S-1 1 tv526676-s1.htm FORM S-1 tv526676-s1 - none - 51.4980712s
As filed with the Securities and Exchange Commission on September 4, 2019.
Registration No. 333-    ​
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
METROCITY BANKSHARES, INC.
(Exact name of registrant as specified in its charter)
Georgia
6022
47-2528408
(State or other jurisdiction of
incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification No.)
5114 Buford Highway,
Doraville, Georgia 30340
(770) 455-4989
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Nack Paek
Chairman and Chief Executive Officer
MetroCity Bankshares, Inc.
5114 Buford Highway,
Doraville, Georgia 30340
(770) 455-4989
(Name, address, including zip code and telephone number, including area code, of agent for service)
Copies to:
Mark C. Kanaly
Kyle G. Healy
David S. Park
Alston & Bird LLP
1201 West Peachtree Street, Suite 4900
Atlanta, Georgia 30309
(404) 881-7000
Farid Tan
President and
Chief Financial Officer
MetroCity Bankshares, Inc.
5114 Buford Highway
Doraville, Georgia 30340
(770) 455-4989
Peter G. Weinstock
Beth A. Whitaker
Hunton Andrews Kurth LLP
1445 Ross Avenue, Suite 3700
Dallas, Texas 75202
(214) 979-3000
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of  “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities to Be Registered
Proposed maximum
aggregate offering price(1)(2)
Amount of
registration fee
Common Stock, $0.01 par value per share
$ 40,000,000 $ 4,848.00
(1)
Includes offering price of shares of common stock that the underwriters have the option to purchase from the registrant.
(2)
Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(o) under the Securities Act of 1933. This amount represents the proposed maximum aggregate offering price of the securities registered hereunder to be sold by the registrant and the selling shareholders.
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. We and the selling shareholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED SEPTEMBER 4, 2019
PRELIMINARY PROSPECTUS
[MISSING IMAGE: lg_metrocity.jpg]
Shares
Common Stock
This is the initial public offering of MetroCity Bankshares, Inc. We are offering        shares of our common stock and the selling shareholders are offering        shares of our common stock. We will not receive any proceeds from the sales of shares by the selling shareholders.
Our common stock is presently quoted on the OTC Market Group’s OTCQX Market under the symbol “MCBS.” The last reported closing sale price for our common stock as reported on the OTCQX Market on August 30, 2019, was $28.00 per share. We anticipate that the public offering price of our common stock will be between $     and $     per share. We have applied to list our common stock on the Nasdaq Global Select Market under the symbol “MCBS.”
Investing in our common stock involves risk. See “Risk Factors” beginning on page 13.
We are an “emerging growth company” under the federal securities laws and will be subject to reduced public company reporting requirements.
Per share
Total
Initial public offering price of our common stock
$          $          
Underwriting discounts and commissions(1)
$ $
Proceeds to us, before expenses
$      $     
Proceeds to selling shareholders, before expenses
$ $
(1)
See “Underwriting” for additional information regarding underwriting compensation.
The underwriters have an option to purchase up to an additional          shares from us at the public offering price, less the underwriting discount, within 30 days from the date of this prospectus.
Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
Shares of our common stock are not savings accounts or deposits and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
The underwriters expect to deliver the shares of our common stock to purchasers on or about            , 2019, subject to customary closing conditions.
Keefe, Bruyette & Woods
Raymond James
A Stifel Company​
Hovde Group, LLC
The date of this prospectus is            , 2019.

TABLE OF CONTENTS
1
11
13
41
44
45
46
47
49
51
89
106
116
125
130
132
134
137
139
143
147
147
147
F-1
i

About this Prospectus
You should rely only on the information contained in this prospectus or in any free writing prospectus that we authorize to be delivered to you. We, the selling shareholders and the underwriters have not authorized anyone to provide you with different or additional information. We, the selling shareholders and the underwriters are not making an offer of these securities in any jurisdiction where the offer is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date.
Unless we state otherwise or the context otherwise requires, references in this prospectus to “we,” “our,” “us,” “ourselves,” “the company” and “the Company” refer to MetroCity Bankshares, Inc., a Georgia corporation, and its consolidated wholly-owned banking subsidiary, Metro City Bank, a Georgia state-chartered bank (“Metro City Bank” or “the Bank”), for all periods following the formation of MetroCity Bankshares, Inc. as a bank holding company under the Bank Holding Company Act of 1956, as amended, and the completion of the transactions under which Metro City Bank became a wholly-owned subsidiary of MetroCity Bankshares, Inc. For all periods prior to the completion of such transactions, these terms refer to Metro City Bank, a Georgia state-chartered bank.
This prospectus describes the specific details regarding this offering and the terms and conditions of our common stock being offered hereby and the risks of investing in our common stock. For additional information, please see the section entitled “Where You Can Find More Information.”
Unless otherwise stated, all information in this prospectus gives effect to a two-for-one stock split of our common stock effected in the form of a stock dividend, whereby each holder of our common stock received one additional share of common stock for each share owned as of the record date of August 15, 2019, which was distributed on August 30, 2019. The effect of the stock dividend on outstanding shares and per share figures has been retroactively applied to all periods presented in this prospectus.
You should not interpret the contents of this prospectus to be legal, business, investment or tax advice. You should consult with your own advisors for that type of advice and consult with them about the legal, tax, business, financial and other issues that you should consider before investing in our common stock.
Unless otherwise stated, all information in this prospectus assumes that the underwriters have not exercised their option to purchase additional shares of our common stock from us.
ii

Market and Industry Data
Within this prospectus, we reference certain market, industry and demographic data and other statistical information. We have obtained this data and information from various independent, third party industry sources and publications. Nothing in the data or information used or derived from third party sources should be construed as advice. Some data and other information are also based on our good faith estimates, which are derived from our review of internal surveys and independent sources. We believe that these external sources and estimates are reliable, but have not independently verified them. Statements as to our market position are based on market data currently available to us. Although we are not aware of any misstatements regarding the economic, employment, industry and other market data presented herein, these estimates involve inherent risks and uncertainties and are based on assumptions that are subject to change.
Implications of Being an Emerging Growth Company
As a company with less than $1.07 billion in revenue during our last fiscal year, we qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies. As an emerging growth company:

we may present as few as two years of audited financial statements, two years of related management discussion and analysis of financial condition and results of operations and two years of selected financial information;

we are exempt from the requirement to obtain an attestation and report from our auditors on management’s assessment of our internal control over financial reporting under the Sarbanes-Oxley Act of 2002;

we are permitted to provide less extensive disclosure about our executive compensation arrangements; and

we are not required to give our shareholders non-binding advisory votes on executive compensation or golden parachute arrangements.
In this prospectus, we have elected to take advantage of the reduced disclosure requirements relating to financial statements and executive compensation, and in the future, we may take advantage of any or all of these exemptions for so long as we remain an emerging growth company. We will remain an emerging growth company until the earliest of  (i) the end of the fiscal year during which we have total annual gross revenues of  $1.07 billion or more, (ii) the end of the fiscal year following the fifth anniversary of the completion of this offering, (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt and (iv) the date on which we are deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, as amended.
In addition to the relief described above, the JOBS Act permits us an extended transition period for complying with new or revised accounting standards affecting public companies. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make our financial statements not comparable with those of another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period because of the potential differences in accounting standards used.
iii

PROSPECTUS SUMMARY
This summary highlights selected information contained in this prospectus. It does not contain all the information that you should consider before deciding to invest in our common stock. You should read the entire prospectus carefully, including the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections, and the historical financial statements and the accompanying notes included in this prospectus.
Our Company
We are MetroCity Bankshares, Inc., a bank holding company headquartered in the Atlanta metropolitan area. We operate through our wholly-owned banking subsidiary, Metro City Bank (the “Bank”), a Georgia state-chartered commercial bank that was founded in 2006. We currently operate 19 full-service branch locations in multi-ethnic communities in Alabama, Florida, Georgia, New York, New Jersey, Texas and Virginia. As of June 30, 2019, we had total assets of  $1.52 billion, total loans (including loans held for sale) of  $1.25 billion, total deposits of  $1.30 billion and total shareholders’ equity of  $184.3 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, predominantly Asian-American communities in growing metropolitan markets in the Eastern U.S. and Texas. We offer a suite of loan and deposit products tailored to meet the needs of the businesses and individuals already established in our communities, as well as first generation immigrants who desire to establish and grow their own businesses, purchase a home, or educate their children in the United States. Through our diverse and experienced management team and talented employees, we are able to speak the language of our customers and provide them with services and products in a culturally competent manner.
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. 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 have experienced tremendous asset growth in recent years, with total assets growing from $671.4 million at December 31, 2015 to $1.43 billion at December 31, 2018. Over the same period, we grew net income from $16.6 million for the year ended December 31, 2015 to $41.3 million for the year ended December 31, 2018. This has made us one of the most profitable community banks in the nation as evidenced by the investment highlights discussed below.
We believe that our culturally familiar approach to banking, our tailored lending products, our branch network located in attractive Asian-American communities, and our highly replicable growth model have laid the foundation for sustainable, profitable growth.
Key Investment Highlights
We have a strong track record of consistent organic growth and profitability that has driven substantial value to our shareholders without sacrificing asset quality. We have been profitable every quarter since 2007 and have consistently paid a portion of earnings to our shareholders through a quarterly dividend since 2012.
The relative financial performance analyses described in this prospectus measure our results against the peer groups described below.

Nationwide Peer Group.   This peer group includes 125 banks traded on either the New York Stock Exchange (“NYSE”) or the Nasdaq Global Select Market with total assets between $1 billion and $3 billion, excluding merger targets, as of June 30, 2019.
1


Ethnic Peer Group.   This peer group includes eight banks traded on either the NYSE or the Nasdaq Global Select Market and headquartered in the United States with a primary focus on serving distinct ethnic communities. We developed this group based on our knowledge of the market generally and of the publicly-traded banking institutions that we compete against within our target geographies and with our primary loan products. Specifically, this peer group consists of East West Bancorp, Inc. (EWBC), Cathay General Bancorp (CATY), Hope Bancorp, Inc. (HOPE), Hanmi Financial Corporation (HAFC), Preferred Bank (PFBC), RBB Bancorp (RBB), OP Bancorp (OPBK) and PCB Bancorp (PCB).
Balance Sheet Growth.   We have experienced double-digit percentage asset growth in each of the last three years, driven by our investments in personnel and branch infrastructure. Since 2015, we have opened eleven full-service branches in carefully selected locations and added 112 full-time equivalent employees, all while paying a healthy dividend to our shareholders and accreting capital to match our growing asset base. These investments yielded growth in assets, loans, deposits and shareholders’ equity well in excess of our peer groups, as shown below.
Three-Year CAGR from December 31, 2015 to December 31, 2018
Nationwide Peer Group
Ethnic Peer Group
MetroCity
75th
Percentile
Median
75th
Percentile
Median
Total Assets
28.9% 16.5% 10.4% 20.5% 17.6%
Total Loans
28.4% 17.7% 13.6% 20.8% 17.1%
Total Deposits
30.7% 18.1% 11.0% 21.3% 16.1%
Total Shareholders’ Equity
23.5% 24.3% 11.5% 27.2% 18.9%
Note: Peer financial data per S&P Global Market Intelligence (“S&P Global”).
Earnings Growth and Profitability.   The growth in our balance sheet has driven outsized revenue growth. Additionally, while our noninterest expense has grown to support our expansion, we have experienced positive operating leverage through our aggressive, cost-efficient branch expansion, as evidenced by our profitability metrics. Our profitability has enabled us to pay quarterly dividends to our shareholders in amounts up to 25% of our net income over the past seven years. Our earnings growth and profitability metrics are shown below compared to our peer groups.
Three-Year CAGR from December 31, 2015 to December 31, 2018
Nationwide Peer Group
Ethnic Peer Group
MetroCity
75th
Percentile
Median
75th
Percentile
Median
Net Interest Income
25.0% 17.7% 12.5% 22.2% 21.2%
Noninterest Income
37.2% 15.7% 5.4% 14.4% 6.4%
Noninterest Expense
28.1% 14.1% 8.4% 16.3% 13.4%
Net Income
35.6% 30.8% 20.9% 33.7% 26.5%
2

For the Year-to-Date Period Ending on the Most Recent
Financial Quarter Available,
Nationwide Peer Group
Ethnic Peer Group
MetroCity
75th
Percentile
Median
75th
Percentile
Median
Return on Average Assets
2.94% 1.35% 1.14% 1.61% 1.53%
Return on Average Equity
25.46% 12.23% 9.76% 13.13% 12.47%
Net Interest Margin
4.30% 4.04% 3.65% 4.08% 3.72%
Efficiency Ratio
40.3% 57.5% 62.2% 45.3% 50.8%
Net Interest Income to Average Assets
2.02% 3.77% 3.41% 3.98% 3.52%
Noninterest Income to Average Assets
1.31% 1.00% 0.67% 0.64% 0.43%
Noninterest Expense to Average Assets
1.34% 2.25% 2.67% 1.74% 1.98%
Noninterest Income/Revenue
39.3% 22.8% 16.3% 14.2% 11.1%
Note: Peer financial data per S&P Global.
Credit Quality.   We achieved the aforementioned growth and profitability without sacrificing our credit quality. In order to maintain the integrity of our balance sheet, we adhere to disciplined and well-defined underwriting practices. For example, we have no delegated individual lending authority; rather, we have defined size limits that must be approved by either our management loan committee, directors’ loan committee or our full board of directors. Additionally, our underwriting process for our residential mortgage loans uses a pre-defined criteria approval system with no need for discretionary judgment or approval. We believe this discipline, along with the high level involvement of our executive senior management team and board of directors, has led to credit quality metrics that compare favorably to our peers, as shown in the table below.
For the Year-to-Date Period Ending on the Most Recent
Financial Quarter Available,
Nationwide Peer Group
Ethnic Peer Group
MetroCity
75th
Percentile
Median
75th
Percentile
Median
Nonperforming Assets to Loans and OREO
1.41% 0.51% 0.89% 0.16% 0.36%
ALL to Loans Held for Investment
0.54% 1.11% 0.94% 0.96% 0.92%
Net Charge-offs to Average Loans
0.03% 0.00% 0.04% (0.00%) 0.02%
Note: Peer financial data per S&P Global.
Our loan loss reserves as a percent of total loans is relatively lower than our peers due to the fact that approximately 58% of our loans consist of residential mortgage loans, which tend to have lower loan loss reserve ratios compared to other commercial or consumer loans. Our loan loss reserves to loans held for investment for our residential mortgage loans is approximately 0.46% while our loan loss reserves to loans held for investment for the remainder of our loan portfolio is approximately 0.66%.
3

