-----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, WIRkyQPBa79aCQeRDtl+k2aOIXzSnzSEX7LYJu8JuFUkGAFVedKs+aZ28MCxHCxW PawdENCD+sXdwuYpEUQRfQ== 0000912057-99-005421.txt : 19991115 0000912057-99-005421.hdr.sgml : 19991115 ACCESSION NUMBER: 0000912057-99-005421 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991112 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: 99750976 BUSINESS ADDRESS: STREET 1: 9600 BELLAIRE BLVD SUITE 152 CITY: HOUSTON STATE: TX ZIP: 77036 BUSINESS PHONE: 7137763876 10-Q 1 10-Q - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 SEPTEMBER 30, 1999
/ / 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 (IRS Employer Identification No.) incorporation or organization)
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 November 11, 1999, the number of outstanding shares of Common Stock, par value $1.00 per share was 7,121,073. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART I FINANCIAL INFORMATION ITEM 1. CONDENSED FINANCIAL STATEMENTS. METROCORP BANCSHARES, INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA) ASSETS
SEPTEMBER 30, DECEMBER 31, 1999 1998 ------------- ------------ (UNAUDITED) Cash and cash equivalents: Cash and due from banks................................... $ 23,029 $ 21,606 Federal funds sold and other temporary investments........ 18,772 14,287 -------- -------- Total cash and cash equivalents......................... 41,801 35,893 Investment securities available-for-sale.................... 82,138 83,623 Investment securities held-to-maturity...................... 35,960 39,567 Loans, net.................................................. 471,072 411,567 Premises and equipment, net................................. 7,806 8,151 Accrued interest receivable................................. 3,489 3,251 Deferred income taxes....................................... 5,051 3,025 Due from customers on acceptances........................... 1,647 865 Other real estate and repossessed assets, net............... 350 675 Other assets................................................ 2,357 691 -------- -------- Total assets............................................ $651,671 $587,308 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Noninterest-bearing....................................... $ 95,580 $ 84,520 Interest-bearing.......................................... 438,081 394,986 -------- -------- Total deposits.......................................... 533,661 479,506 Federal funds purchased..................................... 20,000 25,000 Other borrowings............................................ 35,557 25,043 Accrued interest payable.................................... 1,225 1,030 Income taxes payable........................................ -- 20 Acceptances outstanding..................................... 1,647 865 Other liabilities........................................... 6,356 5,820 -------- -------- Total liabilities....................................... 598,446 537,284 -------- -------- 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, 7,121,073 and 7,004,560 shares issued and outstanding, respectively............................... 7,121 7,005 Additional paid-in capital................................ 25,635 24,569 Retained earnings......................................... 22,388 17,702 Accumulated other comprehensive income/ (loss)............ (1,919) 748 -------- -------- Total shareholders' equity.............................. 53,225 50,024 -------- -------- Total liabilities and shareholders' equity.............. $651,671 $587,308 ======== ========
See accompanying notes to consolidated financial statements 1 METROCORP BANCSHARES, INC. CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT SHARE DATA) (UNAUDITED)
FOR THE THREE MONTHS FOR THE NINE MONTHS ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, ---------------------- ---------------------- 1999 1998 1999 1998 -------- -------- -------- -------- Interest income: Loans................................... $11,640 $10,017 $32,797 $28,934 Investment Securities: Taxable............................... 1,615 1,478 4,977 4,535 Tax-exempt............................ 295 240 824 718 Federal funds sold and other temporary investments........................... 188 284 464 1,057 ------- ------- ------- ------- Total interest income............... 13,738 12,019 39,062 35,244 ------- ------- ------- ------- Interest expense: Time deposits........................... 3,537 3,875 10,110 11,579 Demand and savings deposits............. 1,074 1,085 2,949 3,068 Other borrowings........................ 788 86 2,195 413 ------- ------- ------- ------- Total interest expense.............. 5,399 5,046 15,254 15,060 ------- ------- ------- ------- Net interest income....................... 8,339 6,973 23,808 20,184 Provision for loan losses................. 1,380 690 3,450 2,520 ------- ------- ------- ------- Net interest income after provision for loan losses............................. 6,959 6,283 20,358 17,664 ------- ------- ------- ------- Noninterest income: Service charges on deposit accounts..... 974 901 2,933 2,331 Other loan-related fees................. 266 200 1,204 1,061 Letters of credit commissions and fees.................................. 129 99 334 280 Gain on sale of investment securities, net................................... 43 -- 317 -- Other noninterest income................ 33 63 165 201 ------- ------- ------- ------- Total noninterest income............ 1,445 1,263 4,953 3,873 ------- ------- ------- ------- Noninterest expense: Employee compensation and benefits...... 2,777 2,449 8,366 7,197 Occupancy............................... 1,267 1,293 3,704 3,573 Other real estate, net.................. (8) 38 44 264 Data processing......................... 36 148 282 438 Professional fees....................... 227 176 597 387 Advertising............................. 98 108 337 283 Other noninterest expense............... 1,013 1,327 3,035 3,347 ------- ------- ------- ------- Total noninterest expense........... 5,410 5,539 16,365 15,489 ------- ------- ------- ------- Income before provision for income taxes................................... 2,994 2,007 8,946 6,048 Provision for income taxes................ 1,033 720 2,979 1,948 ------- ------- ------- ------- Net income................................ $ 1,961 $ 1,287 $ 5,967 $ 4,100 ======= ======= ======= ======= Earnings per common share: Basic................................... $ 0.28 $ 0.23 $ 0.84 $ 0.73 Diluted................................. $ 0.28 $ 0.22 $ 0.84 $ 0.73 Weighted average shares outstanding: Basic................................... 7,121 5,655 7,112 5,625 Diluted................................. 7,121 5,743 7,112 5,655
