MetroCity Bankshares, Inc. (MCBS)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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, 2025 through June 30, 2026 and on our results of operations for the three and six months ended June 30, 2026 and 2025. This discussion and analysis should be read in conjunction with our audited consolidated financial statements and notes thereto for the year ended December 31, 2025 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.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements reflect our current views with respect to, among other things, future events, and our financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “might,” “should,” “could,” “predict,” “potential,” “believe,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “strive,” “projection,” “goal,” “target,” “outlook,” “aim,” “would,” “annualized” and “outlook,” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, estimates, and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.

A number of important factors could cause our actual results to differ materially from those indicated in these forward-looking statements, including those factors discussed elsewhere in this quarterly report and the following:

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion and analysis contains forward-looking statements that involve risk, uncertainties and assumptions. Certain risks, uncertainties and other factors, including but not limited to those set forth under “Cautionary Note Regarding Forward-Looking Statements,” “Risk Factors,” and elsewhere in this Annual Report on Form 10-K, may cause actual results to differ materially from those projected in the forward looking statements. We assume no obligation to update any of these forward-looking statements.

Overview

We are MetroCity Bankshares, Inc., a bank holding company headquartered in the Atlanta, Georgia metropolitan area. We operate through our wholly-owned banking subsidiary, Metro City Bank, a Georgia state-chartered commercial bank that was founded in 2006. We currently operate 29 full-service branch locations in multi-ethnic communities in Alabama, California, Florida, Georgia, New York, New Jersey, Texas and Virginia. We are focused on delivering full-service banking services in diverse multi-ethnic markets, including Asian-American communities in growing metropolitan markets in the Eastern U.S. and Texas

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Prior to December 2014, the Bank operated without a holding company structure. In December 2014, the Bank formed MetroCity Bankshares, Inc. as its holding company, and on, December 31, 2014, MetroCity Bankshares, Inc. acquired all of the outstanding common stock of Metro City Bank in connection with the holding company formation transaction.

We are a bank holding company and we conduct all of our material business operations through the Bank. Accordingly, the discussion and analysis herein relates primarily to activities primarily conducted at the Bank level.

Acquisition of First IC Corporation and First IC Bank

After the close of business on December 1, 2025, the Company completed the acquisition of First IC Corporation. (“First IC”). For each share of First IC common stock, First IC stockholders had the right to receive 0.3729 shares of the Company's common stock and $12.00 in cash, with cash paid in lieu of fractional shares. Total consideration was approximately $202.3 million and consisted of $90.5 million of equity (3,384,066 shares) in the form of the Company’s common stock, plus $111.9 million in cash, including cash paid for stock option cancellations and fractional shares. As of December 31, 2025, First IC had approximately $1.13 billion in total assets, $1.01 billion in total loans and $878.4 million in deposits.

Critical Accounting Policies and Estimates

Our accounting  and reporting policies conform to accounting  principles generally accepted in the United States of America (“GAAP”) and conform to general practices within the industry in which we operate. To prepare financial statements in conformity with GAAP, management makes estimates, assumptions and judgments based on available information. These estimates, assumptions and judgments affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the financial statements and, as this information changes, actual results could differ from the estimates, assumptions  and judgments reflected in the financial statement. In particular, management has identified several accounting policies that, due to the estimates, assumptions and judgments inherent in those policies, are critical in understanding our financial statements.

The following is a discussion of the critical accounting policies and significant estimates that require us to make complex and subjective judgments. Additional information about these policies can be found in Note 1 of our consolidated financial statements as of December 31, 2025, included elsewhere in this Annual Report on Form 10-K.

Reserve for Credit Losses

A consequence of lending activities is that we may incur credit losses. The amount of such losses will vary depending upon the risk characteristics of the loan lease portfolio as affected by economic conditions including, among others, volatility in rising interest rates and the financial performance of borrowers.

The reserve for credit losses consists of the allowance for credit losses (“ACL”) and the allowance for unfunded commitments. We estimate the reserve for credit losses using the Current Expected Credit Losses (“CECL”) model, which is based on an expected loss methodology. The estimate of expected credit losses under the CECL approach is based on relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. Historical loss experience is generally the starting point for estimating expected credit losses. We then consider whether the historical loss experience should be adjusted for loan-specific risk characteristics or current conditions at the reporting date that did not exist over the period from which historical experience was used. Finally, we consider forecasts about future economic conditions that are reasonable and supportable. The allowance for unfunded commitments represents the expected credit losses on off-balance sheet commitments such as unfunded commitments to extend credit. This allowance is estimated by loan segment at each balance sheet date under the CECL model using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur.

