10-Q 1 mcbs-20190930x10q.htm 10-Q mcbs_Current_Folio_10Q

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


FORM 10-Q


(Mark One)

 Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended September 30, 2019

 

OR

 

 Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the transition period _______ to _______

 

Commission File Number 001-39068


 

METROCITY BANKSHARES, INC.

(Exact name of registrant as specified in its charter)


 

Georgia

47‑2528408

(State or other jurisdiction of
incorporation)

(I.R.S. Employer
Identification No.)

 

 

5114 Buford Highway
Doraville, Georgia

30340

(Address of principal executive offices)

(Zip Code)

 

(770) 455‑4989

(Registrant’s telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No 

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted  pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   No 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.

 

Large accelerated filer 

Accelerated filer 

Non-accelerated filer 

Smaller reporting company 

 

 

 

 

 

 

 

 

Emerging growth company 

 

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes   No 

 

Securities registered pursuant to Section 12(b) of the Act:

 

 

 

 

Title of each class

Trading Symbol(s)

Name of each Exchange on which registered

Common Stock, par value $0.01 per share

MCBS

Nasdaq Global Select Market

 

As of November 6, 2019, the registrant had 25,529,891 shares of common stock issued and outstanding.

 

 

 

METROCITY BANKSHARES, INC.

Quarterly Report on Form 10‑Q

September 30, 2019

TABLE OF CONTENTS

 

    

 

Page

Part I. 

 

Financial Information

 

 

 

 

 

Item l. 

 

Financial Statements:

 

 

 

Consolidated Balance Sheets as of September 30, 2019 (unaudited) and December 31, 2018

3

 

 

Consolidated Statements of Income (unaudited) for the Three and Nine Months Ended September 30, 2019 and 2018

4

 

 

Consolidated Statements of Comprehensive Income (unaudited) for the Three and Nine Months Ended September 30, 2019 and 2018

5

 

 

Consolidated Statements of Shareholders’ Equity (unaudited) for the Three and Nine Months Ended September 30, 2019 and 2018

6

 

 

Consolidated Statements of Cash Flows (unaudited) for the Nine Months Ended September 30, 2019 and 2018

7

 

 

Notes to Consolidated Financial Statements (unaudited)

9

Item 2. 

 

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

32

Item 3. 

 

Quantitative and Qualitative Disclosures about Market Risk

49

Item 4. 

 

Controls and Procedures

51

 

 

 

 

Part II. 

 

Other Information

 

 

 

 

 

Item 1. 

 

Legal Proceedings

51

Item 1A. 

 

Risk Factors

51

Item 2. 

 

Unregistered Sales of Equity Securities and Use of Proceeds

51

Item 3. 

 

Defaults Upon Senior Securities

52

Item 4. 

 

Mine Safety Disclosures

52

Item 5. 

 

Other Information

52

Item 6. 

 

Exhibits

52

 

 

Signatures

53

 

2

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

METROCITY BANKSHARES, INC.

CONSOLIDATED BALANCE SHEETS

(Dollar in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

September 30, 

 

December 31, 

 

    

2019

    

2018

 

 

(Unaudited)

 

 

 

Assets:

 

 

 

 

 

  

Cash and due from banks

 

$

264,981

 

$

130,263

Federal funds sold

 

 

9,567

 

 

8,164

Cash and cash equivalents

 

 

274,548

 

 

138,427

Securities purchased under agreements to resell

 

 

15,000

 

 

15,000

Securities available for sale (at fair value)

 

 

15,913

 

 

18,888

Loans, less allowance for loan losses of $6,850 and $6,645, respectively

 

 

1,252,196

 

 

1,136,930

Loans held for sale

 

 

 —

 

 

56,865

Accrued interest receivable

 

 

5,465

 

 

4,957

Federal Home Loan Bank stock

 

 

3,842

 

 

1,163

Premises and equipment, net

 

 

14,484

 

 

14,391

Operating lease right-of-use asset

 

 

12,431

 

 

 —

Foreclosed real estate, net

 

 

423

 

 

 —

SBA servicing asset, net

 

 

8,566

 

 

8,446

Mortgage servicing asset, net

 

 

17,740

 

 

14,934

Bank owned life insurance

 

 

20,101

 

 

19,749

Other assets

 

 

4,036

 

 

2,900

Total assets

 

$

1,644,745

 

