-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E/dwGRmxSwDrTSMPLXzNLD9P4uWAC/cQ/qLPGjXtRTES9ZFFA2aOmyuaD/PiQKmX rUWG5ZlpMH/MuObO4WaQ8A== 0000890566-00-000836.txt : 20000517 0000890566-00-000836.hdr.sgml : 20000517 ACCESSION NUMBER: 0000890566-00-000836 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: METROCORP BANCSHARES INC CENTRAL INDEX KEY: 0001068300 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 760579161 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-25141 FILM NUMBER: 636384 BUSINESS ADDRESS: STREET 1: 9600 BELLAIRE BLVD SUITE 152 CITY: HOUSTON STATE: TX ZIP: 77036 BUSINESS PHONE: 7137763876 10-Q 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-Q MARK ONE [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 ------------------------ COMMISSION FILE NUMBER 000-25141 ------------------------ METROCORP BANCSHARES, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) TEXAS 76-0579161 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 9600 BELLAIRE BOULEVARD, SUITE 252 HOUSTON, TEXAS 77036 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES INCLUDING ZIP CODE) (713) 776-3876 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) ------------------------ SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: None SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: Common Stock, par value $1.00 per share (TITLE OF CLASS) ------------------------ 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 [X] No [ ] ------------------------ As of May 4, 2000, the number of outstanding shares of Common Stock was 6,944,566. ================================================================================ PART I FINANCIAL INFORMATION ITEM 1. CONDENSED FINANCIAL STATEMENTS. METROCORP BANCSHARES, INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA) MARCH 31, DECEMBER 31, 2000 1999 ------------ ------------ (UNAUDITED) ASSETS Cash and cash equivalents: Cash and due from banks......... $ 31,659 $ 29,945 Federal funds sold and other temporary investments......... 24,387 6,471 ------------ ------------ Total cash and cash equivalents............. 56,046 36,416 Investment securities available-for-sale, at fair value.............................. 79,729 74,959 Investment securities held-to-maturity, at amortized cost............................... 34,306 35,106 Loans, net........................... 483,222 488,132 Premises and equipment, net.......... 7,730 8,106 Accrued interest receivable.......... 3,592 3,855 Deferred income taxes................ 6,595 6,477 Due from customers on acceptances.... 1,786 831 Other real estate and repossessed assets, net........................ 461 490 Other assets......................... 5,845 6,217 ------------ ------------ Total assets............... $679,312 $660,589 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Noninterest-bearing............. $101,690 $ 96,253 Interest-bearing................ 458,552 448,183 ------------ ------------ Total deposits............. 560,242 544,436 Other borrowings..................... 55,536 55,636 Accrued interest payable............. 864 1,558 Income taxes payable................. 1,361 -- Acceptances outstanding.............. 1,786 831 Other liabilities.................... 6,041 5,548 ------------ ------------ Total liabilities.......... 625,830 608,009 ------------ ------------ Commitments and contingencies........ -- -- Shareholders' equity: Preferred stock, $1.00 par value, 2,000,000 shares authorized, none of which are issued and outstanding........ -- -- Common stock, $1.00 par value, 20,000,000 shares authorized; 7,122,748 issued and 6,949,748 are outstanding at March 31, 2000.......................... 7,123 7,122 Additional paid-in capital........... 25,648 25,646 Retained earnings.................... 24,843 23,124 Accumulated other comprehensive income............................. (2,761) (3,145) Treasury stock, at cost......... (1,371) (167) ------------ ------------ Total shareholders' equity.................. 53,482 52,580 ------------ ------------ Total liabilities and shareholders' equity.... $679,312 $660,589 ============ ============ See accompanying Notes to Condensed Consolidated Financial Statements 2 METROCORP BANCSHARES, INC. CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 31, -------------------- 2000 1999 ------- ------- Interest income: Loans........................... $13,056 $10,299 Investment Securities: Taxable....................... 1,615 1,680 Tax-exempt.................... 268 248 Federal funds sold and other temporary investments......... 231 170 ------- ------- Total interest income...... 15,170 12,397 ------- ------- Interest expense: Time deposits................... 4,238 3,295 Demand and savings deposits..... 1,063 927 Other borrowings................ 740 628 ------- ------- Total interest expense..... 6,041 4,850 ------- ------- Net interest income.................. 9,129 7,547 Provision for loan losses............ 699 1,010 ------- ------- Net interest income after provision for loan losses.................... 8,430 6,537 ------- ------- Noninterest income: Service charges on deposit accounts...................... 