MetroCity Bankshares Inc

Previous wording

The purpose of this discussion and analysis is to focus on significant changes in the financial condition of MetroCity Bancshares, Inc. and our wholly owned subsidiary, Metro City Bank, from December 31, 2023 through September 30, 2024 and on our results of operations for the three and nine months ended September 30, 2024 and 2023. This discussion and analysis should be read in conjunction with our audited consolidated financial statements and notes thereto for the year ended December 31, 2023 included in our Annual Report on Form 10-K, and information presented elsewhere in this Quarterly Report on Form 10-Q, particularly the unaudited consolidated financial statements and related notes appearing in Item 1.

Current wording

The purpose of this discussion and analysis is to focus on significant changes in the financial condition of MetroCity Bancshares, Inc. and our wholly owned subsidiary, Metro City Bank, from December 31, 2024 through March 31, 2025 and on our results of operations for the three months ended March 31, 2025 and 2024. This discussion and analysis should be read in conjunction with our audited consolidated financial statements and notes thereto for the year ended December 31, 2024 included in our Annual Report on Form 10-K, and information presented elsewhere in this Quarterly Report on Form 10-Q, particularly the unaudited consolidated financial statements and related notes appearing in Item 1.

Previous wording

See Note 1 and Note 3 of our consolidated financial statements as of September 30, 2024, included elsewhere in this Form 10-Q, for additional information on thereserve and allowance for credit losses.

Current wording

See Note 1 and Note 3 of our consolidated financial statements as of December 31, 2024 in the Company’s 2024 Form 10-K and as of March 31, 2025, included elsewhere in this Form 10-Q, for additional information on thereserve and allowance for credit losses.

Previous wording

MetroCity Bankshares, Inc. is a bank holding company headquartered in the Atlanta metropolitan area. We operate through our wholly-owned banking subsidiary, Metro City Bank, a Georgia state-chartered commercial bank that was founded in 2006. We currently operate 20 full-service branch locations in multi-ethnic communities in Alabama, Florida, Georgia, New York, New Jersey, Texas and Virginia. As of September 30, 2024, we had total assets of $3.57 billion, total loans of $3.09 billion, total deposits of $2.72 billion and total shareholders’ equity of $407.2 million.

Current wording

MetroCity Bankshares, Inc. is a bank holding company headquartered in the Atlanta metropolitan area. We operate through our wholly-owned banking subsidiary, Metro City Bank, a Georgia state-chartered commercial bank that was founded in 2006. We currently operate 20 full-service branch locations in multi-ethnic communities in Alabama, Florida, Georgia, New York, New Jersey, Texas and Virginia. As of March 31, 2025, we had total assets of $3.66 billion, total loans of $3.13 billion, total deposits of $2.74 billion and total shareholders’ equity of $428.0 million.

Previous wording

The following table sets forth unaudited selected financial data for the most recent five quarters and for the nine months ended September 30, 2024 and 2023. This data should be read in conjunction with the unaudited consolidated financial statements and accompanying notes included in Item 1 and the information contained in this Item 2.

Current wording

The following table sets forth unaudited selected financial data for the most recent five quarters. This data should be read in conjunction with the unaudited consolidated financial statements and accompanying notes included in Item 1 and the information contained in this Item 2.

Previous wording

We recorded net income of $16.7 million for the three months ended September 30, 2024 compared to $11.4 million for the same period in 2023, an increase of $5.3 million, or 46.1%. This increase was due to an increase in net interest income of $6.1 million and an increase in noninterest income of $4.0 million, offset by an increase in noninterest expense of $2.1 million, an increase in income tax expense of $1.7 million and an increase in provision for credit losses of $963,000.

Current wording

We recorded net income of $16.3 million for the three months ended March 31, 2025 compared to $14.6 million for the same period in 2024, an increase of $1.7 million, or 11.4%. This increase was due to an increase in net interest income of $3.5 million and a decrease in income tax expense of $22,000, offset by an increase in noninterest expense of $1.4 million, an increase in provision for credit losses of $275,000 and a decrease in noninterest income of $112,000.

Previous wording

Basic and diluted earnings per common share for the three months ended September 30, 2024 was $0.66 and $0.65, respectively, compared to $0.45 for both the basic and diluted earnings per common share for the same period in 2023. For the nine months ended September 30, 2024, basic and diluted earnings per common share was $1.91 and $1.89, respectively, compared to $1.60 and $1.58 for the same period in 2023, respectively.

Current wording

Basic and diluted earnings per common share for the three months ended March 31, 2025 was $0.64 and $0.63, respectively, compared to $0.58 and $0.57 for the basic and diluted earnings per common share for the same period in 2024.

Previous wording

Interest income totaled $53.8 million for the three months ended September 30, 2024, an increase of $5.1 million, or 10.5%, from the three months ended September 30, 2023, primarily due to a 45 basis points increase in the loan yield coupled with an $86.2 million increase in average loan balances, as well as a 38 basis points increase in the total investment yield coupled with a $19.7 million increase in the average total investment balance. The increase in average loans is due to an increase of $93.5 million in average commercial real estate loans, an increase of $6.1 million in average residential mortgage loans and an increase of $2.8 million in average commercial and industrial loans, offset by a decrease of $16.4 million in construction and development loans. As compared to the three months ended September 30, 2023, the yield on average interest-earning assets increased by 44 basis points to 6.36% from 5.92% with the yield on average loans increasing by 45 basis points and the yield on average total investments increasing by 38 basis points.