$

1,432,650

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

  

 

 

  

Deposits:

 

 

  

 

 

  

Non-interest-bearing demand

 

$

311,198

 

$

299,182

Interest-bearing

 

 

1,024,154

 

 

945,050

Total deposits

 

 

1,335,352

 

 

1,244,232

 

 

 

 

 

 

 

Federal Home Loan Bank advances

 

 

60,000

 

 

 —

Other borrowings

 

 

3,154

 

 

4,257

Operating lease liability

 

 

12,922

 

 

 —

Accrued interest payable

 

 

940

 

 

1,251

Other liabilities

 

 

37,955

 

 

14,302

Total liabilities

 

 

1,450,323

 

 

1,264,042

 

 

 

 

 

 

 

Shareholders' Equity:

 

 

  

 

 

  

Preferred stock, $0.01 par value, 10,000,000 shares authorized, no shares issued or outstanding

 

 

 —

 

 

 —

Common stock, $0.01 par value, 40,000,000 shares authorized 24,305,378 and 24,258,062 shares issued and oustanding

 

 

243

 

 

242

Additional paid-in capital

 

 

39,526

 

 

39,915

Retained earnings

 

 

154,652

 

 

128,555

Accumulated other comprehensive income (loss)

 

 

 1

 

 

(104)

Total shareholders' equity

 

 

194,422

 

 

168,608

Total liabilities and shareholders' equity

 

$

1,644,745

 

$

1,432,650

 

See accompanying notes to unaudited consolidated financial statements.

3

METROCITY BANKSHARES, INC.

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(Dollar amounts in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30, 

 

September 30, 

 

    

2019

    

2018

    

2019

    

2018

Interest and dividend income:

 

 

 

 

  

 

 

  

 

 

  

 

Loans, including fees

 

$

20,857

 

$

18,153

 

$

59,855

 

$

52,130

Other investment income

 

 

907

 

 

500

 

 

2,271

 

 

1,421

Federal funds sold

 

 

144

 

 

113

 

 

462

 

 

305

Total interest income

 

 

21,908

 

 

18,766

 

 

62,588

 

 

53,856

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

5,873

 

 

3,822

 

 

16,375

 

 

9,466

FHLB advances and other borrowings

 

 

56

 

 

32

 

 

182

 

 

661

Total interest expense

 

 

5,929

 

 

3,854

 

 

16,557

 

 

10,127

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 

15,979

 

 

14,912

 

 

46,031

 

 

43,729

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for loan losses

 

 

 —

 

 

318

 

 

 —

 

 

1,189

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income after provision for loan losses

 

 

15,979

 

 

14,594

 

 

46,031

 

 

42,540

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest income:

 

 

 

 

 

 

 

 

 

 

 

 

Service charges on deposit accounts

 

 

294

 

 

256

 

 

811

 

 

776

Other service charges, commissions and fees

 

 

2,592

 

 

2,792

 

 

8,049

 

 

7,668

Gain on sale of residential mortgage loans

 

 

2,901

 

 

1,605

 

 

6,454

 

 

3,956

Mortgage servicing income, net

 

 

2,594

 

 

3,313

 

 

7,248

 

 

9,279

SBA servicing income, net

 

 

900

 

 

416

 

 

3,080

 

 

2,328

Gain on sale of SBA loans

 

 

1,404

 

 

621

 

 

4,296

 

 

4,039

Other income

 

 

316

 

 

142

 

 

595

 

 

459

Total noninterest income

 

 

11,001

 

 

9,145

 

 

30,533

 

 

28,505

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest expense:

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

6,573

 

 

6,436

 

 

18,926

 

 

17,007

Occupancy and equipment

 

 

1,161

 

 

1,075

 

 

3,547

 

 

2,953

Data processing

 

 

245

 

 

214

 

 

765

 

 

644

Advertising

 

 

142

 

 

146

 

 

455

 

 

457

Other expenses

 

 

2,041

 

 

2,549

 

 

6,467

 

 

7,029

Total noninterest expense

 

 

10,162

 

 

10,420

 

 

30,160

 

 

28,090

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before provision for income taxes

 

 

16,818

 

 

13,319

 

 

46,404

 

 

42,955

Provision for income taxes

 

 

4,462

 

 

3,466

 

 

12,356

 

 

11,357

Net income available to common shareholders

 

$

12,356

 

$

9,853

 

$

34,048

 

$

31,598

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.51

 

$

0.41

 

$

1.40

 

$

1.31

Diluted

 

$

0.50

 

$

0.40

 

$

1.39

 

$

1.29

 

See accompanying notes to unaudited consolidated financial statements.