See accompanying notes to consolidated financial statements 2 METROCORP BANCSHARES, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (IN THOUSANDS) (UNAUDITED)
FOR THE THREE MONTHS FOR THE NINE MONTHS ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, ---------------------- ---------------------- 1999 1998 1999 1998 -------- -------- -------- -------- Net income................................... $1,961 $1,287 $ 5,967 $4,100 ------ ------ ------- ------ Other comprehensive income/(loss), net of tax: Unrealized gains/(losses) on investment securities, net: Unrealized holding gains/(losses) arising during the period........................ (269) 281 (2,458) 173 Less: reclassification adjustment for gains included in net income..................... (28) -- (209) -- ------ ------ ------- ------ Other comprehensive income/(loss).......... (297) 281 (2,667) 173 ------ ------ ------- ------ Total comprehensive income................. $1,664 $1,568 $ 3,300 $4,273 ====== ====== ======= ======
See accompanying notes to consolidated financial statements 3 METROCORP BANCSHARES, INC. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (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, 1998.......... 5,556 $5,655 $12,795 $12,003 $808 $(755) $30,506 Repurchase of common stock.......... (26) -- -- -- -- (204) (204) Shares issued for incentive plans... 33 -- -- -- -- 254 254 Sale of treasury stock.............. 92 -- 53 -- -- 705 758 Other comprehensive income/(loss)... -- -- -- -- 173 -- 173 Net income.......................... -- -- -- 4,100 -- -- 4,100 ----- ------ ------- ------- ---- ----- ------- Balance at September 30, 1998....... 5,655 $5,655 $12,848 $16,103 $981 $ -- $35,587 ===== ====== ======= ======= ==== ===== =======
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 Other comprehensive income/(loss)... -- -- -- -- (2,667) -- (2,667) Issuance of common stock............ 116 116 1,066 -- -- -- 1,182 Net income.......................... -- -- -- 5,967 -- -- 5,967 Dividends........................... -- -- -- (1,281) -- -- (1,281) ----- ------ ------- ------- ------- --------- ------- Balance at September 30, 1999....... 7,121 $7,121 $25,635 $22,388 $(1,919) $ -- $53,225 ===== ====== ======= ======= ======= ========= =======
See accompanying notes to consolidated financial statements 4 METROCORP BANCSHARES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, ------------------- 1999 1998 -------- -------- Cash flows from operating activities: Net income................................................ $ 5,967 $ 4,100 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation............................................ 1,579 1,538 Provision for loan losses............................... 3,450 2,153 Gain on sales of securities, net........................ (317) -- Loss on sale of other real estate....................... 4 19 Deferred income taxes................................... (640) (1,101) Changes in: Accrued interest receivable........................... (238) 43 Other assets.......................................... (1,672) (561) Accrued interest payable.............................. 195 (31) Deferred loan fees.................................... 603 146 Other liabilities..................................... 536 2,548 Income taxes payable.................................. (20) 20 -------- -------- Net cash provided by operating activities......... 9,447 8,874 -------- -------- Cash flows from investing activities: Purchases of securities available-for-sale.............. (28,921) (36,649) Proceeds from sales of securities available-for-sale.... 16,890 -- Proceeds from maturities and calls of securities available-for-sale.................................... 9,757 6,346 Purchases of securities held-to-maturity................ (2,822) -- Proceeds from maturities of securities held-to-maturity...................................... 6,452 13,559 Net change in loans..................................... (63,557) (36,259) Proceeds from sales of other real estate................ 327 355 Purchases of premises and equipment..................... (1,235) (1,560) -------- -------- Net cash used by investing activities............... (63,109) (54,208) -------- -------- Cash flows from financing activities: Net change in: Deposits................................................ 54,155 33,756 Other borrowings........................................ 10,514 10,023 Federal funds purchased................................. (5,000) (5,000) Net proceeds from issuance of common stock................ 1,182 -- Treasury stock sold....................................... -- 808 Dividends paid............................................ (1,281) -- -------- -------- Net cash provided by financing activities........... 59,570 39,587 -------- -------- Net increase (decrease) in cash and cash equivalents........ 5,908 (5,747) Cash and cash equivalents at beginning of period............ 35,893 31,218 -------- -------- Cash and cash equivalents at end of period.................. $ 41,801 $ 25,471 ======== ========
See accompanying notes to consolidated financial statements 5 METROCORP BANCSHARES, INC. NOTES TO 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 September 30, 1999, the Company's consolidated results of operations for the three and nine months ended September 30, 1999 and 1998, respectively, consolidated statements of cash flows for the nine months ended September 30, 1999 and 1998 and consolidated changes in shareholders' equity for the nine months ended September 30, 1999 and 1998. Interim period results are not necessarily indicative of results of operations or cash flows for a full-year period. The 1998 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, 1998. 2. EARNINGS 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 FOR THE NINE MONTHS ENDED MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------- ------------------- 1999 1998 1999 1998 -------- -------- -------- -------- (IN THOUSANDS) Net Income available to common shareholders.............................. $1,961 $1,287 $5,967 $4,100 ====== ====== ====== ====== Weighted-average common shares outstanding............................... 7,121 5,655 7,112 5,625 Potentially dilutive common shares from options................................... -- 88 -- 30 ------ ------ ------ ------ Weighted-average common shares and potentially diluted common shares......... 7,121 5,743 7,112 5,655 ====== ====== ====== ====== Basic EPS................................... $ 0.28 $ 0.23 $ 0.84 $ 0.73 Diluted EPS................................. $ 0.28 $ 0.22 $ 0.84 $ 0.73