Current wording

Interest income totaled $52.5 million for the three months ended March 31, 2025, an increase of $161,000, or 0.3%, from the three months ended March 31, 2024, primarily due to a six basis points increase in the loan yield coupled with a $2.6 million increase in average loan balances and a $15.0 million increase in average total investment balances, offset by a 71 basis points decrease in the total investments yield. The increase in average loans is due to an increase of $63.8 million in average commercial real estate loans, an increase of $8.2 million in average commercial and industrial loans and an increase of $1.4 million in average construction and development loans, offset by a decrease of $70.8 million in average residential real estate loans. As compared to the three months ended March 31, 2024, the yield on average interest-earning assets increased by four basis points to 6.31% from 6.27% with the yield on average loans increasing by six basis points and the yield on average total investments decreasing by 31 basis points.

Previous wording

Interest expense for the three months ended September 30, 2024 decreased $1.0 million, or 4.1%, to $23.5 million compared to interest expense of $24.6 million for the three months ended September 30, 2023, primarily due to a 44 basis points decrease in deposit costs, offset by a $31.8 million increase in average deposit balances. The 44 basis points decrease in deposit costs was primarily driven by a 199 basis points decrease in the yield on average money market deposits from the benefit received on our interest rate swaps, offset by an 81 basis point increase in time deposit costs. Average time deposits increased by $91.5 million while average money market deposits decreased by $54.4 million. Average borrowings for the three months ended September 30, 2024 increased by $50.7 million with an increase in rate of 73 basis points compared to the three months ended September 30, 2023.

Current wording

Interest expense for the three months ended March 31, 2025 decreased $3.3 million, or 13.1%, to $22.0 million compared to interest expense of $25.3 million for the three months ended March 31, 2024, primarily due to a 61 basis points decrease in deposit costs coupled with a $67.0 million decrease in average deposit balances, offset by a 44 basis points increase in borrowing costs and a $46.2 million increase in the average borrowing balance. The 61 basis points decrease in deposit costs was primarily driven by a 108 basis points decrease in the yield on average money market deposits from the benefit received on our interest rate swaps and a 32 basis points decrease in the yield on average time deposits, offset by an 27 basis point increase in the yield on interest-bearing demand deposits and savings accounts. Average money market deposits decreased by $67.0 million while average time deposits increased by $4.9 million. Average borrowings for the three months ended March 31, 2025 increased by $46.2 million with an increase in rate of 44 basis points compared to the three months ended March 31, 2024.

Previous wording

The Company currently has interest rate derivative agreements totaling $850.0 million that are designated as cash flow hedges of our deposit accounts indexed to the Federal Funds Effective rate. The weighted average pay rate for these interest rate derivatives is 2.29%. During the three months ended September 30, 2024, we recorded a credit to interest expense of $6.4 million from the benefit received on these interest rate derivatives compared to a credit to interest expense of $1.3 million recorded during the three months ended September 30, 2023. During the nine months ended September 30, 2024, we recorded a credit to interest expense of $17.0 million from the benefit received on these interest rate derivatives compared to a credit to interest expense of $2.3 million recorded during the nine months ended September 30, 2023. Based on the Federal Funds Effective rate as of September 30, 2024 (4.83%), the Company would estimate to record a credit to interest expense of approximately $5.4 million for the remainder of 2024 from the benefit received on these interest rate derivatives. See Note 8 of our consolidated financial statements as of September 30, 2024, included elsewhere in this Form 10-Q, for additional information on these interest rate derivatives.

Current wording

The Company currently has effective interest rate derivative agreements totaling $950.0 million that are designated as cash flow hedges of our deposit accounts indexed to the Federal Funds Effective rate. The weighted average pay rate for these interest rate derivatives is 2.29%. During the three months ended March 31, 2025, we recorded a credit to interest expense of $4.3 million from the benefit received on these interest rate derivatives compared to a credit to interest expense of $4.1 million recorded during the three month period ended March 31, 2024. Based on the Federal Funds Effective rate as of March 31, 2025 (4.33%), the Company would estimate to record a credit to interest expense of approximately $11.5 million for the remainder of 2025 from the benefit received on these interest rate derivatives. See Note 8 of our consolidated financial statements as of March 31, 2025, included elsewhere in this Form 10-Q, for additional information on these interest rate derivatives.

Previous wording

The net interest margin for the three months ended September 30, 2024 increased by 64 basis points to 3.58% from 2.94% for the three months ended September 30, 2023, primarily due to a 44 basis points increase in the yield on average interest-earning assets of $3.37 billion and a 28 basis points decrease in the cost of average interest-bearing liabilities of $2.54 billion. Average earning assets for the three months ended September 30, 2024 increased by $105.9 million from the three months ended September 30, 2023, due to a $86.2 million increase in average loans and a $19.7 million increase in average total investments. Average interest-bearing liabilities for the three months ended September 30, 2024 increased by $82.4 million from the three months ended September 30, 2023, driven by increases in average borrowings of $50.7 million and average interest-bearing deposits of $31.8 million.

