10-Q/A

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 10-Q/A

[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2011

[     ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from		to
Commission File Number:	000-50961

METRO BANCORP, INC.

(Exact name of registrant as specified in its charter)

Pennsylvania	25-1834776
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

3801 Paxton Street,  Harrisburg, PA	17111
(Address of principal executive offices)	(Zip Code)

800-653-6104

(Registrant's telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes X No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act).

Large accelerated filer	Accelerated filer	X
Non-accelerated filer	Smaller Reporting Company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes No X

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 13,957,134 Common shares outstanding at 7/31/2011

Explanatory Note

The purpose of this amendment on Form 10-Q/A to Metro Bancorp, Inc.'s quarterly report on Form 10-Q for the period ended June 30, 2011, filed with the Securities and Exchange Commission on August 9, 2011 (“Form 10-Q”), is solely to furnish Exhibit 101 to the Form 10-Q, as required by Rule 405 of Regulation S-T.

No other changes have been made to the Form 10-Q. This Form 10-Q/A speaks as of the original filing date of the Form 10-Q, does not reflect events that may have occurred subsequent to the original filing date, and does not modify or update in any way disclosures made in Form 10-Q.

Pursuant to Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

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.

METRO BANCORP, INC.
(Registrant)
September 8, 2011	/s/ Gary L. Nalbandian
(Date)	Gary L. Nalbandian
	President/CEO
September 8, 2011	/s/ Mark A. Zody
(Date)	Mark A. Zody
	Chief Financial Officer

EXHIBIT INDEX

10.1	Consulting Agreement by and between Peter M. Musumeci, Jr. and Metro Bancorp, Inc. and Metro Bank, dated June 13, 2011 (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed with the Securities and Exchange Commission on June 17, 2011)
11	Computation of Net Income Per Share *
31.1	Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act) *
31.2	Certification of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under Exchange Act  *
32	Certification of the Company's Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *
101	The following financial statements from Metro Bancorp, Inc. Quarterly Report on Form 10-Q for the three and six months ended June 30, 2011, filed with the Securities and Exchange Commission on August 9, 2011, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets; (ii) the Consolidated Statement of Operations; (iii) the Consolidated Statement of Stockholders' Equity; (iv) the Consolidated Statement of Cash Flows; and (v) the Notes to Consolidated Financial Statements.

* Filed with our Form 10-Q as filed on August 9, 2011

XML



Consolidated Balance Sheets Parentheticals (USD $) In Thousands, except Share data	Jun. 30, 2011	Dec. 31, 2010
Securities, held to maturity fair value	$ 223,153	$ 224,202
Allowance for loan losses	$ 21,723	$ 21,618
Preferred stock, par value	$ 10	$ 10
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares issued	40,000	40,000
Preferred stock, shares outstanding	40,000	40,000
Common stock, par value	$ 1	$ 1
Common stock, shares authorized	25,000,000	25,000,000
Common stock, shares issued	13,926,440	13,748,384
Common stock, shares outstanding	13,926,440	13,748,384

XML



Consolidated Statements of Operations (USD $) In Thousands, except Per Share data	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Loans receivable, including fees:
Taxable	$ 18,070	$ 17,589	$ 35,583	$ 35,126
Tax-exempt	989	1,156	1,975	2,300
Securities:
Taxable	5,599	5,651	10,994	11,050
Tax-exempt	0	0	0	14
Federal funds sold	1	0	2	1
Total interest income	24,659	24,396	48,554	48,491
Interest Expense
Deposits	2,990	3,358	5,987	7,025
Short-term borrowings	127	121	337	187
Long-term debt	725	933	1,396	1,862
Total interest expense	3,842	4,412	7,720	9,074
Net interest income	20,817	19,984	40,834	39,417
Provision for loan losses	1,700	2,600	3,492	5,000
Net interest income after provision for loan losses	19,117	17,384	37,342	34,417
Noninterest Income
Service charges, fees and other operating income	7,025	6,831	13,749	12,875
Gains on sales of loans	1,137	133	2,335	327
Total fees and other income	8,162	6,964	16,084	13,202
Other-than-temporary impairment losses	315	63	315	4,858
Portion recognized in other comprehensive income (before taxes)	0	60	0	3,942
Net impairment loss on investment securities	315	3	315	916
Net gains on sales/calls of securities	309	298	343	919
Total noninterest income	8,156	7,259	16,112	13,205
Noninterest Expenses
Salaries and employee benefits	10,254	10,377	20,633	20,631
Occupancy	2,219	2,151	4,681	4,436
Furniture and equipment	1,536	1,404	2,871	2,548
Advertising and marketing	350	610	749	1,442
Data processing	3,832	3,396	7,227	6,536
Regulatory assessments and related fees	856	1,045	1,941	2,214
Telephone	834	872	1,706	1,795
Loan expense	83	430	407	782
Foreclosed real estate	18	381	1,070	949
Branding	1,720	0	1,747	0
Consulting fees	416	960	823	1,702
Other	2,503	2,895	5,073	5,361
Total noninterest expenses	24,621	24,521	48,928	48,396
Income (loss) before taxes	2,652	122	4,526	(774)
Provision (benefit) for federal income taxes	660	(238)	1,002	(1,140)
Net income	$ 1,992	$ 360	$ 3,524	$ 366
Net Income per Common Share
Basic	$ 0.14	$ 0.02	$ 0.25	$ 0.02
Diluted	$ 0.14	$ 0.02	$ 0.25	$ 0.02
Average Common and Common Equivalent Shares Outstanding
Basic	13,860	13,509	13,820	13,489
Diluted	13,860	13,514	13,820	13,494

