide more details about the reconciling items in some categories if items meet a quantitative threshold. ASU 2023-09 also requires all entities to disclose income taxes paid, net of refunds, disaggregated by federal, state and foreign taxes for annual periods and to disaggregate the information by jurisdiction based on a quantitative threshold, among other things. This ASU was effective for us on January 1, 2025 and did not have a significant impact on our consolidated financial statements.
In December 2025, the FASB issued ASU No. 2025-08, “Financial Instruments-Credit Losses (Topic 326): Purchased Loans”. This ASU requires entities to apply the gross-up approach under Topic 326 to all “purchased seasoned loans.” According to the amendments in this update, purchased seasoned loans are loans (excluding purchased financial assets with credit deterioration, credit card receivables, debt securities and trade receivables) that are (1) acquired in a business combination, or (2) obtained through a transfer that is not a business combination or initially recognized through the consolidation of a variable interest entity, if certain seasoning criteria are met. A loan is considered seasoned if it is obtained more than 90 days after its origination date and the transferee was not involved in the origination. This ASU aligns the accounting for purchased seasoned loans with the treatment of financial assets purchased with more-than-insignificant credit deterioration since origination (“PCD assets”). This standard is effective for annual periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods, with early adoption is permitted. The Company elected to early adopt this standard effective January 1, 2025.
Recently Issued Accounting Pronouncements Not Yet Adopted
In November 2024, the FASB issued ASU 2024-03, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” This ASU requires disaggregated disclosure of income statement expenses for public business entities. ASU 2024-03 also requires new
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financial statement disclosures in tabular format, disaggregating information about prescribed categories underlying any relevant income statement expense caption. The prescribed categories include, among other things, employee compensation, depreciation, and intangible asset amortization. Additionally, entities must disclose the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses. ASU 2024-03 is effective for us, on a prospective basis, for annual periods beginning in 2027, and interim periods within fiscal years beginning in 2028, though early adoption and retrospective application is permitted. ASU 2024-03 is not expected to have a significant impact on our consolidated financial statements.
In November 2025, the FASB issued ASU 2025-09, “Derivatives and Hedging (Topic 825): Hedge Accounting Improvements”. This ASU clarifies certain aspects of the guidance on hedge accounting and to address several incremental hedge accounting issues arising from the global reference rate reform initiative. The objective of this update is to more closely align hedge accounting with the economics of an entity’s risk management activities and to better reflect those strategies in financial reporting by enabling entities to achieve and maintain hedge accounting for highly effective economic hedges of forecasted transactions. This standard is effective for annual periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. Early adoption is permitted on any date on or after the issuance of this update. ASU 2025-09 is not expected to have a significant impact on our consolidated financial statements. .
Recently Issued Disclosure Rules
In March 2024, the U.S. Securities and Exchange Commission ("SEC") adopted the final rule under SEC Release No. 33-11275, “The Enhancement and Standardization of Climate-Related Disclosures for Investors”. This rule will require registrants to disclose certain climate-related information in registration statements and annual reports. The disclosure requirements will apply to the Company's fiscal year beginning January 1, 2026. The Company is currently evaluating the final rule to determine its impact on the Company's disclosures.
The Company has further evaluated other Accounting Standards Updates issued during 2025 but does not expect updates other than those summarized above to have a material impact on the 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
The Company accounted for the First IC acquisition using the acquisition method pursuant to the Business Combinations Topic of the FASB ASC. Accordingly, the Company recorded merger and acquisition expenses of $
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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 | $ | |
Equity |
| |
Fair value of total consideration transferred |
| |
| ||
Recognized amounts of identifiable assets acquired and liabilities assumed: | ||
Cash and cash equivalents |
| |
Investment securities |
| |
Loans held for investment |
| |
Allowance for credit losses on PCD loans and PSLs |
| ( |
Premises and equipment |
| |
Operating lease right-of-use asset |
| |
Core deposit intangible | | |
SBA servicing asset |
| |
Other assets |
| |
Total assets acquired | | |
Deposits | | |
Federal Home Loan Bank advances | | |
Operating lease liability | | |
Other liabilities |
| |
Total liabilities assumed | | |
Total identifiable net assets | | |
Goodwill | $ | |
Fair value adjustment to assets acquired and liabilities assumed are generally amortized using either an effective yield or straight line basis over periods consistent with the average life, useful life and/or the contractual terms of the related assets and liabilities.
Fair values of the major categories of assets acquired and liabilities assumed were determined as follows:
Cash and Cash Equivalents
The fair values of cash and cash equivalents approximate the respective carrying amounts because the instruments are payable on demand or have short-term maturities.
Investment Securities
The fair values of investment securities were based on quoted market prices for identical securities received from an independent, nationally-recognized, third party pricing service. Prices provided by the independent pricing service were based on recent trading activity and other observable information including, but not limited to, market interest rate curves, referenced credit spreads and estimated prepayment rates where applicable.
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Loans
The loans acquired were recorded at fair value. Fair value of the loans is determined using market participant assumptions in estimating the amount and timing of both principal and interest cash flows expected to be collected, as adjusted for an estimate of future credit losses and prepayments, and then applying a market-based discount rate to those cash flows.
Acquired loans were reviewed to determine if any had experienced a more-than-insignificant deterioration in credit quality since origination. Loans meeting established criteria to indicate more-than-insignificant deterioration were identified as PCD loans. The loans acquired without evidence of more-than-insignificant deterioration in credit quality since origination are referred to as purchased seasoned loans (PSLs). The Company estimated an allowance for credit losses for both PCD loans and PSLs, as allowed under ASU 2025-08, based on majority of the Company’s methodology for determining the allowance for credit losses under CECL with the exception of using a non-DCF method for PSL pools versus the DCF method for legacy loan pools. See Note 1 above for further details. The Company recorded an allowance for credit losses on PCD loans and PSLs of approximately $
For PCD loans and PSLs acquired from First IC, a reconciliation of the difference between the purchase price and par value of the assets acquired is presented below:
As of December 1, 2025 | |||||||||
(Dollars in thousands) | PCD Loans | PSLs | Total | ||||||
Gross amortized cost basis as of December 1, 2025 | $ | | $ | | $ | | |||
Allowance for credit losses |
| ( |
| ( |
| ( | |||
Interest and liquidity discount |
| ( |
| ( | ( | ||||
Basis at acquisition - estimated fair value | $ | | $ | | $ | | |||
Premises and Equipment
The fair value of the premises, including land, buildings and improvements, was determined based upon appraisals by licensed real estate appraisers. The appraisals were based upon the best and highest use of the property with final values determined based upon an analysis of the cost, sales comparison and income capitalization approaches for each property appraised.
Lease Assets and Lease Liabilities
Lease assets and liabilities were measured using a methodology to estimate the future rental payments over the remaining lease term with discounting using the Company’s incremental borrowing rate. The lease term was determined for individual leases based on the Company’s assessment of the probability of exercising renewal options. The net effect of any off-market terms in a lease were also discounted and applied to the balance of the lease asset.
Core Deposit Intangibles
The fair value of the core deposit intangible is derived by comparing the interest rate and servicing costs that the financial institution pays on the core deposit liability versus the current market rate for alternative sources of financing, while factoring in estimates over the remaining life and attrition rate of the deposit accounts. The intangible asset represents the stable and relatively low cost source of funds that the deposits and accompanying relationships provide the Company, when compared to alternative funding sources.
Deposits
The fair value of acquired savings and transaction deposit accounts was assumed to approximate the carrying value as these accounts have no stated maturity and are payable on demand. The fair values for time deposits were estimated
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using a discounted cash flow calculation that applies interest rates currently being offered to the contractual interest rates on such time deposits.
FHLB Advances
The fair value of acquired Federal Home Loan Bank advances was assumed to approximate the carrying value as these advances matured a few days after the acquisition date.
Selected Pro Forma Results
The following summarizes the unaudited pro forma results of operations as if the Company acquired First IC on January 1, 2024. The selected pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the financial results of the combined companies 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.
Years Ended December 31, | ||||||
(Dollars in thousands) | 2025 | 2024 | ||||
Net interest income | $ | | $ | | ||
Noninterest income | $ | | $ | | ||
Net income | $ | | $ | | ||
Net income attributable to First IC | $ | | $ | | ||
Included in the pro forma net income for the year ended December 31, 2025 are merger-related costs of $
NOTE 3 – INVESTMENT SECURITIES
The amortized costs, gross unrealized gains and losses, and estimated fair values of securities available for sale as of December 31, 2025 and 2024 are summarized as follows:
December 31, 2025 | ||||||||||||
| Gross | | Gross | | Gross | | Estimated | |||||
Amortized | Unrealized | Unrealized | Fair | |||||||||
(Dollars in thousands) | Cost | Gains | Losses | Value | ||||||||
Obligations of U.S. Government entities and agencies | $ | | $ | | $ | — | $ | | ||||
States and political subdivisions |
| |
| |
| ( |
| | ||||
Mortgage-backed securities |
| |
| | ( |
| | |||||
Total | $ | | $ | | $ | ( | $ | | ||||
December 31, 2024 | ||||||||||||
| Gross | | Gross | | Gross | | Estimated | |||||
Amortized | Unrealized | Unrealized | Fair | |||||||||
(Dollars in thousands) | Cost | Gains | Losses | Value | ||||||||
Obligations of U.S. Government entities and agencies | $ | | $ | — | $ | — | $ | | ||||
States and political subdivisions |
| |
| — |
| ( |
| | ||||
Mortgage-backed securities |
| |
| — | ( |
| | |||||
Total | $ | | $ | — | $ | ( | $ | | ||||
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The amortized costs and estimated fair values of investment securities available for sale at December 31, 2025, 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. Investment securities that are not due at a single maturity are shown separately.