Current wording

The net interest margin for the three months ended March 31, 2025 increased by 43 basis points to 3.67% from 3.24% for the three months ended March 31, 2024, primarily due to a four basis points increase in the yield on average interest-earning assets of $3.38 billion and a 46 basis points decrease in the cost of average interest-bearing liabilities of $2.56 billion. Average earning assets for the three months ended March 31, 2025 increased by $17.6 million from the three months ended March 31, 2024, due to a $15.0 million increase in average total investments and a $2.6 million increase in average loans. Average interest-bearing liabilities for the three months ended March 31, 2025 decreased by $20.8 million

Previous wording

Net interest margin and net interest income are influenced by internal and external factors. Internal factors include balance sheet changes on both volume and mix and pricing decisions, and external factors include changes in market interest rates, competition and the shape of the interest rate yield curve. The increase in our net interest margin is primarily the result of our decreasing deposit costs from the benefit received on our interest rate derivatives, as well as the continued increase to our loan yields.

Current wording

Net interest margin and net interest income are influenced by internal and external factors. Internal factors include balance sheet changes on both volume and mix and pricing decisions, and external factors include changes in market interest rates, competition and the shape of the interest rate yield curve. The increase in our net interest margin is primarily the result of our decreasing deposit costs, as well as the continued increase to our loan yields.

Previous wording

The following tables present, for the three and nine months ended September 30, 2024 and 2023, information about: (i) weighted average balances, the total dollar amount of interest income from interest-earning assets and the resultant average yields; (ii) average balances, the total dollar amount of interest expense on interest-bearing liabilities and the resultant average rates; (iii) net interest income; (iv) the interest rate spread; and (v) the net interest margin.

Current wording

The following tables present, for the three months ended March 31, 2025 and 2024, 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.

Previous wording

The provision for credit losses reflects our internal calculation and judgment of the appropriate amount of the allowance for credit losses. The adoption of ASU No. 2016-13,“Measurement of Credit Losses on Financial Instruments” or “CECL” has significantly changed the methodology of how we measure credit losses (see Note 1 to the Consolidated Financial Statements for more information). We maintain the allowance for credit losses at levels we believe are appropriate to cover our estimate of expected credit losses over the life of loans in the portfolio as of the end of the reporting period. The allowance for credit losses is determined through detailed quarterly analyses of our loan portfolio. The allowance for credit losses is based on our loss experience, changes in the economic environment, reasonable and supportable forecasts, as well as an ongoing assessment of credit quality and environmental factors not reflective in historical loss rates. Additional qualitative factors that are considered in determining the amount of the allowance for credit losses are concentrations of credit risk (geographic, large borrower, and industry), changes in underwriting standards, changes in collateral value, experience and depth of lending staff, trends in delinquencies, and the volume and terms of loans.

Current wording

The provision for credit losses reflects our internal calculation and judgment of the appropriate amount of the allowance for credit losses. The adoption of ASU No. 2016-13,“Measurement of Credit Losses on Financial Instruments” or “CECL” has significantly changed the methodology of how we measure credit losses (see Note 1 to the consolidated financial statements in the Company’s 2024 Form 10-K for more information). We maintain the allowance for credit losses at levels we believe are appropriate to cover our estimate of expected credit losses over the life of loans in the portfolio as of the end of the reporting period. The allowance for credit losses is determined through detailed quarterly analyses of our loan portfolio. The allowance for credit losses is based on our loss experience, changes in the economic environment, reasonable and supportable forecasts, as well as an ongoing assessment of credit quality and environmental factors not reflective in historical loss rates. Additional qualitative factors that are considered in determining the amount of the allowance for credit losses are concentrations of credit risk (geographic, large borrower, and industry), changes in underwriting standards, changes in collateral value, experience and depth of lending staff, trends in delinquencies, and the volume and terms of loans.

Previous wording

We recorded a provision for credit losses of $582,000 and $314,000 during the three and nine months ended September 30, 2024 compared to a credit to the provision for credit losses of $381,000 and $797,000 during the three and nine months ended September 30, 2023. The provision expense recorded during the nine months ended September 30, 2024 was primarily due to the increase in reserves allocated to our individually analyzed loans, as well as the increase in general reserves allocated to our commercial real estate loan portfolio due to higher loan balances, partially offset by the decrease in the general reserves allocated to our residential mortgage loan portfolio as a large amount of residential mortgage loans were sold during the period. Our ACL as a percentage of gross loans for the periods ended September 30, 2024, December 31, 2023 and September 30, 2023 was 0.60%, 0.57% and 0.58%, respectively. Our ACL as a percentage of gross loans is relatively lower than our peers due to our high percentage of residential mortgage loans, which tend to have lower allowance for credit loss ratios compared to other commercial or consumer loans due to their low LTVs.

Current wording

offset by the decrease in reserves allocated to our residential real estate loan portfolio and individually analyzed loans. Our ACL as a percentage of gross loans for the periods ended March 31, 2025, December 31, 2024 and March 31, 2024 was 0.59%, 0.59% and 0.58%, respectively. Our ACL as a percentage of gross loans is relatively lower than our peers due to our high percentage of residential mortgage loans, which tend to have lower allowance for credit loss ratios compared to other commercial or consumer loans due to their low LTVs.