Our Strategic Focus
We are focused on being the community bank of choice for small- and medium-sized businesses and individuals in our market areas. We believe there are significant growth opportunities in our existing markets, as well as opportunities to expand into new gateway markets with large Asian-American populations where we believe we can successfully leverage our competitive strengths. We intend to capture these opportunities by focusing on the following:
Commercial and Business Lending.   We offer a full range of conventional lending products, including commercial loans to small- to medium-sized businesses and construction loans, as well as loans under the SBA 7(a) and SBA 504 programs. SBA lending has been a core component of our banking strategy since our inception, and our Chairman and Chief Executive Officer has substantial experience in SBA lending dating back to the early 1980s. We have a Preferred Lender designation under the SBA Preferred Lender Program. We offer SBA Section 7(a) and 504 loans, most of which are variable rate, to hospitality, retail and other small businesses for working capital needs, business expansion or acquisitions. We have been one of the most active SBA originators in the United States, ranking in the top 50 by dollars of approved SBA 7(a) loans in each of the SBA fiscal years 2010 through 2018, most recently ranking #29 for the nine months of fiscal year 2019 beginning October 2018. We have historically been able to sell the guaranteed portion of our SBA loans on favorable terms, which has provided us with attractive non-interest income and enabled us to continue to pursue SBA lending opportunities.
Residential Mortgage Lending.   Our residential mortgage lending primarily consists of non-conforming single family residential mortgage loans. We developed our non-conforming residential mortgage loan product to serve consumers working and living in and around our markets who find these loans more attractive than the conventional loans offered by larger national and regional banks and mortgage brokers. Our loans are non-conforming because they generally do not qualify for sale to Fannie Mae or Freddie Mac for a variety of reasons, including that many of our loans are jumbo loans and that we offer our borrowers reduced documentation requirements. This has resulted in residential mortgage loans with higher yields and lower loan-to-value, or LTV, ratios than conventional, conforming residential mortgage loans. Furthermore, we originate all of our residential mortgage loans in-house without the use of brokers or third party originators. Periodically, we sell pools of these loans to investors for a premium and retain servicing rights on such loans, for which we receive recurring fee income. As we expand into new markets, we believe that our residential mortgage loan product will be attractive to our customers and will help accelerate our growth in these new markets.
Since launching our residential mortgage product in 2012, we have not only experienced tremendous growth in our residential real estate loans, as detailed by the charts below, but have also maintained exceptional credit quality, as evidenced by having only 5 foreclosures out of 7,520 residential mortgage loans originated between January 1, 2015 and June 30, 2019, none of which resulted in a loss. For more detail regarding this portfolio, see “Business — Residential Real Estate Loans.”
[MISSING IMAGE: tv526043_chrt-bar.jpg]
4

Growing Sources of Recurring Noninterest Income.   Historically, a significant portion of our revenue has been generated through multiple sources of noninterest income. When we sell the guaranteed portion of the SBA loans and residential mortgage loans into the secondary market, we generate revenue on the premiums paid for these loans. We also retain the servicing rights for both our SBA and residential mortgage loans sold, which provides a stable source of fee income after the loans have been sold. Our sales of residential mortgage loans, with servicing retained, allow us to provide for future recurring servicing income, as well as to recognize current gains from the sale of these loans at a premium. We believe that this structure enables us to have more predictable income that is less reliant on gain on sale revenue. For the year ended December 31, 2018 and six months ended June 30, 2019, 39.3% and 39.4%, respectively, of our revenue came from noninterest income. The charts below illustrate the components of our revenue and noninterest income for the six months ended June 30, 2019.
[MISSING IMAGE: tv526676_chrt-pie1.jpg]
Deposit Gathering.   We are focused on growing our low-cost deposits, which we gather primarily through our branch network. Since 2015, we have opened eleven new branches and anticipate that our deposit growth rate will increase as these branches mature. Additionally, we have placed an increased emphasis on growing our relationship-based deposits with our commercial and business lending customers. While many of our SBA borrowers have historically maintained only transaction-based relationships with us, we have increasingly demonstrated success in building these relationships into full-scale customer relationships, including the origination of deposits from these borrowers. We believe these efforts to broaden our customer relationships provide significant opportunity for us to grow our noninterest-bearing and other non-maturity deposits in the future. The chart below illustrates the components of our deposit portfolio as of June 30, 2019.
[MISSING IMAGE: tv526043_chrt-pie2.jpg]
5

Diversification and Expansion.   We constantly look for ways to grow our Bank, both geographically and through different loan products. Since 2015, we have opened eleven new branches, including two branches in the Atlanta metropolitan area. We opened three branches in Texas, two branches in New York, and one branch in each of Alabama, Florida, New Jersey and Virginia. We expect to continue to expand geographically to new gateway markets that are culturally diverse and experiencing demographic growth.
As noted above, our primary loan products are SBA loans and residential mortgage loans. However, we continue to make loans that diversify our portfolio. We originate construction and development loans that are typically WSJ Prime-based and have maturities of 12 to 18 months. We also originate conventional owner-occupied and non-owner-occupied commercial real estate loans. Our team works to develop extensive knowledge of our borrowers and the markets where we operate, takes a conservative approach to commercial real estate lending, and focuses on low LTV ratios, strong cash flows and personal guarantees in most cases.
Our Competitive Strengths
We believe the following key strengths provide us with a competitive advantage and position us well to execute on our strategic goals:
Efficient Branch Network.   We have built an efficient branch network centered around our market areas, where we believe our product mix and cultural familiarity are most attractive. We have a strong track record of expansion both in existing markets and entering new markets through de novo branch openings without compromising our profits. To achieve this, we have strategically established our de novo branches in culturally diverse areas outside of main business centers. We have also been able to keep the cost of operations low at the de novo branches as a result of efficient staffing and our centralized credit approval process. Consequently, this has allowed us to lower the cost of opening and operating a de novo branch, with an average cost of less than $500,000 to establish a fully-operational de novo branch. As a result of our branch expansion in recent years, many of our branches have been open for less than three years, positioning us to realize greater benefits from our efficient expansion as these branches mature.
Focus on Our Tailored Lending Products.   While we offer many traditional lending products, we have tailored our loan products and processes to fit the needs of the businesses and individuals in our market areas. In addition to our SBA and residential mortgage lending, we have developed additional expertise in owner-occupied commercial real estate and construction and development lending. We believe our team has extensive knowledge of our borrowers and the markets where we operate, takes a conservative approach to commercial real estate and construction and development lending and focuses on low LTV ratios, strong cash flows and personal guarantees. The chart below illustrates our focus through our loan portfolio composition as of June 30, 2019.
[MISSING IMAGE: tv526043_chrt-pie3.jpg]
Relatable, High-Quality Customer Service.   We strive to connect with customers of all backgrounds, cultures and ethnicities. However, we do not try to be everything to everyone. Instead, we focus on providing a defined set of banking products and services to the diverse businesses and individuals located
6

near our branches. When customers walk through our doors, our relationship managers are encouraged to get to know them, greet them by name and take responsibility for personally answering their inquiries about products and services. Although we conduct most of our business in English, almost all of our customer-facing employees are multi-lingual and speak the customer’s native language when appropriate. We believe this approach provides a sense of cultural familiarity and understanding to our customers.
We also believe we have a strategic advantage over our competitors because we are faster and more reliable. Our customers refer business to us because they know we can make quick decisions and close loans in a timely and efficient manner. We achieve this speed and quality of service by hiring the best people and arming them with well-defined processes and procedures.
Veteran Management Team.   Our executive management team is made up of seasoned professionals with diverse backgrounds, with over 150 years of combined financial industry experience. Furthermore, our three most senior executives have all been with the Bank since its founding in 2006. Key members of our team include:
Nack Y. Paek.   Mr. Paek is the Chairman and Chief Executive Officer of MetroCity Bankshares, Inc. and Executive Chairman of the Bank. Mr. Paek’s experience in banking traces back to when he made his first SBA loan in 1981. He leveraged that experience over the following decade, helping to underwrite loans for a third party non-bank SBA lender, and now at the Bank, as he helps set the direction of the Bank’s loan underwriting and approval process. Mr. Paek also brings past accounting experience to the Company, as he previously owned and managed his own accounting firm for ten years. In addition, Mr. Paek was a founding director for another Georgia community bank where he served in various capacities, including chairman of the audit committee and chairman of the board of directors. In 2006, he founded Metro City Bank along with a group of investors.
Farid Tan.   Mr. Tan is the President of MetroCity Bankshares, Inc. and Chief Executive Officer of the Bank. Mr. Tan also serves as the Chief Financial Officer of the Company and the Bank since July 2019. Mr. Tan has 38 years of experience in banking and has been in community banking in Georgia since 1999 when he became Senior Vice President and Chief Lending Officer of Global Commerce Bank. In 2002, Mr. Tan was named President and Chief Executive Officer of Global Commerce Bank where he served until 2005 when he resigned to help form Metro City Bank as its President and Chief Executive Officer. Mr. Tan was instrumental in establishing the Bank’s critical policies and guidelines in asset liability management and developing a strategic short- and long-range strategic plan that addressed increased revenues and identified potential long-range problems involving capital and liquidity. Mr. Tan started his banking career in 1981 for Bank Bumiputra Malaysia, where he held various positions, including Senior Account Officer, Senior Internal Audit Supervisor and Senior Foreign Exchange Dealer. In 1993, Mr. Tan became the Assistant General Manager of their New York office where he served until 1999 when he left to join Global Commerce Bank.
Howard H. Kim.   Mr. Kim is Executive Vice President, Chief Operating Officer and Chief Lending Officer of the Company and President of the Bank. Mr. Kim has more than 37 years of experience in financial services, having worked for Korea Development Bank as an officer for lending, deposit, foreign exchange dealing and accounting from 1980 to 1991 and Korea Development Securities Co. Ltd as an assistant branch manager and a manager of accounting division and as a representative in their Amsterdam office from 1991 to 1997. Mr. Kim also served as Vice President, Commercial and SBA Lender for two local community banks in Doraville, Georgia before joining Metro City Bank at its inception in 2006.
S. Benton Gunter.   Mr. Gunter is Executive Vice President and Chief Administrative Officer of the Company and the Bank. Mr. Gunter also served as the Chief Financial Officer of the Company and the Bank prior to July 2019. Mr. Gunter has more than 50 years of experience in financial services, including time spent with large regional banks and community banks. He has experience in all areas of bank operations, including administration, branch operations, deposit operations, financial reporting, compliance, human resources and audit. Prior to joining Metro City Bank in 2010, Mr. Gunter served as Vice President and Chief Operations Officer of Atlanta Business Bank, a de novo bank formed in Atlanta, Georgia in 2001 and which opened for business in early 2002.
7

Our executive management team is supported by nine highly qualified and experienced individuals who oversee various aspects of our organization, including our senior accounting manager, controller, senior operations manager, compliance manager, mortgage loan officer, our SBA loan manager, human resources officer, information technology officer and credit risk manager. Our team has a demonstrated track record of achieving profitable growth and maintaining sound enterprise risk management.
Experienced, Diverse Board of Directors with Substantial Ownership.   Our board of directors is comprised of eleven successful business people representing five different nationalities. Our board members bring valuable insight to our strategic planning process and to the ongoing monitoring of the business gained from their diverse professional backgrounds, including experiences and expertise in banking, financial services, accounting, real estate, hospitality and various other industries. They also contribute to the growth of the Bank by actively referring business to us. Our board of directors and their families and affiliated entities own in aggregate approximately 45.09% of our outstanding common stock as of June 30, 2019 before giving effect to the offering.
Our Markets
We are located primarily in the Atlanta metropolitan area with our headquarters in Doraville, Georgia. Our 19 full-service branch locations in Alabama, Florida, Georgia, New York, New Jersey, Texas and Virginia are located in growing multi-ethnic communities. Additionally, we have identified several attractive markets where we would like to expand our presence. The table below demonstrates some of the key highlights of our current markets of operation.
Summary Demographic Information
Population
Median Household Income
MSA Name
2019
(actual)
2014 – 2019
Growth
2019 – 2024
Proj. Growth
2019
($)
2014 – 2019
Growth
2019 – 2024
Proj. Growth
Number of
Businesses
Atlanta-Sandy Springs-Alpharetta, GA
6,017,552 8.0% 6.5% 68,974 31.3% 11.8% 221,070
Auburn-Opelika, AL
165,585 8.7% 5.8% 50,561 22.6% 8.1% 4,681
Dallas-Fort Worth-Arlington, TX
7,575,979 10.0% 7.7% 69,458 22.4% 7.6% 240,876
Houston-The Woodlands-Sugar Land, TX
7,092,836 11.6% 8.0% 65,702 16.2% 2.4% 213,685
Montgomery, AL
374,026 (0.7%) 0.7% 51,310 9.3% 8.9% 15,237
New York-Newark-Jersey City, NY-NJ-PA
20,432,620 2.2% 2.1% 77,981 20.8% 10.2% 810,883
Tampa-St. Petersburg-Clearwater, FL
3,171,289 9.9% 6.8% 55,732 27.1% 10.8% 112,371
Washington-Arlington-Alexandria, DC-VA-MD-WV
6,311,930 5.6% 5.2% 102,260 11.3% 7.0% 219,675
United States of America
329,236,175 3.8% 3.6% 63,174 22.5% 8.8% 12,492,759
Source: S&P Global.
Recent Developments
Stock Split
On August 30, 2019, we effected a two-for-one split of our common stock in the form of a stock dividend, whereby each holder of our common stock received one additional share of common stock for each share owned as of the record date of August 15, 2019. The effect of the stock dividend on outstanding shares and per share figures has been retroactively applied to all periods presented in this prospectus.
Corporate Information
Our principal executive office is located at 5114 Buford Highway, Doraville, Georgia 30340, telephone number: (770) 455-4989. Our website address is www.metrocitybank.com. The information contained on our website is not part of, or incorporated by reference into, this prospectus.
8

The Offering
Common stock offered by us
     shares.
Common stock offered by the selling shareholders
     shares.
Underwriters’ option to purchase additional shares
     shares from us.
Common stock outstanding after completion of this offering
     shares (or      shares if the underwriters exercise their option in full to purchase additional shares).
Use of proceeds
We estimate that the net proceeds to us from this offering, after deducting underwriting discounts and estimated offering expenses, will be approximately $     million (or approximately $     million if the underwriters exercise their option to purchase      additional shares in full), based on an assumed public offering price of  $     per share, which is the midpoint of the price range set forth on the cover page of this prospectus. We intend to use the net proceeds from this offering to support our organic growth and other general corporate purposes, which could include branch expansion and opportunistic strategic acquisitions. However, as of the date of this prospectus, we do not have any immediate plans, arrangements or understandings relating to any material acquisitions or de novo banking branches. We will not receive any proceeds from the sale of shares of our common stock by the selling shareholders. See “Use of Proceeds.”
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 25% of our net income over the past seven 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. See “Market Price of Common Stock — Dividend Policy.”
Directed share program
At our request, the underwriters have reserved for sale, at the initial public offering price, up to     % of the shares offered by this prospectus for sale to the directors, officers and employees and other related persons of MetroCity Bankshares, Inc. and Metro City Bank. If these persons purchase reserved shares, it will reduce the number of shares available for sale to the general public. Any reserved shares that are not so purchased will be offered by the underwriters to the general public on the same terms as the other shares offered by this prospectus.
9

Risk factors
Investing in shares of our common stock involves a high degree of risk. See “Risk Factors,” beginning on page 13, for a discussion of certain factors you should consider carefully before deciding to invest.
NASDAQ symbol
Our common stock is currently quoted on the OTCQX Market under the trading symbol “MCBS.” We have applied to list our common stock on the Nasdaq Global Select Market under the trading symbol “MCBS.” Assuming that our common stock is listed for trading on the Nasdaq Global Select Market, the quoting of our shares on the OTCQX Market will be discontinued upon or prior to the completion of this offering.
Unless otherwise indicated, all information in this prospectus relating to the number of shares of common stock to be outstanding immediately after the completion of this offering is based on 24,305,378 shares outstanding as of June 30, 2019 and:

gives effect to a two-for-one stock split effected in the form of stock dividend completed on August 30, 2019, and the effect of the stock dividend on outstanding shares and per share figures has been retroactively applied to all periods presented in this prospectus;

excludes 2,472,372 shares of common stock reserved at June 30, 2019 available for future awards under our 2006 Stock Option Plan and 2018 Omnibus Incentive Plan;

does not attribute to any director, executive officer or principal shareholder any purchases of shares of our common stock in this offering, including through the directed share program described in “Underwriting — Directed Share Program”; and

assumes the underwriters do not exercise their option to purchase up to      additional shares from us.
10

SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
You should read the selected historical consolidated financial information set forth below in conjunction with the sections titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Capitalization,” as well as our consolidated financial statements and the related notes included elsewhere in this prospectus. The following table sets forth selected historical consolidated financial information as of the dates and for the periods shown. The selected balance sheet data as of December 31, 2018 and 2017 and the selected income statement data for the years ended December 31, 2018 and 2017 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The selected balance sheet data as of December 31, 2016 and 2015 and the selected income statement data for the years ended December 31, 2016 and 2015 have been derived from our audited consolidated financial statements not included in this prospectus. The selected balance sheet data as of June 30, 2019 and the selected income statement data as of June 30, 2019 and 2018 have been derived from our unaudited interim consolidated financial statements included elsewhere in this prospectus. The selected balance sheet data as of June 30, 2018 has been derived from our internal financial statements not included in this prospectus. Our historical results may not be indicative of our future performance. The selected historical consolidated financial information presented below contains financial measures that are not presented in accordance with accounting principles generally accepted in the United States and have not been audited. See “GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures.”
As of and for the Six Months Ended
June 30,
As of and for the Year Ended December 31,
2019
2018
2018
2017
2016
2015
(dollars in thousands, except per share data)
Income Statement Data:
Interest income
$ 40,680 $ 35,090 $ 72,879 $ 60,514 $ 43,566 $ 33,370
Interest expense
10,628 6,273 14,675 8,619 5,238 3,583
Net interest income
30,052 28,817 58,204 51,895 38,327 29,787
Provision for loan losses
871 1,237 3,058
Noninterest income
19,532 19,360 37,609 32,405 20,247 14,261
Noninterest expense
19,998 17,670 38,575 31,192 26,159 18,005
Income tax expense
7,894 7,891 14,667 18,153 12,200 9,431
Net income
21,692 21,745 41,334 31,897 20,216 16,613
Per Share Data(4):
Basic income per share
$ 0.90 $ 0.90 $ 1.71 $ 1.34 $ 0.87 $ 0.73
Diluted income per share
$ 0.89 $ 0.89 $ 1.69 $ 1.32 $ 0.86 $ 0.73
Dividends per share
$ 0.20 $ 0.18 $ 0.38 $ 0.23 $ 0.16 $ 0.12
Book value per share (at period end)
$ 7.58 $ 6.30 $ 6.95 $ 5.61 $ 4.54 $ 3.90
Shares of common stock outstanding
24,305,378 24,241,206 24,258,062 24,074,882 23,642,510 22,973,584
Weighted average diluted shares
24,427,642 24,397,508 24,475,698 24,139,006 23,704,334 22,469,762
Balance Sheet Data:
Gross loans held for investment
$ 1,190,911 $ 1,094,229 $ 1,145,714 $ 1,068,593 $ 804,318 $ 570,755
Loans held for sale
69,686 74,827 56,865 31,802 161,890
Allowance for loan losses
6,483 6,766 6,645 6,925 5,471 5,527
Total assets
1,524,509 1,345,821 1,432,650 1,288,927 1,100,063 671,380
Deposits
1,296,187 1,163,298 1,244,232 1,019,984 870,867 562,850
Shareholders’ equity
184,317 152,751 168,608 135,115 107,261 89,560
11

As of and for the Six Months Ended
June 30,
As of and for the Year Ended December 31,
2019
2018
2018
2017
2016
2015
(dollars in thousands, except per share data)
Performance Ratios:
Return on average assets(1)
2.94% 3.30% 3.01% 2.77% 2.42% 2.61%
Return on average equity(1)
25.46 31.51 27.95 27.24 21.19 20.88
Dividend payout ratio
22.57 20.16 22.48 17.05 18.65 16.04
Yield on total loans
6.15 5.92 5.92 5.91 5.94 6.20
Yield on average earning assets
5.81 5.63 5.60 5.55 5.54 5.74
Cost of average interest bearing liabilities
2.16 1.41 1.60 1.11 0.97 0.88
Cost of deposits
2.17 1.39 1.60 1.09 0.96 0.85
Net interest margin
4.30 4.62 4.48 4.76 4.87 4.98
Efficiency ratio(2)
40.33 35.55 40.26 37.00 44.66 40.88
Asset quality data:
Net charge-offs to average loans
held for investment(1)
0.03% 0.19% 0.14% 0.17% 0.01% 0.09%
Nonperforming assets to gross
loans and other real estate owned
1.41 0.73 0.78 1.00 0.49 1.07
ALL to nonperforming loans
38.67 84.88 74.12 69.06 153.94 111.79
ALL to loans held for investment
0.54 0.62 0.58 0.65 0.68 0.97
Balance sheet and capital ratios:
Gross loans held for investment to deposits
91.88% 94.06% 92.08% 104.77% 92.36% 101.40%
Noninterest bearing deposits to deposits
23.87 24.66 24.05 25.52 24.74 27.01
Tangible common equity to tangible assets(3)
12.09 11.35 11.77 10.48 9.75 13.33
Leverage ratio
11.67 10.79 11.14 10.76 10.19 13.20
Common equity tier 1 ratio
17.99 16.17 17.44 16.24 14.16 18.26
Tier 1 risk-based capital ratio
17.99 16.17 17.44 16.24 14.16 18.26
Total risk-based capital ratio
18.66 16.93 18.16 17.08 14.89 19.40
(1)
Represents annualized June 30, 2019 and 2018 data.
(2)
Represents non-interest expense divided by the sum of net interest income plus non-interest income.
(3)
Represents a non-GAAP financial measure. See “GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures” for a reconciliation of our non-GAAP measure to the most comparable financial measure.
(4)
All share and per share information reflects the two-for-one stock split of our common stock effected in the form of a stock dividend, whereby each holder of our common stock received one additional share of common stock for each share owned as of the record date of August 15, 2019, which was distributed on August 30, 2019. The effect of the stock dividend on outstanding shares and per share figures has been retroactively applied to all periods presented in this prospectus.
12

RISK FACTORS
Investing in our common stock involves a high degree of risk. Before you decide to invest, you should carefully consider the risks described below, together with all other information included in this prospectus. We believe the risks described below are the risks that are material to us. Any of the following risks, as well as risks that we do not know or currently deem immaterial, could have a material adverse effect on our business, financial condition, results of operations and growth prospects. In that case, you could experience a partial or complete loss of your investment.
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. In recent years, there has been a gradual improvement in the U.S. economy as evidenced by a rebound in the housing market, lower unemployment and higher valuations in the equities markets. However, economic growth has been uneven, and opinions vary on the strength and direction of the economy. Uncertainties also have arisen regarding the potential for a reversal or renegotiation of international trade agreements and tariffs under the current administration, and the impact such actions and other policies of the new administration may have on economic and market conditions. In addition, concerns about the performance of international economies, especially in Europe and emerging markets, and economic conditions in Asia can impact the economy and financial markets here in the United States and can impact our customer base, especially the segment of our business that is directly or indirectly supported by foreign trade. If the national, regional and local economies experience worsening economic conditions, including high levels of unemployment, our growth and profitability could be constrained. Weak economic conditions are characterized by, among other indicators, deflation, elevated levels of unemployment, 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. All of these factors are generally detrimental to our business. Our business is significantly affected by monetary and other regulatory policies of the U.S. federal government, its agencies and government-sponsored entities. Changes in any of these policies are influenced by macroeconomic conditions and other factors that are beyond our control, are difficult to predict and could have a material adverse effect on our business, financial position, results of operations and growth prospects.
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. We also face competition from many other types of financial institutions, including savings associations, finance companies, brokerage firms, insurance companies, credit unions, mortgage banks and other financial intermediaries. In addition, a number of out-of-state financial intermediaries have opened production offices or otherwise solicit deposits in our market areas. Additionally, we face growing competition from so-called “online businesses” with few or no physical locations, including online banks, lenders and consumer, commercial and mortgage lending platforms, as well as automated retirement and investment service providers. Many of these competing institutions have much greater financial and marketing resources than we have. Due to their size, many competitors can achieve larger economies of scale and may offer a broader range of products and services than we can. If we are unable to offer competitive products and services, our business may be negatively affected. Some of the financial services organizations with which we compete are not subject to the same degree of regulation as is imposed on
13

bank holding companies and federally insured financial institutions or are not subject to increased supervisory oversight arising from regulatory examinations. As a result, these non-bank competitors have certain advantages over us in accessing funding and in providing various services and they may be subject to lower regulatory costs.
New technology and other changes are allowing parties to effectuate financial transactions that previously required the involvement of banks. For example, consumers can maintain funds in brokerage accounts or mutual funds that would have historically been held as bank deposits. Consumers can also complete transactions such as paying bills and transferring funds directly without the assistance of banks. The process of eliminating banks as intermediaries, known as “disintermediation,” could result in the loss of fee income, as well as the loss of customer deposits and the related income generated from those deposits. The loss of these revenue streams and access to lower cost deposits as a source of funds could have a material adverse effect on our business, results of operations and financial condition.
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. Ultimately, we may not be able to compete successfully against current and future competitors. 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 may impact net interest income and otherwise negatively impact our financial condition and results of operations.
Shifts in short-term interest rates may impact net interest income, which is the principal component of our earnings. Net interest income is the difference between the amounts received by us on our interest-earning assets and the interest paid by us on our interest-bearing liabilities. When interest rates rise, the rate of interest we receive on our assets, such as loans, rises more quickly than the rate of interest that we pay on our interest-bearing liabilities, such as deposits, which may cause our profits to increase. When interest rates decrease, the rate of interest we receive on our assets, such as loans, declines more quickly than the rate of interest that we pay on our interest-bearing liabilities, such as deposits, which may cause our profits to decrease. Changes in interest rates could influence our ability to originate loans and deposits. Historically, there has been an inverse correlation between the demand for loans and interest rates. Loan origination volume usually declines during periods of rising or high interest rates and increases during periods of declining or low interest rates. For example, mortgage production historically, including refinancing activity, declines in rising interest rate environments.
Interest rate increases often result in larger payment requirements for our borrowers, which increases the potential for default. At the same time, the marketability of any underlying property that serves as collateral for such loans may be adversely affected by any reduced demand resulting from higher interest rates. In addition, an increase in interest rates that adversely affects the ability of borrowers to pay the principal or interest on loans may lead to an increase in nonperforming assets and a reduction of income recognized, which could have a material adverse effect on our results of operations and cash flows. Further, when we place a loan on nonaccrual status, we reverse any accrued but unpaid interest receivable, which decreases interest income. Subsequently, we continue to have a cost to fund the loan, which is reflected as interest expense, without any interest income to offset the associated funding expense. Thus, an increase in the amount of nonperforming assets would have an adverse impact on net interest income.
Changes in interest rates also can affect the value of loans, securities and other assets. Rising interest rates will result in a decline in value of the fixed-rate debt securities we hold in our investment securities portfolio. The unrealized losses resulting from holding these securities would be recognized in accumulated other comprehensive income and reduce total shareholders’ equity. Unrealized losses do not negatively impact our regulatory capital ratios. However, tangible common equity and the associated ratios would be reduced. If debt securities in an unrealized loss position are sold, such losses become realized and will reduce our regulatory capital ratios.
14

Interest rates on our outstanding financial instruments might be subject to change based on regulatory developments, which could adversely affect our revenue, expenses, and the value of those financial instruments.
LIBOR and certain other “benchmarks” are the subject of recent national, international, and other regulatory guidance and proposals for reform. These reforms may cause such benchmarks to perform differently than in the past or have other consequences which cannot be predicted. On July 27, 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, publicly announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021. It is unclear whether, at that time, LIBOR will cease to exist or if new methods of calculating LIBOR will be established. If LIBOR ceases to exist or if the methods of calculating LIBOR change from current methods for any reason, interest rates on our floating rate obligations, loans, deposits, derivatives, and other financial instruments tied to LIBOR rates, as well as the revenue and expenses associated with those financial instruments, may be adversely affected. Any uncertainty regarding the continued use and reliability of LIBOR as a benchmark interest rate could adversely affect the value of our floating rate obligations, loans, deposits, derivatives, and other financial instruments tied to LIBOR rates.
Our adjustable-rate commercial real estate loans are generally based on the Wall Street Journal Prime Rate (WSJPR) or London Interbank Offered Rate (LIBOR), and as of June 30, 2019, most of our loans were based on WSJPR. However, we may not be able to successfully eliminate all loans tied to LIBOR prior to 2022. Even with “fallback” provisions contained within remaining LIBOR tied loans, changes to or the discontinuance of LIBOR could result in customer uncertainty and disputes around how variable rates should be calculated. All of this could result in damage to our reputation, loss of customers and additional costs to us, all of which could be material.
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.
Other primary sources of funds consist of cash from operations, investment maturities and sales, sale of loans and proceeds from the issuance and sale of our equity securities 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. 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.
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 credit risk.
The operation of our business requires us to manage credit risk. As a lender, we are exposed to the risk that our borrowers will be unable to repay their loans according to their terms, and that the collateral securing repayment of their loans, if any, may not be sufficient to ensure repayment. In addition, there are risks inherent in making any loan, including risks with respect to the period of time over which the loan may be repaid, risks relating to proper loan underwriting, risks resulting from changes in economic and industry conditions and risks inherent in dealing with individual borrowers. In order to successfully manage
15

credit risk, we must, among other things, maintain disciplined and prudent underwriting standards and ensure that our bankers follow those standards. The weakening of these standards for any reason, such as an attempt to attract higher yielding loans, a lack of discipline or diligence by our employees in underwriting and monitoring loans, the inability of our employees to adequately adapt policies and procedures to changes in economic or any other conditions affecting borrowers and the quality of our loan portfolio, may result in loan defaults, foreclosures and additional charge-offs and may necessitate that we significantly increase our allowance for loan losses (“ALL”) each of which could adversely affect our net income. As a result, our inability to successfully manage credit risk could have a material adverse effect on our business, financial condition or results of operations.
An important feature of our credit risk management system is our use of an internal credit committee which identifies, measures, monitors and mitigates existing and emerging credit risk of our customers. As this process involves detailed analysis of the customer or credit risk, taking into account both quantitative and qualitative factors, it is subject to human error. In exercising judgment, our credit committee may not always be able to assign an accurate credit rating to a customer or credit risk, which may result in our exposure to higher credit risks than indicated by our risk rating and control system. Although our management seeks to address possible credit risk proactively, it is possible that the credit risk rating and control system will not identify credit risk in our loan portfolio and that we may fail to manage credit risk effectively.
Some of our tools and metrics for managing credit risk and other risks are based upon our use of observed historical market behavior and assumptions. We rely on quantitative models to measure risks and to estimate certain financial values. Models may be used in such processes as determining the pricing of various products, grading loans and extending credit, measuring interest rates and other market risks, estimating losses, assessing capital adequacy and calculating regulatory capital levels, as well as estimating the value of financial instruments and balance sheet items. Poorly designed or implemented models present the risk that our business decisions based on information incorporating such models will be adversely affected due to the inadequacy of that information. Moreover, our models may fail to predict future risk exposures if the information used in the model is incorrect, obsolete or not sufficiently comparable to actual events as they occur, or if our model assumptions prove incorrect. We seek to incorporate appropriate historical data in our models, but the range of market values and behaviors reflected in any period of historical data is not at all times predictive of future developments in any particular period and the period of data we incorporate into our models may turn out to be inappropriate for the future period being modeled. In such case, our ability to manage risk would be limited and our risk exposure and losses could be significantly greater than our models indicated.
Because a significant portion of our loan portfolio is comprised of 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 June 30, 2019, approximately 96.1% 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. Real estate values and real estate markets are generally affected by changes in national, regional or local economic conditions, the rate of unemployment, fluctuations in interest rates and the availability of loans to potential purchasers, changes in tax laws and other governmental statutes, regulations and policies and acts of nature. 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 profitability. 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
16