Securities Available for Sale | ||||||
| Amortized | | Estimated | |||
(Dollars in thousands) | Cost | Fair Value | ||||
Due in one year or less | $ | | $ | | ||
Due after one year but less than five years |
| |
| | ||
Due after five years but less than ten years |
| |
| | ||
Due in more than ten years |
| |
| | ||
Mortgage-backed securities |
| |
| | ||
Total | $ | | $ | | ||
Accrued interest receivable for securities available for sale totaled $
As of December 31, 2025 and 2024, the Company had securities pledged to the Federal Reserve Bank Discount Window with a carrying amount of $
Information pertaining to securities with gross unrealized losses at December 31, 2025 and 2024 aggregated by investment category and length of time that individual securities have been in a continuous loss position, are summarized in the table below.
December 31, 2025 | ||||||||||||
Twelve Months or Less | Over Twelve Months | |||||||||||
| Gross | | Estimated | | Gross | | Estimated | |||||
Unrealized | Fair | Unrealized | Fair | |||||||||
(Dollars in thousands) | Losses | Value | Losses | Value | ||||||||
States and political subdivisions | $ | ( | $ | | $ | ( | $ | | ||||
Mortgage-backed securities | ( | |
| ( | | |||||||
Total | $ | ( | $ | | $ | ( | $ | | ||||
December 31, 2024 | ||||||||||||
Twelve Months or Less | Over Twelve Months | |||||||||||
| Gross | | Estimated | | Gross | | Estimated | |||||
Unrealized | Fair | Unrealized | Fair | |||||||||
(Dollars in thousands) | Losses | Value | Losses | Value | ||||||||
States and political subdivisions | $ | — | $ | — | $ | ( | $ | | ||||
Mortgage-backed securities | — | — |
| ( | | |||||||
Total | $ | — | $ | — | $ | ( | $ | | ||||
At December 31, 2025, the
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Equity Securities
As of December 31, 2025 and 2024, the Company had equity securities with carrying values totaling $
During the years ended December 31, 2025, 2024 and 2023, we recognized an unrealized gain of $
NOTE 4 – LOANS AND ALLOWANCE FOR CREDIT LOSSES
Major classifications of loans at December 31, 2025 and 2024 are summarized as follows:
December 31, | ||||||
(Dollars in thousands) | | 2025 | | 2024 | ||
Construction and development | $ | | $ | | ||
Commercial real estate |
| |
| | ||
Commercial and industrial |
| |
| | ||
Residential real estate |
| |
| | ||
Consumer and other |
| |
| | ||
Total loans receivable |
| |
| | ||
Unearned income |
| ( |
| ( | ||
Loan discounts | ( | — | ||||
Allowance for credit losses |
| ( |
| ( | ||
Loans, net | $ | | $ | | ||
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 December 31, 2025 and 2024, accrued interest receivable for loans totaled $
Allowance for Credit Losses
As previously mentioned in Note 1, the Company’s January 1, 2023 adoption of ASU 2016-13 resulted in a significant change to our methodology for estimating the allowance for credit losses since December 31, 2022. As a result of this adoption, the Company recorded a $
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A summary of changes in the allowance for credit losses by portfolio segment for years ended December 31, 2025, 2024 and 2023 is as follows:
| Year Ended December 31, 2025 | ||||||||||||||||||||
Construction | |||||||||||||||||||||
| and |
| Commercial |
| Commercial |
| Residential | Consumer | |||||||||||||
(Dollars in thousands) | | Development | | Real Estate | | and Industrial | | Real Estate | | and Other | | Unallocated | | Total | |||||||
Allowance for credit losses: | |||||||||||||||||||||
Beginning balance | $ | | $ | | $ | | $ | | $ | | $ | — | $ | | |||||||
Initial allowance on acquired loans | | | | | | — | | ||||||||||||||
Charge-offs |
| — | ( | ( |
| — |
| — |
| — |
| ( | |||||||||
Recoveries |
| — | | |
| — |
| — |
| — |
| | |||||||||
Provision |
| | | |
| ( |
| |
| — |
| ( | |||||||||
Ending balance | $ | | $ | | $ | | $ | | $ | | $ | — | $ | | |||||||
Year Ended December 31, 2024 | |||||||||||||||||||||
Construction | |||||||||||||||||||||
and | Commercial | Commercial | Residential | Consumer | |||||||||||||||||
(Dollars in thousands) | | Development | | Real Estate | | and Industrial | | Real Estate | | and Other | | Unallocated | | Total | |||||||
Allowance for credit losses: | |||||||||||||||||||||
Beginning balance | $ | | $ | | $ | | $ | | $ | | $ | — | $ | | |||||||
Charge-offs |
| — | — | ( |
| — |
| — |
| — |
| ( | |||||||||
Recoveries |
| — | | |
| — |
| — |
| — |
| | |||||||||
Provision |
| ( | | |
| ( |
| ( |
| — |
| | |||||||||
Ending balance | $ | | $ | | $ | | $ | | $ | | $ | — | $ | | |||||||
Year Ended December 31, 2023 | |||||||||||||||||||||
Construction | |||||||||||||||||||||
and | Commercial | Commercial | Residential | Consumer | |||||||||||||||||
(Dollars in thousands) | | Development | | Real Estate | | and Industrial | | Real Estate | | and Other | | Unallocated | | Total | |||||||
Allowance for credit losses: | |||||||||||||||||||||
Beginning balance | $ | | $ | | $ | | $ | | $ | | $ | — | $ | | |||||||
Impact of adopting ASU 2016-13 | ( | | ( | | — | — | | ||||||||||||||
Charge-offs |
| — | ( | ( |
| — |
| — |
| — |
| ( | |||||||||
Recoveries |
| — | | |
| — |
| — |
| — |
| | |||||||||
Provision |
| | | ( |
| ( |
| |
| — |
| ( | |||||||||
Ending balance | $ | | $ | | $ | | $ | | $ | | $ | — | $ | | |||||||
The allowance for credit losses was $
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 December 31, 2025, there were $
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December 31, 2024, there were $
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 December 31, 2025 and 2024:
Accruing | Total | ||||||||||||||||||||
(Dollars in thousands) | 30-59 Days | 60-89 Days | Greater than | Accruing | |||||||||||||||||
December 31, 2025 | | Current | | Past Due | | Past Due | | 90 Days | | Past Due | | Nonaccrual | | Total Loans | |||||||
Construction and development | $ | | $ | | $ | — | $ | — | $ | | $ | — | $ | | |||||||
Commercial real estate |
| |
| |
| |
| — |
| |
| |
| | |||||||
Commercial and industrial |
| |
| |
| — |
| — |
| |
| |
| | |||||||
Residential real estate |
| |
| |
| |
| — |
| |
| |
| | |||||||
Consumer and other | |
| — |
| — |
| — |
| — |
| — | | |||||||||
Total | $ | | $ | | $ | | $ | — | $ | | $ | | $ | | |||||||
Accruing | Total | ||||||||||||||||||||
(Dollars in thousands) | 30-59 Days | 60-89 Days | Greater than | Accruing | |||||||||||||||||
December 31, 2024 | | Current | | Past Due | | Past Due | | 90 Days | | Past Due | | Nonaccrual | | Total Loans | |||||||
Construction and development | $ | | $ | — | $ | — | $ | — | $ | — | $ | — | $ | | |||||||
Commercial real estate |
| |
| |
| |
| — |
| |
| |
| | |||||||
Commercial and industrial |
| |
| — |
| |
| — |
| |
| |
| | |||||||
Residential real estate |
| |
| |
| |
| — |
| |
| |
| | |||||||
Consumer and other |
| |
| — |
| — |
| — |
| — |
| — | | ||||||||
Total | $ | | $ | | $ | | $ | — | $ | | $ | | $ | | |||||||
The following table presents an analysis of nonaccrual loans with and without a related allowance for credit losses as of December 31, 2025 and 2024:
Nonaccrual | Nonaccrual | ||||||||
(Dollars in thousands) | Loans With a | Loans Without a | Total | ||||||
December 31, 2025 | | Related ACL | | Related ACL | | Nonaccrual Loans | |||
Construction and development | $ | — | $ | — | $ | — | |||
Commercial real estate | | | | ||||||
Commercial and industrial |
| |
| |
| | |||
Residential real estate | — | | | ||||||
Total | $ | | $ | | $ | | |||
Nonaccrual | Nonaccrual | ||||||||
(Dollars in thousands) | Loans With a | Loans Without a | Total | ||||||
December 31, 2024 | | Related ACL | | Related ACL | | Nonaccrual Loans | |||
Construction and development | $ | — | $ | — | $ | — | |||
Commercial real estate | | | | ||||||
Commercial and industrial |
| |
| |
| | |||
Residential real estate | — | | | ||||||
Total | $ | | $ | | $ | | |||
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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 rating system for its loan portfolio as follows:
| ● | Loans rated Pass – Loans in these categories have low to average risk. There are six loan risk ratings (grades 1- 6) included in loans rated Pass. |
| ● | Loans rated Special Mention (grade 7) – Loans do not presently expose the Company to a sufficient degree of risk to warrant adverse classification, but does possess deficiencies deserving close attention. |
| ● | Loans rated Substandard (grade 8) – Loans are inadequately protected by the current sound worth and paying capability of the obligor or of the collateral pledged, if any. |
| ● | Loans rated Doubtful (grade 9) – Loans which have all the weaknesses inherent in loans classified Substandard, with the added characteristic that the weaknesses make collections or liquidation in full, or on the basis of currently known facts, conditions and values, highly questionable or improbable. |
| ● | Loans rated Loss (grade 10) – Loans classified Loss are considered uncollectible and such little value that there continuance as bankable assets is not warranted. |
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.