Previous wording

The following table sets forth the major components of our noninterest income for the three and nine months ended September 30, 2024 and 2023:

Current wording

Noninterest income for the three months ended March 31, 2025 was $5.5 million, a decrease of $112,000, or 2.0%, compared to $5.6 million for the three months ended March 31, 2024. The following table sets forth the major components of our noninterest income for the three months ended March 31, 2025 and 2024:

Previous wording

Service charges on deposit accounts increased $41,000, or 8.4%, to $531,000 for the three months ended September 30, 2024 compared to $490,000 for the same three months during 2023. Service charges on deposit accounts were $1.5 million for the nine months ended September 30, 2024 compared to $1.4 million for the same period in 2023, an increase of $107,000, or 7.6%. These increases were primarily attributable to higher overdraft fees and wire transfer fees, offset by lower analysis charges.

Current wording

Service charges on deposit accounts increased $53,000, or 11.9%, to $500,000 for the three months ended March 31, 2025 compared to $447,000 for the same three months during 2024. This increase was primarily attributable to higher analysis fees and wire transfer fees.

Previous wording

Other service charges, commissions and fees increased $437,000, or 29.6%, to $1.9 million for the three months ended September 30, 2024 compared to $1.5 million for the three months ended September 30, 2023. Other service charges, commissions and fees increased $1.5 million, or 41.0%, to $5.1 million for the nine months ended September 30, 2024 compared to $3.6 million for the nine months ended September 30, 2023. These increases were mainly attributable to higher origination, underwriting and processing fees earned from our origination of residential mortgage loans as mortgage volume increased during the three and nine months ended September 30, 2024 compared to the same periods in 2023. Mortgage loan originations totaled $122.4 million and $310.4 million during the three and nine months ended September 30, 2024 compared to $91.9 million and $208.1 million during the same periods in 2023.

Current wording

Other service charges, commissions and fees decreased $16,000, or 1.0%, to $1.6 million for the three months ended March 31, 2025 compared to $1.6 million for the three months ended March 31, 2024. This slight decrease was mainly attributable to lower origination, underwriting and processing fees earned from our origination of residential mortgage loans as mortgage volume decreased during the three months ended March 31, 2025 compared to the same period in 2024. Mortgage loan originations totaled $91.1 million during the three months ended March 31, 2025 compared to $94.0 million during the same period in 2024.

Previous wording

Gain on sale of residential mortgage loans totaled $526,000 and $1.9 million for the three and nine months ended September 30, 2024 as we sold $54.2 million and $187.5 million in residential mortgage loans during these periods with an average premium of 1.05%. We recorded no gain on sale of residential mortgage loans during the three and nine months ended September 30, 2023 as no mortgage loans were sold during the period.

Current wording

Gain on sale of residential mortgage loans totaled $399,000 for the three months ended March 31, 2025 as we sold $40.1 million in residential mortgage loans during this period with an average premium of 1.06%. Gain on sale of residential mortgage loans totaled $222,000 for the three months ended March 31, 2024 as we sold $21.9 million in residential mortgage loans during the period with an average premium of 1.06%.

Previous wording

Gain on sale of SBA loans totaled $1.1 million and $2.1 million for the three and nine months ended September 30, 2024 compared to $244,000 and $3.3 million for the same periods in 2023. We sold $28.9 million and $52.9 million in SBA loans during the three and nine months ended September 30, 2024 with average premiums of 6.67% and 6.69%,

Current wording

Gain on sale of SBA loans totaled $658,000 for the three months ended March 31, 2025 compared to $1.1 million for the same period in 2024. We sold $16.6 million in SBA loans during the three months ended March 31, 2025 with average premiums of 5.97%. We sold $24.1 million in SBA loans during the three months ended March 31, 2024 with average premiums of 6.72%.

Previous wording

Mortgage loan servicing income, net of amortization, increased by $507,000, or 596.5%, to $422,000 during the three months ended September 30, 2024 compared to an expense balance of $85,000 for the same period of 2023. Mortgage loan servicing income increased by $2.0 million, or 857.8%, to $1.8 million during the nine months ended September 30, 2024 compared to an expense balance of $232,000 for the same period of 2023. The changes in mortgage loan servicing income were primarily due to decreases in mortgage servicing amortization and an increase in capitalized mortgage servicing assets, partially offset by the decrease in mortgage servicing fees. Included in mortgage loan servicing income for the three and nine months ended September 30, 2024 was $580,000 and $1.7 million in mortgage servicing fees compared to $606,000 and $1.9 million for the same periods in 2023 and capitalized mortgage servicing assets of $310,000 and $1.2 million for the three and nine months ended September 30, 2024 compared to $0 for the same periods in 2023. These amounts were offset by mortgage loan servicing asset amortization of $216,000 and $957,000 for the three and nine months ended September 30, 2024 compared to $691,000 and $2.2 million during the three and nine months ended September 30, 2023. During the three and nine months ended September 30, 2024, we recorded a fair value impairment of $252,000 on our mortgage servicing assets. During the three and nine months ended September 30, 2023, we did not record a fair value impairment on our mortgage servicing assets. Our total residential mortgage loan servicing portfolio was $556.4 million at September 30, 2024 compared to $464.8 million at September 30, 2023.

Current wording

mortgage servicing assets, partially offset by the decrease in mortgage servicing fees. Included in mortgage loan servicing income for the three months ended March 31, 2025 was $551,000 in mortgage servicing fees compared to $566,000 for the same period in 2024 and capitalized mortgage servicing assets of $310,000 for the three months ended March 31, 2025 compared to $136,000 for the same period in 2024. These amounts were offset by mortgage loan servicing asset amortization of $118,000 for the three months ended March 31, 2025 compared to $472,000 during the three months ended March 31, 2024. During the three months ended March 31, 2025, we recorded a fair value impairment of $42,000 on our mortgage servicing assets. During the three months ended March 31, 2024, we did not record a fair value impairment on our mortgage servicing assets. Our total residential mortgage loan servicing portfolio was $537.6 million at March 31, 2025 compared to $443.9 million at March 31, 2024.