Management’s evaluation of the appropriateness of the reserve for credit losses is often the most critical of accounting estimates for a financial institution. Our determination of the amount of the reserve for credit losses is a critical accounting

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estimate as it requires the use of estimates and significant judgment as to the amount and timing of expected future cash flows, reliance on historical loss rates on homogenous portfolios, consideration of our quantitative and qualitative evaluation of economic factors, and the reliance on our reasonable and supportable forecasts. The reserve for credit losses attributable to each portfolio segment also includes an amount for inherent risks not reflected in the historical analyses. Relevant factors include, but are not limited to, concentrations of credit risk (geographic, large borrower, and industry), changes in underwriting standards, changes in collateral values, experience and depth of lending staff, trends in delinquencies, and the volume and terms of loans.

See Note 1 and Note 4 of our consolidated financial statements as of December 31, 2025, included elsewhere in this Annual Report on Form 10-K, for additional information on the reserve and allowance for credit losses.

Business Combinations

In accordance with applicable accounting guidance, the Company recognizes assets acquired and liabilities assumed at their respective fair values as of the date of acquisition, with the related transaction costs expensed in the period incurred. The Company may use third party valuation specialists to assist in the determination of fair value of certain assets and liabilities at the acquisition date, including loans, core deposit intangibles and time deposits. While the Company uses its best estimates and assumptions to accurately value assets acquired and liabilities assumed on the acquisition date, the estimates are inherently uncertain. The allowance for credit losses on purchased seasoned loans (PSLs) and purchased credit deteriorated (PCD) loans are recognized within business combination accounting.

See Note 1 and Note 2 of our consolidated financial statements as of December 31, 2025, included elsewhere in this Annual Report on Form 10-K, for additional information on the Company’s accounting policies for estimating credit losses on acquired loans and details regarding our acquisition of First IC.

Goodwill and Core Deposit Intangible

The Company has increased its market share through the acquisition of entire financial institutions accounted for under the acquisition method of accounting. For all acquisitions, the Company is required to record assets acquired and liabilities assumed at their fair value, which is an estimate determined by the use of internal or other valuation techniques, which may include the use of third-party specialists. Goodwill is evaluated for impairment at least annually, or more often if warranted, using a combined qualitative and quantitative impairment approach. The initial qualitative approach assesses whether the existence of events or circumstances led to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events and circumstances, the Company determines it is more likely than not that the fair value is less than carrying value, a quantitative impairment test is performed to compare carrying value to the fair value of the reporting unit. If the carrying amount of the reporting unit exceeds its fair value, an impairment loss will be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. The Company’s goodwill relates to acquisitions that are fully integrated into the retail banking operations, which management does not consider to be at risk of failing step one in the near future.

The Company’s core deposit intangibles arise from the acquisition of deposits and represent the fair value of the expected cost savings from a stable, low-cost funding source compared to alternative market funding. Core deposit intangible assets are amortized on a straight-line method over their estimated useful life of 10 years.

Results of Operations

Net Income

Year ended December 31, 2025 compared to year ended December 31, 2024

We recorded net income of $68.5 million for the year ended December 31, 2025 compared to $64.5 million for the year ended December 31, 2024, an increase of $4.0 million, or 6.2%. The increase was due to an increase in net interest income of $12.3 million, an increase in noninterest income of $2.1 million and a decrease in provision for credit losses of

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$834,000, offset by an increase in noninterest expense of $9.9 million and an increase in income tax expense of $1.4 million.

Basic and diluted earnings per common share for the year ended December 31, 2025 was $2.66 and $2.64, respectively, compared to $2.55 and $2.52 for the basic and diluted earnings per common share for the year ended December 31, 2024.

Year ended December 31, 2024 compared to year ended December 31, 2023

We recorded net income of $64.5 million for the year ended December 31, 2024 compared to $51.6 million for the year ended December 31, 2023, an increase of $12.9 million, or 25.0%. The increase was due to an increase in net interest income of $16.7 million and an increase in noninterest income of $4.9 million, offset by an increase in noninterest expense of $5.7 million, an increase in income tax expense of $2.5 million and an increase in provision for credit losses of $531,000.

Basic and diluted earnings per common share for the year ended December 31, 2024 was $2.55 and $2.52, respectively, compared to $2.05 and $2.02 for the basic and diluted earnings per common share for the year ended December 31, 2023.

Financial Performance Ratios

The following table sets forth our return on average assets, return on average equity, dividend payout ratio and average shareholders’ equity to average assets ratio for the periods indicated:

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