872 1,018 Other loan-related fees......... 174 372 Letters of credit commissions and fees...................... 125 102 Gain on sale of investment securities, net............... -- 24 Other noninterest income........ 303 73 ------- ------- Total noninterest income... 1,474 1,589 ------- ------- Noninterest expense: Employee compensation and benefits...................... 3,235 2,703 Occupancy....................... 1,436 1,204 Other real estate, net.......... (32) 44 Data processing................. 42 207 Professional fees............... 519 178 Advertising..................... 96 130 Other noninterest expense....... 1,193 903 ------- ------- Total noninterest expense................. 6,489 5,369 ------- ------- Income before provision for income taxes.............................. 3,415 2,757 Provision for income taxes........... 1,278 896 ------- ------- Net income........................... $ 2,137 $ 1,861 ======= ======= Earnings per common share: Basic........................... $ 0.30 $ 0.26 Diluted......................... $ 0.30 $ 0.26 Weighted average shares outstanding: Basic........................... 7,014 7,095 Diluted......................... 7,014 7,095 See accompanying Notes to Condensed Consolidated Financial Statements 3 METROCORP BANCSHARES, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (IN THOUSANDS) (UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 31, -------------------- 2000 1999 --------- --------- Net income........................... $ 2,137 $ 1,861 --------- --------- Other comprehensive income (loss), net of tax: Unrealized gains (losses) on investment securities, net: Unrealized holding gains (losses) arising during the period....................... 384 (439) Less: reclassification adjustment for gains included in net income -- (16) --------- --------- Other comprehensive income (loss)......................... 384 (455) --------- --------- Total comprehensive income...... $ 2,521 $ 1,406 ========= ========= See accompanying Notes to Condensed Consolidated Financial Statements 4 METROCORP BANCSHARES, INC. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999 (IN THOUSANDS) (UNAUDITED)
ACCUMULATED COMMON STOCK ADDITIONAL OTHER TREASURY ----------------- PAID-IN RETAINED COMPREHENSIVE STOCK, SHARES AT PAR CAPITAL EARNINGS INCOME (LOSS) AT COST TOTAL --------- ------ ---------- --------- ------------- -------- ------- Balance at January 1, 1999........... 7,005 $7,005 $ 24,569 $ 17,702 $ 748 -- $50,024 Issuance of common stock............. 100 100 916 -- -- -- 1,016 Repurchase of common stock........... -- -- -- -- -- -- -- Other comprehensive loss............. -- -- -- -- (455) -- (455) Net income........................... -- -- -- 1,861 -- -- 1,861 Dividend payment..................... -- -- -- (426) -- -- (426) --------- ------ ---------- --------- ------------- -------- ------- Balance at March 31, 1999............ 7,105 $7,105 $ 25,485 $ 19,137 $ 293 $ -- $52,020 ========= ====== ========== ========= ============= ======== ======= ACCUMULATED COMMON STOCK ADDITIONAL OTHER TREASURY ----------------- PAID-IN RETAINED COMPREHENSIVE STOCK, SHARES AT PAR CAPITAL EARNINGS INCOME (LOSS) AT COST TOTAL --------- ------ ---------- --------- ------------- -------- ------- Balance at January 1, 2000........... 7,102 $7,122 $ 25,646 $ 23,124 $(3,145) $ (167) $52,580 Issuance of common stock............. 1 1 2 -- -- -- 3 Repurchase of common stock........... (153) -- -- -- -- (1,204) (1,204) Other comprehensive income........... -- -- -- -- 384 -- 384 Net income........................... -- -- -- 2,137 -- -- 2,137 Dividend payment..................... -- -- -- (418) -- -- (418) --------- ------ ---------- --------- ------------- -------- ------- Balance at March 31, 2000............ 6,950 $7,123 $ 25,648 $ 24,843 $(2,761) $ (1,371) $53,482 ========= ====== ========== ========= ============= ======== =======
See accompanying Notes to Condensed Consolidated Financial Statements 5 METROCORP BANCSHARES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 31, --------------------- 2000 1999 --------- ---------- Cash flows from operating activities: Net income......................... $ 2,137 $ 1,861 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation.................... 551 513 Provision for loan losses....... 699 1,010 Gain on sales of securities, net............................ -- (24) Loss (gain) on sale of other real estate.................... (39) 22 Deferred loan fees.............. 73 (150) Deferred income taxes........... (315) (579) Changes in: Accrued interest receivable... 263 17 Accrued interest payable...... (694) 1,041 Other assets.................. 372 255 Other liabilities............. 502 489 Income taxes payable.......... 1,361 (175) Net cash provided by operating activities.... 4,910 4,280 --------- ---------- Cash flows from investing activities: Purchases of investments available-for-sale............. (5,058) (10,042) Proceeds from sales, maturities and principal paydowns of investments available-for-sale............. 869 5,062 Purchases of investments held-to-maturity............... -- (1,857) Proceeds from maturities and principal paydowns of investments held-to-maturity... 800 1,745 Net change in loans............. 