Previous wording

SBA servicing income increased by $961,000, or 355.9%, to $1.2 million for the three months ended September 30, 2024 compared to $270,000 for the three months ended September 30, 2023. SBA servicing income was $3.3 million for the nine months ended September 30, 2024 compared to $3.5 million for the same period in 2023, a decrease of $185,000, or 5.3%. Our total SBA and USDA loan servicing portfolio was $487.4 million as of September 30, 2024 compared to $487.8 million as of September 30 2023. Included in SBA servicing income for the three and nine months ended September 30, 2024 was $1.0 million and $3.2 million in SBA servicing fees compared to $1.2 million and $3.4 million for the same periods in 2023. Our SBA servicing rights are carried at fair value and the inputs used to calculate fair value change from period to period. During the three months ended September 30, 2024, we recorded a $201,000 fair value increase to our SBA servicing rights compared to a $911,000 fair value charge to our SBA servicing rights during the three months ended September 30, 2023. During the nine months ended September 30, 2024, we recorded a $69,000 fair value increase to our SBA servicing rights compared to a $58,000 fair value increase during the nine months ended September 30, 2023.

Current wording

SBA servicing income decreased by $583,000, or 39.0%, to $913,000 for the three months ended March 31, 2025 compared to $1.5 million for the three months ended March 31, 2024. Our total SBA and USDA loan servicing portfolio was $474.1 million as of March 31, 2025 compared to $516.4 million as of March 31, 2024. Included in SBA servicing income for the three months ended March 31, 2025 was $1.0 million in SBA servicing fees compared to $1.1 million for the same period in 2024. Our SBA servicing rights are carried at fair value and the inputs used to calculate fair value change from period to period. During the three months ended March 31, 2025, we recorded a $104,000 fair value charge to our SBA servicing rights compared to a $361,000 fair value increase to our SBA servicing rights during the three months ended March 31, 2024.

Previous wording

Other noninterest income increased by $647,000, or 248.8%, to $907,000 for the three months ended September 30, 2024 compared to $260,000 for the three months ended September 30, 2023. Other noninterest income was $2.0 million for the nine months ended September 30, 2024 compared to $2.0 million for the same period in 2023, an increase of $64,000, or 3.3%. The increases were mainly due to increases in bank owned life insurance income and unrealized gains on our equity securities. These increases were partially offset by decreases in gain on sale of foreclosed real estate as a $547,000 gain on sale was recorded during the nine months ended September 30, 2023 compared to a $85,000 loss on sale being recorded during the nine months ended September 30, 2024. The largest component of other noninterest income is the income on bank owned life insurance which totaled $609,000 and $1.7 million, respectively, for the three and nine months ended September 30, 2024 compared to $452,000 and $1.3 million, respectively, for the three and nine months ended September 30, 2023. Included in other noninterest income are fair value gains/losses on our equity securities, which totaled $292,000 (gain) and $233,000 (gain) for the three and nine months ended September 30, 2024, respectively, compared to $245,000 (loss) and $187,000 (loss) for the same periods in 2023, respectively.

Current wording

Other noninterest income increased by $261,000, or 51.1%, to $772,000 for the three months ended March 31, 2025 compared to $511,000 for the three months ended March 31, 2024. The increase was mainly due to increases in bank owned life insurance income and unrealized gains on our equity securities. The largest component of other noninterest income is the income on bank owned life insurance which totaled $615,000 for the three months ended March 31, 2025 compared to $535,000 for the three months ended March 31, 2024. Included in other noninterest income are fair value gains/losses on our equity securities, which totaled a $140,000 gain for the three months ended March 31, 2025 compared to a $47,000 loss for the same period in 2024.

Previous wording

The following table sets forth the major components of our noninterest expense for the three and nine months ended September 30, 2024 and 2023:

Current wording

Noninterest expense for the three months ended March 31, 2025 was $13.8 million compared to $12.4 million for the three months ended March 31, 2024, an increase of $1.4 million, or 11.6%. The following table sets forth the major components of our noninterest expense for the three months ended March 31, 2025 and 2024:

Previous wording

Salaries and employee benefits expense for the three months ended September 30, 2024 was $8.5 million compared to $6.9 million for the three months ended September 30, 2023, an increase of $1.6 million, or 24.0%. Salaries and employee benefits expense for the nine months ended September 30, 2024 was $23.9 million compared to $20.3 million for the nine months ended September 30, 2023, an increase of $3.6 million, or 17.7%. These increases were partially attributable to higher employee salaries, restricted stock expense and employee insurance, as well as higher commissions paid to our loan officers as loan volume increased during the three and nine months ended September 30, 2024 compared to the same periods in 2023.

Current wording

Salaries and employee benefits expense for the three months ended March 31, 2025 was $8.5 million compared to $7.4 million for the three months ended March 31, 2024, an increase of $1.1 million, or 15.2%. This increase was partially attributable to higher employee salaries and incentives, restricted stock expense and employee insurance.

Previous wording

Advertising expenses for the three and nine months ended September 30, 2024 remained relatively flat compared to the same periods in 2023.