XML



Document and Entity Information	6 Months Ended
	Jun. 30, 2011	Jul. 31, 2011
Entity Information [Line Items]
Entity Registrant Name	METRO BANCORP, INC.
Entity Central Index Key	0001085706
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Document Type	10-Q
Document Period End Date	Jun. 30, 2011
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q2
Amendment Flag	false
Entity Common Stock, Shares Outstanding		13,957,134

XML



Other Comprehensive Income

6 Months Ended

Jun. 30, 2011

OTHER COMPREHENSIVE INCOME [Abstract]

Other Comprehensive Income

OTHER COMPREHENSIVE INCOME

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available for sale (AFS) securities, are reported as a separate component of the equity section of the balance sheet, such items, along with net income are components of comprehensive income. The only other comprehensive income items that the Company presently has are net unrealized gains on securities available for sale and unrealized losses for noncredit-related impairment losses. The federal income tax effect allocated to the net unrealized gains (losses) are presented in the following table:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(in thousands)	2011			2010			2011			2010
Net unrealized holding gains arising during the period	$	6,209		$	5,616		$	9,835		$	4,858
Reclassification adjustment on securities	360			650			(1,260		)	1,643
Noncredit related other-than-temporary impairment losses on securities not expected to be sold	—			60			—			3,942
Subtotal	6,569			6,326			8,575			10,443
Income tax impact	(2,234		)	(2,151		)	(2,916		)	(3,718		)
Other comprehensive income, net of tax impact	$	4,335		$	4,175		$	5,659		$	6,725

XML



Income Taxes

6 Months Ended

Jun. 30, 2011

INCOME TAXES [Abstract]

Income Taxes

INCOME TAXES

The provision for federal income taxes was $660,000 for the second quarter of 2011, compared to a tax benefit for federal income taxes of $238,000 for the same period in 2010. The effective tax rates were 25% and a 195% benefit for the quarters ended June 30, 2011 and June 30, 2010, respectively. The significant variance in the effective tax rates was the result of lower gross income.  In addition, in 2010 the proportion of tax free income to the Company's earnings before taxes was higher. Tax-exempt income was $167,000 higher in the second quarter of 2010 compared to the second quarter of 2011. The Company's statutory tax rate was 34% in both the second quarter of 2011 and the second quarter of 2010.

The provision for federal income taxes was $1.0 million for the first six months of 2011, compared to a tax benefit for federal income taxes of $1.1 million for the same period in 2010. The effective tax rates were 22% and 147% for the six months ended June 30, 2011 and June 30, 2010. The significant variance in the effective tax rates was primarily the result of a $256,000 tax benefit recorded during the first quarter of 2010 for merger-related expenses that were not deductible in previous periods.  In addition, in 2010 the proportion of tax free income to the Company's earnings (loss) before taxes was higher than in 2011. Tax-exempt income was $339,000 higher in the first six months of 2010 compared to the first six months of 2011. The Company's statutory tax rate was 34% in both the first six months of 2011 and the first six months of 2010.