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The following table presents the loan portfolio's amortized cost by loan type, risk rating and year of origination as of December 31, 2025 and 2024. There were
(Dollars in thousands) | Term Loan by Origination Year | Revolving | ||||||||||||||||||||||
December 31, 2025 | | 2025 | 2024 | | 2023 | | 2022 | 2021 | Prior | | Loans | | Total Loans | |||||||||||
Construction and development |
| |
| |
| |
| | | |
| |
| | ||||||||||
Pass | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | | ||||||||
Special Mention |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — | ||||||||
Substandard |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — | ||||||||
Total construction and development | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | | ||||||||
Commercial real estate |
| |
| |
| |
| | | |
| |
| | ||||||||||
Pass | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||
Special Mention |
| — |
| — |
| |
| |
| — |
| |
| — |
| | ||||||||
Substandard |
| — |
| — |
| |
| |
| |
| |
| — |
| | ||||||||
Total commercial real estate | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||
Commercial real estate: | ||||||||||||||||||||||||
Current period gross write offs | $ | — | $ | — | $ | — | $ | — | $ | | $ | | $ | — | $ | | ||||||||
Commercial and industrial |
| |
| |
| |
| | | |
| |
| | ||||||||||
Pass | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||
Special Mention |
| — |
| — |
| — |
| — |
| — |
| |
| — |
| | ||||||||
Substandard |
| — |
| — |
| |
| |
| |
| |
| — |
| | ||||||||
Total commercial and industrial | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||
Commercial and industrial: | ||||||||||||||||||||||||
Current period gross write offs | $ | — | $ | — | $ | — | $ | — | $ | | $ | | $ | — | $ | | ||||||||
Residential real estate |
| |
| |
| |
| | | |
| |
| | ||||||||||
Pass | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | | ||||||||
Special Mention |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — | ||||||||
Substandard |
| — |
| |
| |
| |
| |
| |
| — |
| | ||||||||
Total residential real estate | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | | ||||||||
Consumer and other |
| |
| |
| |
| | | |
| |
| | ||||||||||
Pass | $ | | $ | | $ | — | $ | — | $ | — | $ | — | $ | — | $ | | ||||||||
Special Mention |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — | ||||||||
Substandard |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — | ||||||||
Total consumer and other | $ | | $ | | $ | — | $ | — | $ | — | $ | — | $ | — | $ | | ||||||||
Total loans |
| $ | |
| $ | |
| $ | |
| $ | | $ | | $ | |
| $ | |
| $ | | ||
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(Dollars in thousands) | Term Loan by Origination Year | Revolving | ||||||||||||||||||||||
December 31, 2024 | | 2024 | | 2023 | | 2022 | | 2021 | 2020 | Prior | | Loans | | Total Loans | ||||||||||
Construction and development |
| |
| |
| |
| | | |
| |
| | ||||||||||
Pass | $ | | $ | | $ | | $ | | $ | | $ | — | $ | — | $ | | ||||||||
Special Mention |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — | ||||||||
Substandard |
| — |
| — |
| — |
| |
| — |
| — |
| — |
| | ||||||||
Total construction and development | $ | | $ | | $ | | $ | | $ | | $ | — | $ | — | $ | | ||||||||
Commercial real estate |
| |
| |
| |
| | | |
| |
| | ||||||||||
Pass | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||
Special Mention |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — | ||||||||
Substandard |
| — |
| |
| |
| |
| |
| |
| — |
| | ||||||||
Total commercial real estate | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||
Commercial and industrial |
| |
| |
| |
| | | |
| |
| | ||||||||||
Pass | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||
Special Mention |
| — |
| — |
| — |
| — |
| — |
| |
| — |
| | ||||||||
Substandard |
| — |
| — |
| |
| |
| |
| |
| — |
| | ||||||||
Total commercial and industrial | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||
Commercial and industrial: | ||||||||||||||||||||||||
Current period gross write offs | $ | — | $ | — | $ | | $ | — | $ | — | $ | | $ | — | $ | | ||||||||
Residential real estate |
| |
| |
| |
| | | |
| |
| | ||||||||||
Pass | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | | ||||||||
Special Mention |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — | ||||||||
Substandard |
| |
| |
| |
| |
| |
| |
| — |
| | ||||||||
Total residential real estate | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | | ||||||||
Consumer and other |
| |
| |
| |
| | | |
| |
| | ||||||||||
Pass | $ | | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | | ||||||||
Special Mention |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — | ||||||||
Substandard |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — | ||||||||
Total consumer and other | $ | | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | | ||||||||
Total loans |
| $ | |
| $ | |
| $ | |
| $ | | $ | | $ | |
| $ | |
| $ | | ||
During the year ended December 31, 2025,
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.
The following table presents the amortized cost basis of loan modifications made to borrowers experiencing financial difficulty during the year ended December 31, 2025 and 2024.
Interest | ||||||||||||||||
(Dollars in thousands) | Term | Payment | Rate | % of Total | ||||||||||||
Year Ended December 31, 2025 | | Extension | | Deferral | | Reduction | | Total | | Loans | ||||||
Construction and development | $ | — | $ | — | $ | — | $ | — | — | % | ||||||
Commercial real estate |
| — | | — | |
| | |||||||||
Commercial and industrial |
| — | — | — | — |
| - | |||||||||
Residential real estate |
| — | — | — | — |
| — | |||||||||
Consumer and other | — | — | — | — |
| — | ||||||||||
Total | $ | — | $ | | $ | — | $ | | | % | ||||||
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Interest | ||||||||||||||||
(Dollars in thousands) | Term | Payment | Rate | % of Total | ||||||||||||
Year Ended December 31, 2024 | | Extension | | Deferral | | Reduction | | Total | | Loans | ||||||
Construction and development | $ | — | $ | — | $ | — | $ | — | — | % | ||||||
Commercial real estate |
| — | | — | |
| | |||||||||
Commercial and industrial |
| — | | — | |
| | |||||||||
Residential real estate |
| — | — | — | — |
| — | |||||||||
Consumer and other | — | — | — | — |
| — | ||||||||||
Total | $ | — | $ | | $ | — | $ | | | % | ||||||
The following table presents the financial effect of the loan modifications made to borrowers experiencing financial difficulty during the year ended December 31, 2025 and 2024.
Weighted/Average | Weighted/Average | Weighted/Average | ||||||||
(Dollars in thousands) | Months of | Payment | Interest Rate | |||||||
Year Ended December 31, 2025 | | Term Extension | | Deferral | | Reduction | | |||
Construction and development | — | $ | — | — | % | |||||
Commercial real estate | — |
| | — | ||||||
Commercial and industrial | — |
| — | — | ||||||
Residential real estate | — |
| — | — | ||||||
Consumer and other | — |
| — | — | ||||||
Total | — | $ | | — | % | |||||
Weighted/Average | Weighted/Average | Weighted/Average | ||||||||
(Dollars in thousands) | Months of | Payment | Interest Rate | |||||||
Year Ended December 31, 2024 | | Term Extension | | Deferral | | Reduction | | |||
Construction and development | — | $ | — | — | % | |||||
Commercial real estate | — |
| | — | ||||||
Commercial and industrial | — |
| | — | ||||||
Residential real estate | — |
| — | — | ||||||
Consumer and other | — |
| — | — | ||||||
Total | — | $ | | — | % | |||||
There were
Related Party Loans:
The Company conducts transactions with its directors and executive officers, including companies in which such officers or directors have beneficial interests. None of the related party loans were classified as nonaccrual, past due, restructured, or potential problem loans at December 31, 2025 or 2024.