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, which was deferred by SFAS No. 137, now becomes effective for reporting periods beginning after June 15, 2000, and will not be applied retroactively. SFAS No. 133 establishes 6 3. NEW ACCOUNTING PRONOUNCEMENTS (CONTINUED) 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. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Certain of the matters discussed in this Form 10-Q, including matters discussed under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations," may constitute forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995, as amended, and as such may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. The words "expect," "anticipate," "intend," "contemplate," "plan," "believe," "seek," "estimate," "will," "would," "should," "projected," and similar expressions are intended to identify such forward-looking statements. The Company's actual results may differ materially from the results anticipated in these, forward-looking statements due to a variety of factors, including, without limitation: the effects of future economic conditions; governmental monetary and fiscal policies, as well as legislative and regulatory changes; the risks of changes in interest rates on the level and composition of deposits, loan demand, and the values of loan collateral, securities and interest rate protection agreements, as well as interest rate risks; the effects of competition from other commercial banks, savings banks, savings and loan associations, consumer finance companies, credit unions, securities brokerage and investment banking firms, insurance companies, money market and other mutual funds and other financial institutions operating in the Company's market area and elsewhere, including institutions operating locally, regionally, nationally and internationally, together with such competitors offering banking products and services by mail, telephone, computer and the Internet; the failure of assumptions underlying the establishment of reserves for loan losses and estimations of values of collateral and various financial assets and liabilities; that technological changes, including "Year 2000" data systems compliance issues, are more difficult or expensive than anticipated; and other uncertainties set forth in the Company's other public reports and filings and public statements. All written or oral forward-looking statements attributable to the Company are expressly qualified in their entirety by these cautionary statements. GENERAL. Net income for the quarters ended September 30, 1999 and 1998 was $2.0 million and $1.3 million, respectively. Basic and diluted EPS for the three months ended September 30, 1999 were $0.28 and $0.28, respectively, compared with $0.23 and $0.22, respectively, for the same period in 1998. Net income for the nine months ended September 30, 1999 and 1998 was $6.0 million and $4.1 million, respectively. Basic and diluted EPS for the nine months ended September 30, 1999 were $0.84, compared with $0.73 for the same period in 1998. The increase in net income for the three and nine month periods ended September 30, 1999 was primarily due to higher net interest income resulting from greater loan and investment volumes. At September 30, 1999, total assets and net loans were $651.7 million and $471.1 million compared with $587.3 million and $411.6 million, respectively, at December 31, 1998. Total liabilities and total shareholders' equity at September 30, 1999, were $598.4 million and $53.2 million, respectively, compared with $537.3 million and $50.0 million, respectively, at December 31, 1998. 7 NET INTEREST INCOME. Net interest income for the quarter ended September 30, 1999 increased by $1.3 million or 18.6% to $8.3 million compared with $7.0 million for the same period in 1998. Net interest income for the nine months ended September 30, 1999 increased by $3.6 million or 17.8% to $23.8 million compared with $20.2 million for the same period in 1998. The increase in net interest income during the three and nine month periods ended September 30, 1999 was due to higher average earning assets, coupled with lower interest rates paid on deposits. The net interest margin was 5.52% for the three months ended September 30, 1999, compared with 5.55% during the same period in 1998. The net interest margin was 5.53% for the nine months ended September 30, 1999, up from 5.45% for the same period in 1998. The improvement in the net interest margin for the three and nine months periods ended September 30, 1999 was attributable to a combination of increased volume of earning assets and reduced interest expense. For the three months ended September 30, 1999, interest income increased by $1.7 million or 14.3% to $13.7 million. The increase was principally driven by a $94.7 million increase in average loans, partially offset by a decrease in the yield of average loans, which declined by 78 basis points to 9.9%, compared with 10.7% for the same period in 1998. For the three months ended September 30, 1999, the average securities portfolio increased by $12.6 million or 11.9% and its yield decreased by 4 basis points to 6.37%. For the nine months ended September 30, 1999, interest income increased by $3.9 million or 11.1% to $39.1 million compared with $35.2 million for the same period in 1998. The increase was primarily driven by an $84.2 million or 23.4% growth in average loan volumes, partially offset by a decrease in the yield earned on average loans, which declined to 9.9% for the nine months ended September 30, 1999 from 10.7% during the same period in 1998. For the nine months ended September 30, 1999, the average securities portfolio increased by $11.2 million or 10.2% and its yield increased by 4 basis points to 6.39%. Interest expense increased by $353,000 for the three months ended September 30, 1999 to $5.4 million, compared with $5.0 million during the same period in 1998. For the nine months ended September 30, 1999, interest expense increased by $194,000 or 1.3%, to $15.3 million, compared with $15.1 million during the same period in 1998. The increase was primarily due to a higher volume of 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. 8 The following tables present 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 for the three and nine month periods ended September 30, 1999 and 1998. 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.