Current wording

Advertising expenses for the three months ended March 31, 2025 remained relatively flat compared to the same periods in 2024.

Previous wording

Other expenses for the three months ended September 30, 2024 were $3.3 million compared to $3.0 million for the three months ended September 30, 2023, an increase of $301,000, or 10.2%. This increase was partially due to higher security expense and other real estate owned related expenses, offset by lower FDIC insurance premiums and professional fees. Other operating expenses for the nine months ended September 30, 2024 were $9.6 million compared to $8.6 million for the nine months ended September 30, 2023, an increase of $1.0 million, or 11.7%. This increase was partially due to higher FDIC insurance premiums, audit expense, security expense and other real estate owned expenses, partially offset by lower loan related expenses and legal fees. Included in other expenses for the nine months ended September 30, 2024 and 2023 were directors’ fees of approximately $477,000 and $452,000, respectively.

Current wording

Other expenses for the three months ended March 31, 2025 were $3.4 million compared to $3.2 million for the three months ended March 31, 2024, an increase of $206,000, or 6.5%. This increase was partially due to higher security expense, audit expense and merger-related expenses, offset by lower FDIC insurance premiums and legal fees. Included in other expenses for the three months ended March 31, 2025 and 2024 were directors’ fees of approximately $167,000 and $163,000, respectively.

Previous wording

Income tax expense for the three months ended September 30, 2024 and 2023 was $6.0 million and $4.2 million, respectively. The Company’s effective tax rates were 26.3% and 27.0% for the three months ended September 30, 2024 and 2023, respectively.

Current wording

Income tax expense for the three months ended March 31, 2025 and 2024 was $5.8 million for both periods. The Company’s effective tax rates were 26.2% and 28.4% for the three months ended March 31, 2025 and 2024, respectively.

Previous wording

Total assets increased $66.4 million, or 1.9%, to $3.57 billion at September 30, 2024 as compared to $3.50 billion at December 31, 2023. The increase in total assets was primarily attributable to increases in cash and due from banks of $136.6 million, federal funds sold of $9.8 million and Federal Home Loan Bank stock of $2.4 million, partially offset by decreases in loans held for investment of $54.3 million, loans held for sale of $17.7 million and interest rate derivatives of $12.9 million.

Current wording

Total assets increased $65.7 million, or 1.8%, to $3.66 billion at March 31, 2025 as compared to $3.59 billion at December 31, 2024. The increase in total assets was primarily attributable to increases in cash and due from banks of $36.0 million, loans held for sale of $34.5 million, other assets of $14.9 million and equity securities of $8.1 million, partially offset by decreases in loans held for investment of $25.4 million and interest rate derivatives of $4.6 million.

Previous wording

Our investment securities portfolio made up only 0.81% of our total assets at September 30, 2024 compared to 0.82% at December 31, 2023.

Current wording

Our investment securities portfolio made up 0.93% of our total assets at March 31, 2025 compared to 0.77% at December 31, 2024.

Previous wording

Gross loans held for investment decreased $55.5 million, or 1.8%, to $3.10 billion as of September 30, 2024 as compared to $3.15 billion as of December 31, 2023. Our loan decrease during the nine months ended September 30, 2024 was comprised of a decrease of $6.7 million, or 28.9%, in construction and development loans, an increase of $27.8 million, or 3.9%, in commercial real estate loans, a decrease of $2.3 million, or 3.5%, in commercial and industrial loans, a decrease of $74.1 million, or 3.2%, in residential real estate loans and a decrease of $104,000, or 32.6%, in consumer and other loans. We had loans held for sale of $4.6 million as of September 30, 2024 compared to $22.3 million as of December 31, 2023.

Current wording

Gross loans held for investment decreased $25.2 million, or 0.8%, to $3.14 billion as of March 31, 2025 as compared to $3.17 billion as of December 31, 2024. Our loan decrease during the three months ended March 31, 2025 was comprised of an increase of $6.8 million, or 31.7%, in construction and development loans, an increase of $30.1 million, or 4.0%, in commercial real estate loans, a decrease of $6.7 million, or 8.6%, in commercial and industrial loans, a decrease of $55.2 million, or 2.4%, in residential real estate loans and a decrease of $193,000, or 74.2%, in consumer and other loans. We had loans held for sale of $34.5 million as of March 31, 2025 compared to no loans held for sale as of December 31, 2024.

Previous wording

As of September 30, 2024 and December 31, 2023, we serviced $487.4 million and $508.0 million, respectively, in SBA and USDA loans for others. We carried a servicing asset of $7.3 million at both September 30, 2024 and December 31, 2023, respectively. See Note 4 of our consolidated financial statements as of September 30, 2024, included elsewhere in this Form 10-Q, for additional information on the activity for SBA and USDA loan servicing rights for the three and nine months ended September 30, 2024 and 2023.

Current wording

As of March 31, 2025 and December 31, 2024, we serviced $474.1 million and $480.0 million, respectively, in SBA and USDA loans for others. We carried a servicing asset of $7.2 million and $7.3 million at March 31, 2025 and December 31, 2024, respectively. See Note 4 of our consolidated financial statements as of March 31, 2025, included elsewhere in this Form 10-Q, for additional information on the activity for SBA and USDA loan servicing rights for the three months ended March 31, 2025 and 2024.