2,909 (16,804) Proceeds from sales of other real estate.................... (1,297) 434 Purchases of premises and equipment...................... (175) (524) --------- ---------- Net cash used by investing activities.............. 642 (21,986) --------- ---------- Cash flows from financing activities: Net change in: Deposits........................ 15,806 (176) Other borrowings................ (100) 10,573 Federal funds sold.............. -- -- Net proceeds from issuance of common stock.................... 3 1,016 Treasury stock sold (purchased), net............................. 1,204 -- Dividends paid..................... (427) (426) --------- ---------- Net cash provided by financing activities.... 14,708 10,987 --------- ---------- Net increase (decrease) in cash and cash equivalents................... 19,630 (6,719) Cash and cash equivalents at beginning of period................ 36,416 35,893 --------- ---------- Cash and cash equivalents at end of period............................. $ 56,046 $ 29,174 ========= ========== See accompanying Notes to Condensed Consolidated Financial Statements 6 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The unaudited condensed consolidated financial statements include the accounts of MetroCorp Bancshares, Inc. (the "Company") and its wholly-owned subsidiary MetroBank, National Association (the "Bank"). All material intercompany accounts and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements were prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q. In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal and recurring adjustments, necessary to present fairly the Company's consolidated financial position at March 31, 2000, the Company's consolidated results of operations for the three months ended March 31, 2000 and 1999, consolidated cash flows for the three months ended March 31, 2000 and 1999 and consolidated changes in shareholders' equity for the three months ended March 31, 2000 and 1999. Interim period results are not necessarily indicative of results of operations or cash flows for a full-year period. The 1999 year-end condensed consolidated balance sheet and statement of changes in shareholders' equity data were derived from audited financial statements, but do not include all disclosures required by generally accepted accounting principles. These financial statements and the notes thereto should be read in conjunction with the Company's annual report on Form 10-K for the year ended December 31, 1999. 2. EARNING PER COMMON SHARE Basic earnings per share ("EPS") is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted EPS is computed by dividing net income available to common shareholders by the weighted-average number of common shares and potential dilutive common shares outstanding during the period. Potential dilutive common shares are computed using the treasury stock method. FOR THE THREE MONTHS ENDED MARCH 31, ------------------ 2000 1999 ------ ------ (IN THOUSANDS, EXCEPT SHARE DATA) Net income available to common shareholders....................... $2,137 $1,861 ====== ====== Weighted-average common shares outstanding........................ 7,014 7,095 Potentially dilutive common shares from options....................... -- -- ------ ------ Weighted -- average common shares and potentially diluted common shares............................. 7,014 7,095 ====== ====== Basic EPS............................ $ 0.30 $ 0.26 Diluted EPS.......................... $ 0.30 $ 0.26 3. NEW ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." ("SFAS No. 133"). SFAS No. 133 becomes effective for reporting periods beginning after June 15, 2000, and will not be applied retroactively. SFAS No. 133 establishes accounting and reporting standards for derivatives instruments and hedging activities. Under the standard, all derivatives must be measured at fair value and recognized as either assets or liabilities in the financial condition. In addition, hedge accounting should only be provided for transactions that meet certain specified criteria. The accounting for changes in fair value (gains and losses) of a derivative is dependent on the intended use of the derivative and its designation. Derivatives may be used to: 1) hedge exposure to change the fair value of a recognized asset or liability or from a commitment, referred to as a fair value hedge, 2) hedge exposure to variable cash flow of forecasted transactions, referred to as cash flow hedge, or 3) hedge foreign currency exposure. Management is currently assessing the potential impact of SFAS No. 133 on future corporate operations. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS Statements and financial discussion and analysis contained in this Quarterly Report on Form 10-Q and documents incorporated herein by reference that are not historical facts are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements describe the Company's future plans, strategies and expectations, are based on assumptions and involve a number of risks and uncertainties, many of which are beyond the Company's control. The important factors that could cause actual results to differ materially from the results, performance or achievements expressed or implied by the forward-looking statements include, without limitation: o Changes in interest rates and market prices, which could reduce the Company's net interest margins, asset valuations and expense expectations; o Changes in the levels of loan prepayments and the resulting effects on the value of the Company's loan portfolio; o Changes in local economic and business conditions which adversely affect the ability of the Company's customers to transact profitable business with the Company, including the ability of borrowers to repay their loans according to their terms or a change in the value of the related collateral; o Increased competition for deposits and loans adversely affecting rates and terms; o The Company's ability to identify suitable acquisition candidates; o The timing, impact and other uncertainties of the Company's ability to enter new markets successfully and capitalize on growth opportunities; o Increased credit risk in the Company's assets and increased operating risk caused by a material change in commercial, consumer and/or real estate loans as a percentage of the total loan portfolio; o The failure of assumptions underlying the establishment of and provisions made to the allowance for loan losses; o Changes in the availability of funds resulting in increased costs or reduced liquidity; o Increased asset levels and changes in the composition of assets and the resulting impact on our capital levels and regulatory capital ratios; o The Company's ability to acquire, operate and maintain cost effective and efficient systems without incurring unexpectedly difficult or expensive but necessary technological changes; o The loss of senior management or operating personnel and the potential inability to hire qualified personnel at reasonable compensation levels; and o Changes in statutes and government regulations or their interpretations applicable to bank holding companies and our present and future banking and other subsidiaries, including change in tax requirements and tax rates. All written or oral forward-looking statements attributable to the Company are expressly qualified in their entirety by these cautionary statements. 8 GENERAL. Net income for the quarters ended March 31, 2000 and 1999 was $2.1 million and $1.9 million, respectively. The increase in net income was primarily due to higher net interest income resulting from a greater volume of loans and investment securities. Basic and diluted EPS for the three months ended March 31, 2000 were $0.30, compared to $0.26 for the same period in 1999. At March 31, 2000, total assets and net loans were $679.3 million and $483.2 million compared with $660.6 million and $488.1 million at December 31, 1999. Total liabilities and total shareholders' equity at March 31, 2000 were $625.8 million and $53.5 million, compared with $608.0 million and $52.6 million at December 31, 1999. NET INTEREST INCOME. Net interest income for the quarter ended March 31, 2000 increased by $1.6 million or 20.9% to $9.1 million compared with $7.5 million for the same period in 1999. The increase was principally due to a $2.8 million increase in interest income on loans partially offset by an increase of $1.2 million in interest expense on deposits and other borrowings. The increase in the loan and securities portfolios, coupled with reduced interest expense, resulted in improved net interest margins and net interest spreads which increased from 5.43% to 5.91%, and from 4.51% to 5.04%, for the quarters ended March 31, 1999 and 2000, respectively. Interest income for the quarter ended March 31, 2000 increased to $15.2 million from $12.4 million for the same period in 1999. The increase was driven by growth in the average loan portfolio of $70.4 million or 16.7% as well as an increase in the yield on average loans, which increased to 10.60% for the three months ended March 31, 2000, from 9.76% in the same period in 1999. The average securities portfolio decreased by $8.8 million or 7.3%, while its yield rose 34 basis points from 6.34% in 1999 to 6.68% as of March 31, 2000 as a result of change in the mix of the investment portfolio from agency securities into mortgage-backed securities. Interest expense increased $1.2 million to $6.1 million at March 31, 2000 compared with $4.9 million at March 31, 1999. The increase was the result of higher interest paid on time deposits and improved funding efficiency resulting from an $8.4 million or 9.4% increase in average noninterest-bearing deposits. The Company views time deposits as a stable means of supporting loan growth. The Company believes that based on its historical experience its large time deposits have core-type characteristics. The Company anticipates that this source of funding will continue to sustain a portion of the Company's assets growth in the future. 9 The following table presents the total dollar amount of interest income from average interest-earning assets and the resultant yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates. No tax-equivalent adjustments were made and all average balances are yearly average balances. Non-accruing loans have been included in the tables as loans having a zero yield.
