MetroCity Bankshares, Inc. (MCBS) stock intrinsic value fair value estimate & owner earnings analysis

MetroCity Bankshares is the holding company for Metro City Bank, a Georgia-chartered community bank founded in 2006 with 29 branches in Alabama, California, Florida, Georgia, New York, New Jersey, Texas and Virginia. It serves small businesses and households in multi-ethnic communities, with a particular focus on Asian-American communities. Its money comes from interest on commercial real estate, SBA-guaranteed and other business loans, plus fees and gains on selling the guaranteed portion of SBA loans. How we measured earnings. For a bank we start from the cash generated by operations and take out the swings caused by timing: changes in loans held for sale, accrued interest, other assets and liabilities, and state tax credit balances. We then subtract stock compensation as a real cost and subtract capital spending on branches and equipment (capital spending is small, under 10% of earnings every year, so we deducted all of it rather than trying to split out growth). On that basis earnings per diluted share were about $1.36 (2018), $1.78 (2019), $1.68 (2020), $2.78 (2021), $2.52 (2022), $1.99 (2023), $2.47 (2024) and $2.50 (2025). The company stopped originating residential mortgages for sale after 2019 (originations fell from $549 million in 2019 to $7 million in 2020 and none afterwards), so 2018 to 2020 describe a different business and we rely on 2021 to 2025. The median of those five years is $2.50 per share. Two things in 2025 are left as reported: residential mortgage sale gains of $3.9 million (2025) and $1.9 million (2024) do not show up as operating cash, and the 2025 figures include $4.7 million of merger costs that will not repeat. The First IC acquisition. On December 1, 2025 the bank bought First IC Corporation (First IC Bank, Georgia) for $202.3 million: $90.5 million in stock (3,384,066 new shares) and $111.9 million in cash, with $56.0 million booked as goodwill. Only one month of First IC is in the 2025 figures, so the 2025 result understates the business as it now exists. In the first half of 2026 net income was $44.4 million versus $33.1 million a year earlier, and diluted shares rose from about 25.7 million to about 29.0 million. Earnings per share still rose, so the deal is adding more than it dilutes. We therefore lift the starting level from $2.50 to $2.75 per share. This is deliberately below the first-half 2026 pace (net income of roughly $3.07 per diluted share if annualized) because only two quarters exist since closing and total assets fell from $4.77 billion to $4.52 billion and deposits from $3.65 billion to $3.49 billion in those six months, so we have not assumed that the strong pace persists. Growth reconciliation. Actual 2025 earnings per share grew about 1.5% over 2024. The base case assumes $2.75 in year one, about 10% higher. The dated reason is the December 1, 2025 closing of First IC, which contributed one month to 2025 and a full year from 2026, supported by the two quarters of 2026 results above. After that first step we credit no growth at all: earnings per share have been flat to lower since 2021 ($2.78 then, $2.50 now), and we did not find a mechanism that has compounded per-share earnings through a cycle, so loan growth, branch openings, further acquisitions and margin improvement are excluded. Base case: $34.20 per share. $2.75 of earnings per share each year for 15 years, then a straight-line fade to zero over the following 20 years. The bank has operated for 20 years and holds $3.5 billion of deposits, but we cannot name anything that keeps its earning power beyond a generation, so the far years are faded rather than extended. No debt is subtracted; the earnings are already after interest paid. Bear case: $18.80 per share. Earnings per share fall to $2.00, roughly the 2023 level when deposit costs surged, and stay there for 10 years before fading to zero over the next 10. Named risks: hotels make up $600.3 million, or 38.5%, of commercial real estate loans and 78.0% of the non-owner-occupied portfolio; nonperforming loans rose from $14.7 million to $18.0 million to $25.2 million over the last three year-ends; and the business is concentrated in Asian-American communities, which the company itself lists as a risk. Bull case: $38.60 per share. The first-half 2026 pace holds, helped by the operating synergies the company describes for First IC, at $3.10 per share for 15 years, then a fade to zero over 20 years. No further growth is credited. What we tested. The main assumption is that First IC adds about $15 million a year of earnings. The evidence: quarterly net income rose from $16.8 million (second quarter 2025) to $22.1 million (second quarter 2026). Against that, the balance sheet shrank in the first half of 2026 while earnings rose, so we did not treat the higher quarterly pace as permanent and set the starting level below it. The purchase-price allocation for First IC is described as preliminary, so figures may be refined. Shares appear to be worth $34.20 in the middle case; the margin-of-safety price is $19.00, close to the bear case, because of the hotel concentration, rising nonperforming loans and the recently completed acquisition.