The following table summarizes aggregate loan transactions with related parties for the years ended December 31, 2025 and 2024:
| December 31, | |||||
(Dollars in thousands) |
| 2025 |
| 2024 | ||
Beginning balance | $ | | $ | | ||
New loans and principal advances |
| — |
| — | ||
Repayments | ( | ( | ||||
Transactions due to changes in related parties |
| — |
| ( | ||
Ending balance | $ | | $ | | ||
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NOTE 5 – PREMISES AND EQUIPMENT
Premises and equipment are summarized as follows:
December 31, | ||||||
(Dollars in thousands) | | 2025 | | 2024 | ||
Land | $ | | $ | | ||
Building |
| |
| | ||
Leasehold improvements |
| |
| | ||
Furniture, fixtures and equipment |
| |
| | ||
Computer equipment | | | ||||
Computer software | | | ||||
Construction in process |
| |
| | ||
Premises and equipment, gross |
| |
| | ||
Accumulated depreciation |
| ( |
| ( | ||
Premises and equipment, net | $ | | $ | | ||
Depreciation expense for premises and equipment totaled $
NOTE 6 – OPERATING LEASES
The Company has entered into various operating leases for certain branch locations with terms
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 years ended December 31, 2025, 2024 and 2023 were as follows:
Year Ended | |||||||||
(Dollars in thousands) | | December 31, 2025 | December 31, 2024 | | December 31, 2023 | ||||
Operating lease cost | $ | | $ | | $ | | |||
Variable lease cost |
| |
| |
| | |||
Short-term lease cost |
| |
| — |
| — | |||
Sublease income |
| — |
| — |
| — | |||
Total net lease cost | $ | | $ | | $ | | |||
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Future maturities of the Company’s operating lease liabilities are summarized as follows:
(Dollars in thousands) | |||
Year Ended : | | Lease Liability | |
December 31, 2026 | $ | | |
December 31, 2027 |
| | |
December 31, 2028 |
| | |
December 31, 2029 |
| | |
December 31, 2030 |
| | |
After December 31, 2030 |
| | |
Total lease payments |
| | |
Less: interest discount |
| ( | |
Present value of lease liabilities | $ | | |
(Dollars in thousands) |
| ||
Supplemental Lease Information | | December 31, 2025 |
|
Weighted-average remaining lease term (years) |
| ||
Weighted-average discount rate |
| | % |
Year Ended December 31, | ||||||
| 2025 | | 2024 | |||
Cash paid for amounts included in the measurement of lease liabilities: |
| |
| | ||
Operating cash flows from operating leases (cash payments) | $ | | $ | | ||
Operating cash flows from operating leases (lease liability reduction) | $ | | $ | | ||
Operating lease right-of-use assets obtained in exchange for leases entered into during the period | $ | | $ | | ||
Operating lease right-of-use assets obtained from First IC acquisition | $ | | $ | — | ||
The Company signed an agreement to lease space in Norcross, Georgia with an entity in which the Chairman of the Company serves as a managing member. The lease is a
NOTE 7 – 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 December 31, 2025 and 2024, the unpaid principal balances of serviced loans totaled $
Activity for SBA and USDA loans servicing rights are as follows:
For the Year Ended December 31, | |||||||||
(Dollars in thousands) | | 2025 | | 2024 | | 2023 | |||
Beginning of period | $ | | $ | | $ | | |||
Acquired from First IC at fair value | | — | — | ||||||
Change in fair value |
| ( |
| |
| | |||
End of period, fair value | $ | | $ | | $ | | |||
Fair value at December 31, 2025 and 2024 was determined using discount rates ranging from
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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.
NOTE 8 – RESIDENTIAL MORTGAGE LOAN SERVICING
Residential mortgage loans serviced for others are not reported as assets. The outstanding principal of these loans at December 31, 2025 and 2024 was $
Activity for mortgage loan servicing rights and the related valuation allowance are as follows:
(Dollars in thousands) | Years Ended December 31, | ||||||||
Mortgage loan servicing rights: | | 2025 | | 2024 | | 2023 | |||
Beginning of period | $ | | $ | | $ | | |||
Additions |
| |
| |
| — | |||
Amortization expense | ( | ( | ( | ||||||
Valuation allowance |
| |
| ( |
| — | |||
End of period, carrying value | $ | | $ | | $ | | |||
(Dollars in thousands) | Years Ended December 31, | ||||||||
Valuation allowance: | | 2025 | | 2024 | | 2023 | |||
Beginning balance | $ | | $ | — | $ | — | |||
Additions expensed |
| — |
| |
| — | |||
Reductions credited to operations | ( | — | — | ||||||
Direct write-downs |
| — |
| — |
| — | |||
Ending balance | $ | — | $ | | $ | — | |||
The fair value of servicing rights was $
NOTE 9 – DEPOSITS
Deposit account balances as of December 31, 2025 and 2024 are summarized as follows:
December 31, | ||||||
(Dollars in thousands) | | 2025 | | 2024 | ||
Noninterest-bearing demand deposits | $ | | $ | | ||
NOW accounts and savings |
| |
| | ||
Money market |
| |
| | ||
Brokered money market |
| |
| | ||
Time deposits less than $250,000 | | | ||||
Time deposits $250,000 or greater | | | ||||
Total deposits | $ | | $ | | ||
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Table of Contents
Maturities of time deposits at December 31, 2025 are summarized as follows:
(Dollars in thousands) |
| ||
Year Ended December 31, | | ||
2026 | $ | | |
2027 |
| | |
2028 |
| | |
2029 |
| | |
2030 | | ||
Total time deposits | $ | | |
At December 31, 2025 and 2024, overdraft demand deposits reclassified to loans totaled $
The Company held related party deposits of approximately $
NOTE 10 – FEDERAL HOME LOAN BANK ADVANCES & OTHER BORROWINGS
Advances from the Federal Home Loan Bank (FHLB) at December 31, 2025 and 2024 are summarized as follows:
December 31, | ||||||
(Dollars in thousands) | | 2025 | | 2024 | ||
Daily rate credit advance maturing on December 2, 2026; fixed rate of | $ | | $ | — | ||
Convertible advance maturing December 4, 2026; fixed rate of | | — | ||||
Convertible advance maturing April 22, 2027; fixed rate of | | | ||||
Convertible advance maturing April 23, 2027; fixed rate of | | | ||||
Convertible advance maturing April 26, 2027; fixed rate of | | | ||||
Convertible advance maturing May 7, 2027; fixed rate of | | | ||||
Convertible advance maturing May 13, 2027; fixed rate of | | | ||||
Convertible advance maturing May 14, 2027; fixed rate of | | | ||||
Convertible advance maturing June 24, 2027; fixed rate of | | | ||||
Total FHLB advances | $ | | $ | | ||
All of the convertible FHLB advances outstanding at December 31, 2025 have a conversion feature that allows the FHLB to call the advances every three months. At December 31, 2025 and 2024, the Company had a line of credit with the FHLB, set as a percentage of total assets, with maximum borrowing capacity of $
As of December 31, 2025 and 2024, the Company had unsecured federal funds lines available with various financial institutions of approximately $
As of December 31, 2025 and 2024, the Company had Federal Reserve Discount Window funds available of approximately $
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NOTE 11 – INTEREST RATE DERIVATIVES
During 2021 and 2022, the Company entered into
During January 2025, the Company entered into
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 December 31, 2025, there were
Summary information for the interest rate swaps designated as cash flow hedges is as follows:
| As of or for the | | As of or for the | |||
Year Ended | Year Ended | |||||
(Dollars in thousands) |
| December 31, 2025 |
| December 31, 2024 | ||
Notional Amounts | $ | |
| $ | | |
Weighted-average pay rate | ||||||
Weighted-average receive rate | ||||||
Weighted-average maturity | ||||||
Weighted-average remaining maturity | ||||||
Net interest income | $ | | $ | | ||
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Summary information for the interest rate caps designated as cash flow hedges is as follows:
| As of or for the | | As of or for the | |||
Year Ended | Year Ended | |||||
(Dollars in thousands) |
| December 31, 2025 |
| December 31, 2024 | ||
Notional Amounts | $ | |
| $ | | |
Rate Cap Premiums | $ | | $ | | ||
Cap Rate | ||||||
Weighted-average maturity | ||||||
Weighted-average remaining maturity | ||||||
Net interest income | $ | | $ | | ||
NOTE 12 – INCOME TAXES
The components of income tax expense for the periods indicated were as follows:
Years Ended December 31, | |||||||||
(Dollars in thousands) | | 2025 | | 2024 | | 2023 | |||
Current tax provision: | |||||||||
Federal | $ | | $ | | $ | | |||
State | | | | ||||||
Total current tax provision | | | | ||||||
Deferred tax provision: | |||||||||
Federal | | | | ||||||
State | | | | ||||||
Total deferred tax provision (benefit) | | | | ||||||
Total provision for income taxes | $ | | $ | | $ | | |||
The Company recorded no pretax income or provision for income taxes from foreign operations during the years ended December 31, 2025, 2024 and 2023.