THREE MONTHS ENDED MARCH 31, -------------------------------------------------------------------------- 2000 1999 ----------------------------------- ----------------------------------- AVERAGE INTEREST AVERAGE AVERAGE INTEREST AVERAGE OUTSTANDING EARNED/ YIELD/ OUTSTANDING EARNED YIELD/ BALANCE PAID RATE BALANCE PAID RATE ----------- --------- ------- ----------- --------- ------- (DOLLARS IN THOUSANDS) ASSETS Interest-earning assets: Total loans..................... $ 492,472 $ 13,056 10.60% $ 422,111 $ 10,299 9.76% Taxable securities.............. 91,100 1,615 7.09 103,020 1,680 6.52 Tax-exempt securities........... 21,653 268 4.95 18,582 248 5.34 Federal funds sold and other temporary investments.............. 12,561 231 7.36 12,493 170 5.44 ----------- --------- ----------- --------- Total interest-earning assets........ 617,786 15,170 9.82% 556,206 12,397 8.92% ----------- --------- ----------- --------- Less allowance for loan losses....... (7,870) (6,218) ----------- ----------- Total interest-earning assets, net of allowance for loan losses.......... 609,916 549,988 Nonearning assets.................... 56,376 38,902 ----------- ----------- Total assets............... $ 666,292 $ 588,890 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Interest-bearing liabilities: Interest-bearing demand deposits..... $ 41,076 308 3.00% $ 32,761 $ 204 2.49% Savings and money market accounts.... 93,459 755 3.23 97,257 723 2.97 Time deposits........................ 315,376 4,238 5.38 258,917 3,295 5.09 Federal funds purchased and securities sold under repurchase agreements......................... 47 1 5.99 25,000 306 4.90 Other borrowings..................... 55,561 739 5.32 26,345 322 4.89 ----------- --------- ----------- --------- Total interest-bearing liabilities... 505,519 6,041 4.78% 440,280 4,850 4.41% --------- --------- Noninterest-bearing liabilities: Noninterest-bearing demand deposits...................... 97,602 89,183 Other liabilities............... 10,463 7,520 Total liabilities.......... 613,584 536,983 ----------- ----------- Shareholders' equity................. 52,708 51,907 ----------- ----------- Total liabilities and shareholders' equity............................. $ 666,292 $ 588,890 =========== =========== Net interest income.................. $ 9,129 $ 7,547 ========= ========= Net interest spread.................. 5.04% 4.51% Net interest margin.................. 5.91% 5.43%
10 The following table presents the dollar amount of changes in interest income and interest expense for the major components of interest-earning assets and interest-bearing liabilities and distinguishes between the increase related to higher outstanding balances and changes in interest rates. For purposes of this table, changes attributable to both rate and volume have been allocated to rate. THREE MONTHS ENDED MARCH 31, 2000 VS. 1999 ------------------------------ INCREASE (DECREASE) DUE TO ------------------- VOLUME RATE TOTAL ------- --------- ------ (IN THOUSANDS) INTEREST-EARNING ASSETS: Total loans..................... $(1,404) $ 4,161 $2,757 Securities...................... (248) 203 (45) Federal funds sold and other temporary investments......... (179) 240 61 ------- --------- ------ Total increase (decrease) in interest income...... (1,831) 4,604 2,773 INTEREST-BEARING LIABILITIES: Interest-bearing demand deposits...................... (105) 209 104 Savings and money market accounts...................... (209) 241 32 Time deposits................... 45 898 943 Federal funds purchased......... (306) 1 (305) Other borrowings................ 177 240 417 ------- --------- ------ Total increase (decrease) in interest expense..... (398) 1,589 1,191 ------- --------- ------ Increase (decrease) in net interest income............................. $(1,433) $ 3,015 $1,582 ======= ========= ====== PROVISION FOR LOAN LOSSES. Provisions for loan losses are charged to income to bring the Company's allowance for loan losses to a level deemed appropriate by management. The March 31, 2000 quarter end provision for loan losses decreased by $311,000 or 30.8% to $699,000 compared with the provision as of March 31, 1999, as management has determined this amount is adequate to meet the Company's historical loan loss experience and the current size and composition of the loan portfolio. NONINTEREST INCOME. Noninterest income for the quarters ended March 31, 2000 and 1999 was $1.5 million and $1.6 million, respectively. The majority of the $115,000 decrease in noninterest income resulted from decreases in service charges on deposit accounts and other loan related fees. The decrease in service charges was due to higher average balances in deposit accounts for the first quarter of 2000. No loan sales occurred in the quarter ended March 31, 2000; therefore the loan related fees received were lower than prior year amounts. The following table presents the major categories of noninterest income: FOR THE THREE MONTHS ENDED MARCH 31, ------------------ 2000 1999 ------ ------ (IN THOUSANDS) Service charges on deposit accounts........................... $ 872 $1,018 Other loan-related fees.............. 174 372 Letters of credit commissions and fees............................... 125 102 Gain on sale of investment securities, net.................... -- 24 Other noninterest income............. 