Previous wording

As of September 30, 2024, we serviced $556.4 million in residential mortgage loans for others compared to $443.1 million as of December 31, 2023. We carried a servicing asset, net of amortization, of $1.3 million at both September 30, 2024 and December 31, 2023, respectively. Amortization relating to the mortgage loan servicing asset was $216,000 and $957,000 for the three and nine months ended September 30, 2024, respectively, compared to $691,000 and $2.2 million for the same periods in 2023. During the three and nine months ended September 30, 2024, we recorded a fair value impairment of $252,000 on our mortgage servicing asset. During the three and nine months ended September 30, 2023, we did not record a fair value impairment on our mortgage servicing asset. See Note 5 of our consolidated financial statements as of September 30, 2024, included elsewhere in this Form 10-Q, for additional information on the activity for mortgage loans servicing rights for the three and nine months ended September 30, 2024 and 2023.

Current wording

As of March 31, 2025, we serviced $537.6 million in residential mortgage loans for others compared to $527.0 million as of December 31, 2024. We carried a servicing asset, net of amortization, of $1.5 million and $1.4 million at March 31, 2025 and December 31, 2024, respectively. Amortization relating to the mortgage loan servicing asset was $118,000 for the three months ended March 31, 2025 compared to $472,000 for the same period in 2024. During the three months ended March 31, 2025, we recorded a fair value impairment of $42,000 on our mortgage servicing asset. During the three months ended March 31, 2024, we did not record a fair value impairment on our mortgage servicing asset. See Note 5 of our consolidated financial statements as of March 31, 2025, included elsewhere in this Form 10-Q, for additional information on the activity for mortgage loans servicing rights for the three months ended March 31, 2025 and 2024.

Previous wording

Asset quality remained strong during the third quarter of 2024 as our nonperforming loans to total loans remained low at 0.46% as of September 30, 2024. Nonperforming loans were $14.3 million at September 30 2024 compared to $14.7 million at December 31, 2023. The decrease from December 31, 2023 to September 30, 2024 was attributable to a $366,000 decrease in nonaccrual loans. We did not recognize any interest income on nonaccrual loans during the nine months ended September 30, 2024 or the year ended December 31, 2023.

Current wording

Asset quality remained strong during the first quarter of 2025 as our nonperforming loans to total loans remained low at 0.54% as of March 31, 2025. Nonperforming loans were $16.8 million at March 31, 2025 compared to $18.0 million at December 31, 2024. The decrease from December 31, 2024 to March 31, 2025 was attributable to a $1.2 million decrease in nonaccrual loans. We did not recognize any interest income on nonaccrual loans during the three months ended March 31, 2025 or the year ended December 31, 2024.

Previous wording

The following table sets forth the allocation of our nonperforming assets among our different asset categories as of the dates indicated. Nonperforming loans include nonaccrual loans and loans past due 90 days or more and still accruing interest. Nonperforming assets consist of nonperforming loans plus OREO. Nonaccrual loans at September 30, 2024 comprised of $537,000 of commercial real estate loans, $189,000 of commercial and industrial loans and $13.6 million of residential real estate loans. Nonaccrual loans at December 31, 2023 comprised of $548,000 of construction and development loans, $991,000 of commercial real estate loans, $1.3 million of commercial and industrial loans, and $11.9 million of residential real estate loans.

Current wording

The following table sets forth the allocation of our nonperforming assets among our different asset categories as of the dates indicated. Nonperforming loans include nonaccrual loans and loans past due 90 days or more and still accruing interest. Nonperforming assets consist of nonperforming loans plus foreclosed real estate. Nonaccrual loans at March 31, 2025 comprised of $2.5 million of commercial real estate loans, $394,000 of commercial and industrial loans and $13.9 million of residential real estate loans. Nonaccrual loans at December 31, 2024 comprised of $3.3 million of commercial real estate loans, $526,000 of commercial and industrial loans, and $14.2 million of residential real estate loans.

Previous wording

The allowance for credit losses was $18.6 million at September 30, 2024 compared to $18.1 million at December 31, 2023, an increase of $477,000, or 2.6%. The increase was primarily due to the increase in reserves allocated to our individually analyzed loans, as well as the increase in general reserves allocated to our commercial real estate loan portfolio due to higher loan balances, partially offset by the decrease in the general reserves allocated to our residential mortgage loan portfolio as a large amount of residential mortgage loans were sold during the nine months ended September 30, 2024.

Current wording

The allowance for credit losses was $18.6 million at March 31, 2025 compared to $18.7 million at December 31, 2024, a decrease of $152,000, or 0.8%. The decrease was primarily due to the decrease in reserves allocated to our residential real estate loan portfolio and individually analyzed loans, as well as a $173,000 charge-off on one commercial and industrial loan during the three months ended March 31, 2025, partially offset by the increase in the general reserves allocated to our commercial real estate loan portfolio.

Previous wording

We maintain a reserve for credit losses that consists of two components, the allowance for credit losses and the allowance for unfunded commitments. The allowance for credit losses provides for the risk of credit losses expected in our loan portfolio and is based on loss estimates derived from a comprehensive quarterly evaluation. The evaluation reflects analyses of individual borrowers for impairment coupled with analysis of historical loss experience in various loan pools that have been grouped based on similar risk characteristics, supplemented as necessary by credit judgment that considers observable trends, conditions, reasonable and supportable forecasts, and other relevant environmental and economic factors. The level of the allowance for credit losses is adjusted by recording an expense or credit through the provision for credit losses. The level of the allowance for unfunded commitments is adjusted by recording an expense or credit in other noninterest expense. The allowance for unfunded commitments was created upon adoption of CECL on January 1, 2023 and had a balance of $216,000 as of September 30, 2024 compared to $294,000 as of September 30, 2023.