The following table presents a reconciliation of the recorded provision for income taxes to the amount of taxes computed by applying the applicable statutory Federal income tax rate for the periods indicated:
Years Ended December 31, | ||||||||||||||||
2025 | 2024 | 2023 | ||||||||||||||
(Dollars in thousands) | | Amount | | % | | Amount | | % | Amount | | % | |||||
Federal statutory tax rate | $ | | | % | $ | | | % | $ | | | % | ||||
State income taxes, net of federal benefit(1) | | | | | | | ||||||||||
Nontaxable or nondeductible items | | | | | | | ||||||||||
Other adjustments | | | | | | |||||||||||
$ | | | % | $ | | | % | $ | | | % | |||||
(1) | State and local income taxes in New York and New York City comprised greater than 50% of the tax effect in this category during the years ended Deember 31, 2025, 2024 and 2024. |
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The following table presents income taxes paid, net of refunds received, for the periods presented:
(Dollars in thousands) | | 2025 | | 2024 | | 2023 | |||
Cash paid for Federal taxes | $ | | $ | | $ | | |||
Cash paid for state and local taxes: | |||||||||
New York State | | | | ||||||
New York City | | | | ||||||
Other(1) | | | | ||||||
Total cash paid for state and local taxes | | | | ||||||
Total cash paid for income taxes | $ | | $ | | $ | | |||
At December 31, 2025 and 2024, the Company’s deferred tax assets and liabilities consisted of the following:
December 31, | ||||||
(Dollars in thousands) | | 2025 | | 2024 | ||
Deferred tax assets: | ||||||
Allowance for credit losses | $ | | $ | | ||
Nonaccrual interest |
| |
| | ||
Deferred loan fees | | | ||||
Lease liabilities under operating leases | | | ||||
Unrealized losses on securities available for sale |
| |
| | ||
Fair value discount on acquired loans | | — | ||||
Other | | | ||||
Total gross deferred tax assets | | | ||||
Deferred tax liabilities: | ||||||
Deferred mortgage servicing fees |
| ( |
| ( | ||
Deferred SBA servicing fees |
| ( |
| ( | ||
Premises and equipment | ( | ( | ||||
Right-of-use assets under operating leases | ( | ( | ||||
Interest rate derivatives | ( | ( | ||||
Core deposit intangible | ( | — | ||||
Other | ( | ( | ||||
Total gross deferred tax liabilities | ( | ( | ||||
Net deferred tax assets | $ | | $ | | ||
During the year ended December 31, 2024, the Company sold $
On July 4, 2025, the U.S. enacted the One Big Beautiful Bill Act ("the Act") that includes several U.S. corporate tax provisions, including the restoration of 100% bonus depreciation on qualified property and the current deductibility of domestic research and experimental expenditures. The provisions of the Act did not have a material impact on the Company’s income tax expense or effective tax rate.
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Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. Management believes
For the years ended December 31, 2025 and 2024, management believes there are no material amounts of uncertain tax position. Additionally, there were
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 stock options awards 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
Stock Options
The Company did
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Weighted | ||||||||||
Average | Aggregate | |||||||||
Weighted | Remaining | Intrinsic | ||||||||
Average | Contractual | Value | ||||||||
| Shares | Exercise Price | | Term (in years) | | (in thousands) | ||||
Outstanding at January 1, 2023 |
| | $ | | ||||||
Granted |
| — |
| — | ||||||
Exercised |
| — |
| — | ||||||
Forfeited |
| — |
| — | ||||||
Outstanding at December 31, 2023 |
| | $ | | $ | | ||||
Granted |
| — |
| — | ||||||
Exercised |
| ( |
| | $ | | ||||
Forfeited |
| — |
| — | ||||||
Outstanding at December 31, 2024 |
| | $ | |
| $ | | |||
Granted |
| — |
| — |
| |||||
Exercised |
| — |
| — |
| |||||
Forfeited |
|
|
| |||||||
Outstanding at December 31, 2025 |
| | $ | |
| $ | | |||
During the year ended December 31, 2024, the Company received cash proceeds of $
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 granted to officers and employees vest in annual installments on the first
A summary of restricted stock activity for the years ended December 31, 2025, 2024 and 2023 is presented below:
Years Ended December 31, | |||||||||||||||
2025 | 2024 | 2023 | |||||||||||||
Weighted | Weighted | Weighted | |||||||||||||
Average Grant- |
| Average Grant- |
| Average Grant- | |||||||||||
| Shares | Date Fair Value | | Shares | | Date Fair Value | | Shares | | Date Fair Value | |||||
Nonvested shares at beginning of year |
| | $ | | | $ | | | $ | | |||||
Granted |
| | | |
| | |
| | ||||||
Vested |
| ( | | ( |
| | ( |
| | ||||||
Forfeited |
| — |
| — | — |
| — | — |
| — | |||||
Nonvested shares at end of year |
| | $ | | | $ | | | $ | | |||||
During the years ended December 31, 2025, 2024 and 2023, the Company recognized compensation expense for restricted stock of $
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NOTE 14 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Accumulated other comprehensive income (loss) for the Company consists of changes in net unrealized gains/losses on investment securities available for sale and interest rate swap derivatives. The following tables present a summary of the accumulated comprehensive income (loss) balances, net of tax, as of December 31, 2025, 2024 and 2023.
Unrealized | Unrealized | Accumulated Other | |||||||
Gain (Loss) | Gain (Loss) | Comprehensive | |||||||
(Dollars in thousands) | | on Securities | | on Derivatives | | Income (Loss) | |||
Balance, December 31, 2024 | $ | ( | $ | | $ | | |||
Current year changes, net of tax |
| |
| ( |
| ( | |||
Balance, December 31, 2025 | $ | ( | $ | | $ | | |||
Unrealized | Unrealized | Accumulated Other | |||||||
Gain (Loss) | Gain (Loss) | Comprehensive | |||||||
(Dollars in thousands) | | on Securities | | on Derivatives | | Income (Loss) | |||
Balance, December 31, 2023 | $ | ( | $ | | $ | | |||
Current year changes, net of tax |
| ( |
| ( |
| ( | |||
Balance, December 31, 2024 | $ | ( | $ | | $ | | |||
Unrealized | Unrealized | Accumulated Other | |||||||
Gain (Loss) | Gain (Loss) | Comprehensive | |||||||
(Dollars in thousands) | | on Securities | | on Derivatives | | Income (Loss) | |||
Balance, December 31, 2022 | $ | ( | $ | | $ | | |||
Current year changes, net of tax |
| |
| |
| | |||
Balance, December 31, 2023 | $ | ( | $ | | $ | | |||
NOTE 15 – EARNINGS PER SHARE
The following table presents the calculation of basic and diluted earnings per common share for the periods indicated:
| Year Ended December 31, | ||||||||
(Dollars in thousands except per share data) | | 2025 | | 2024 | | 2023 | |||
Basic earnings per share | |||||||||
Net Income | $ | | $ | | $ | | |||
Weighted average common shares outstanding |
| |
| |
| | |||
Basic earnings per common share | $ | | $ | | $ | | |||
Diluted earnings per share | |||||||||
Net Income | $ | | $ | | $ | | |||
Weighted average common shares outstanding for basic earnings per common share |
| |
| |
| | |||
Add: Dilutive effects of restricted stock and options |
| |
| |
| | |||
Average shares and dilutive potential common shares |
| |
| |
| | |||
Diluted earnings per common share | $ | | $ | | $ | | |||
There were
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NOTE 16 – REVENUE RECOGNITION
Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers ("ASC 606"), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.
The majority of our revenue-generating transactions are not subject to ASC 606, including revenue generated from financial instruments, such as our loans, letters of credit, and investment securities, as well as revenue related to our loan servicing activities and revenue on bank owned life insurance, as these activities are subject to other GAAP discussed elsewhere within our disclosures. Descriptions of our revenue-generating activities that are within the scope of ASC 606, which are presented in our income statements as components of noninterest income are as follows:
Service charges on deposits: Income from service charges on deposits is within the scope of ASC 606. These include general service fees for monthly account maintenance and activity or transaction-based fees and consist of transaction-based revenue, time-based revenue (service period), item-based revenue or some other individual attribute-based revenue. Revenue on these types of fees are recognized when our performance obligation is completed which is generally monthly for account maintenance services or when a transaction has been completed. Payment for such performance obligations are generally received at the time the performance obligations are satisfied. Service charges on deposits also include overdraft and nonsufficient funds fees. Overdraft fees are charged when a depositor has a draw on their account that has inadequate funds. All services charges on deposit accounts represent less than
Other Service Charges, Commissions and Fees: Other service charges, commissions and fees are primarily comprised of mortgage origination related income, wire fees, interchange fees, and other service charges and fees. Mortgage origination related income, which makes up the majority of the other service charges, commissions and fees line item amounts reported on the Consolidated Statements of Income, consists of mortgage loan origination fees, underwriting fees, processing fees, and application fees. The Company’s performance obligations for other service charges, commissions and fees are largely satisfied, and related revenue recognized, when the services are rendered or upon completion. Payment is typically received immediately or in the following month.