303 73 ------ ------ Total noninterest income........ $1,474 $1,589 ====== ====== NONINTEREST EXPENSE. For the quarters ended March 31, 2000 and 1999, noninterest expense totaled $6.5 million and $5.4 million, respectively. The $1.1 million or 20.82% increase was primarily due to higher employee benefits and compensation, and occupancy expense related to the new branches opened in late November 1999. The Company's efficiency ratio was 60.0% and 58.9% as of March 31, 2000 and 1999, respectively. The relative stability in the efficiency ratio over the last twelve months reflects the Company's continued efforts to control operating expenses and gain other efficiencies through such means 11 as upgrading its centralized computer systems. The following table presents the major categories in noninterest expense: FOR THE THREE MONTHS ENDED MARCH 31, -------------------- 2000 1999 --------- --------- (IN THOUSANDS) Employee compensation and benefits... $ 3,235 $ 2,703 Nonstaff expenses: Occupancy....................... 1,436 1,204 Other real estate, net.......... (32) 44 Data processing................. 42 207 Professional, legal and accounting fees............... 519 383 Advertising..................... 96 130 Director compensation........... 124 66 Printing and supplies........... 93 143 Telecommunications.............. 141 124 Other noninterest expense....... 835 365 --------- --------- Total non-staff expenses...... 3,254 2,666 --------- --------- Total noninterest expense..... $ 6,489 $ 5,369 ========= ========= Employee compensation and benefits expense for the quarters ended March 31, 2000 and 1999 was $3.2 million and $2.7 million, respectively, reflecting an increase of $500,000 or 18.5%. The increase in the first quarter 2000 resulted primarily from the costs associated with a change in mix of professional versus clerical employees and the establishment of the Boone Road (Houston) and Garland (Dallas) branches, which opened in late November 1999. Total full-time equivalent employees at March 31, 2000 and 1999 were 285 and 286, respectively. Non-staff expenses for the quarter ended March 31, 2000 increased by $588,000 or 22.0% to $3.2 million when compared with the same period in 1999. The increase in the first quarter of 2000 was primarily due to an increase in other noninterest expenses of $470,000. Of this amount there were operational losses of $200,000 caused by fraudulent endorsements of several cashiers' checks, increased business development expenses of $100,000, and various other miscellaneous expenses. Professional fees increased $126,000 primarily due to legal and professional fees associated with problem loan and other bank related expenses. Occupancy expense is higher due to the increased number of operating branches as well as the cost of technology upgrades in the branches. Director compensation increased due to the monthly accruals made for year-end stock bonuses which may be awarded to the Company's directors pursuant to the terms of the Company's Non-Employee Director Stock Bonus Plan. INCOME TAXES. The provision for income taxes as a percentage of net income before taxes increased from 32.5% to 37.4% for the quarter ended March 31, 2000 as a result of higher taxable income and a reduction in nontaxable income related to a decrease in the tax-exempt municipal securities portfolio. FINANCIAL CONDITION LOAN PORTFOLIO. Total loans decreased from $495.7 million at year-end December 31, 1999 to $491.6 million at March 31, 2000. The $4.1 million or .8% decline in total loans reflected the seasonality of loan demand as well as the Company's increased efforts to acquire depository relationships with each banking customer. At March 31, 2000 and December 31, 1999, the ratio of total loans to total deposits was 90.96% and 88.05%, respectively. For the same periods, total loans represented 75.80% and 73.12% of total assets, respectively. 12 The following table summarizes the loan portfolio of the Company by type of loan:
AS OF MARCH 31, AS OF DECEMBER 31, ------------------- ------------------- 2000 1999 ------------------- ------------------- AMOUNT PERCENT AMOUNT PERCENT -------- ------- -------- ------- (IN THOUSANDS) Commercial and industrial............ $297,383 59.87% $298,150 59.55% Real estate mortgage Residential.................... 10,683 2.15 10,934 2.18 Commercial..................... 121,981 24.56 126,363 25.24 Real estate construction Residential..................... 11,112 2.24 11,348 2.27 Commercial...................... 29,870 6.01 28,661 5.72 Consumer and other................... 11,598 2.34 11,550 2.31 Factored receivables................. 14,049 2.83 13,700 2.74 -------- ------- -------- ------- Gross loans.......................... 496,676 100.00% 500,706 100.00% -------- ======= -------- ======= Less: unearned discounts, interest and deferred fees.................. (5,111) (5,037) -------- -------- Total loans..................... $491,565 $495,669 ======== ========
NONPERFORMING ASSETS. Nonperforming assets at March 31, 2000 and December 31, 1999 were $4.2 million and $7.0 million, respectively. The decrease is due to several loans which were paid off during the first quarter of 2000, as well as the establishment of the Bank's Special Asset Department. This department handles the identification and collection of potentially problem loans. Included in the nonperforming assets are the portions guaranteed by the United States Small Business Administration (the "SBA"), the Overseas Chinese Community Guaranty Fund ("OCCGF") which is sponsored by the government of Taiwan, and the Export Import Bank of the United States (the "Ex-Im Bank"), an agency of the U.S. government, which were $1.6 million and $1.8 million at March 31, 2000 and December 31, 1999, respectively. The following table presents information regarding nonperforming assets at the periods indicated: AS OF MARCH 31, AS OF DECEMBER 31, 2000 1999 --------------- ------------------ (IN THOUSANDS) Nonaccrual loans..................... $ 3,741 $6,552 Accruing loans 90 days or more past due................................ -- -- Other real estate.................... 461 490 --------------- -------- Total nonperforming assets.................. $ 4,202 $7,042 =============== ======== Nonperforming assets to total loans and other real estate.............. 0.85% 1.42% Nonperforming assets to total assets............................. 0.38% 0.78% ALLOWANCE FOR LOAN LOSSES. For the quarter ended March 31, 2000, net loan recoveries were $108,000 or 0.02% of average loans outstanding, compared with charge offs of $4.1 million or 0.9% of average loans outstanding for the year ended December 31, 1999. During the three months ended March 31, 2000, the provision for loan losses decreased by $311,000 to $699,000 when compared with the $1.0 million provision made for the first quarter in 1999. This decrease was necessary to meet the Company's goal to maintain an overall allowance of 1.6% of total loans for the year ended December 31, 2000. At March 31, 2000 and December 31, 1999, the allowance for loan losses aggregated to $8.3 million and $7.5 million, or 1.70% and 1.52% of total loans, respectively. 13 The following table presents an analysis of the allowance for loan losses and other related data: AS OF MARCH 31, AS OF DECEMBER 31, ---------------- ------------------- 2000 1999 ---------------- ------------------- (IN THOUSANDS) Average loans outstanding............ $497,553 $ 461,500 ================ =================== Total loans outstanding at end of period............................. $496,676 $ 500,706 ================ =================== Allowance for loan losses at beginning of period................ $ 7,537 $ 6,119 Provision for loan losses............ 699 5,550 Chargeoffs: Commercial and industrial....... (342) (3,563) Real estate -- mortgage......... -- (32) Real estate -- construction..... -- -- Consumer and other.............. (103) (807) ---------------- ------------------- Total chargeoffs........... (445) (4,402) ---------------- ------------------- Recoveries: Commercial and industrial....... 536 94 Real estate -- mortgage......... -- -- Real estate -- construction..... -- -- Consumer and other.............. 17 176 ---------------- ------------------- Total recoveries........... 553 270 ---------------- ------------------- Net loan chargeoffs.................. 108 (4,132) ---------------- ------------------- Allowance for loan losses at end of period............................. $ 8,343 $ 7,537 ================ =================== Ratio of allowance to end of period total loans........................ 1.70% 1.52% Ratio of net loan chargeoffs to average loans...................... (0.02) 0.90 Ratio of allowance to end of period nonperforming loans................ 