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 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.
Many of our loans are to commercial borrowers, which have a higher degree of risk than other types of loans.
At June 30, 2019, we had $501.2 million of commercial loans, consisting of  $37.1 million of construction and development loans, $420.3 million of commercial real estate loans, and $43.8 million of commercial and industrial loans for which real estate may not the primary source of collateral. Included in our commercial loan balance is $169.9 million of SBA loans. Commercial loans represented approximately 42.1% of our total loan portfolio at June 30, 2019. Commercial loans are often larger and involve greater risks than other types of lending. Because payments on such loans are often dependent on the successful operation or development of the property or business involved, repayment of such loans is often more sensitive than other types of loans to adverse conditions in the real estate market or the general business climate and economy. Accordingly, a downturn in the real estate market and a challenging business and economic environment may increase our risk related to commercial loans, particularly commercial real estate loans. Unlike residential mortgage loans, which generally are made on the basis of the borrowers’ ability to make repayment from their employment and other income and which are secured by real property whose value tends to be more easily ascertainable, commercial loans typically are made on the basis of the borrowers’ ability to make repayment from the cash flow of the commercial venture. Our commercial and industrial loans are primarily made based on the identified cash flow of the borrower and secondarily on the collateral underlying the loans. Most often, collateral consists of accounts receivable, inventory and equipment. Inventory and equipment may depreciate over time, may be difficult to appraise and may fluctuate in value based on the success of the business. Accounts receivable may be uncollectable. If the cash flow from business operations is reduced, the borrower’s ability to repay the loan may be impaired. Due to the larger average size of each commercial loan as compared with other loans such as residential mortgage loans, as well as collateral that is generally less readily-marketable, losses incurred on a small number of commercial loans could have a material adverse impact on our financial condition and results of operations.
The residential mortgage loans that we originate consist primarily of non-conforming residential mortgage loans which may be considered less liquid and more risky.
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.
We also have significant concentration in our residential mortgage loan secondary sale market, as a substantial portion of our non-conforming residential mortgage loans over the past two years have been sold to a small number of financial institutions. Although we are taking steps to reduce our dependence on those financial institutions and are attempting to expand the number of financial institutions that we sell our non-conforming residential mortgage loans, we may not be successful expanding our sales market for our non-conforming residential mortgage loans. Additionally, if we lose any of these financial institutions, our resale market may decline and we may not be able to sell our non-conforming residential mortgage loans at our current volume, which will significantly decrease our non-interest income as well as limit the number of non-conforming residential mortgage loans we can put on our books without excess interest rate risk. These loans also present pricing risk as rates change, and our sale premiums cannot be guaranteed. Further, the criteria for our loans to be purchased by other financial institutions may change from time to time, which could result in a lower volume of corresponding loan originations. In addition, when we sell the non-conforming residential mortgage loans, we are required to make certain representations and warranties to the purchaser regarding such loans. Under those agreements, we may be required to repurchase the non-conforming residential mortgage loans if we have breached any of these representations or warranties, in which case we may record a loss. Additionally, 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.
17

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. 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 laws, regulations and standard operating procedures that are applicable to SBA loan products may change in the future. We cannot predict the effects of these changes on our business and profitability. Because government regulation greatly affects the business and financial results of all commercial banks and bank holding companies and especially our organization, changes in the laws, regulations and procedures applicable to SBA loans could adversely affect our ability to operate profitably.
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 originated $75.5 million and $121.0 million of SBA loans for the six months ended June 30, 2019 and for the year ended December 31, 2018, respectively. We sold $59.4 million for the six months ended June 30, 2019, and $93.3 million for the year ended December 31, 2018, of the guaranteed portion of our SBA loans. We generally retain the non-guaranteed portions of the SBA loans that we originate. Consequently, as of June 30, 2019, we held $169.9 million of SBA loans on our balance sheet, $143.9 million of which consisted of the non-guaranteed portion of SBA loans and $26.0 million, or 15.3%, consisted of the guaranteed portion of SBA loans. 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. We generally retain the non-guaranteed portions of the SBA loans that we originate and sell, and to the extent the borrowers of such loans experience financial difficulties, our financial condition and results of operations would be adversely impacted.
18

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.
The recognition of gains on the sale of loans and servicing asset valuations reflect certain assumptions.
We expect that gains on the sale of U.S. government guaranteed loans will comprise a meaningful component of our revenue. The gains on such sales recognized for the six months ended June 30, 2019 and for the year ended December 31, 2018 was $2.9 million and $4.6 million, respectively. The determination of these gains is based on assumptions regarding the value of unguaranteed loans retained, servicing rights retained and deferred fees and costs, and net premiums paid by purchasers of the guaranteed portions of U.S. government guaranteed loans. The value of retained unguaranteed portion of the loans and servicing rights are determined based on market derived factors such as prepayment rates, current market conditions and recent loan sales. Deferred fees and costs are determined using internal analysis of the cost to originate loans. Significant errors in assumptions used to compute gains on sale of loans or servicing asset valuations could result in material revenue misstatements, which may have a material adverse effect on our business, results of operations and profitability. In addition, while we believe these valuations reflect fair value and such valuations are subject to validation by an independent third party, if such valuations are not reflective of fair market value then our business, results of operations and financial condition may be materially and adversely affected.
We may not be able to continue growing our business, particularly if we cannot increase loans and deposits through organic growth.
We have grown our consolidated assets from $671.4 million as of December 31, 2015 to $1.52 billion as of June 30, 2019, and our deposits from $562.9 million as of December 31, 2015 to $1.30 billion as of June 30, 2019. Our ability to continue to grow successfully will depend to a significant extent on our capital resources. It also will depend, in part, upon our ability to attract deposits and grow our loan portfolio and investment opportunities and on whether we can continue to fund growth while maintaining cost controls and asset quality, as well as on other factors beyond our control, such as national, regional and local economic conditions and interest rate trends.
The small and medium-sized businesses that we lend to may have fewer resources to weather adverse business developments, which may impair a borrower’s ability to repay a loan, and such impairment could adversely affect our results of operations and financial condition.
We concentrate our business development and marketing strategy primarily to serve the banking and financial services needs of small to medium-sized businesses. These businesses generally have fewer financial resources in terms of capital or borrowing capacity than larger entities, frequently have smaller market shares than their competition, may be more vulnerable to economic downturns, often need substantial additional capital to expand or compete and may experience substantial volatility in operating results, any of which may impair a borrower’s ability to repay a loan. In addition, the success of a small and medium-sized business often depends on the management talents and efforts of one or two people or a small group of people, and the death, disability or resignation of one or more of these people could have a material adverse impact on the business and its ability to repay its loan. If general economic conditions negatively impact the markets in which we operate or the markets in which our customers compete and small to medium-sized businesses are adversely affected or our borrowers are otherwise affected by adverse business developments, our business, financial condition and results of operations may be adversely affected.
We may suffer losses in our loan portfolio despite our underwriting practices.
We mitigate the risks inherent in our loan portfolio by adhering to sound and proven underwriting practices, managed by experienced and knowledgeable credit professionals. These practices include analysis of a borrower’s prior credit history, financial statements, tax returns, and cash flow projections, valuations
19

of collateral based on reports of independent appraisers and verifications of liquid assets. Although we believe that our underwriting criteria is appropriate for the various kinds of loans we make, we may incur losses on loans that meet our underwriting criteria, and these losses may exceed the amounts set aside as reserves in our ALL.
Construction and development loans are based upon estimates of costs and values associated with the complete project. These estimates may be inaccurate, and we may be exposed to significant losses on loans for these projects.
Construction and development loans, including land development loans, comprised approximately 3.1% of our total loan portfolio as of June 30, 2019, and such lending involves additional risks because funds are advanced upon the security of the project, which is of uncertain value prior to its completion, and costs may exceed realizable values in declining real estate markets. Because of the uncertainties inherent in estimating construction costs and the realizable market value of the completed project and the effects of governmental regulation of real property, it is relatively difficult to evaluate accurately the total funds required to complete a project and the related LTV ratio. As a result, construction loans often involve the disbursement of substantial funds with repayment dependent, in part, on the success of the ultimate project and the ability of the borrower to sell or lease the property, rather than the ability of the borrower or guarantor to repay principal and interest. If our appraisal of the value of the completed project proves to be overstated or market values or occupancy or rental rates decline, we may have inadequate security for the repayment of the loan upon completion of construction of the project. If we are forced to foreclose on a project prior to or at completion due to a default, we may not be able to recover all of the unpaid balance of, and accrued interest on, the loan as well as related foreclosure and holding costs. In addition, we may be required to fund additional amounts to complete the project and may have to hold the property for an unspecified period of time while we attempt to dispose of it.
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. In these loans, loan funds are advanced upon the security of the project under construction (which is of uncertain value prior to completion of construction) and the estimated operating cash flow to be generated by the completed project. Such properties may not be sold or leased so as to generate the cash flow anticipated by the borrower. A general decline in real estate sales and prices across the United States or locally in the relevant real estate market, a decline in demand for residential or commercial real estate, economic weakness, high rates of unemployment, and reduced availability of mortgage credit, are some of the factors that can adversely affect the borrowers’ ability to repay their obligations to us and the value of our security interest in collateral, and thereby adversely affect our results of operations and financial results.
Our deposit portfolio includes significant concentrations and a large percentage of our deposits are attributable to a relatively small number of clients.
As a commercial bank, we provide services to a number of clients whose deposit levels vary considerably and have some seasonality. Excluding brokered deposits, our fifteen largest depositor relationships accounted for approximately 4.9% of our deposits at June 30, 2019. These deposits can and do fluctuate substantially. The depositors are not concentrated in any industry or business. The loss of any combination of these depositors, or a significant decline in the deposit balances due to ordinary course fluctuations related to these customers’ businesses, would adversely affect our liquidity and require us to raise deposit rates to attract new deposits, purchase federal funds or borrow funds on a short-term basis to replace such deposits. Depending on the interest rate environment and competitive factors, low cost deposits may need to be replaced with higher cost funding, resulting in a decrease in net interest income and net income. While these events could have a material impact on our results, we expect, in the ordinary course of business, that these deposits will fluctuate and believe we are capable of mitigating this risk, as well as the risk of losing one of these depositors, through additional liquidity, and business generation in the future. However, should a significant number of these customers leave, it could have a material adverse impact on us.
20

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.
Competition among U.S. banks for customer deposits is intense, may increase the cost of retaining current deposits or procuring new deposits, and may otherwise negatively affect our ability to grow our deposit base.
Any changes we make to the rates offered on our deposit products to remain competitive with other financial institutions may adversely affect our profitability and liquidity. Interest-bearing accounts earn interest at rates established by management based on competitive market factors. The demand for the deposit products we offer may also be reduced due to a variety of factors, such as demographic patterns, changes in customer preferences, reductions in consumers’ disposable income, regulatory actions that decrease customer access to particular products, or the availability of competing products.
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 degree, on the skills of our management team and our ability to retain, recruit and motivate key officers and employees. Our senior management team has significant industry experience, and their knowledge and relationships would be difficult to replace. Leadership changes will occur from time to time, and we cannot predict whether significant resignations will occur or whether we will be able to recruit additional qualified personnel. Competition for senior executives and skilled personnel in the financial services and banking industry is intense, which means the cost of hiring, incentivizing and retaining skilled personnel may continue to increase. We need to continue to attract and retain key personnel and to recruit qualified individuals to succeed existing key personnel to ensure the continued growth and successful operation of our business. In addition, as a provider of relationship-based commercial banking services, we must attract and retain qualified banking personnel to continue to grow our business, and competition for such personnel can be intense. Our ability to effectively compete for senior executives and other qualified personnel by offering competitive compensation and benefit arrangements may be restricted by applicable banking laws and regulations as discussed in “Supervision and Regulation — Regulation of the Company — Incentive Compensation.” The loss of the services of any senior executive and, in particular Mr. Nack Paek, our Chairman and Chief Executive Officer and Executive Chairman of the Bank, Mr. Farid Tan, our Chief Executive Officer and Chief Financial Officer of the Bank, and Mr. Howard Kim, our President, Chief Lending Officer and Chief Operating Officer of the Bank, or other key personnel, or the inability to recruit and retain qualified personnel in the future, could have a material adverse effect on our business, financial condition or results of operations. In addition, to attract and retain personnel with appropriate skills and knowledge to support our business, we may offer a variety of benefits, which could reduce our earnings.
21

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.
As of June 30, 2019, our nonperforming loans (which consist of nonaccrual loans, loans past due 90 days or more and still accruing interest and loans modified under troubled debt restructurings) totaled $16.8 million, or 1.41%, of our loan portfolio, and our nonperforming assets (which include nonperforming loans plus other real estate owned, or OREO) totaled $16.8 million, or 1.10%, of total assets. In addition, we had $7.2 million in accruing loans that were 30-89 days delinquent as of June 30, 2019.
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 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 allowance for loan losses may prove to be insufficient to absorb potential losses in our loan portfolio.
We maintain an ALL for probable incurred losses in our loan portfolio. The allowance is established through a provision for loan losses based on management’s evaluation of the risks inherent in the loan portfolio and the general economy. The allowance is also appropriately increased for new loan growth. The allowance is based upon a number of factors, including the size of the loan portfolio, asset classifications, economic trends, industry experience and trends, industry and geographic concentrations, estimated collateral values, management’s assessment of the credit risk inherent in the portfolio, historical loan loss experience and loan underwriting policies. The allowance is only an estimate of the probable incurred losses in the loan portfolio and may not represent actual losses realized over time, either of losses in excess of the allowance or of losses less than the allowance.
In addition, we evaluate all loans identified as impaired loans and allocate an allowance based upon our estimation of the potential loss associated with those problem loans. While we strive to carefully manage and monitor credit quality and to identify loans that may be deteriorating, at any time there are loans included in the portfolio that may result in losses, but that have not yet been identified as nonperforming or potential problem loans. Through established credit practices, we attempt to identify deteriorating loans and adjust the ALL accordingly. However, because future events are uncertain and because we may not successfully identify all deteriorating loans in a timely manner, there may be loans that deteriorate in an accelerated time frame. We cannot be sure that we will be able to identify deteriorating loans before they become nonperforming assets, or that we will be able to limit losses on those loans that have been so identified. Changes in economic, operating and other conditions which are beyond our control, including interest rate fluctuations, deteriorating values in underlying collateral (most of which consists of real estate), and changes in the financial condition of borrowers, may cause our estimate of probable losses or actual loan losses to exceed our current allowance. As a result, future additions to the allowance may be necessary. Further, because the loan portfolio contains a number of commercial real estate loans with relatively large balances, deterioration in the credit quality of one or more of these loans may require a significant increase to the ALL.
As of June 30, 2019, our ALL as a percentage of total loans was 0.54% and as a percentage of total nonperforming loans was 38.67%. Although management believes that the ALL is adequate to absorb losses on any existing loans that may become uncollectible, we may be required to take additional provisions for loan losses in the future to further supplement the ALL, either due to management’s decision to do so or because our banking regulators require us to do so. Our bank regulatory agencies will periodically review
22