Gain or loss on sale of OREO: This revenue stream is recorded when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. When the Company finances the sale of OREO to the buyer, the Company assesses whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the OREO asset is derecognized and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. In determining the gain or loss on the sale, the Company adjusts the transaction price and related gain or loss on sale if a significant financing component is present. This revenue stream is within the scope of ASC 606 and is included in other income in noninterest income, but no significant revenues were generated from gains and losses on the sale and financing of OREO for the years ended December 31, 2025, 2024 and 2023.
Other revenue streams that are recorded in other income in noninterest income include revenue generated from letters of credit and income on bank owned life insurance. These revenue streams are either not material or out of scope of ASC 606.
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NOTE 17 – COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company makes various commitments and incurs certain contingent liabilities that are not reflected in the Company’s financial statements. These commitments and contingent liabilities include various guarantees, commitments to extend credit and standby letters of credit. The Company does not anticipate any material losses as a result of these commitments and contingent liabilities.
Credit Related Commitments
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 and December 31, 2025 and 2024 include:
December 31, | ||||||
(Dollars in thousands) | | 2025 | | 2024 | ||
Financial instruments whose contract amounts represent credit risk: |
| |
| | ||
Commitments to extend credit | $ | | $ | | ||
Standby letters of credit | $ | | $ | | ||
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 $
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.
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 no material risk because of the financial strength of the institution.
Other Commitments
The Bank has entered into employment agreements with its Executive Chairman, Chief Executive Officer, and President/Chief Lending Officer/Chief Operations Officer. Each employment agreement provides for a base salary, an incentive bonus based upon the Company’s profitability, stock awards and other benefits commensurate with employment. The Bank may be obligated to make payments to each employee upon termination, with the timing and amount of the payment dependent upon the cause of termination. The agreements contain a contract term of
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Contingencies
The Company's nature of business is such that it ordinarily results in a certain amount of litigation. In the opinion of management for the Company, there is no litigation in which the outcome will have a material effect on the financial statements.
NOTE 18 – 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.
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The following presents the assets and liabilities as of December 31, 2025 and 2024 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:
December 31, 2025 | |||||||||||||||
Total Gains | |||||||||||||||
(Dollars in thousands) | | Total | | Level 1 | | Level 2 | | Level 3 | | (Losses) | |||||
Assets |
| |
| |
| |
| |
| | |||||
Recurring fair value measurements: |
|
| |
| |
| |
| | ||||||
Securities available for sale: |
|
| |
| |
| |
| | ||||||
Obligations of U.S. Government entities and agencies | $ | | $ | — | $ | | $ | |
| | |||||
States and political subdivisions |
| | — |
| | — |
| | |||||||
Mortgage-backed GSE residential |
| | — |
| | — |
| | |||||||
Total securities available for sale |
| | — |
| |
| |
| | ||||||
Equity securities | | | — | — | |||||||||||
SBA and USDA servicing asset |
| | — | — |
| |
| | |||||||
Interest rate derivatives | | — | | — | |||||||||||
$ | | $ | | $ | | $ | | ||||||||
Nonrecurring fair value measurements: |
| |
| |
| |
| | |||||||
Collateral-dependent loans | | — | — | | | ||||||||||
$ | | $ | — | $ | — | $ | | $ | | ||||||
Liabilities |
| |
| |
| |
| | |||||||
Recurring fair value measurements: | |||||||||||||||
Interest rate derivatives | $ | | $ | — | $ | | $ | — | |||||||
| December 31, 2024 | ||||||||||||||
Total Gains | |||||||||||||||
(Dollars in thousands) | Total | | Level 1 | | Level 2 | | Level 3 | | (Losses) | ||||||
Assets |
| |
| |
| |
| |
| | |||||
Recurring fair value measurements: |
| |
| |
| |
| |
| | |||||
Securities available for sale: |
| |
| |
| |
| |
| | |||||
Obligations of U.S. Government entities and agencies | $ | | $ | — | $ | — | $ | |
| | |||||
States and political subdivisions |
| | — |
| | — |
| | |||||||
Mortgage-backed GSE residential |
| | — |
| | — |
| | |||||||
Total securities available for sale |
| | — |
| |
| |
| | ||||||
Equity securities | | | — | — | |||||||||||
SBA and USDA servicing asset |
| | — | — |
| |
| | |||||||
Interest rate derivatives | | — | | — | |||||||||||
$ | | $ | | $ | | $ | | ||||||||
Nonrecurring fair value measurements: |
| |
| |
| |
| | |||||||
Collateral-dependent loans | | — | — | | | ||||||||||
Foreclosed real estate, net | | — | — | | ( | ||||||||||
$ | | $ | — | $ | — | $ | | $ | ( | ||||||
Liabilities |
| |
| |
| |
| | |||||||
Recurring fair value measurements: | |||||||||||||||
Interest rate derivatives | $ | | $ | — | $ | | $ | — | |||||||
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The Company used the following methods and significant assumptions to estimate fair value:
Securities, Available for Sales: 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 Servicing Assets and Interest Only Strip: 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 initially 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 swap 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.
Individually Assessed 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 collateral-dependent is 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.
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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 years ended December 31, 2025, 2024 and 2023:
Obligations of | ||||||||||||
U.S. Government | SBA and USDA | Interest Only | ||||||||||
(Dollars in thousands) | | Entities and Agencies | | Servicing Asset | | Strip | | Liabilities | ||||
Fair value, January 1, 2025 | $ | | $ | | $ | — | $ | — | ||||
Acquired from First IC at fair value | — | | — | — | ||||||||
Total loss included in income |
| — |
| ( | — |
| — | |||||
Settlements |
| — |
| — |
| — |
| — | ||||
Prepayments/paydowns |
| ( |
| — |
| — |
| — | ||||
Transfers in and/or out of level 3 |
| — |
| — |
| — |
| — | ||||
Fair value, December 31, 2025 | $ | | $ | | $ | — | $ | — | ||||
Fair value, January 1, 2024 | $ | | $ | | $ | — | $ | — | ||||
Total gain included in income |
| — |
| | — |
| — | |||||
Settlements |
| — |
| — |
| — |
| — | ||||
Prepayments/paydowns |
| ( |
| — |
| — |
| — | ||||
Transfers in and/or out of level 3 |
| — |
| — |
| — |
| — | ||||
Fair value, December 31, 2024 | $ | | $ | | $ | — | $ | — | ||||
Fair value, January 1, 2023 | $ | | $ | | $ | | $ | — | ||||
Total gain (loss) included in income |
| — |
| | ( |
| — | |||||
Settlements |
| — |
| — |
| — |
| — | ||||
Prepayments/paydowns |
| ( |
| — |
| — |
| — | ||||
Transfers in and/or out of level 3 |
| — |
| — |
| — |
| — | ||||
Fair value, December 31, 2023 | $ | | $ | | $ | — | $ | — | ||||
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There were
| Valuation | | Unobservable | | General | |
Technique | Input | Range | ||||
December 31, 2025 |
| |||||
Recurring: | ||||||
Obligations of U.S. Government entities and agencies |
|
| Discount Rate |
| ||
SBA and USDA servicing asset |
| Prepayment speed |
| |||
| Discount rate |
| ||||
Nonrecurring: | ||||||
Collateral-dependent loans | Estimated selling costs | |||||
December 31, 2024 |
| | |
|
| |
Recurring: | ||||||
Obligations of U.S. Government entities and agencies | Discount Rate | |||||
SBA and USDA servicing asset and interest only strip | Prepayment speed | |||||
Discount rate | ||||||
Nonrecurring: | ||||||
Collateral-dependent loans | Estimated selling costs | |||||
Foreclosed real estate | Estimated selling costs | |||||
| |
The carrying amounts and estimated fair values of the Company’s financial instruments at December 31, 2025 and 2024 are as follows:
Carrying | | Estimated Fair Value at December 31, 2025 | |||||||||||||
(Dollars in thousands) | | Amount | | Level 1 | | Level 2 | | Level 3 | | Total | |||||
Financial Assets: |
| |
| |
| |
| |
| | |||||
Cash, due from banks, and federal funds sold | $ | | $ | — | $ | | $ | — | $ | | |||||
Investment securities |
| |
| | | |
| | |||||||
Federal Home Loan Bank stock |
| |
| — |
| — |
| — |
| N/A | |||||
Loans held for sale | | — | | — | | ||||||||||
Loans, net |
| |
| — |
| — |
| |
| | |||||
Accrued interest receivable |
| |
| — |
| |
| |
| | |||||
SBA and USDA servicing assets |
| |
| — |
| — |
| |
| | |||||
Mortgage servicing assets |
| |
| — |
| — |
| |
| | |||||
Interest rate derivatives | | — | | — | | ||||||||||
Financial Liabilities: |
|
| |
| |
| |
| |||||||
Deposits |
| |
| — |
| |
| — |
| | |||||
Federal Home Loan Bank advances | | — | | — | | ||||||||||
Accrued interest payable | | — | | — | | ||||||||||
Interest rate derivatives |
| |
| — |
| |
| — |
| | |||||
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Carrying | Estimated Fair Value at December 31, 2024 | ||||||||||||||
(Dollars in thousands) | | Amount | | Level 1 | | Level 2 | | Level 3 | | Total | |||||
Financial Assets: |
| |
| |
| |
| |
| | |||||
Cash, due from banks, and federal funds sold | $ | | $ | — | $ | | $ | — | $ | | |||||
Investment securities |
| |
| | | |
| | |||||||
Federal Home Loan Bank stock |
| |
| — |
| — |
| — |
| N/A | |||||
Loans, net |
| |
| — |
| — |
| |
| | |||||
Accrued interest receivable |
| |
| — |
| |
| |
| | |||||
SBA and USDA servicing assets |
| |
| — |
| — |
| |
| | |||||
Mortgage servicing assets |
| |
| — |
| — |
| |
| | |||||
Interest rate derivatives | | — | | — | | ||||||||||
Financial Liabilities: |
|
| |
| |
| |
| |||||||
Deposits |
| |
| — |
| |
| — |
| | |||||
Federal Home Loan Bank advances | | — | | — | | ||||||||||
Accrued interest payable | | — | | — | | ||||||||||
Interest rate derivatives |
| |
| — |
| |
| — |
| | |||||
NOTE 19 – 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
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 December 31, 2025 and 2024, the most recent regulatory notifications categorized the Bank as well 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.
