METROCITY BANKSHARES, INC. The purpose of this discussion and analysis is to focus on significant changes
in the financial condition of
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as "may," "might," "should," "could," "predict," "potential," "believe," "expect," "continue," "will," "anticipate," "seek," "estimate," "intend," "plan," "strive," "projection," "goal," "target," "outlook," "aim," "would," "annualized" and "outlook," or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management's beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, estimates and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.
A number of important factors could cause our actual results to differ materially from those indicated in these forward-looking statements, including those factors discussed elsewhere in this quarterly report and the following:
? business and economic conditions, particularly those affecting the financial
services industry and our primary market areas;
the risk of inflation and interest rate increases resulting from monetary and
? fiscal stimulus responses, and the resulting effect of all of such items on our
operations, liquidity and capital position, and on the financial condition of
our borrowers and other customers;
the risk that a future economic downturn and contraction, including a
recession, 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 rising interest rates, supply chain
challenges 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;
? concentration of our loan portfolio in real estate loans;
? changes in the prices, values and sales volumes of commercial and residential
real estate;
credit and lending risks associated with our construction and development,
? commercial real estate, commercial and industrial, residential real estate and
SBA loan portfolios;
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negative impact in our mortgage banking services, including declines in our
mortgage originations or profitability due to rising interest rates and
? increased competition and regulation, the Bank's or third party's failure to
satisfy mortgage servicing obligations, loan modificaitons, the effects of
judicial or regulatory requirements or guidance, and the possibility of the
Bank being required to repurchase mortgage loans or indemnify buyers;
our ability to attract sufficient loans that meet prudent credit standards,
? including in our construction and development, commercial and industrial and
owner-occupied commercial real estate loan categories;
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;
changes in interest rate environment, including changes to the federal funds
? rate, and competition in our markets may result in increased funding costs or
reduced earning assets yields, thus reducing our margins and net interest
income;
? our ability to successfully manage our credit risk and the sufficiency of our
allowance for loan losses ("ALL");
? the adequacy of our reserves (including ALL) 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 focus on small and mid-sized businesses;
? our ability to manage our growth;
? our ability to increase our operating efficiency;
? 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;
liquidity issues, including fluctuations in the fair value and liquidity of the
? securities we hold for sale and our ability to raise additional capital, if
necessary;
? failure to maintain adequate liquidity and regulatory capital and comply with
evolving federal and state banking regulations;
? 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;
? a large percentage of our deposits are attributable to a relatively small
number of customers;
inability of our risk management framework to effectively mitigate credit risk,
? interest rate risk, liquidity risk, price risk, compliance risk, operational
risk, strategic risk and reputational risk;
? 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 the interest rate policies of the
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demand for loans, and fluctuations in consumer spending, borrowing and savings
habits, which may have an adverse impact on our financial condition;
? uncertainty related to the transition away from the London Inter-bank Offered
Rate ("LIBOR");
the continued impact of the COVID-19 pandemic on our business, including the
impact of the actions taken by governmental authorities to try and contain the
? virus or address the impact of the virus on
(including, without limitations, the Coronavirus Aid, Relief, and Economic
Security ("CARES") Act), including the risk of inflation and interest rate
increases resulting from monetary and fiscal stimulus responses;
adverse results from current or future litigation, regulatory examinations or
? other legal and/or regulatory actions related to the COVID-19 pandemic,
including as a result of participation in and execution of government programs
related to the COVID-19 pandemic, including, but not limited to, the PPP;
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;
? a failure in the internal controls we have implemented to address the risks
inherent to the business of banking;
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;
? our ability to identify and address cyber-security risks, fraud and systems
errors;
? disruptions, security breaches, or other adverse events, failures or
interruptions in, or attacks on, our information technology systems;
? disruptions, security breaches, or other adverse events affecting the
third-party vendors who perform several of our critical processing functions;
? 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 expenses that we will incur to operate as a public company and our
inexperience complying with the requirements of being a public company;
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? 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
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 (including
?
or pandemics, or other catastrophic events that may affect general economic
conditions; and
other risks and factors identified in our Annual Report on Form 10-K for the
? year ended
"Risk Factors", and detailed from time to time in our other filings with the
The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this Quarterly Report on Form 10-Q. Because of these risks and other uncertainties, our actual future results, performance or achievement, or industry results, may be materially different from the results indicated by the forward looking statements in this Quarterly Report on Form 10-Q. In addition, our past results of operations are not necessarily indicative of our future results. You should not rely on any forward looking statements, which represent our beliefs, assumptions and estimates only as of the dates on which they were made, as predictions of future events. 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 review any forward-looking statement, whether as a result of new information, future developments or otherwise.
Critical Accounting Policies and Estimates
Our accounting and reporting estimates conform with
Critical accounting estimates include a high degree of uncertainty in the
underlying assumptions. Management bases its estimates on historical experience,
current information and other factors deemed relevant. The development,
selection and disclosure of our critical accounting estimates are reviewed with
the Audit Committee of the Company's Board of Directors. Actual results could
differ from these estimates. For additional information regarding critical
accounting policies, refer to "Part II - Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations - Critical Accounting
Policies and Estimates" and Note 1 of our consolidated financial statements as
of
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Overview
We are a full-service commercial bank focused on delivering personalized service
in an efficient and reliable manner to the small to medium-sized businesses and
individuals in our markets, predominantly Asian-American communities in growing
metropolitan markets in the
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Selected Financial Data
The following table sets forth unaudited selected financial data for the most
recent five quarters and for the nine months ended
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