our ALL and the value attributed to nonaccrual loans or to real estate acquired through foreclosure and may require us to adjust our determination of the value for these items. These adjustments may adversely affect our business, financial condition and results of operations.
Real estate market volatility and future changes in our disposition strategies could result in net proceeds that differ significantly from our OREO fair value appraisals.
As of June 30, 2019, we held no OREO. Our OREO portfolio historically has been insignificant, and generally consisted of properties that we obtained through foreclosure or through a deed in lieu of foreclosure. Properties in our OREO portfolio are recorded at the lower of the recorded investment in the loans for which the properties previously served as collateral or the “fair value,” which represents the estimated sales price of the properties on the date acquired less estimated selling costs. Generally, in determining “fair value,” an orderly disposition of the property is assumed, except when a different disposition strategy is expected. Judgment is required in estimating the fair value of OREO, and the period of time within which such estimates can be considered current is shortened during periods of market volatility. As a result of the significant judgments required in estimating fair value and the variables involved in different methods of disposition, the net proceeds realized from such sales transactions could differ significantly from appraisals, comparable sales and other estimates used to determine the fair value of our OREO properties.
Our use of appraisals in deciding whether to make a loan secured by real property does not ensure the value of the real property collateral.
In considering whether to make a loan secured by real property we generally require an appraisal of the property. However, an appraisal is only an estimate of the value of the property at the time the appraisal is conducted, and an error in fact or judgment could adversely affect the reliability of an appraisal. In addition, events occurring after the initial appraisal may cause the value of the real estate to decrease. As a result of any of these factors the value of collateral securing a loan may be less than estimated, and if a default occurs we may not recover the outstanding balance of the loan.
We could recognize losses on securities held in our securities portfolio, particularly if interest rates increase or economic and market conditions deteriorate.
Factors beyond our control can significantly influence the fair value of securities in our portfolio and can cause potential adverse changes to the fair value of these securities. For example, fixed-rate securities acquired by us are generally subject to decreases in market value when interest rates rise. Additional factors include, but are not limited to, rating agency downgrades of the securities or our own analysis of the value of the security, defaults by the issuer or individual mortgagors with respect to the underlying securities, or instability in the credit markets. Any of the foregoing factors could cause other-than-temporary impairment in future periods and result in realized losses. The process for determining whether impairment is other-than-temporary usually requires difficult, subjective judgments about the future financial performance of the issuer and any collateral underlying the security in order to assess the probability of receiving all contractual principal and interest payments on the security. Because of changing economic and market conditions affecting interest rates, the financial condition of issuers of the securities and the performance of the underlying collateral, we may recognize realized and/or unrealized losses in future periods, which could have an adverse effect on our financial condition and results of operations. As of June 30, 2019, we had $31,000 in net unrealized losses on our securities portfolio, which is primarily due to rising interest rates.
The current expected credit loss standard established by the Financial Accounting Standards Board will require significant data requirements and changes to methodologies.
In the aftermath of the 2007 – 2008 financial crisis, the Financial Accounting Standards Board, or FASB, decided to review how banks estimate losses in the ALL calculation, and it issued the final Current Expected Credit Loss, or CECL, standard on June 16, 2016. Currently, the impairment model used by financial institutions is based on incurred losses, and loans are recognized as impaired when there is no longer an assumption that future cash flows will be collected in full under the originally contracted terms. This model will be replaced by the CECL model that will become effective for us for the fiscal year
23

beginning after December 15, 2021 in which financial institutions will be required to use historical information, current conditions and reasonable forecasts to estimate the expected loss over the life of the loan. Management established a task force to begin the implementation process. We are currently collecting the historical data required by the new model and have engaged a third-party software solution to develop a new expected credit loss model compliant with the new standard. The transition to the CECL model will require significantly greater data requirements and changes to methodologies to accurately account for expected loss. There can be no assurance that we will not be required to increase our reserves and ALL as a result of the implementation of CECL.
There is risk related to potential acquisitions.
We plan to continue to grow our business organically. However, from time to time, we may consider opportunistic strategic acquisitions that we believe support our long-term business strategy. We face significant competition from numerous other financial services institutions, many of which will have greater financial resources than we do, when considering acquisition opportunities. Accordingly, attractive acquisition opportunities may not be available to us. There can be no assurance that we will be successful in identifying or completing any future acquisitions. Acquisitions of financial institutions involve operational risks and uncertainties and acquired companies may have unforeseen liabilities, exposure to asset quality problems, key employee and customer retention problems and other problems that could negatively affect our organization. We may not be able to complete future acquisitions and, if we do complete such acquisitions, we may not be able to successfully integrate the operations, management, products and services of the entities that we acquire and eliminate redundancies. The integration process could result in the loss of key employees or disruption of the combined entity’s ongoing business or inconsistencies in standards, controls, procedures, and policies that adversely affect our ability to maintain relationships with customers and employees or achieve the anticipated benefits of the transaction. The integration process may also require significant time and attention from our management that they would otherwise direct at servicing existing business and developing new business. We may not be able to realize any projected cost savings, synergies or other benefits associated with any such acquisition we complete. We cannot determine all potential events, facts and circumstances that could result in loss or give assurances that our investigation or mitigation efforts will be sufficient to protect against any such loss.
As we continue to expand our business outside of Georgia markets, we will encounter risks that could adversely affect us.
We primarily operate in Georgia markets with a concentration of multi-ethnic, primarily Asian-American, individuals and businesses. However, one of our strategies is to expand beyond Georgia into other domestic markets with similar characteristics. For example, we also have branches in Alabama, Florida, New Jersey, New York, Texas and Virginia, which have relatively high concentrations of Asian-American individuals and businesses. In the course of this expansion, we will encounter significant risks and uncertainties that could have a material adverse effect on our operations. These risks and uncertainties include increased expenses and operational difficulties arising from, among other things, our ability to attract sufficient business in new markets, to understand and gain an in-depth knowledge of the customers in the new markets, to manage operations in noncontiguous market areas, to compete with other multi-ethnic banks and/or financial institutions in new markets, to comply with all of the various local laws and regulations, and to anticipate events or differences in markets in which we have no current experience.
We must effectively manage our branch growth strategy.
We seek to expand our franchise efficiently, safely and consistently. Since 2015, we have opened eleven new branches. A successful growth strategy requires us to manage multiple aspects of our business simultaneously, such as following adequate loan underwriting standards, balancing loan and deposit growth without increasing interest rate risk or compressing our net interest margin, maintaining sufficient capital, maintaining proper systems and controls, and recruiting, training and retaining qualified professionals. We also may experience a lag in profitability associated with new branch openings. As part of our general growth strategy we may expand into additional communities or attempt to strengthen our position in our current markets by opening new offices, subject to any regulatory constraints on our ability to do so. To the
24

extent that we are able to open additional offices, we are likely to experience the effects of higher operating expenses relative to operating income from the new operations for a period of time which would have an adverse effect on our levels of reported net income, return on average equity and return on average assets.
New lines of business or new products and services may subject us to additional risks.
From time to time, we may implement or may acquire new lines of business or offer new products and services within existing lines of business. There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed. 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. 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. 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.
As a result of the Dodd-Frank Act and recent rulemaking, the Bank is subject to more stringent capital requirements.
In July 2013, the U.S. federal banking authorities approved the implementation of the global Basel III regulatory capital reforms, or the Basel III Capital Rules, and issued rules effecting certain changes required by the U.S. Dodd-Frank Act. The Basel III Capital Rules are applicable to all U.S. banks that are subject to minimum capital requirements as well as to bank and saving and loan holding companies, other than “small bank holding companies” (generally bank holding companies with consolidated assets of less than $3.0 billion), like us. The Basel III Capital Rules not only increased most of the required minimum regulatory capital ratios, they introduced a new common equity Tier 1 capital ratio and the concept of a capital conservation buffer. The Basel III Capital Rules also expanded the current definition of capital by establishing additional criteria that capital instruments must meet to be considered additional Tier 1 and Tier 2 capital. The failure to meet applicable regulatory capital requirements could result in one or more of our regulators placing limitations or conditions on our activities, including our growth initiatives, or restricting the commencement of new activities, and could affect customer and investor confidence, our costs of funds and Federal Deposit Insurance Corporation (“FDIC”) insurance costs, our ability to pay dividends on our common stock, our ability to make acquisitions, and our business, results of operations and financial conditions, generally.
We may need to raise additional capital in the future, and if we fail to maintain sufficient capital, whether due to losses, an inability to raise additional capital or otherwise, our financial condition, liquidity and results of operations, as well as our ability to maintain regulatory compliance, would be adversely affected.
We face significant capital and other regulatory requirements as a financial institution. Although management believes that the funds expected to be raised in this offering will be sufficient to fund operations and growth initiatives for at least the next eighteen to twenty-four months based on our estimated future operations, 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. In addition, the Company, on a consolidated basis, and the Bank, on a stand-alone basis, must meet certain regulatory capital requirements and maintain sufficient liquidity. Importantly, regulatory capital requirements could increase from current levels, which could require us to raise additional capital or contract our operations. 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. Any occurrence that may limit our access to the capital markets may adversely affect our capital costs and our ability to raise capital. Moreover, if we need to raise capital in the future, we may have to do so when many other financial institutions are also seeking to raise capital and
25

would have to compete with those institutions for investors. Accordingly, we cannot assure you that we will be able to raise additional capital if needed or on terms acceptable to us. If we fail to maintain capital to meet regulatory requirements, our financial condition, liquidity and results of operations would be materially and adversely affected.
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.
Adverse conditions in Asia and elsewhere could adversely affect our business.
Although we believe we have minimal exposure to customers that have direct economic ties to Asia, we are still likely to feel the effects of adverse economic and political conditions in Asia, including the effects of rising inflation or slowing growth and volatility in the real estate and stock markets in Asia. U.S. and global economic policies, including recent tariffs imposed by the Trump Administration, and unfavorable global economic conditions may adversely impact Asian economies. In addition, pandemics and other public health crises or concerns over the possibility of such crises could create economic and financial disruptions in the region. A significant deterioration of economic conditions in Asia could expose us to, among other things, economic and transfer risk, and we could experience an outflow of deposits by those of our customers with connections to Asia. Transfer risk may result when an entity is unable to obtain the foreign exchange needed to meet its obligations or to provide liquidity. This may adversely impact the recoverability of investments with, or loans made to, such entities. Adverse economic conditions in Asia may also negatively impact asset values and the profitability and liquidity of our customers who operate in this region. Currency volatility may also negatively impact our customers’ level of business or the overall level of trade upon which certain of our customers depend.
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. It is inherently difficult to assess the outcome of these matters, and we may not prevail in any proceedings or litigation. Our insurance may not cover all claims that may be asserted against us and indemnification rights to which we are entitled may not be honored, and any claims asserted against us, regardless of merit or eventual outcome, may harm our reputation. Should the ultimate judgments or settlements in any litigation or investigation significantly exceed our insurance coverage or to the extent that we incur civil money penalties that are not covered by insurance, they could have a material adverse effect on our business, financial condition and results of operations. In addition, premiums for insurance covering the financial and banking sectors are rising. We may not be able to obtain appropriate types or levels of insurance in the future, nor may we be able to obtain adequate replacement policies with acceptable terms or at historic rates, if at all.
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
26

institutions generally, unethical practices, employee misconduct, failure to deliver minimum standards of service or quality, compliance deficiencies, 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 governmental 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, 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 undergoing rapid technological changes with frequent introductions of new technology-driven products and services. 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. We may experience operational challenges as we implement these new technology enhancements, or seek to implement them across all of our offices and business units, which could result in us not fully realizing the anticipated benefits from such new technology or require us to incur significant costs to remedy any such challenges in a timely manner.
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 superior products to those that we will be able to offer, which would put us at a competitive disadvantage. Accordingly, a risk exists that we will not be able to effectively implement new technology-driven products and services or be successful in marketing such products and services to our customers.
System failure or breaches 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 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 or a similar catastrophic event. We could also experience a breach by intentional or negligent conduct on the part of employees or other internal or external sources, including our third-party vendors and cyber criminals. 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, cyber security breaches and other disruptive problems caused by the internet or other users. Such computer break-ins, breaches and other disruptions would jeopardize the security of information stored in and transmitted through our computer systems and network infrastructure, which may result in significant liability, damage our reputation 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, we may be required to expend significant additional resources to continue to modify or enhance our
27

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 rely heavily on communications, information systems (both internal and provided by third parties) and the internet to conduct our business. Our business is dependent on our ability to process and monitor large numbers of daily transactions in compliance with legal, regulatory and internal standards and specifications. In addition, a significant portion of our operations relies heavily on the secure processing, storage and transmission of personal and confidential information, such as the personal information of our customers and clients.
In addition, several U.S. financial institutions have recently experienced significant distributed denial-of-service attacks, some of which involved sophisticated and targeted attacks intended to disable or degrade service, or sabotage systems. Other attacks have attempted to obtain unauthorized access to confidential information or destroy data, often through the introduction of computer viruses or malware, cyber-attacks and other means. To date, none of these types of attacks have had a material effect on our business or operations. However, no assurances can be provided that we may not suffer from such an attack in the future that may cause us material harm. Such security attacks can originate from a wide variety of sources, including persons who are involved with organized crime or who may be linked to terrorist organizations or hostile foreign governments. Those same parties may also attempt to fraudulently induce employees, customers or other users of our systems to disclose sensitive information in order to gain access to our data or that of our customers or clients. We are also subject to the risk that our employees may intercept and transmit unauthorized confidential or proprietary information. An interception, misuse or mishandling of personal, confidential or proprietary information being sent to or received from a customer or third party could result in legal liability, remediation costs, regulatory action and reputational harm to us.
Although we regularly add additional security measures to our computer systems and network infrastructure to mitigate the possibility of cyber security breaches, including firewalls and penetration testing, it is difficult or impossible to defend against every risk being posed by changing technologies as well as criminal intent on committing cyber-crime. Increasing sophistication of cyber criminals and terrorists make keeping up with new threats difficult and could result in a data security breach. Controls employed by our information technology department could prove inadequate. A breach of our security that results in unauthorized access to our data could expose us to a disruption or challenges relating to our daily operations, as well as to data loss, litigation, damages, fines and penalties, significant increases in compliance costs and reputational damage, any of which could have an adverse effect on our business, financial condition and results of operations.
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. If our internal controls fail to prevent or detect an occurrence, or if any resulting loss is not insured or exceeds applicable insurance limits, it could have a material adverse effect on our business, financial condition and results of operations.
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.
28

Confidential customer information transmitted through our online banking service is vulnerable to security breaches and computer viruses, which could expose us to litigation and adversely affect our reputation and ability to generate deposits.
We provide our customers the ability to bank online. The secure transmission of confidential information over the Internet is a critical element of online banking. Our network could be vulnerable to unauthorized access, computer viruses, phishing schemes and other security problems. We may be required to spend significant capital and other resources to protect against the threat of security breaches and computer viruses, or to alleviate problems caused by security breaches or viruses. To the extent that our activities or the activities of our customers involve the storage and transmission of confidential information, security breaches and viruses could expose us to claims, litigation and other possible liabilities. Any inability to prevent security breaches or computer viruses could also cause existing customers to lose confidence in our systems and could adversely affect our reputation and our ability to generate deposits.
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. Some of the information regarding customers provided to us is also used in our credit decisioning and scoring models, which we use to determine whether to do business with customers and the risk profiles of such customers which are subsequently utilized by counterparties who lend us capital to fund our operations. 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. While we have a practice of seeking to independently verify some of the customer information that we use in deciding whether to extend credit or to agree to a loan modification, including employment, assets, income and credit score, not all customer information is independently verified, and if any of the information that is independently verified (or any other information considered in the loan review process) is misrepresented and such misrepresentation is not detected prior to loan funding, the value of the loan may be significantly lower than expected. Whether a misrepresentation is made by the applicant, another third party or one of our employees, we generally bear the risk of loss associated with the misrepresentation. We may not detect all misrepresented information in our originations or from service providers we engage to assist in the approval process. Any such misrepresented information could adversely affect our business, financial condition and results of operations.
We are subject to customer or employee fraud and data processing system failures and errors.
Employee errors and employee and customer misconduct could subject us to financial losses or regulatory sanctions and seriously harm our reputation. Misconduct by our employees could include hiding unauthorized activities from us, improper or unauthorized activities on behalf of our customers or improper use of confidential information. It is not always possible to prevent employee errors and misconduct, and the precautions we take to prevent and detect this activity may not be effective in all cases. Because the nature of the financial services business involves a high volume of transactions, certain errors may be repeated or compounded before they are discovered and successfully rectified. Our necessary dependence upon processing systems to record and process transactions and our large transaction volume may further increase the risk that employee tampering or manipulation of those systems will result in losses that are difficult to detect. Employee errors could also subject us to financial claims for negligence.
Our accounting estimates and risk management processes rely on analytical and forecasting models.
Processes that management uses to estimate our probable 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 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.
29