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The actual capital amounts (in thousands) and ratios of the Company and Bank are presented in the following table:
To Be Well Capitalized |
| |||||||||||||
Minimum Capital Required - | Under Prompt Corrective |
| ||||||||||||
(Dollars in thousands) | Actual | Basel III | Action Provisions: |
| ||||||||||
| Amount | | Ratio | | Amount ≥ | | Ratio ≥ | | Amount ≥ | | Ratio ≥ |
| ||
As of December 31, 2025 | ||||||||||||||
Total Capital (to Risk Weighted Assets) | ||||||||||||||
Consolidated | $ | | % | | | % | N/A |
| N/A | |||||
Bank |
| | % | |
| | |
| | % | ||||
Tier I Capital (to Risk Weighted Assets) | ||||||||||||||
Consolidated |
| | % | | | % | N/A |
| N/A | |||||
Bank |
| | % | |
| | |
| | % | ||||
Common Tier 1 (CET1) | ||||||||||||||
Consolidated |
| | % | | | % | N/A |
| N/A | |||||
Bank |
| | % | |
| | | | % | |||||
Tier 1 Capital (to Average Assets) | ||||||||||||||
Consolidated |
| | % | | | % | N/A |
| N/A | |||||
Bank |
| | % | |
| | |
| | % | ||||
As of December 31, 2024 | ||||||||||||||
Total Capital (to Risk Weighted Assets) | ||||||||||||||
Consolidated | $ | | % | | | % | N/A |
| N/A | |||||
Bank |
| | % | |
| | |
| | % | ||||
Tier I Capital (to Risk Weighted Assets) | ||||||||||||||
Consolidated |
| | % | | | % | N/A |
| N/A | |||||
Bank |
| | % | |
| | |
| | % | ||||
Common Tier 1 (CET1) | ||||||||||||||
Consolidated |
| | % | | | % | N/A |
| N/A | |||||
Bank |
| | % | |
| | | | % | |||||
Tier 1 Capital (to Average Assets) | ||||||||||||||
Consolidated |
| | % | | | % | N/A |
| N/A | |||||
Bank |
| | % | |
| | |
| | % | ||||
The sole source of funds available to pay stockholder dividends is from the Company’s earnings. Bank regulatory authorities impose restrictions on the amount of dividends that may be declared by the Company. Further restrictions could result from a review by regulatory authorities of the Company’s capital adequacy. For the years ended December 31, 2025, 2024 and 2023, $
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NOTE 20 – OTHER EXPENSES
Significant components of other expenses for the years ended December 31, 2025, 2024, and 2023 are as follows:
December 31, | |||||||||
(Dollars in thousands) | | 2025 | 2024 | | 2023 | ||||
Miscellaneous loan related | $ | | $ | | $ | | |||
Professional fees | | | | ||||||
FDIC insurance |
| | | | |||||
Internet and mobile banking services | | | | ||||||
Bank security |
| | | | |||||
Phone and data services |
| | | | |||||
Director fees | | | | ||||||
Licenses, subscriptions and memberships | | | | ||||||
Amortization of core deposit intangible | | — | — | ||||||
Foreclosed real estate expenses | | | | ||||||
Other | | | | ||||||
Total other expenses | $ | | $ | | $ | | |||
NOTE 21 – CONDENSED PARENT COMPANY ONLY FINANCIAL STATEMENTS
Financial statements of MetroCity Bankshares, Inc. (parent company only) are as follows:
Condensed Balance Sheets
December 31, | ||||||
(Dollars in thousands) | | 2025 | | 2024 | ||
Assets: | ||||||
Cash and due from banks* | $ | | $ | | ||
Investment in bank subsidiary* |
| |
| | ||
Goodwill | | |||||
Other assets | — | — | ||||
Total assets | $ | | $ | | ||
Liabilities: | ||||||
Accrued expenses and other liabilities | $ | | $ | | ||
Total liabilities | | | ||||
Shareholders' equity: | ||||||
Preferred stock | ||||||
Common stock | | | ||||
Additional paid-in-capital | | | ||||
Retained earnings | | | ||||
Accumulated other comprehensive (loss) income | | | ||||
Total shareholders' equity | | | ||||
Total liabilities shareholders' equity | $ | | $ | | ||
* Eliminated in consolidation.
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Condensed Statements of Income
Years Ended December 31, | |||||||||
(Dollars in thousands) | | 2025 | 2024 | | 2023 | ||||
Income: | |||||||||
Dividends receive from bank subsidiary* | $ | | $ | | $ | | |||
Interest income* | | | | ||||||
Other income | — | | — | ||||||
Total income | | | | ||||||
Expenses: | |||||||||
Intercompany expenses* | | | | ||||||
Other expenses | — | | | ||||||
Total expenses | | | | ||||||
Income before taxes and equity in undistributed income of subsidiary | | | | ||||||
Income tax expense | — | — | — | ||||||
Income before equity in undistributed income of subsidiary | | | | ||||||
Equity in undistributed income of subsidiary* | ( | | | ||||||
Net Income | $ | | $ | | $ | | |||
* Eliminated in consolidation.
Condensed Statements of Cash Flows
Years Ended December 31, | |||||||||
(Dollars in thousands) | | 2025 | 2024 | | 2023 | ||||
Cash flows from operating activities: | |||||||||
Net income | $ | | $ | | $ | | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||
Equity in undistributed net income of subsidiary | | ( | ( | ||||||
Decrease (increase) in other assets | — | | ( | ||||||
Decrease in accrued expenses and other liabilities | ( | — | — | ||||||
Net cash provided by operating activities | | | | ||||||
Cash flows from operating activities: | |||||||||
Cash paid for First IC acquisition | ( | — | — | ||||||
Net cash used by investing activities | ( | — | — | ||||||
Cash flows from financing activities: | |||||||||
Exercise of stock options | — | | — | ||||||
Repurchase of common stock | ( | ( | ( | ||||||
Stock issuance costs | ( | — | — | ||||||
Dividends paid on common stock | ( | ( | ( | ||||||
Net cash used by financing activities | ( | ( | ( | ||||||
Net decrease (increase) in cash and cash equivalents | ( | | | ||||||
Cash and cash equivalents, beginning of year | | | | ||||||
Cash and cash equivalents, end of year | $ | | $ | | $ | | |||
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Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Company's CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating disclosure controls and procedures, as defined in SEC Rule 13a-15 under the Exchange Act, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
In connection with the preparation of this Annual Report on Form 10-K, as of the end of the period covered by this report, an evaluation was performed, with the participation of the CEO and CFO, of the effectiveness of the Company's disclosure controls and procedures, as required by Rule 13a-15 of the Exchange Act. Based upon that evaluation, the CEO and CFO concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report.