FOR THE THREE MONTHS ENDED SEPTEMBER 30, --------------------------------------------------------------------- 1999 1998 --------------------------------- --------------------------------- 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.............................. $467,871 $11,640 9.87% $373,221 $10,017 10.65% Taxable securities....................... 96,369 1,615 6.65 88,682 1,478 6.61 Tax-exempt securities.................... 22,592 295 5.18 17,669 240 5.39 Federal funds sold and Other temporary investments............................ 12,030 188 6.20 18,635 284 6.05 -------- ------- -------- ------- Total interest earning assets............ 598,862 13,738 9.10% 498,207 12,019 9.57% ------- ------- Less allowance for loan loses............ (6,942) (5,532) -------- -------- Total interest-earning assets, net of allowance for loan losses................ 591,920 492,675 Nonearning assets.......................... 41,692 38,180 -------- -------- Total assets........................... $633,612 $530,855 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Interest-bearing liabilities: Interest-bearing demand deposits......... $ 38,971 $ 294 2.99% $ 30,942 $ 204 2.62% Savings and money market accounts........ 98,970 780 3.13 91,692 881 3.81 Time deposits............................ 279,997 3,537 5.01 278,138 3,875 5.53 Federal funds purchased and securities sold under repurchase agreements....... 26,154 349 5.29 1,876 26 5.50 Other borrowings......................... 35,488 439 4.91 5,212 60 4.57 -------- ------- -------- ------- Total interest-bearing liabilities......... 479,580 5,399 4.47% 407,860 5,046 4.91% ------- ------- Noninterest-bearing liabilities: Noninterest-bearing demand deposits...... 93,291 80,390 Other liabilities........................ 7,387 7,730 Total liabilities...................... 580,258 495,980 -------- -------- Shareholders' equity....................... 53,354 34,875 -------- -------- Total liabilities and shareholders equity................................... $633,612 $530,855 ======== ======== Net interest income........................ $ 8,339 $ 6,973 ======= ======= Net interest spread........................ 4.63% 4.66% ==== ===== Net interest margin........................ 5.52% 5.55% ==== =====
9
FOR THE NINE MONTHS ENDED SEPTEMBER 30, --------------------------------------------------------------------- 1999 1998 --------------------------------- --------------------------------- 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.............................. $444,297 $32,797 9.87% $360,107 $28,934 10.71% Taxable securities....................... 100,410 4,977 6.63 92,532 4,535 6.53 Tax-exempt securities.................... 20,944 824 5.26 17,591 718 5.44 Federal funds sold and Other temporary investments............................ 10,060 464 6.17 23,449 1,057 6.01 -------- ------- -------- ------- Total interest earning assets............ 575,711 39,062 9.07% 493,679 35,244 9.52% ------- ------- Less allowance for Loan Loses............ (6,558) (4,739) -------- -------- Total interest-earning assets, net of allowance for loan losses................ 569,153 488,940 Nonearning assets.......................... 39,275 35,317 -------- -------- Total assets........................... $608,428 $524,257 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Interest-bearing liabilities: Interest-bearing demand deposits......... $ 35,897 $ 733 2.73% $ 29,668 $ 579 2.60% Savings and money market accounts........ 97,321 2,216 3.04 88,679 2,489 3.74 Time deposits............................ 266,373 10,110 5.07 278,507 11,579 5.54 Federal funds purchased and securities sold under repurchase agreements....... 26,383 1,000 5.07 989 42 5.66 Other borrowings......................... 32,497 1,195 4.92 9,016 371 5.49 -------- ------- -------- ------- Total interest-bearing liabilities......... 458,471 15,254 4.45% 406,859 15,060 4.94% ------- ------- Noninterest-bearing liabilities: Noninterest-bearing demand deposits...... 89,382 77,918 Other liabilities........................ 7,835 6,468 Total liabilities...................... 555,688 491,245 -------- -------- Shareholders' equity....................... 52,740 33,012 -------- -------- Total liabilities and shareholders equity................................... $608,428 $524,257 ======== ======== Net interest income........................ $23,808 $20,184 ======= ======= Net interest spread........................ 4.62% 4.58% ==== ===== Net interest margin........................ 5.53% 5.45% ==== =====
10 The following tables present 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 the three and nine month periods ended September 30, 1999. For purposes of these tables, changes attributable to both rate and volume have been allocated to rate.
THREE MONTHS ENDED SEPTEMBER 30, 1999 VS. 1998 ------------------------------ INCREASE (DECREASE) DUE TO ------------------- VOLUME RATE TOTAL -------- -------- -------- (DOLLARS IN THOUSANDS) INTEREST-EARNING ASSETS: Total loans............................................... $5,262 $(3,639) $1,623 Securities................................................ 396 (204) 192 Federal funds sold and other temporary investments........ (114) 18 (96) ------ ------- ------ Total increase (decrease) in interest income............ 5,544 (3,825) 1,719 INTEREST-BEARING LIABILITIES: Interest-bearing demand deposits.......................... (57) 147 90 Savings and money market accounts......................... 577 (678) (101) Time deposits............................................. 1,106 (1,444) (338) Federal funds purchased................................... 376 (53) 323 Other borrowings.......................................... 258 121 379 ------ ------- ------ Total increase (decrease) in interest expense........... 2,260 (1,907) 353 ------ ------- ------ Increase (decrease) in net interest income.................. $3,284 $(1,918) $1,361 ====== ======= ======
NINE MONTHS ENDED SEPTEMBER 30, 1999 VS. 1998 ------------------------------ INCREASE (DECREASE) DUE TO ------------------- VOLUME RATE TOTAL -------- -------- -------- (DOLLARS IN THOUSANDS) INTEREST-EARNING ASSETS: Total loans............................................... $7,612 $(3,749) $3,863 Securities................................................ 657 (109) 548 Federal funds sold and other temporary investments........ (609) 16 (593) ------ ------- ------ Total increase (decrease) in interest income............ 7,660 (3,842) 3,818 INTEREST-BEARING LIABILITIES: Interest-bearing demand deposits.......................... 108 46 154 Savings and money market accounts......................... 406 (679) (273) Time deposits............................................. (220) (1,249) (1,469) Federal funds purchased................................... 1,115 (157) 958 Other borrowings.......................................... 1,009 (185) 824 ------ ------- ------ Total increase (decrease) in interest expense........... 2,420 (2,226) 194 ------ ------- ------ Increase (decrease) in net interest income.................. $5,240 $(1,616) $3,624 ====== ======= ======