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 probable credit losses are inadequate, the ALL 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.
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. Restating or revising our financial statements may result in reputational harm or may have other adverse effects on us.
Failure to maintain effective internal controls over financial reporting could have a material adverse effect on our business and stock price.
We are not currently required to comply with the rules of the SEC implementing Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, and are therefore not required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. Upon becoming subject to the Securities Exchange Act of 1934, or the Exchange Act, after completion of this offering, we will be required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which will require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of controls over financial reporting. In particular, we will be required to certify our compliance with Section 404 of the Sarbanes-Oxley Act beginning with our second annual report on Form 10-K, which will require us to furnish annually a report by management on the effectiveness of our internal control over financial reporting. Although we are currently an emerging growth company and have elected additional transitional relief available to emerging growth companies, if we are unable to continue to qualify as an emerging growth company in the future, then our independent registered public accounting firm will be required to report on the effectiveness of our internal control over financial reporting, beginning as of that second annual report.
If we identify any material weaknesses in our internal control over financial reporting or are unable to comply with the requirements of Section 404 in a timely manner or assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting once we are no longer an emerging growth company, then: investors, counterparties and customers may lose confidence in the accuracy and completeness of our financial statements and reports; our liquidity, access to capital markets and perceptions of our creditworthiness could be adversely affected; and the market price of our common stock could decline. In addition, we could become subject to investigations by the stock exchange on which our securities are listed, the SEC, the Board of Governors of the Federal Reserve System (“Federal Reserve”), the FDIC, the Georgia Department of Banking and Finance (“DBF”) or other regulatory authorities, which could require additional financial and management resources. These events could have an adverse effect on our business, financial condition and results of operations.
30

The obligations associated with being a public company will require significant resources and management attention, which may divert from our business operations.
As a result of this offering, we will become subject to the reporting requirements of the Exchange Act and the Sarbanes-Oxley Act. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition and proxy statements with the SEC. The Sarbanes-Oxley Act requires, among other things, that we establish and maintain effective internal controls and procedures for financial reporting. As a result, we will incur significant legal, accounting and other expenses that we did not previously incur. We anticipate that these costs will materially increase our general and administrative expenses. Furthermore, as we transition to a public company, we intend to continue to improve the effectiveness of our internal controls by hiring additional personnel, utilizing outside consultants and accountants to supplement our internal staff as needed, improving our IT systems, and implementing additional policies and procedures. We anticipate incurring costs in connection with these improvements to our internal control system. If we are unsuccessful in implementing these improvements, we may not be able to accurately and timely report our financial results, conclude on an ongoing basis that we have effective controls over financial reporting or prevent a material weakness in our internal controls over financial reporting, each of which could have a significant and adverse effect on our business, reputation and the market price of our common stock.
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. 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.
Legislative and regulatory actions taken now or in the future may increase our costs and impact our business, governance structure, financial condition or results of operations. Proposed legislative and regulatory actions, including changes to financial regulation, may not occur on the timeframe that is expected, or at all, which could result in additional uncertainty for our business.
We are subject to extensive regulation by multiple regulatory bodies. These regulations may affect the manner and terms of delivery of our services. If we do not comply with governmental regulations, we may be subject to fines, penalties, lawsuits or material restrictions on our businesses in the jurisdiction where the violation occurred, which may adversely affect our business operations. Changes in these regulations can significantly affect the services that we provide as well as our costs of compliance with such regulations. In addition, adverse publicity and damage to our reputation arising from the failure or perceived failure to comply with legal, regulatory or contractual requirements could affect our ability to attract and retain customers.
Further, new proposals for legislation continue to be introduced in the U.S. Congress that could change regulation of the financial services industry, impose restrictions on the operations and general ability of firms within the industry to conduct business consistent with historical practices.
31

The recent Tax Cuts and Jobs Act and future tax reform may impact our customers’ future demand for credit and our future results.
While we expect the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) to continue to have a positive impact on our business, that impact remains uncertain. Some customers may elect to use their additional cash flow from lower taxes to fund their existing levels of activity, decreasing borrowing needs. Furthermore, the elimination of the federal income tax deductibility of business interest expenses for a significant number of customers effectively increases the cost of borrowing and could make equity or hybrid funding relatively more attractive. Moreover, tax-exempt borrowing may be less attractive in the future due to the decrease in tax rates generally. This could have long-term negative impact on business customer borrowing. The differing effects of the Tax Act for taxable corporations as compared to pass through entities owned by individuals also creates the potential for differing economic strategies by our customers that are presently uncertain and may continue to be for some time.
We experienced an increase in our after-tax net income in 2018 as a result of the decrease in our effective tax rate and expect the Tax Act to continue to positively impact our after-tax net income in future years. However, some or all of this benefit could be lost to the extent that our competitors elect to lower interest rates and fees and we are forced to respond in order to remain competitive. The estimated impact of the Tax Act is based on management’s current knowledge and assumptions, but there is no assurance that the presently anticipated benefits of the Tax Act on us will be realized or that we will not incur further charges with respect to the revaluation of our deferred tax assets.
Monetary policies and regulations of the Federal Reserve could adversely affect our business, financial condition and results of operations.
In addition to being affected by general economic conditions, our earnings and growth are affected by the policies of the Federal Reserve. An important function of the Federal Reserve is to regulate the money supply and credit conditions. Among the instruments used by the Federal Reserve to implement these objectives are open market purchases and sales of U.S. government securities, adjustments of the discount rate and changes in banks’ reserve requirements against bank deposits. These instruments are used in varying combinations to influence overall economic growth and the distribution of credit, bank loans, investments and deposits. Their use also affects interest rates charged on loans or paid on deposits.
The monetary policies and regulations of the Federal Reserve have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future. The effects of such policies upon our business, financial condition and results of operations cannot be predicted.
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.
32

We are subject to numerous laws designed to protect consumers, including the Community Reinvestment Act and fair lending laws, and failure to comply with these laws could lead to a wide variety of sanctions.
The Community Reinvestment Act, the Equal Credit Opportunity Act (“ECOA”), the Fair Housing Act and other fair lending laws and regulations prohibit discriminatory lending practices by financial institutions. The U.S. Department of Justice, federal banking agencies, and other federal agencies are responsible for enforcing these laws and regulations. A challenge to an institution’s compliance with fair lending laws and regulations could result in a wide variety of sanctions, including damages and civil money penalties, injunctive relief, restrictions on mergers and acquisitions activity, restrictions on expansion, and restrictions on entering new business lines. Private parties may also challenge an institution’s performance under fair lending laws in private class action litigation. Such actions could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
The federal government is increasingly seeking significant monetary damages and penalties against mortgage lenders and servicers under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”) and the False Claims Act (“FCA”) for making false statements and seeking reimbursement for ineligible costs and expenses.
The federal government has initiated a number of actions against mortgage lenders and servicers alleging violations of FIRREA and the FCA. Some of the actions against lenders allege that the lenders sold defective loans to Fannie Mae and Freddie Mac, while representing that the loans complied with the government-sponsored enterprise’s underwriting guidelines. The federal government has also brought actions against lenders asserting that they submitted claims for loans insured by the Fair Housing Administration, or FHA, that the lender falsely certified to U.S. Department of Housing and Urban Development met FHA underwriting requirements that resulted in FHA paying out millions of dollars in insurance claims to cover the defaulted loans. Other allegations involve the Home Affordable Modification Program (“HAMP”), which is a federal program established to help eligible homeowners impacted by financial hardship by offering them loan modifications on their mortgages. HAMP requires participating mortgage servicers to file annual certifications that they have been truthful and accurate in their HAMP-related activities, including reports they submitted to the government in which they acknowledged that providing false or fraudulent information may violate the FCA. Actions have also been filed against certain banks alleging they improperly denied borrowers access to HAMP services, and submitted fraudulent certifications and accepted financial incentives for HAMP participation. Because these actions carry the possibility for treble damages, many have resulted in settlements totaling in the hundreds of millions of dollars, as well as required lenders and servicers to make significant changes in their practices.
We may be subject to liability for potential violations of predatory lending laws, which could adversely impact our results of operations, financial condition and business.
Various U.S. federal, state and local laws have been enacted that are designed to discourage predatory lending practices. The U.S. Home Ownership and Equity Protection Act of 1994 (“HOEPA”) prohibits inclusion of certain provisions in mortgages that have interest rates or origination costs in excess of prescribed levels and requires that borrowers be given certain disclosures prior to origination. Some states have enacted, or may enact, similar laws or regulations, which in some cases impose restrictions and requirements greater than those in HOEPA. In addition, under the anti-predatory lending laws of some states, the origination of certain mortgages, including loans that are not classified as “high-cost” loans under applicable law, must satisfy a net tangible benefit test with respect to the related borrower. Such tests may be highly subjective and open to interpretation. As a result, a court may determine that a home mortgage, for example, does not meet the test even if the related originator reasonably believed that the test was satisfied. If any of our mortgages are found to have been originated in violation of predatory or abusive lending laws, we could incur losses, even if we previously sold such loans, which could adversely impact our results of operations, financial condition and business.
Regulatory agencies and consumer advocacy groups are becoming more aggressive in asserting claims that the practices of lenders and loan servicers result in a disparate impact on protected classes.
Antidiscrimination statutes, such as the Fair Housing Act and the ECOA, prohibit creditors from discriminating against loan applicants and borrowers based on certain characteristics, such as race, religion and national origin. Various federal regulatory agencies and departments, including the U.S. Department of
33

Justice and the Consumer Financial Protection Bureau (“CFPB”), take the position that these laws apply not only to intentional discrimination, but also to neutral practices that have a disparate impact on a group that shares a characteristic that a creditor may not consider in making credit decisions protected classes (i.e., creditor, servicing or marketing practices that have a disproportionate negative affect on a protected class of individuals).
These regulatory agencies, as well as consumer advocacy groups and plaintiffs’ attorneys, are focusing greater attention on “disparate impact” claims. The U.S. Supreme Court confirmed that the “disparate impact” theory applies to cases brought under the Fair Housing Act, while emphasizing that a causal relationship must be shown between a specific policy of the defendant and a discriminatory result that is not justified by a legitimate objective of the defendant. Although it is still unclear whether the theory applies under ECOA, regulatory agencies and private plaintiffs can be expected to continue to apply it to both the Fair Housing Act in the context of mortgage marketing, lending and servicing and ECOA in the context of our consumer and certain business loans. To extent that the “disparate impact” theory continues to apply, we will be faced with significant administrative burdens in attempting to comply, and potential liability for failures to comply.
In addition to reputational harm, violations of the ECOA and the Fair Housing Act can result in actual damages, punitive damages, injunctive or equitable relief, attorneys’ fees and civil money penalties.
We 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, the USA Patriot Act and other laws and regulations require financial institutions, among other duties, to institute and maintain an effective anti-money laundering program and to file reports such as suspicious activity reports and currency transaction reports. We are required to comply with these and other anti-money laundering requirements. The federal banking agencies and Financial Crimes Enforcement Network are authorized to impose significant civil money penalties for violations of those requirements and have recently engaged in coordinated enforcement efforts against banks and other financial services providers with the U.S. Department of Justice, Drug Enforcement Administration and Internal Revenue Service. We are also subject to increased scrutiny of compliance with the rules enforced by the Office of Foreign Assets Control. If our policies, procedures and systems are deemed deficient, we would be subject to liability, including fines and regulatory actions, which may include 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.
Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us. Any of these results could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
The Federal Reserve may require us to commit capital resources to support the Bank.
The Federal Reserve 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 a subsidiary bank. A capital injection may be required at times when the bank holding company may not have the resources to provide it and therefore may be required to borrow the funds or raise capital. As a result, we may not be able to serve existing indebtedness, and such default may require us to declare bankruptcy. Any capital contributions by a bank holding company to its subsidiary banks are subordinate in right of payment to deposits and to other indebtedness of such subsidiary bank. In the event of a bank holding company’s bankruptcy, the bankruptcy trustee will assume any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank. Moreover, bankruptcy law provides that claims based on any such commitment will be entitled to a priority of payment over the claims of the institution’s general unsecured creditors, including the holders of its note obligations. Thus, any borrowing that must be incurred by us to make a required capital injection to the Bank becomes more difficult and expensive and could have an adverse effect on our business, financial condition and results of operations.
34

Liabilities from environmental regulations could materially and adversely affect our business and financial condition.
In the course of our business, we may foreclose and take title to real estate, and could be subject to environmental liabilities with respect to these properties. We may be held liable to a governmental entity or to third parties for property damage, personal injury, investigation and clean-up costs incurred by these parties in connection with environmental contamination, or may be required to investigate or clear up hazardous or toxic substances, or chemical releases at a property. The costs associated with investigation or remediation activities could be substantial. In addition, as the owner or former owner of any contaminated site, we may be subject to common law claims by third parties based on damages, and costs resulting from environmental contamination emanating from the property. If we ever become subject to significant environmental liabilities, our business, financial condition, liquidity, and results of operations could be materially and adversely affected.
We may be adversely affected by the soundness of other financial institutions.
Our ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial services companies are interrelated as a result of trading, clearing, counterparty, and other relationships. We have exposure to different industries and counterparties, and through transactions with counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks, and other institutional clients. As a result, defaults by, or even rumors or questions about, one or more financial services companies, or the financial services industry generally, have led to market-wide liquidity problems and could lead to losses or defaults by us or by other institutions. These losses or defaults could have a material adverse effect on our business, financial condition, results of operations and growth prospects. Additionally, if our competitors were extending credit on terms we found to pose excessive risks, or at interest rates which we believed did not warrant the credit exposure, we may not be able to maintain our business volume and could experience deteriorating financial performance.
Risks Related to this Offering and an Investment in Our Common Stock
An active, liquid trading market for our common stock may not develop for several reasons, including that the directors and their affiliates will retain a substantial ownership interests in the Company, and you may not be able to sell your common stock at or above the public offering price, or at all.
Prior to this offering, there has been a limited public market for our common stock on the OTCQX Market. In addition, as of June 30, 2019, our directors collectively owned 37.97% of our issued and outstanding shares of common stock, and when aggregated with the holdings of their extended families and their affiliated entities, they collectively own 45.09% of our issued and outstanding shares of common stock. After completion of this offering, our directors collectively are expected to beneficially own     % of our issued and outstanding shares of common stock, or     % if the underwriters’ option to purchase additional shares is exercised in full. This relatively concentrated ownership may result in a lack of liquidity for our shares of common stock. As a result, although we have applied to list our common stock on the Nasdaq Global Select Market, an active trading market for shares of our common stock may never develop or be sustained following this offering even if our common stock is listed on Nasdaq. If an active trading market does not develop, you may have difficulty selling your shares of common stock at an attractive price, or at all. The public offering price for the common stock sold in this offering will be determined by negotiations between us, the selling shareholders and the representatives of the underwriters and may not be indicative of prices that will prevail in the open market following this offering. Consequently, you may not be able to sell your common stock at or above the public offering price or at any other price or at the time that you would like to sell. An inactive market may also impair our ability to raise capital by selling our common stock and may impair our ability to expand our business by using our common stock as consideration in an acquisition of another company or business.
35