223.04 115.03 SECURITIES. At March 31, 2000, the securities portfolio totaled $114.0 million, reflecting a decrease of $4.0 million or 3.6% from $110.1 million for the year ended December 31, 1999. The growth was due primarily to an increase in fixed rate mortgage-backed securities which were funded by the sale of lower yielding securities in the last quarter of 1999 and by the increased liquidity from the successful deposit gathering program during the quarter ending March 31, 2000. DEPOSITS. Total deposits for the first quarter of 2000 increased by $15.8 million or 2.9% to $560.2 million at March 31, 2000 from $544.4 million at March 31, 1999. The noninterest-bearing deposits on March 31, 2000 increased by $5.4 million or 5.6% to $101.7 million from $96.2 million at March 31, 1999. The Company's ratios of noninterest-bearing demand deposits to total deposits for March 31, 2000 and December 31, 1999 were 18.1% and 17.7%, respectively. OTHER BORROWINGS. The Company has three ten-year loans totaling $30 million and one short-term loan for $25 million from the Federal Home Loan Bank of Dallas ("FHLB") in an attempt to further leverage its balance sheet and diversify its funding sources. The loans bear interest at the average rate for the March 31, 2000 quarter of 4.82% and 5.98%. Other short-term borrowings principally consist of U.S. Treasury tax note option accounts and have a maturity of 14 days or less. Additionally, the Company had several unused, unsecured lines of credit with correspondent banks totaling $17.0 million and $12.0 million at March 31, 2000 and 1999, respectively. CAPITAL RESOURCES. Shareholders' equity increased from $52.5 million at December 31, 1999 to $53.4 million at March 31, 2000, an increase of $0.9 million or 1.7%. This increase was primarily due to net income of $2.1 million for the quarter ended March 31, 2000, which was partially offset by the repurchase of treasury stock for $1.2 million. 14 The following table provides a comparison of the Company's and the Bank's leverage and risk-weighted capital ratios as of March 31, 2000 to the minimum and well-capitalized regulatory standards: ACTUAL RATIO MINIMUM WELL AT REQUIRED CAPITALIZED MARCH 31, 2000 ------- ----------- -------------- THE COMPANY Leverage ratio.................. 4.00%(1) N/A 8.44% Tier 1 risk-based capital ratio......................... 4.00 N/A 11.10 Risk-based capital ratio........ 8.00 N/A 12.36 THE BANK Leverage ratio.................. 4.00%(2) 5.00% 8.06% Tier 1 risk-based capital ratio......................... 4.00 8.00 10.60 Risk-based capital ratio........ 8.00 10.00 11.85 - ------------ (1) The Federal Reserve Board may require the Company to maintain a leverage ratio of up to 100 basis points above the required minimum. (2) The OCC may require the Bank to maintain a leverage ratio of up to 100 basis points above the required minimum. YEAR 2000 COMPLIANCE The Company suffered no failures of any system or product through the end of the year 1999 and into the year 2000. During 2000, the Company's Year 2000 project team will continue to monitor the Company's computer systems and products and the Year 2000 compliance of the third parties with which the Company transacts business in an attempt to identify any potential problems. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. There have been no material changes in the previously disclosed market risk information in the Company's Form 10-K for the year ended December 31, 1999. See Form 10-K, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations "Interest Rate Sensitivity and Liquidity." PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Not applicable ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS Not applicable ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable ITEM 5. OTHER INFORMATION Not applicable 15 ITEM 6A. EXHIBITS EXHIBIT NUMBER DESCRIPTION - ------- ----------- 11 -- Computation of Earnings Per Common Share, included as Note (2) to Condensed Consolidated Financial Statements on Page 3 of this Form 10-Q. 27 -- Financial Data Schedule. The required Financial Data Schedule has been included as Exhibit 27 of the Form 10-Q filed electronically with the Securities and Exchange Commission. ITEM 6B. REPORTS ON FORM 8-K Not applicable 16 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. METROCORP BANCSHARES, INC. Date: May 15, 2000 By: /s/ DON J. WANG ---------------------------------------- DON J. WANG CHAIRMAN OF THE BOARD AND PRESIDENT Date: May 15, 2000 By: /s/ RUTH E. RANSOM ---------------------------------------- RUTH E. RANSOM CHIEF FINANCIAL OFFICER 17 EX-11 2 [EXHIBIT TO COME] EX-27.1 3
9 1,000 3-MOS DEC-31-2000 MAR-31-2000 27,992 3,667 24,387 0 79,729 34,306 34,332 483,222 8,343 679,312 560,242 30,536 10,052 25,000 0 0 7,123 46,359 679,312 13,056 1,883 231 15,170 5,301 6,041 9,129 699 0 6,489 3,415 3,415 0 0 2,137 0.30 0.30 0 3,741 0 0 0 7,537 445 553 8,343 5,830 0 2,513
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