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. For the three months ended September 30, 1999, the provision for loan losses increased by $690,000 or 100.0% to $1.4 million when 11 compared with the same period last year. For the nine months ended September 30, 1999, the provision for loan losses increased by $930,000 or 36.9% to $3.5 million compared with the same period last year. The increase in the provision for loan losses for the three and nine month periods ended September 30, 1999 was due to an increase in net charge offs and was made to restore the Company's allowance for loan losses to a level deemed appropriate by management. Based on recent experience in the loan portfolio, the Company may make an additional provision to the allowance for loan losses in the fourth quarter. NONINTEREST INCOME. Noninterest income for the quarters ended September 30, 1999 and 1998, was $1.4 million and $1.3 million, respectively. The $182,000 increase in noninterest income during the three months ended September 30, 1999 primarily resulted from continued improvement in the collection of service charges on deposit accounts and higher loan related fees. For the nine months ended September 30, 1999 and 1998, noninterest income was $5.0 million and $3.9 million, respectively. The majority of the growth in noninterest income during the nine months ended September 30, 1999 resulted from a $602,000 increase in service charges on deposit accounts. The increase in service charges was realized through improvement in the monitoring of the accounts subject to service charges. The following table presents, for the periods indicated, the major categories of noninterest income:
FOR THE THREE FOR THE NINE MONTHS ENDED MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------- ------------------- 1999 1998 1999 1998 -------- -------- -------- -------- (DOLLARS IN THOUSANDS) Service charges on deposit accounts......... $ 974 $ 901 $2,933 $2,331 Other loan-related fees..................... 266 200 1,204 1,061 Gain on sale of securities, net............. 43 -- 317 -- Letters of credit commissions and fees...... 129 99 334 280 Other noninterest income.................... 33 63 165 201 ------ ------ ------ ------ Total noninterest income................ $1,445 $1,263 $4,953 $3,873 ====== ====== ====== ======
NONINTEREST EXPENSE. For the quarters ended September 30, 1999 and 1998, noninterest expense totaled $5.4 million and $5.5 million, respectively, a decrease of $129,000 or 2.3% principally due to improved data processing efficiency. For the nine months ended September 30, 1999, noninterest expense increased by $876,000 or 5.7% to $16.4 million compared with $15.5 million during the same period in 1998. The increase in noninterest expense is principally the result of higher employee compensation and benefits. For the three month period ended September 30, 1999 and 1998, the Company's efficiency ratio was 55.6% and 67.3%, respectively. For the nine month period ended September 30, 1999 and 1998, the Company's efficiency ratio was 57.5% and 64.4%, respectively. The improvement in the efficiency ratios for the three and nine month periods ended September 30, 1999 reflects the Company's improved earnings position coupled with management's continued efforts to control operating expenses and gain other efficiencies through centralized computer systems. 12 The following table presents, for the periods indicated, the major categories in noninterest expense:
FOR THE THREE FOR THE NINE MONTHS ENDED MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------- ------------------- 1999 1998 1999 1998 -------- -------- -------- -------- (DOLLARS IN THOUSANDS) Employee compensation and benefits........................ $2,777 $2,449 $ 8,366 $ 7,197 Non-staff expenses: Occupancy............................................... 1,267 1,293 3,704 3,573 Other real estate, net.................................. (8) 38 44 264 Data processing......................................... 36 148 282 438 Professional fees....................................... 227 176 597 387 Advertising............................................. 98 108 337 283 Consultants/contract labor.............................. 20 94 366 340 Director compensation................................... 69 77 211 248 Printing and supplies................................... 113 124 377 333 Telecommunications...................................... 120 113 380 311 Other noninterest expense............................... 691 919 1,701 2,115 ------ ------ ------- ------- Total non-staff expenses.............................. 2,633 3,090 7,999 8,292 ------ ------ ------- ------- Total noninterest expense............................. $5,410 $5,539 $16,365 $15,489 ====== ====== ======= =======
Employee compensation and benefits expense for the quarters ended September 30, 1999 and 1998, was $2.8 million and $2.4 million, respectively, an increase of $328,000 or 13.4%. For the nine months ended September 30, 1999 and 1998, employee compensation and benefits expense was $8.4 million and $7.2 million, respectively, an increase of $1.2 million or 16.7%. The increases for the three and nine month periods ended September 30, 1999 were primarily due to the costs associated with the establishment of the Dulles and Long Point branches, which opened in March and April 1999, respectively. Total full-time equivalent employees at September 30, 1999 and 1998 were 275 and 259, respectively. For the three months ended September 30, 1999, non-staff expenses decreased by $457,000 compared with the same period last year, principally due to a decrease in other noninterest expense. For the nine months ended September 30, 1999, non-staff expenses decreased by $293,000 primarily due to a $200,000 reduction in other real estate expenses. INCOME TAXES. The provision for income taxes as a percentage of net income before taxes decreased from 35.9% for the quarter ended September 30,1998 to 34.6% for the quarter ended September 30, 1999 due to greater nontaxable income related to an increase in the tax-exempt municipal securities portfolio. For the nine months ended September 30, 1999, the provision for income taxes increased to 33.3% from 32.2% during the same period in 1998. FINANCIAL CONDITION LOAN PORTFOLIO. Total loans increased from $417.7 million at December 31, 1998 to $477.9 million at September 30, 1999. The $60.2 million or 14.4% growth in total loans reflected the improving local economy, the opening of new branches and the Company's investment in loan production capacity. At September 30, 1999 and December 31, 1998, the ratio of total loans to total deposits was 89.5% and 87.1%, respectively. For the same periods, total loans represented 73.3% and 71.1% of total assets, respectively. 13 The following table summarizes the loan portfolio of the Company by type of loan:
AS OF SEPTEMBER 30, AS OF DECEMBER 31, 1999 1998 ------------------- ------------------- AMOUNT PERCENT AMOUNT PERCENT -------- -------- -------- -------- (DOLLARS IN THOUSANDS) Commercial and industrial............................... $283,379 58.68% $256,311 60.73% Real estate mortgage Residential........................................... 12,360 2.56 11,795 2.80 Commercial............................................ 127,381 26.38 103,677 24.57 Real estate construction Residential........................................... 11,559 2.39 10,842 2.57 Commercial............................................ 25,040 5.19 17,769 4.21 Consumer and other...................................... 11,868 2.46 12,117 2.87 Factored receivables.................................... 11,283 2.34 9,506 2.25 -------- ------ -------- ------ Gross loans............................................. 482,870 100.00% 422,017 100.00% ====== ====== Less: unearned discounts, interest and deferred fees.... (4,989) (4,331) -------- -------- Total loans......................................... $477,881 $417,686 ======== ========
NONPERFORMING ASSETS. Net nonperforming assets at September 30, 1999 and December 31, 1998 were $4.5 million and $3.9 million, respectively. These figures are net of guarantees from the United States Department of Commerce's Small Business Administration (the "SBA"), the Export Import Bank of the United States (the "Ex-Im Bank"), an independent agency of the Unites States Government, and the Overseas Chinese Community Guaranty Fund ("OCCGF"), an agency sponsored by the government of Taiwan, which were $5.3 million and $1.4 million at September 30, 1999 and December 31, 1998, respectively. Included in the $9.7 million of nonperforming loans at September 30, 1999, were two borrowing relationships whose combined exposure totaled $4.7 million. However, the loans to these two entities have aggregate SBA and Ex-Im Bank guarantees of $3.3 million. The Company is actively involved in the origination and sale of certain federally guaranteed loans into the secondary market with servicing retained. Under the terms of these programs, the Company is required to repurchase any loans which may become nonperforming. As a result of this requirement, the Company's non-performing loans may increase during the period of time in which any loan repurchased is either restored to an accrual status or the Company asserts a claim on the guarantee. 14 The following table presents information regarding nonperforming assets at the periods indicated:
AS OF AS OF SEPTEMBER 30, 1999 DECEMBER 31, 1998 ------------------ ----------------- (DOLLARS IN THOUSANDS) Nonaccrual loans............................................ $9,414 $3,329 Accruing loans 90 days or more past due..................... -- 1,291 Other real estate........................................... 327 654 ------ ------ Total nonperforming assets.............................. $9,741 $5,274 ------ ------ Less: Nonperforming loans guaranteed by the SBA and Ex-Im Bank.................................................... 4,771 1,350 Nonperforming loans guaranteed by the OCCGF............... 8 -- ------ ------ Total net nonperforming assets.......................... $4,962 $3,924 ====== ====== Nonperforming assets to total assets........................ 1.49% 0.90% Nonperforming assets to total loans and other real estate... 2.04 1.26 Net nonperforming assets to total assets(1)................. 0.76 0.67 Net nonperforming assets to total loans and other real estate(1)................................................. 1.04 0.94
- ------------------------ (1) Net nonperforming assets are net of guarantees from the SBA, Ex-Im Bank and OCCGF. 15 ALLOWANCE FOR LOAN LOSSES. For the nine months ended September 30, 1999, net loan charge-offs were $2.8 million or 0.83% of average loans outstanding, compared with $827,000 or 0.22% of average loans outstanding for the year ended December 31, 1998. At September 30, 1999 and December 31, 1998, the allowance for loan losses aggregated $6.8 million and $6.1 million, or 1.42% and 1.46% of total loans, respectively. The following table presents an analysis of the allowance for loan losses and other related data:
NINE MONTHS ENDED YEAR ENDED SEPTEMBER 30, 1999 DECEMBER 31, 1998 ------------------ ----------------- (DOLLARS IN THOUSANDS) Average loans outstanding................................... $444,297 $368,394 ======== ======== Total loans outstanding at end of period.................... $477,881 $417,686 ======== ======== Allowance for loan losses at beginning of period............ $ 6,119 $ 3,569 Provision for loan losses................................... 3,450 3,377 Charge-offs: Commercial and industrial................................. (2,007) (237) Real estate--mortgage..................................... (474) 114 Real estate--construction................................. -- -- Consumer and other........................................ (372) (619) -------- -------- Total charge-offs....................................... (2,853) (970) -------- -------- Recoveries: Commercial and industrial................................. 47 77 Real estate--mortgage..................................... -- 17 Real estate--construction................................. -- 16 Consumer and other........................................ 46 33 -------- -------- Total recoveries........................................ 93 143 -------- -------- Net loan charge-offs........................................ (2,760) (827) -------- -------- Allowance for loan losses at end of period.................. $ 6,809 $ 6,119 ======== ======== Ratio of allowance to end of period total loans............. 1.42% 1.46% Ratio of net loan charge-offs to average loans.............. 0.83 0.22 Ratio of allowance to end of period nonperforming loans..... 72.33 132.44 Ratio of allowance to end of period net nonperforming loans(1).................................................. 163.72 187.13