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.
Prior to the completion of this offering, our directors and their families and affiliated entities collectively have a 45.09% ownership interest in the Company. After the completion of this offering, our directors collectively are expected to have approximately a     % ownership interest in the Company, or     % if the underwriters’ option to purchase additional shares is exercised in full. See “Principal and Selling Shareholders” on page 132.
As a result, our directors initially may be able to elect the majority of our entire board of directors, control the management and policies of the Company and, in general, determine, without the consent of the other shareholders, 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.
The price of our common stock could be volatile following this offering.
The market price of our common stock following this offering may be volatile and could be subject to wide fluctuations in price in response to various factors, some of which are beyond our control. These factors include, among other things:

actual or anticipated variations in our quarterly results of operations;

recommendations by securities analysts;

operating and stock price performance of other companies that investors deem comparable to us;

news reports relating to trends, concerns and other issues in the financial services industry generally;

perceptions in the marketplace regarding us and/or our competitors;

fluctuations in the stock price and operating results of our competitors;

domestic and international economic factors unrelated to our performance;

general market conditions and, in particular, developments related to market conditions for the financial services industry;

new technology used, or services offered, by competitors; and

changes in government regulations.
In addition, if the market for stocks in our industry, or the stock market in general, experiences a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, financial condition or results of operations. If any of the foregoing occurs, it could cause our stock price to fall and may expose us to lawsuits that, even if unsuccessful, could be costly to defend and a distraction to management.
An investment in our common stock is not an insured deposit.
An investment in our common stock is not a bank deposit and, therefore, is not insured against loss by the FDIC, any other deposit insurance fund or by any other public or private entity. Investment in our common stock is inherently 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.
If equity research analysts do not publish research or reports about our business, or if they do publish such reports but issue unfavorable commentary or downgrade our common stock the price and trading volume of our common stock could decline.
The trading market for our common stock could be affected by whether equity research analysts publish research or reports about us and our business. We cannot predict at this time whether any research
36

analysts will publish research and reports on us and our common stock. If one or more equity analysts do cover us and our common stock and publish research reports about us, the price of our stock could decline if one or more securities analysts downgrade our stock or if those analysts issue other unfavorable commentary or cease publishing reports about us or our business.
If any of the analysts who elect to cover us downgrades our stock, our stock price could decline rapidly. If any of these analysts ceases coverage of us, we could lose visibility in the market, which in turn could cause our common stock price or trading volume to decline and our common stock to be less liquid.
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 seven years. 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 have limited the circumstances in which our directors will be liable for monetary damages.
We have included in our articles of incorporation a provision to eliminate the liability of directors for monetary damages to the maximum extent permitted by Georgia law. The effect of this provision will be to reduce the situations in which we or our shareholders will be able to seek monetary damages from our directors.
Our bylaws also have a provision providing for indemnification of our directors and executive officers and advancement of litigation expenses to the fullest extent permitted or required by Georgia law, including circumstances in which indemnification is otherwise discretionary. Such indemnification may be available for liabilities arising in connection with this offering.
Shares of certain shareholders may be sold into the public market in the near future. This could cause the market price of our common stock to drop significantly.
In connection with this offering, we, our directors, our executive officers and certain of our shareholders have each agreed to enter into lock-up agreements that restrict the sale of their holdings of our common stock for a period of 180 days from the date of this prospectus, subject to an extension in certain circumstances. The underwriters, in their discretion, may release any of the shares of our common stock subject to these lock-up agreements at any time without notice. In addition, after this offering, approximately      shares of our common stock that are currently issued and outstanding will not be subject to lock-up. We also have the ability to issue options exercisable for up to an additional 2,400,000 shares of common stock pursuant to our 2018 Omnibus Incentive Plan. The resale of such shares could cause the market price of our stock to drop significantly, and concerns that those sales may occur could cause the trading price of our common stock to decrease or to be lower than it might otherwise be.
Our management will have broad discretion as to the use of proceeds from this offering, and we may not use the proceeds effectively.
We are not required to apply any portion of the net proceeds of this offering for any particular purpose. Accordingly, our management will have broad discretion as to the application of the net proceeds of this offering and could use them for purposes other than those contemplated at the time of this offering.
37

Our shareholders may not agree with the manner in which our management chooses to allocate and invest the net proceeds. We may not be successful in using the net proceeds from this offering to increase our profitability or market value and we cannot predict whether the proceeds will be invested to yield a favorable return. As of June 30, 2019, our annualized return on average equity was 25.46% with total shareholders’ equity of approximately $184.3 million. After the completion of this offering, shareholders’ equity will be approximately $     million (or approximately $     million if the underwriters exercise their option to purchase additional shares in full), based on an assumed public offering price of  $     per share, which is the midpoint of the price range set forth on the cover of this prospectus.
You will incur immediate dilution as a result of this offering.
If you purchase common stock in this offering, you will pay more for your shares than our existing net tangible book value per share. As a result, you will incur immediate dilution of  $     per share, representing the difference between the assumed public offering price of  $     per share (the mid-point of the range set forth on the cover page of this prospectus) and our adjusted net tangible book value per share after giving effect to this offering. This represents     % dilution from the public offering price. If the underwriters exercise their option to purchase additional shares from us in full, you will incur an immediate dilution of  $     per share to new investors. This represents     % dilution from the public offering price.
Future equity issuances could result in dilution, which could cause our common stock price to decline.
We are generally not restricted from issuing additional shares of our common stock, up to the 40 million shares of voting common stock and 10 million shares of preferred stock authorized in our articles of incorporation (subject to Nasdaq shareholder approval rules), which in each case could be increased by a vote of a majority of our shares. We may issue additional shares of our common stock in the future pursuant to current or future equity compensation plans, upon conversions of preferred stock or debt, upon exercise of warrants or in connection with future acquisitions or financings. If we choose to raise capital by selling shares of our common stock for any reason, the issuance could have a dilutive effect on the holders of our common stock and could have a material negative effect on the market price of our common stock.
We may issue shares of preferred stock in the future, which could make it difficult for another company to acquire us or could otherwise adversely affect holders of our common stock, which could depress the price of our common stock.
Although there are currently no shares of our preferred stock issued and outstanding, our articles of incorporation authorize us to issue up to 10 million shares of one or more series of preferred stock. Our board of directors also has the power, without shareholder approval (subject to Nasdaq shareholder approval rules), to set the terms of any series of preferred stock that may be issued, including voting rights, dividend rights, preferences over our common stock with respect to dividends or in the event of a dissolution, liquidation or winding up and other terms. In the event that we issue preferred stock in the future that has preference over our common stock with respect to payment of dividends or upon our liquidation, dissolution or winding up, or if we issue preferred stock with voting rights that dilute the voting power of our common stock, the rights of the holders of our common stock or the market price of our common stock could be adversely affected. In addition, the ability of our board of directors to issue shares of preferred stock without any action on the part of our shareholders (subject to Nasdaq shareholder approval rules) may impede a takeover of us and prevent a transaction perceived to be favorable to our shareholders.
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.
38

There are substantial regulatory limitations on changes of control of bank holding companies.
We are a bank holding company regulated by the Federal Reserve. Subject to certain exceptions, the Change in Bank Control Act of 1978, as amended (“CIBCA”), and its implementing regulations require that any individual or company acquiring “control” of a bank or bank holding company, either directly or indirectly, give the Federal Reserve 60 days’ prior written notice of the proposed acquisition. If within that time period the Federal Reserve has not issued a notice disapproving the proposed acquisition, extended the period for an additional period up to 90 days or requested additional information, the acquisition may proceed. An acquisition may be made before expiration of the disapproval period if the Federal Reserve issues written notice that it intends not to disapprove the acquisition. Acquisition of 25 percent or more of any class of voting securities constitutes control, and it is generally presumed for purposes of the CIBCA that the acquisition of 10 percent or more of any class of voting securities would constitute the acquisition of control, although such a presumption of control may be rebutted.
Also, under the CIBCA, the shareholdings of individuals and companies that are deemed to be “acting in concert” would be aggregated for purposes of determining whether such holders “control” a bank or bank holding company. “Acting in concert” under the CIBCA generally means knowing participation in a joint activity or parallel action towards the common goal of acquiring control of a bank or a bank holding company, whether or not pursuant to an express agreement. The manner in which this definition is applied in individual circumstances can vary and cannot always be predicted with certainty. Many factors can lead to a rebuttable presumption of acting in concert, including where: (i) the shareholders are commonly controlled or managed; (ii) the shareholders are parties to an oral or written agreement or understanding regarding the acquisition, voting or transfer of control of voting securities of a bank or bank holding company; (iii) the shareholders are immediate family members; or (iv) both a shareholder and a controlling shareholder, partner, trustee or management official of such shareholder own equity in the bank or bank holding company.
Furthermore, under the Bank Holding Company Act of 1956, as amended (“BHCA”) and its implementing regulations, and subject to certain exceptions, any company would be required to obtain Federal Reserve approval prior to obtaining control of a bank or bank holding company. Control under the BHCA exists where a company acquires 25 percent or more of any class of voting securities, has the ability to elect a majority of a bank holding company’s directors, is found to exercise a “controlling influence” over a bank or bank holding company’s management and policies, and in certain other circumstances. There is a presumption of non-control for any holder of less than 5% of any class of voting securities. Regulatory determination of  “control” of a depository institution or holding company, under either the BHCA or CIBCA, is based on all of the relevant facts and circumstances. Potential investors are advised to consult with their legal counsel regarding the applicable regulations and requirements.
Provisions in our charter documents and Georgia law may have an anti-takeover effect, and there are substantial regulatory limitations on changes of control of bank holding companies.
Provisions of our charter documents and the Georgia Business Corporation Code, or the GBCC, could make it more difficult for a third party to acquire us, even if doing so would be perceived to be beneficial by our shareholders. Furthermore, with certain limited exceptions, federal regulations prohibit a person or company or a group of persons deemed to be “acting in concert” from, directly or indirectly, acquiring more than 10% (5% if the acquirer is a bank holding company) of any class of our voting stock or obtaining the ability to control in any manner the election of a majority of our directors or otherwise direct the management or policies of our company without prior notice or application to and the approval of the Federal Reserve. Accordingly, prospective investors need to be aware of and comply with these requirements, if applicable, in connection with any purchase of shares of our common stock. Moreover, the combination of these provisions effectively inhibits certain mergers or other business combinations, which, in turn, could adversely affect the market price of our common stock.
We are an “emerging growth company,” and the reduced regulatory and reporting requirements applicable to emerging growth companies may make our common stock less attractive to investors.
We are an “emerging growth company,” as described in the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of reduced regulatory and reporting requirements that are otherwise generally applicable to public companies. These include, without limitation, not being
39

required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced financial reporting requirements, reduced disclosure obligations regarding executive compensation, and exemptions from the requirements of holding non-binding advisory votes on executive compensation and golden parachute payments. We cannot predict if investors will find our common stock less attractive because of our reliance on certain of these exemptions. If some investors find our common stock less attractive as a result, then there may be a less active trading market for our common stock, our stock price may be more volatile and the price of our common stock may decline.
Further, the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make our financial statements not comparable with those of another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period because of the potential differences in accounting standards used.
40

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements within the meaning of the federal securities laws. 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 identified in “Risk Factors” or “Management’s Discussion and Analysis of Financial Condition and Results of Operations” or the following:

business and economic conditions, particularly those affecting the financial services industry and our primary market areas;

our ability to successfully manage our credit risk and the sufficiency of our ALL;

the adequacy of our reserves (including ALL) and the appropriateness of our methodology for calculating such reserves;

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;

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, 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;

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;

interest rate fluctuations, which could have an adverse effect on our profitability;
41


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 and/or market factors, such as changes in monetary and fiscal policies and laws, 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;

continued or increasing competition from other financial institutions, credit unions, and non-bank financial services 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;

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;

the impact of any claims or legal actions to which we may be subject, including any effect on our reputation;
42


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 FDIC insurance and other coverage;

changes in our accounting standards;

changes in tariffs and trade barriers;

changes in federal tax law or policy, including the impact of the Tax Cuts and Jobs Act of 2017; and

risks related to this offering, including factors and risks described under the “Risk factors” and “Management’s discussion and analysis of financial condition and results of operations” sections herein.
The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this prospectus. 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 prospectus. 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.
43

USE OF PROCEEDS
We estimate that the net proceeds to us from this offering, after deducting underwriting discounts and estimated offering expenses, will be approximately $     million (or approximately $     million if the underwriters exercise their option to purchase additional shares from us in full), based on an assumed public offering price of  $     per share (the midpoint of the price range set forth on the cover page of this prospectus). Each $1.00 increase or decrease in the assumed public offering price of  $     per share would increase or decrease the net proceeds to us from this offering by approximately $     million (or approximately $     million if the underwriters exercise their option to purchase additional shares in full).
We intend to use the net proceeds to us from this offering to support our organic growth, which could include branch expansion and opportunistic strategic acquisitions, and for general corporate purposes, which may include contributing a significant portion of such proceeds to the Bank. We have not specifically allocated the amount of net proceeds to us that will be used for these purposes and our management will have broad discretion over how these proceeds are used. We are conducting this offering at this time because we believe that it will allow us to better execute our growth strategy. In the ordinary course of business, we may evaluate potential acquisition opportunities for other financial institutions or establish de novo banking branches, particularly in the communities that we believe provide attractive risk-adjusted returns. However, we do not have any immediate plans, arrangements or understanding relating to any acquisitions or de novo banking branches. Our management will retain broad discretion to allocate the net proceeds of this offering, and the precise amounts and timing of our use of the proceeds will depend upon market conditions, among other factors. We will not receive any proceeds from the sale of shares of common stock by the selling shareholders.
44

CAPITALIZATION
The following table shows our capitalization, including regulatory capital ratios, on a consolidated basis, as of June 30, 2019:

on an actual basis; and

on an as adjusted basis after giving effect to the net proceeds from the sale of shares by us (assuming the underwriters do not exercise their option to purchase additional shares) at an assumed initial public offering price of  $     per share (the midpoint of the price range set forth on the front cover page of this prospectus), after deducting underwriting discounts and estimated offering expenses.
The “as adjusted” information below is illustrative only and our capitalization following the closing of this offering will be adjusted based on the actual public offering price and other terms of this offering determined at pricing. You should read the following table in conjunction with the sections titled “Selected Historical Consolidated Financial Information” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our consolidated financial statements and related notes appearing elsewhere in this prospectus.
As of June 30, 2019
(Dollars in thousands)
Actual
As
adjusted
Shareholders’ Equity:
Preferred stock, $0.01 par value per share, 10,000,000 shares authorized; none issued or outstanding
Common stock, $0.01 par value per share, 40,000,000 shares authorized; 24,305,378 shares outstanding;      shares outstanding, as adjusted
$ 243 $
Additional paid-in-capital
39,096
Retained earnings
144,989
Accumulated other comprehensive loss
(11)
Total shareholders’ equity
$ 184,317 $
Capital ratios:
Tier 1 capital to average assets
11.67% %
Tier 1 capital to risk-weighted assets
17.99% %
Total capital to risk-weighted assets
18.66% %
Common equity Tier 1 capital to risk-weighted assets
17.99% %
Total shareholder’s equity to total assets
12.09%     %
45