XML



Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2011

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]

Summary of Significant Accounting Policies

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidated Financial Statements

The consolidated balance sheet at December 31, 2010 has been derived from audited consolidated financial statements and the consolidated interim financial statements included herein have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) have been condensed or omitted pursuant to such rules and regulations. These consolidated financial statements were prepared in accordance with GAAP for interim financial statements and with instructions for Form 10-Q and Regulation S-X Section 210.10-01. Further information on the Company's accounting policies are available in Note 1 (Significant Accounting Policies) of the Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2010. The accompanying consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary to reflect a fair statement of the results for the interim periods presented. Such adjustments are of a normal, recurring nature.

These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2010. Events occurring subsequent to the date of the balance sheet have been evaluated for potential recognition or disclosure in the consolidated financial statements. The results for the six months endedJune 30, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011.

The consolidated financial statements include the accounts of Metro Bancorp, Inc. (the Company) and its consolidated subsidiaries including Metro Bank (Metro or the Bank). All material intercompany transactions have been eliminated. Certain amounts from the prior year have been reclassified to conform to the 2011 presentation.  Such reclassifications had no impact on the Company's stockholders' equity or net income.

Use of Estimates

The financial statements are prepared in conformity with GAAP. GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and require disclosure of contingent assets and liabilities. Actual results could differ from these estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, impaired loans, the valuation of deferred tax assets, the valuation of securities available for sale and the determination of other-than-temporary impairment (OTTI) on the Bank's investment securities portfolio.

During the third quarter of 2010, as part of the quantitative analysis of the adequacy of the allowance for loan losses, management adjusted its calculation of probable loan losses based upon a much shorter and more recent period of actual historical losses.  This was done as a result of the much higher level of loan charge-offs experienced by the Company over the past two years compared to previous years.  The change in this estimate would have resulted in an additional $3.6 million of provision in the first six months of 2010. The impact to the net income after taxes would have been a loss of $2.4 million and a decrease of $0.17 to earnings per share.

XML



Fair Value Disclosure

6 Months Ended

Jun. 30, 2011

FAIR VALUE DISCLOSURE [Abstract]

Fair Value Disclosure

FAIR VALUE DISCLOSURE

The Company uses its best judgment in estimating the fair value of its financial instruments and certain nonfinancial assets; however, there are inherent weaknesses in any estimation technique due to assumptions that are susceptible to significant change.  Therefore, for substantially all financial instruments and certain nonfinancial assets, the fair value estimates herein are not necessarily indicative of the amounts the Company could have realized in a sale transaction on the dates indicated.  The estimated fair value amounts have been measured as of their respective period-ends and have not been reevaluated or updated for purposes of these financial statements subsequent to those respective dates.  As such, the estimated fair values of these financial instruments and certain nonfinancial assets subsequent to the respective reporting dates may be different than the amounts reported at each period-end.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company uses the following fair value hierarchy in selecting inputs with the highest priority given to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements): 

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2: Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability;

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported with little or no market activity).

As required, financial and certain nonfinancial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following table sets forth the Company's financial assets that were measured at fair value on a recurring basis at June 30, 2011 by level within the fair value hierarchy:

			Fair Value Measurements at Reporting Date Using
Description			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(in thousands)	June 30, 2011		(Level 1)		(Level 2)		(Level 3)
U.S. Government agency securities	$	21,647	$	—	$	21,647	$	—
Residential mortgage-backed   securities	12,397		—		12,397		—
Agency collateralized mortgage   obligations	427,287		—		427,287		—
Private-label collateralized   mortgage obligations	26,927		—		26,927		—
Securities available for sale	$	488,258	$	—	$	488,258	$	—

For financial assets measured at fair value on a recurring basis at December 31, 2010, the fair value measurements by level within the fair value hierarchy used were as follows:

			Fair Value Measurements at Reporting Date Using
Description			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(in thousands)	December 31, 2010		(Level 1)		(Level 2)		(Level 3)
U.S. Government agency securities	$	21,409	$	—	$	21,409	$	—
Residential mortgage-backed   securities	2,386		—		2,386		—
Agency collateralized mortgage   obligations	383,214		—		383,214		—
Private-label collateralized   mortgage obligations	31,003		—		31,003		—
Securities available for sale	$	438,012	$	—	$	438,012	$	—

As of June 30, 2011 and December 31, 2010, the Company did not have any liabilities that were measured at fair value on a recurring basis.