4

METROCITY BANKSHARES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30, 

 

September 30, 

 

    

2019

    

2018

    

2019

    

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

12,356

 

$

9,853

 

$

34,048

 

$

31,598

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss):

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gains (losses) on securities available for sale arising during the period

 

 

15

 

 

(4)

 

 

134

 

 

(81)

Tax effect

 

 

(3)

 

 

 1

 

 

(29)

 

 

 4

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss)

 

 

12

 

 

(3)

 

 

105

 

 

(77)

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

$

12,368

 

$

9,850

 

$

34,153

 

$

31,521

 

See accompanying notes to unaudited consolidated financial statements.

5

METROCITY BANKSHARES, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)

(Dollars in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

Common Stock

 

Additional

 

 

 

 

Other

 

 

 

 

 

Number of

 

 

 

 

Paid-in

 

Retained

 

Comprehensive

 

 

 

 

    

Shares

    

Amount

    

Capital(1)

    

Earnings

    

Income (Loss)

    

Total

Three Months Ended:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, July 1, 2019

 

24,305,378

 

$

243

 

$

39,096

 

$

144,989

 

$

(11)

 

$

184,317

Stock based compensation expense

 

 —

 

 

 —

 

 

430

 

 

 —

 

 

 —

 

 

430

Net income

 

 —

 

 

 —

 

 

 —

 

 

12,356

 

 

 —

 

 

12,356

Other comprehensive income

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

12

 

 

12

Dividends on common stock ($0.11 per share)

 

 —

 

 

 —

 

 

 —

 

 

(2,693)

 

 

 —

 

 

(2,693)

Balance, September 30, 2019

 

24,305,378

 

 

243

 

 

39,526

 

 

154,652

 

 

 1

 

 

194,422

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, July 1, 2018

 

24,241,206

 

$

242

 

$

38,765

 

$

113,873

 

$

(129)

 

$

152,751

Stock based compensation expense

 

 —

 

 

 —

 

 

575

 

 

 —

 

 

 —

 

 

575

Vesting of restricted stock

 

16,856

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Net income

 

 —

 

 

 —

 

 

 —

 

 

9,853

 

 

 —

 

 

9,853

Other comprehensive loss

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(3)

 

 

(3)

Dividends on common stock ($0.10 per share)

 

 —

 

 

 —

 

 

 —

 

 

(2,454)

 

 

 —

 

 

(2,454)

Balance, September 30, 2018

 

24,258,062

 

$

242

 

$

39,340

 

$

121,272

 

$

(132)

 

$

160,722

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended:

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

Balance, January 1, 2019

 

24,258,062

 

$

242

 

$

39,915

 

$

128,555

 

$

(104)

 

$

168,608

Stock based compensation expense

 

 —

 

 

 —

 

 

1,097

 

 

 —

 

 

 —

 

 

1,097

Vesting of restricted stock

 

157,316

 

 

 2

 

 

(2)

 

 

 —

 

 

 —

 

 

 —

Repurchase and retirement of common stock

 

(110,000)

 

 

(1)

 

 

(1,484)

 

 

 —

 

 

 —

 

 

(1,485)

Net income

 

 —

 

 

 —

 

 

 —

 

 

34,048

 

 

 —

 

 

34,048

Impact of adoption of new accounting standard(1)

 

 —

 

 

 —

 

 

 —

 

 

(362)

 

 

 —

 

 

(362)

Other comprehensive income

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

105

 

 

105

Dividends on common stock ($0.31 per share)

 

 —

 

 

 —

 

 

 —

 

 

(7,589)

 

 

 —

 

 

(7,589)

Balance, September 30, 2019

 

24,305,378

 

$

243

 

$

39,526

 

$

154,652

 

$

 1

 

$

194,422

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, January 1, 2018

 

24,074,882

 

$

240

 

$

38,418

 

$

96,525

 

$

(68)

 

$

135,115

Stock based compensation expense

 

 —

 

 

 —

 

 

924

 

 

 —

 

 

 —

 

 

924

Vesting of restricted stock

 

183,180

 