Management’s Annual Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. The Company’s internal control system was designed to provide reasonable assurance to the Company’s management and board of directors regarding the preparation and fair presentation of the financial statements. No matter how well designed, internal control over financial reporting has inherent limitations, including the possibility that a control can be circumvented or overridden, and misstatements due to error or fraud may occur and not be detected. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2025. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013). Based on this assessment, the Chief Executive Officer and Chief Financial Officer concluded that the Company maintained effective internal control over financial reporting as of December 31, 2025. On December 1, 2025, the Company acquired First IC Corporation (“First IC”), and as of December 31, 2025, full integration of First IC’s systems and processes into those of the Company was not complete. Management's assessment of and conclusion on the effectiveness of internal control over financial reporting as of December 31, 2025, excludes the internal controls of First IC. This exclusion is in accordance with the SEC Staff's general guidance that an assessment of a recently acquired business may be omitted from the scope of management’s assessment for one year following the acquisition
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2025 has been audited by Crowe LLP, the independent registered public accounting firm who also has audited the Company’s consolidated financial statements in this Annual Report. Crowe LLP’s attestation report, which expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2025, is included in Part II, Item 8 of this Annual Report on Form 10-K under the heading “Report of Independent Registered Public Accounting Firm”.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting (as such term is defined in Rule 13a-15(e) and 15d-15(f) under the Exchange Act) during the fourth quarter ended December 31, 2025, that have
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materially affected, or are 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.
Limitations on the Effectiveness of Controls
The Company’s management recognizes that a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, errors and instances of fraud, if any, within the Company have been detected.
Item 9B. Other Information
During the fourth quarter of 2025,
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevents Inspections
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required in Part III, Item 10 of this Annual Report is incorporated herein by reference to the Company’s definitive proxy statement for the 2026 Annual Meeting of Shareholders to be filed with the SEC within 120 days of December 31, 2025.
Insider Trading Policy
The Company has
Item 11. Executive Compensation
The information required in Part III, Item 11 of this Annual Report is incorporated herein by reference to the Company’s definitive proxy statement for the 2026 Annual Meeting of Shareholders to be filed with the SEC within 120 days of December 31, 2025.
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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
The following table provides information as of December 31, 2025 regarding stock-based compensation awards outstanding and available for future grants under the Company’s equity compensation plans.
(A) | (B) | (C) | ||||
Number of | ||||||
Securities Remaining | ||||||
Number of | Available for Future | |||||
Securities to be | Weighted Average | Issuance Under Equity | ||||
Issued upon Exercise | Exercise Price | Compensation Plans | ||||
of Outstanding | of Outstanding | (Excluding Securities | ||||
Options, Warrants | Options, Warrants | Reflected in | ||||
| and Rights | | and Rights | | Column (A)) | |
Equity compensation plans approved by shareholders |
| 169,134 |
| $ 12.70 |
| 1,174,217 |
Equity compensation plans not approved by shareholders |
| — |
| — |
| — |
Total |
| 169,134 | $ 12.70 | 1,174,217 |
The remaining information required in Part III, Item 12 of this Annual Report is incorporated herein by reference to the Company’s definitive proxy statement for the 2026 Annual Meeting of Shareholders to be filed with the SEC within 120 days of December 31, 2025.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required in Part III, Item 13 of this Annual Report is incorporated herein by reference to the Company’s definitive proxy statement for the 2026 Annual Meeting of Shareholders to be filed with the SEC within 120 days of December 31, 2025.
Item 14. Principal Accounting Fees and Services
The information required in Part III, Item 14 of this Annual Report is incorporated herein by reference to the Company’s definitive proxy statement for the 2026 Annual Meeting of Shareholders to be filed with the SEC within 120 days of December 31, 2025.
PART IV
Item 15. Exhibits, Financial Statement Schedules
| (a) | The following documents are filed as part of this report: |
| (1) | Financial Statements (Part II - Item 8. Financial Statements and Supplementary Data): |
(i) | Report of Independent Registered Public Accounting Firm (PCAOB ID 173) |
(ii) Consolidated Balance Sheets at December 31, 2025 and 2024
(iii) Consolidated Statements of Income for the Years Ended December 31, 2025, 2024 and 2023
(iv) Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2025, 2024 and 2023
(v) Consolidated Statements of Shareholder’s Equity for the Years Ended December 31, 2025, 2024 and 2023
(vi) Consolidated Statements of Cash Flows for the Years Ended December 31, 2025, 2024 and 2023
(vii) Notes to the Consolidated Financial Statements
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| (2) | Financial Statement Schedules: All financial statement schedules are omitted because they are not required or applicable, or the required information is shown in the Consolidated Financial Statements or the Notes thereto. |
| (3) | Exhibits: Included in schedule below. |
| (b) | 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)) | |
4.1 | Description of Capital Stock of MetroCity Bankshares, Inc. | |
10.1 | Amended and Restated Employment Agreement, dated August 21, 2019, by and between Metro City Bank and Nack Paek (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statement on Form S-1 filed September 4, 2019 (File No. 333-233625))* | |
10.2 | Amended and Restated Employment Agreement, dated August 21, 2019, by and between Metro City Bank and Farid Tan (incorporated by reference to Exhibit 10.2 to the Company’s Registration Statement on Form S-1 filed September 4, 2019 (File No. 333-233625))* | |
10.3 | Amended and Restated Employment Agreement, dated August 21, 2019, by and between Metro City Bank and Howard Kim (incorporated by reference to Exhibit 10.3 to the Company’s Registration Statement on Form S-1 filed September 4, 2019 (File No. 333-233625))* | |
10.5 | MetroCity Bankshares, Inc. 2018 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.5 to the Company’s Registration Statement on Form S-1 filed September 4, 2019 (File No. 333-233625))* | |
19 | Insider Trading Policy | |
21.1 | Subsidiaries of MetroCity Bankshares, Inc. | |
23.1 | Consent of Crowe LLP | |
24.1 | Power of Attorney contained on the signature pages of this 2025 Annual Report on Form 10-K and incorporated herein by reference | |
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** | |
97 | Incentive Compensation Recovery (“Clawback”) Policy (incorprated by reference to Exhibit 97 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 11, 2024)* | |
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 | |
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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 |
* Management contract or compensatory plan or arrangement
** The certifications attached as Exhibits 32.1 and 32.2 accompany this Annual Report on Form 10-K and are “furnished” to the Securities and Exchange Commission pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed “filed” by the Company for purposes of Section 18 of the Exchange Act.
Item 16. Form 10-K Summary
None.
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SIGNATURES
Pursuant to the requirements of the section 13 or 15(d) 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.
METROCITY BANKSHARES, INC. | ||
Date: March 16, 2026 | By: | /s/ Nack Y. Paek |
Nack Y. Paek | ||
Chairman and Chief Executive Officer (Principal Executive Officer) | ||
Date: March 16, 2026 | By: | /s/ Lucas Stewart |
Lucas Stewart | ||
Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) |
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KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Nack Y. Paek and Lucas Stewart, with full power to act without the other, his or her true and lawful attorney-in-fact and agent, with full and several powers of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to such attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully as to all intents and purposes as each of the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in their capacities and on the dates indicated.
Signature | | Title | | Date |
/s/ Nack Y. Paek | Chairman; Chief Executive Officer | March 16, 2026 | ||
Nack Y. Paek | (principal executive officer) | |||
/s/ Farid Tan | President and Director | March 16, 2026 | ||
Farid Tan | ||||
/s/ Frank Glover | Director | March 16, 2026 | ||
Frank Glover | ||||
/s/ William J. Hungeling | Director | March 16, 2026 | ||
William J. Hungeling | ||||
/s/ Howard Hwasaeng Kim | Director | March 16, 2026 | ||
Howard Hwasaeng Kim | ||||
/s/ Francis Lai | Director | March 16, 2026 | ||
Francis Lai | ||||
/s/ Don T. P. Leung | Director | March 16, 2026 | ||
Don Leung | ||||
/s/ Feiying Lu | Director | March 16, 2026 | ||
Feiying Lu | ||||
/s/ John Paek | Director | March 16, 2026 | ||
John Paek | ||||
/s/ Ajit A. Patel | Director | March 16, 2026 | ||
Ajit Patel | ||||
/s/ Frank S. Rhee | Director | March 16, 2026 | ||
Frank S. Rhee | ||||
/s/ David Shim | Director | March 16, 2026 | ||
David Shim |
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FAQ
What is MetroCity Bankshares (MCBS) core business and market focus?
How large is MetroCity Bankshares’ balance sheet as of December 31, 2025?
What acquisition did MetroCity Bankshares (MCBS) complete in 2025?
How is MetroCity Bankshares’ loan portfolio composed at year-end 2025?
What is MetroCity Bankshares’ deposit mix and cost of funds?
How significant are SBA and mortgage servicing activities for MCBS?
What are key human capital characteristics at MetroCity Bankshares?