- ------------------------ (1) Net nonperforming loans are net of guarantees from the SBA, Ex-Im Bank and OCCGF. SECURITIES. At September 30, 1999, the securities portfolio totaled $118.1 million, a decrease of $5.1 million or 4.1% from $123.2 million at December 31, 1998. This decrease was due primarily to sales of investment securities to support loan demand. DEPOSITS. At September 30, 1999, total deposits were $533.7 million, up $54.2 million or 11.3% from $479.5 million at December 31, 1998. Noninterest-bearing deposits at September 30, 1999 increased by $11.1 million or 13.1% to $95.6 million from $84.5 million at December 31, 1998. The Company's ratios of noninterest-bearing demand deposits to total deposits for September 30, 1999 and December 31, 1998 were 17.9% and 17.6%, respectively. At September 30, 1999, interest-bearing deposits increased by $43.1 million or 9.8% to $438.1 million from $395.0 million at December 31, 1998. The increase in interest-bearing deposits partially resulted from the issuance of $20 million in aggregate principal amount of ten-year callable certificates of deposits (the "Callable CDs") and an increase in CDs in an amount greater 16 than $100,000. The Callable CDs are callable at the Company's discretion at the first anniversary of issuance and semi-annually thereafter. OTHER BORROWINGS. The Company had two ten-year loans totaling $35.0 million from the Federal Home Loan Bank of Dallas ("FHLB") to further leverage its balance sheet and diversify its funding sources. The loans bear interest at the average rate of 4.9% per annum until the fifth anniversary of the loans, at which time the loans may be repaid or the interest rate may be renegotiated. During the quarter ended September 30, 1999, the Company had a $20 million six-month advance from the FHLB. This loan bears an interest rate of 5.9%. Other short-term borrowings principally consist of U.S. Treasury tax note option accounts having a maturity of 14 days or less. Additionally, the Company had several unused, unsecured lines of credit with correspondent banks totaling $17.0 million at September 30, 1999 and $7.0 million at December 31, 1998. CAPITAL RESOURCES. Shareholders' equity increased from $50.0 million at December 31, 1998 to $53.2 million at September 30, 1999, an increase of $3.2 million or 6.4%. This increase was primarily due to $6.0 million in net income for the nine months ended September 30, 1999, partially offset by $1.9 million in accumulated other comprehensive losses reflecting the mark-to-market of the available-for-sale investment portfolio. The following table provides a comparison of the Company's and the Bank's leverage and risk-weighted capital ratios as of September 30, 1999 to the minimum and well-capitalized regulatory standards:
MINIMUM WELL ACTUAL RATIO AT REQUIRED CAPITALIZED SEPTEMBER 30, 1999 -------- ----------- ------------------ THE COMPANY Leverage ratio........................................ 3.00%(1) N/A 8.70% Tier 1 risk-based capital ratio....................... 4.00 N/A 10.87 Risk-based capital ratio.............................. 8.00 N/A 12.12 THE BANK Leverage ratio........................................ 3.00%(2) 5.00% 7.13% Tier 1 risk-based capital ratio....................... 4.00 8.00 8.91 Risk-based capital ratio.............................. 8.00 10.00 10.16
- ------------------------ (1) The Federal Reserve Board may require the Company to maintain a leverage ratio of up to 200 basis points above the required minimum. (2) The OCC may require the Bank to maintain a leverage ratio of up to 200 basis points above the required minimum. YEAR 2000 COMPLIANCE. The Year 2000 risk involves computer programs and computer software that may not able to perform without interruption into the Year 2000. If computer systems do not correctly recognize the date change from December 31, 1999 to January 1, 2000, computer applications that rely on the date field could fail or create erroneous results. Such erroneous results could affect interest, payment or due dates or cause the temporary inability to process transactions, send invoices or engage in similar normal business activities. If the Company, its suppliers, and its borrowers do not address these issues, there could be a material adverse impact on the Company's financial condition or results of operations. STATE OF READINESS. The Company formally initiated its Year 2000 project and plan in November 1997 to ensure that its operational and financial systems will not be adversely affected by Year 2000 problems. The Company formed a Year 2000 project team and the Board of Directors and management are supporting all compliance efforts and allocating the necessary resources to ensure completion. An inventory of all systems and products (including both information technology ("IT") and 17 non-informational technology ("non-IT") systems) that could be affected by the Year 2000 date change has been developed, verified and categorized as to its importance to the Company and an assessment of all major IT and critical non-IT systems has been completed. This assessment involved inputting into IT systems test data simulating the Year 2000 date change and reviewing the system output for accuracy. The Company's assessment of critical non-IT systems involved reviewing such systems to determine whether they were date dependent. Based on such assessment, the Company believes that none of its critical non-IT systems are date dependent. The software for the Company's systems is provided through software vendors. The Company has contacted all of its third party vendors and software providers and has required them to demonstrate and represent that the products provided are Year 2000 compliant. Furthermore, the Company developed and has fully implemented a program for testing compliance with Year 2000 requirements. During the first quarter of 1999, the Company brought in-house its data processing services. The data processing software purchased by the Company is the same software that had been used by the Company in its vendor provided system since 1995. The Company's previous service bureau, which performed substantially all of the Company's data processing functions until March 15, 1999, and which currently provides the Company's data processing software, has warranted in writing that its software is Year 2000 compliant and pursuant to applicable regulatory guidelines. The Company completed Year 2000 compliance testing and certification on its in-house system during the first quarter of 1999. The Company has completed the following phases of its Year 2000 plan: (i) recognizing Year 2000 