 

 2

 

 

(2)

 

 

 —

 

 

 —

 

 

 —

Net income

 

 —

 

 

 —

 

 

 —

 

 

31,598

 

 

 —

 

 

31,598

Impact of adoption of new accounting standard(2)

 

 —

 

 

 —

 

 

 —

 

 

(13)

 

 

13

 

 

 —

Other comprehensive loss

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(77)

 

 

(77)

Dividends on common stock ($0.28 per share)

 

 —

 

 

 —

 

 

 —

 

 

(6,838)

 

 

 —

 

 

(6,838)

Balance, September 30, 2018

 

24,258,062

 

 

242

 

 

39,340

 

 

121,272

 

 

(132)

 

 

160,722


(1)

Represents the impact of the adoption of Accounting Standards Update ("ASU") No. 2016‑02: Leases

(2)

Represents the impact of the adoption of Accounting Standards Update ("ASU") No. 2018‑02: Income Statement - Reporting Comprehensive Income (Topic 220)

 

See accompanying notes to unaudited consolidated financial statements.

6

METROCITY BANKSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 

 

    

2019

    

2018

Cash flow from operating activities:

 

 

  

 

 

  

Net income

 

$

34,048

 

$

31,598

Adjustments to reconcile net income to net cash provided (used) by operating activities:

 

 

 

 

 

 

Depreciation, amortization and accretion

 

 

1,972

 

 

650

Provision for loan losses

 

 

 —

 

 

1,189

Stock based compensation expense

 

 

1,097

 

 

924

Gain on sale of foreclosed real estate

 

 

 —

 

 

(36)

Origination of residential real estate loans held for sale

 

 

(356,715)

 

 

(450,429)

Proceeds from sales of residential real estate loans

 

 

420,034

 

 

394,987

Gain on sale of residential mortgages

 

 

(6,454)

 

 

(3,956)

Origination of SBA loans held for sale

 

 

(90,353)

 

 

(78,016)

Proceeds from sales of SBA loans held for sale

 

 

94,649

 

 

82,055

Gain on sale of SBA loans

 

 

(4,296)

 

 

(4,039)

Increase in cash value of bank owned life insurance

 

 

(352)

 

 

(360)

Increase in accrued interest receivable

 

 

(508)

 

 

(349)

(Increase) decrease in SBA servicing rights

 

 

(120)

 

 

674

Increase in mortgage servicing rights

 

 

(2,806)

 

 

(6,632)

(Increase) decrease in other assets

 

 

(1,164)

 

 

2,731

(Decrease) increase in accrued interest payable

 

 

(311)

 

 

488

Increase in other liabilities

 

 

22,603

 

 

9,974

Net cash flow provided (used) by operating activities

 

 

111,324

 

 

(18,547)

 

 

 

 

 

 

 

Cash flow from investing activities:

 

 

  

 

 

  

Increase in loans, net

 

 

(115,689)

 

 

(12,582)

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

 

 

3,080

 

 

1,839

(Purchase) redemption of Federal Home Loan Bank stock

 

 

(2,679)

 

 

4,929

Purchases of premises and equipment

 

 

(858)

 

 

(1,999)

Proceeds from sales of foreclosed real estate owned

 

 

 —

 

 

907

Net cash flow used by investing activities

 

 

(116,146)

 

 

(6,906)

 

 

 

 

 

 

 

Cash flow from financing activities:

 

 

  

 

 

  

Dividends paid on common stock

 

 

(7,589)

 

 

(6,838)

Repurchase of common stock

 

 

(1,485)

 

 

 —

Increase in deposits, net

 

 

91,120

 

 

235,115

Decrease in other borrowings, net

 

 

(1,103)

 

 

(705)

Proceeds (repayments) from Federal Home Loan Bank advances

 

 

60,000

 

 

(120,000)

Net cash flow provided by financing activities

 

 

140,943

 

 

107,572

 

See accompanying notes to unaudited consolidated financial statements.

7

METROCITY BANKSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 

 

    

2019

    

2018

 

 

 

 

 

 

 

Net change in cash and cash equivalents

 

 

136,121

 

 

82,119

Cash and cash equivalents at beginning of period

 

 

138,427

 

 

95,833

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

$

274,548

 

$

177,952

 

 

 

 

 

 

 

Supplemental schedule of noncash investing and financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

423

 

$

261