DILUTION
If you purchase shares of our common stock in this offering, your ownership interest will experience immediate book value dilution to the extent the public offering price per share exceeds our net tangible book value per share immediately after this offering. Net tangible book value per share represents the amount of our total tangible assets less our total liabilities, divided by the number of shares of common stock outstanding.
Our net tangible book value at June 30, 2019 was $184.3 million, or $7.58 per share, based on the number of shares outstanding as of such date. After giving effect to our sale of shares in this offering at an assumed public offering price of  $     per share, which is the midpoint of the price range on the cover page of this prospectus, and after deducting underwriting discounts and estimated offering expenses, our as adjusted net tangible book value at June 30, 2019, would have been approximately $     million, or $     per share. Therefore, under those assumptions this offering would result in an immediate increase of  $     in the net tangible book value per share to our existing shareholders, and immediate dilution of  $     in the net tangible book value per share to investors purchasing shares in this offering. The following table illustrates this per share dilution.
Public offering price per share
$     
Net tangible book value per share at June 30, 2019
$ 7.58
Increase in net tangible book value per share attributable to this offering
$
As adjusted net tangible book value per share after this offering
$
Dilution in net tangible book value per share to new investors
$
If the underwriters exercise their option to purchase additional shares from us in full, the as adjusted net tangible book value after giving effect to this offering would be $     per share. This represents an increase in net tangible book value of  $     per share to existing shareholders and dilution of  $     per share to new investors.
A $1.00 increase (decrease) in the assumed public offering price of  $     per share, which is the midpoint of the price range on the cover page of this prospectus, would increase (decrease) our net tangible book value by $     million, or $     per share, and the dilution to new investors by $     per share, assuming no change to the number of shares offered by us as set forth on the cover of this prospectus, and after deducting underwriting discounts and estimated offering expenses.
The following table sets forth information regarding the shares issued to, and consideration paid by, our existing shareholders and the shares to be issued to, and consideration to be paid by, investors in this offering at an assumed public offering price of  $     per share, which is the midpoint of the price range on the cover page of this prospectus, before deducting underwriting discounts and estimated offering expenses.
Shares purchased
Total consideration
Average price
per share
Number
Percent
Amount
Percent
Shareholders as of June 30, 2019
% $ % $
Investors in this offering
     %      %     
Total
100% $ 100% $
Assuming no shares are sold to existing shareholders in this offering and using the number of shares of common stock outstanding as of June 30, 2019, sales of shares of our common stock by the selling shareholders in this offering would reduce the number of shares of common stock held by existing shareholders to             , or approximately    % of the total shares of our common stock outstanding after this offering, and will result in new investors holding       shares, or approximately    % of the total shares of our common stock after this offering.
In addition, if the underwriters’ option to purchase additional shares is exercised in full, the number of shares of common stock held by existing shareholders would be further reduced to approximately    % of the total number of shares of common stock to be outstanding upon the completion of this offering, and the number of shares of common stock held by investors participating in this offering will be further increased to       shares, or approximately    % of the total number of shares of common stock to be outstanding upon the completion of this offering.
46

MARKET PRICE OF COMMON STOCK
The common stock of the Company is quoted on the OTCQX Market, under the symbol “MCBS.” The Company’s common stock was listed on the OTCQX Market on August 8, 2016 and was first traded on the OTCQX Market January 19, 2017. The following table shows the high and low bid quotations of our common stock for each full quarterly period within the two most recent fiscal years and any subsequent interim period. There may also have been transactions at prices other than those shown during that time. The market for our common stock is sporadic and at times very limited.
High(1)
Low(1)
Dividend
declared
per share(1)
Year ended December 31, 2019
First Quarter
$ 33.00 $ 24.75 $ 0.20
Second Quarter
$ 29.00 $ 27.50 $ 0.20
Third Quarter (to August 30, 2019)
$ 28.00 $ 27.28 $ 0.22
Year ended December 31, 2018
First Quarter
$ 22.00 $ 19.55 $ 0.18
Second Quarter
$ 26.00 $ 22.00 $ 0.18
Third Quarter
$ 33.00 $ 25.40 $ 0.20
Fourth Quarter
$ 33.00 $ 33.00 $ 0.20
Year ended December 31, 2017
First Quarter
$ 13.50 $ 12.00 $ 0.10
Second Quarter
$ 20.00 $ 13.50 $ 0.10
Third Quarter
$ 22.00 $ 16.75 $ 0.10
Fourth Quarter
$ 20.00 $ 18.25 $ 0.15
(1)
The prices in the table above do not reflect the two-for-one stock split recently enacted.
On June 30, 2019, we had approximately 248 record holders of our common stock. There has been no regular and liquid trading market for our common stock. We have applied to list our common stock on the Nasdaq Global Select Market under the symbol “MCBS.” Assuming our common stock is listed for trading on the Nasdaq Global Select Market, the quoting of our shares on the OTCQX Market will be discontinued upon or prior to the completion of this offering.
Dividend Policy
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 25% of our net income over the past seven 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, we are 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 “Supervision and Regulation — Regulation of the Company — Payment of Dividends.”
47

Equity Compensation Plan Information
The following table provides information as of December 31, 2018 with respect to shares of common stock that may be issued under the Company’s equity compensation plans.
Number of
securities to
be issued upon
exercise
of outstanding
options,
warrants and
rights
(a)
Weighted
average
exercise
price of
outstanding
options,
warrants
and rights
(b)
Number of
securities
remaining
available for
future issuance
under equity
compensation
plans (excluding
securities
reflected
in column (a))
(c)
Plan Category
Equity compensation plans approved by security holders
240,000 $ 12.70 2,232,372
Total at December 31, 2018
240,000 $ 12.70 2,232,372
48

GAAP RECONCILIATION AND MANAGEMENT EXPLANATION OF
NON-GAAP FINANCIAL MEASURES
Some of the financial measures included in our “Prospectus Summary” and “Selected Historical Consolidated Financial and Operating Information” are not measures of financial performance recognized by GAAP. Our management uses the non-GAAP financial measures set forth below in its analysis of our financial condition credit quality and performance.

“Tangible common equity” is defined as total shareholders’ equity reduced by other intangible assets. Management does not consider loan servicing rights as an intangible asset for purposes of this calculation. The Company did not have goodwill or outstanding preferred stock during the presented periods.

“Tangible assets” is defined as total assets reduced by other intangible assets. Management does not consider loan servicing rights as an intangible asset for purposes of this calculation. The Company did not have goodwill during the presented periods.

“Tangible common equity to tangible assets” is calculated as tangible common equity divided by tangible assets. This measure is important to investors interested in relative changes in the ratio of total shareholders’ equity to total assets, each exclusive of changes in intangible assets.

“Adjusted allowance for loan losses to gross loans” and “adjusted net charge-offs to average loans” exclude the impact of our remaining auto loan pools on “allowance for loan losses to gross loans” and “net charge-offs to average loans,” respectively.
Our management, banking regulators, many financial analysts and other investors use tangible common equity, tangible assets and tangible common equity to tangible assets in conjunction with more traditional bank capital ratios to compare the capital adequacy of banking organizations with significant amounts of goodwill or other intangible assets, which typically stem from the use of the purchase accounting method of accounting for mergers and acquisitions. Tangible common equity, tangible assets, tangible book value per share and related measures should not be considered in isolation or as a substitute for total shareholders’ equity, total assets, book value per share or any other measure calculated in accordance with GAAP. Moreover, the manner in which we calculate tangible common equity, tangible assets, tangible book value per share and any other related measures may differ from that of other companies reporting measures with similar names.
Our management utilizes the adjusted credit metrics described above to evaluate the credit quality of our core loan portfolio excluding the effects of our auto loan pools given our decision to discontinue the purchase of these loan pools. We also believe these adjusted credit metrics provide investors with additional information regarding the credit quality of our loan portfolio. However, these adjusted credit metrics should not be considered substitutes for non-performing assets to total assets, loan loss reserves to gross loans or net charge-offs to average loans.
The following reconciliation tables provide a more detailed analysis of these non-GAAP financial measures:
As of and for the
Six Months Ended
June 30,
As of and for the Year Ended
December 31,
2019
2018
2018
2017
2016
2015
(dollars in thousands, except per share data)
Tangible common equity:
Total shareholders’ equity
$ 184,317 $ 152,751 $ 168,608 $ 135,115 $ 107,261 $ 89,560
Less: Core deposit intangibles and other intangibles
9 66
Tangible common equity
$ 184,317 $ 152,751 $ 168,608 $ 135,115 $ 107,252 $ 89,494
49

As of and for the
Six Months Ended
June 30,
As of and for the Year Ended
December 31,
2019
2018
2018
2017
2016
2015
(dollars in thousands, except per share data)
Tangible assets:
Total assets
$ 1,524,509 $ 1,345,821 $ 1,432,650 $ 1,288,927 $ 1,100,063 $ 671,380
Less: Core deposit intangibles and other intangibles
9 66
Tangible assets
$ 1,524,509 $ 1,345,821 $ 1,432,650 $ 1,288,927 $ 1,100,054 $ 671,314
Tangible common equity to tangible assets:
Tangible common equity
$ 184,317 $ 152,751 $ 168,808 $ 135,115 $ 107,252 $ 89,494
Tangible assets
1,524,509 1,345,821 1,432,650 1,288,927 1,100,054 671,314
Tangible common equity to tangible assets
12.09% 11.35% 11.77% 10.48% 9.75% 13.33%
Adjusted allowance for loan losses to adjust gross
loans:
Gross Loans
$ 1,190,911 $ 1,094,229 $ 1,145,714 $ 1,068,593 $ 804,318 $ 570,755
Less: Auto loan pools
1,450 5,042 2,641 8,695 18,856 27,749
Adjusted gross loans excluding auto loan pools 
1,189,461 1,089,187 1,143,073 1,059,898 785,462 543,006
Allowance for loan losses
6,483 6,766 6,645 6,925 5,471 5,527
Less: Allowance for loan losses allocated to auto
loan pools
190 650 384 1,166
Adjusted allowance for loan losses
6,293 6,116 6,261 5,759 5,471 5,527
Allowance for loan losses to gross loans
0.54% 0.62% 0.58% 0.65% 0.68% 0.97%
Adjusted allowance for loan losses to adjusted Gross loans
0.53% 0.56% 0.55% 0.54% 0.70% 1.02%
Adjusted net charge-offs to average loans:
Net charge-offs
$ 162 $ 1,030 $ 1,517 $ 1,603 $ 56 $ 459
Less: Net charge-offs attributable to auto loan pools
159 1,026 1,412 1,531
Adjusted net charge-offs
3 4 105 72 56 459
Average gross loans
1,190,422 1,096,726 1,110,451 966,707 679,733 525,961
Net charge-offs to average gross loans(1)
0.03% 0.19% 0.14% 0.17% 0.01% 0.09%
Adjusted net charge-offs to average gross loans(1)
0.00% 0.00% 0.01% 0.01% 0.01% 0.09%
(1)
Represents annualized June 30, 2019 and 2018 data.
50

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 the “Selected Historical Consolidated Financial Information” and our consolidated financial statements and related notes included elsewhere in this prospectus. 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 prospectus, 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 metropolitan area. We operate through our wholly-owned banking subsidiary, Metro City Bank (the “Bank”), a Georgia state-chartered commercial bank that was founded in 2006. We currently operate 19 full-service branch locations in multi-ethnic communities in Alabama, Florida, Georgia, New York, New Jersey, Texas and Virginia. We are focused on delivering full-service banking services in markets, predominantly Asian-American communities in growing metropolitan markets in the Eastern U.S. and Texas.
Prior to December 2014, we operated without a holding company, and in December 2014, the Bank formed MetroCity Bankshares, Inc. as its holding company. On December 31, 2014, MetroCity Bankshares, Inc. acquired all of the outstanding common stock of Metro City Bank as a part of the holding company formation transaction.
The following discussion and analysis is intended to assist readers in their analysis and understanding of our consolidated financial statements and selected financial information appearing in this prospectus and should be read in conjunction therewith. This discussion and analysis presents our financial condition and results of operations on a consolidated basis, unless otherwise specified.
Recent Developments
Stock Split
On August 30, 2019, we effected a two-for-one split of our common stock in the form of a stock dividend, whereby each holder of our common stock received one additional share of common stock for each share owned as of the record date of August 15, 2019. The effect of the stock dividend on outstanding shares and per share figures has been retroactively applied to all periods presented in this prospectus.
Public Company Costs
Following the completion of this offering, we expect to incur additional costs associated with operating as a public company, hiring additional personnel, enhancing technology and expanding our capabilities. We expect that these costs will include legal, regulatory, accounting, investor relations and other expenses that we did not incur as a private company. Sarbanes-Oxley, as well as rules adopted by the U.S. Securities and Exchange Commission, or SEC, the FDIC and national securities exchanges requires public companies to implement specified corporate governance practices that are currently inapplicable to us as a private company. In addition, due to regulatory changes in the banking industry and the implementation of new laws, rules and regulations, we will experience higher regulatory compliance costs. These additional rules and regulations will increase our legal, regulatory, accounting and financial compliance costs and will make some activities more time-consuming.
Results of Operations — Comparison of Results of Operations for the Six Months Ended June 30, 2019 and 2018
The following discussion of our results of operations compares the six months ended June 30, 2019 and 2018. We reported net income for the six months ended June 30, 2019 and 2018 of  $21.7 million.
51

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. Our net interest margin is also adversely impacted by the reversal of interest on nonaccrual loans and the reinvestment of loan payoffs into lower yielding investment securities and other short-term investments.
The following table presents, for the periods indicated, 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.
Six Months Ended June 30,
2019
2018
(Dollars in thousands)
Average
Balance
Interest and
Fees
Yield/​
Rate
Average
Balance
Interest and
Fees
Yield/​
Rate
Earning Assets:
Federal funds sold and other investments(1)
$ 97,605 $ 1,214 2.51% $ 63,207 $ 690 2.20%
Securities purchased under agreements to resell 
15,000 227 3.05 15,000 166 2.23
Securities available for sale
18,693 241 2.60 20,917 257 2.48
Total investments
131,298 1,682 2.58 99,124 1,113 2.26
Construction and development
34,442 1,143 6.69 46,577 1,343 5.81
Commercial real estate
443,212 14,899 6.78 387,799 12,200 6.34
Commercial and industrial
38,129 1,392 7.36 36,781 1,232 6.75
Consumer
2,383 107 9.05 7,408 235 6.40
Residential real estate
761,216 21,455 5.68 679,527 18,965 5.63
Other
283 2 1.43 268 6 1.50
Gross loans(2)
1,279,665 38,998 6.15 1,158,360 33,977 5.92
Total earning assets
1,410,963 40,680 5.81 1,257,484 35,090 5.63
Noninterest-earning assets
78,108 72,040
Total assets
$ 1,489,071 $ 1,329,524
Interest-bearing liabilities:
NOW and savings deposits
$ 53,088 $ 92 0.35% $ 74,359 $ 151 0.41%
Money market deposits
103,190 1,135 2.22 42,554 161 0.76
Time deposits
820,912 9,275 2.28 699,204 5,332 1.54
Total interest-bearing deposits
977,190 10,502 2.17 816,117 5,644 1.39
Borrowings
13,628 126 1.86 83,468 629 1.52
Total interest-bearing liabilities
$ 990,818 $ 10,628 2.16 $ 899,585 $ 6,273 1.41
Noninterest-bearing liabilities:
Noninterest-bearing deposits
$ 299,373 $ 273,792
Other noninterest-bearing liabilities
27,064 16,967
Total noninterest-bearing liabilities
326,437 290,759
Shareholders’ equity
171,816 139,180
Total liabilities and shareholders’ equity
$ 1,489,071 $ 1,329,524
Net interest income
$ 30,052 $ 28,817
Net interest spread
3.65% 4.22%
Net interest margin
4.30% 4.62%
(1)
Includes income and average balances for term federal funds, interest-earning time deposits and other miscellaneous interest-earning assets.
(2)
Average loan balances include non-accrual loans and loans held for sale.
52

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 tables set 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.
Six Months Ended June 30,
2019 over 2018
Increase (Decrease) Change Due to
(Dollars in thousands)
Average
Volume
Average
Rate
Net Interest
Variance
Earning Assets:
Federal funds sold and other investments(1)
$ 251 $ 273 $ 524
Securities purchased under agreements to resell
61 61
Securities available for sale
(27) 11 (16)
Total investments
224 345 569
Construction and development
(384) 184 (200)
Commercial real estate
1,410 1,289 2,699
Commercial and industrial
47 113 160
Consumer
(111) (17) (128)
Residential real estate
2,217 273 2,490
Other
Loans
3,179 1,842 5,021
Total earning assets
$