issues, (ii) assessing the impact of Year 2000 issues on the Company's critical systems, (iii) upgrading systems as necessary to resolve those Year 2000 issues which have been identified and (iv) developing a business resumption contingency plan. COSTS OF COMPLIANCE. The Company has increased its estimates for Year 2000 related expenses from $24,000 to $40,000. As of September 30, 1999, the Company had incurred approximately $30,000 in expenses associated with Year 2000 issues. The largest potential internal risk to the Company concerning Year 2000 is the malfunction of its data processing system. In the event its data processing system does not function properly, the Company is prepared to perform functions manually. The Company believes it is in compliance with regulatory guidelines regarding Year 2000 compliance. RISKS RELATED TO THIRD PARTIES. The impact of Year 2000 noncompliance by third parties with which the Company transacts business cannot be accurately gauged. The Company identified its largest dollar deposit (aggregate deposits over $200,000) and loan ($250,000 or more) customers and, based on information available to the Company, conducted a preliminary evaluation to determine which of those customers are likely to be affected by Year 2000 issues. The Company then surveyed those customers deemed at risk to determine their readiness with respect to Year 2000 issues, including their awareness of Year 2000 issues, plans to address such issues and progress with respect to such plans. The survey included approximately 69.0% of all depositors with balances of $200,000 or greater, which was approximately 10.0% of the Company's total dollar deposit base, and all of its borrowers of $250,000 or more, which was approximately 69.0% of the Company's total dollar loan base. This survey was completed in the third quarter of 1998. The responses indicated that substantially all loan customers and slightly greater than one-half of deposit customers are aware of Year 2000 issues, are in the process of updating their systems and have informed the Company that they believe they will be ready for the Year 2000 date change by the end of 1999. To the extent a problem has been identified, the Company intends to monitor the customer's progress in resolving such problem. In the event that Year 2000 noncompliance adversely affects a borrower, the Company may be required to charge off the loan to that borrower. For a discussion of possible effects of such charge-offs, see "--Contingency Plans" below. With respect to its borrowers, the Company includes in its loan documents a Year 2000 disclosure form as an addendum to the loan agreement in which the borrower represents and warrants its Year 2000 compliance to the Company. The Company relies on the Federal Reserve Bank of Dallas for electronic fund transfers who has assured the Company that its systems are Year 2000 compliant. 18 CONTINGENCY PLANS. The Company has finalized its contingency planning with respect to the Year 2000 date change and believes that if its own systems should fail, the Company could convert to a manual entry system for a period of up to two weeks without significant losses. The Company believes that any mission critical systems could be recovered and operating within seven days. In the event that the Federal Reserve Bank of Dallas is unable to handle electronic funds transfers, the Company does not expect the impact to be material to its financial condition or results of operations as long as the Company is able to utilize an alternative electronic funds transfer source. As part of its contingency planning, the Company has reviewed its loan customer base and the potential impact on capital of Year 2000 noncompliance. Based upon such review, using what it considers to be a reasonable worst case scenario, the Company has assumed that certain of its commercial borrowers whose businesses are most likely to be affected by Year 2000 noncompliance would be unable to repay their loans, resulting in charge-offs of loan amounts in excess of collateral values. If such were the case, the Company believes that it is unlikely that its exposure would exceed $300,000, although there are no assurances that this amount will not be substantially higher. The Company does not believe that this amount is material enough for the Company to adjust its current methodology for making provisions to the allowance for credit losses. In addition, the Company plans to maintain additional cash on hand to meet any unusual deposit withdrawal activity. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. During the quarter ended September 30, 1999, the Company entered into two, $10 million each, ten-year interest rate swap agreements whereby the Company receives a fixed rate and pays a floating rate. The floating rate the Company pays is based upon the three month London Interbank Best Offered Rate ("LIBOR") and reprices every three months. The Company expects the interest rate swap agreements to help mitigate the Company's asset sensitive position. There have been no other material changes in the previously disclosed market risk information in the Company's Form 10-K for the year ended December 31, 1998. See Form 10-K, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations--Interest Rate Sensitivity." 19 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 ITEM 6A. EXHIBITS
EXHIBIT NUMBER IDENTIFICATION OF EXHIBIT ------ ------------------------- 11 --Computation of Earnings Per Common Share, included as Note (2) to the Interim Consolidated Financial Statements on Page 6 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 No reports on Form 8-K were filed by the Company during the three months ended September 30, 1999. 20 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: November 12, 1999 By: /s/ DON J. WANG --------------------------------------- Don J. Wang CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER Date: November 12, 1999 By: /s/ ATTILIO F. GALLI --------------------------------------- Attilio F. Galli CHIEF FINANCIAL OFFICER
21 EX-27 2 EX-27
9 0001068300 METROCORP BANCSHARES INC. 1,000 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 23,029 5,131 13,641 0 82,138 35,960 0 477,881 6,809 651,671 533,661 20,000 9,785 35,000 0 0 7,121 46,104 651,671 32,797 6,265 0 39,062 15,254 15,254 23,808 3,450 317 16,365 8,946 8,946 0 0 5,967 0.84 0.84 9.07 9,414 0 0 0 6,119 (2,853) 93 6,809 6,809 0 1,638 INCLUDES ACCRUED INTEREST PAYABLE, INCOME TAX PAYABLE, ACCEPTABLE OUTSTANDING AND OTHER LIABILITIES. INCLUDES TWO 10-YEAR LOANS FROM FEDERAL HOME LOAN BANK-DALLAS.
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