Current wording

We maintain a reserve for credit losses that consists of two components, the allowance for credit losses and the allowance for unfunded commitments. The allowance for credit losses provides for the risk of credit losses expected in our loan portfolio and is based on loss estimates derived from a comprehensive quarterly evaluation. The evaluation reflects analyses of individual borrowers for impairment coupled with analysis of historical loss experience in various loan pools that have been grouped based on similar risk characteristics, supplemented as necessary by credit judgment that considers observable trends, conditions, reasonable and supportable forecasts, and other relevant environmental and economic factors. The level of the allowance for credit losses is adjusted by recording an expense or credit through the provision for credit losses. The level of the allowance for unfunded commitments is adjusted by recording an expense or

Previous wording

Loans that do not share risk characteristics are evaluated on an individual basis. For collateral dependent loans where the Company has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the loan to be provided substantially through the operation or sale of the collateral, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. When repayment is expected to be from the operation of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the loan exceeds the present value

Current wording

Loans that do not share risk characteristics are evaluated on an individual basis. For collateral dependent loans where the Company has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the loan to be provided substantially through the operation or sale of the collateral, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. When repayment is expected to be from the operation of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the loan exceeds the present value of expected cash flows from the operation of the collateral. When repayment is expected to be from the sale of the collateral, expected credit losses are calculated as the amount by which the amortized costs basis of the loan exceeds the fair value of the underlying collateral less estimated cost to sell. The ACL may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the loan.

Previous wording

The impact of utilizing the CECL approach to calculate the allowance for credit losses will be significantly influenced by the composition, characteristics and quality of our loan portfolio, as well as the prevailing economic conditions and forecasts utilized. Material changes to these and other relevant factors may result in greater volatility to the provision for credit losses, and therefore, greater volatility to our reported earnings. See Note 1 and Note 3 of our consolidated financial statements as of September 30, 2024, included elsewhere in this Form 10-Q, for additional information on theon the allowance for credit losses and the allowance for unfunded commitments.

Current wording

The impact of utilizing the CECL approach to calculate the allowance for credit losses will be significantly influenced by the composition, characteristics and quality of our loan portfolio, as well as the prevailing economic conditions and forecasts utilized. Material changes to these and other relevant factors may result in greater volatility to the provision for credit losses, and therefore, greater volatility to our reported earnings. See Note 1 and Note 3 of our consolidated financial statements as of March 31, 2025, included elsewhere in this Form 10-Q, and as of December 31, 2024 in the Company’s 2024 Form 10-K, for additional information on theon the allowance for credit losses and the allowance for unfunded commitments.

Previous wording

It is the policy of management to maintain the allowance for credit losses at a level adequate for risks inherent in the loan portfolio. The FDIC and GA DBF also review the allowance for credit losses as an integral part of their examination process. Based on information currently available, management believes that our allowance for credit losses is adequate. However, the loan portfolio can be adversely affected if economic conditions and the real estate market in our market areas were expected to weaken. The effect of such events, although uncertain at this time, could result in an increase in the level of nonperforming loans and increased credit losses, which could adversely affect our future growth and profitability. No assurance of the ultimate level of credit losses can be given with any certainty.

Current wording

It is the policy of management to maintain the allowance for credit losses at a level adequate for risks inherent in the loan portfolio. The FDIC and GA DBF also review the allowance for credit losses as an integral part of their examination process. Based on information currently available, management believes that our allowance for credit losses is adequate. However, the loan portfolio can be adversely affected if economic conditions and the real estate market in our market areas were to weaken. The effect of such events, although uncertain at this time, could result in an increase in the level of nonperforming loans and increased credit losses, which could adversely affect our future growth and profitability. No assurance of the ultimate level of credit losses can be given with any certainty.

Previous wording

Total deposits decreased $7.8 million, or 0.3%, to $2.72 billion at September 30, 2024 compared to $2.73 billion at December 31, 2023. The decrease was due to a $63.1 million decrease in money market accounts (includes a $23.1 million decrease in brokered money markets), a $41.4 million decrease in interest-bearing demand deposits and a $2.2 million decrease in savings accounts, offset by a $58.5 million increase in time deposits and a $40.4 million increase in noninterest-bearing deposits. As of September 30, 2024 and December 31, 2023, 20.3% and 18.7% of total deposits, respectively, were comprised of noninterest-bearing demand accounts and 79.7% and 81.3%, respectively, of interest-bearing deposit accounts.

Current wording

Total deposits increased $232,000 to $2.74 billion at March 31, 2025 compared to $2.74 billion at December 31, 2024. The increase was due to a $44.5 million increase in money market accounts and a $3.7 million increase in noninterest-bearing deposits, offset by a $36.2 million decrease in time deposits, a $11.6 million decrease in interest-bearing demand deposits and a $239,000 decrease in savings account. As of March 31, 2025 and December 31, 2024, 19.7% and 19.6% of total deposits, respectively, were comprised of noninterest-bearing demand accounts and 80.3% and 80.4%, respectively, of interest-bearing deposit accounts.