Impaired Loans (Generally Carried at Fair Value)

Impaired loans are those that the Company has measured impairment of based on the fair value of the loan's collateral.  Fair value is generally determined based upon independent third-party appraisals of the properties, or discounted cash flows based upon the expected proceeds. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements. The fair value consists of the loan balances less any valuation allowance. The valuation allowance amount is calculated as the difference between the recorded investment in a loan and the present value of expected future cash flows or it is calculated based on collateral values if the loans are collateral dependent. The collateral values are further reduced by a discount factor specific to the nature of the collateral. At June 30, 2011 the fair value of four related impaired loans with allowance allocations totaled $7.7 million, net of a valuation allowance of $3.2 million. At December 31, 2010, the fair value of impaired loans with allowance allocations and their associated loan relationships totaled $10.4 million, net of a valuation allowance of $3.6 million. The Company's impaired loans are more fully discussed in Note 9.

Foreclosed Assets (Carried at Lower of Cost or Fair Value)

The fair value of real estate acquired through foreclosure was based on independent third party appraisals of the properties, less estimated selling costs. The carrying value of foreclosed assets, with valuation allowances recorded subsequent to initial foreclosure, was $3.6 million at June 30, 2011 and $4.8 million at December 31, 2010, which are net of valuation allowances of $1.0 million and $410,000 that were established in 2011 and 2010, respectively.

For assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used were as follows:

			Fair Value Measurements at Reporting Date Using
Description			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(in thousands)	June 30, 2011		(Level 1)		(Level 2)		(Level 3)
Impaired loans	$	7,652	$	—	$	—	$	7,652
Foreclosed assets	3,559		—		—		3,559
Total	$	11,211	$	—	$	—	$	11,211

			Fair Value Measurements at Reporting Date Using
Description			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(in thousands)	December 31, 2010		(Level 1)		(Level 2)		(Level 3)
Impaired loans	$	10,444	$	—	$	—	$	10,444
Foreclosed assets	4,774		—		—		4,774
Total	$	15,218	$	—	$	—	$	15,218

The following information should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only provided for a limited portion of the Company's assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company's disclosures and those of other companies may not be meaningful. The following valuation techniques were used to estimate the fair values of the Company's financial instruments at June 30, 2011 and December 31, 2010:

Cash and Cash Equivalents (Carried at Cost)

The carrying amounts reported in the balance sheet for cash and short-term instruments approximate those assets' fair values.

Securities

The fair value of securities available for sale (carried at fair value) and held to maturity (carried at amortized cost) are determined by matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities' relationship to other benchmark prices. 

Loans Held for Sale (Carried at Lower of Cost or Fair Value)

The fair value of loans held for sale is determined, when possible, using quoted secondary-market prices.  If no such quoted prices exist, the fair value of a loan is determined using quoted prices for a similar loan or loans, adjusted for the specific attributes of that loan.  The Company did not write down any loans held for sale during the six months endedJune 30, 2011 or the year ended December 31, 2010.

Loans Receivable (Carried at Cost)

The fair value of loans, excluding impaired loans with specific loan allowances, are estimated using discounted cash flow analysis, using market rates at the balance sheet date that reflect the credit and interest rate-risk inherent in the loans. Projected future cash flows are calculated based upon contractual maturity, projected repayments and prepayments of principal. Generally, for variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values.

Restricted Investments in Bank Stock (Carried at Cost)

The carrying amount of restricted investments in bank stock approximates fair value and considers the limited marketability of such securities.  The restricted investments in bank stock consisted of Federal Home Loan Bank (FHLB) and Atlantic Central Bankers Bank (ACBB) stock at June 30, 2011 and December 31, 2010.

Accrued Interest Receivable and Payable (Carried at Cost)

The carrying amount of accrued interest receivable and accrued interest payable approximates its fair value.

Deposit Liabilities (Carried at Cost)

The fair values disclosed for demand deposits (e.g., interest and noninterest checking, passbook savings and money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts).  Fair values for fixed-rate certificates of deposits (CDs) are estimated using a discounted cash flow calculation that applies interest rates currently being offered in the market on certificates to a schedule of aggregated expected monthly maturities on time deposits.

Short-Term Borrowings (Carried at Cost)

The carrying amounts of short-term borrowings approximate their fair values.

Long-Term Debt (Carried at Cost)

Long-term debt was estimated using discounted cash flow analysis, based on quoted prices from a third party broker for new debt with similar characteristics, terms and remaining maturity. The price for the long-term debt was obtained in an inactive market where these types of instruments are not traded regularly. 

Off-Balance Sheet Financial Instruments (Disclosed at Cost)

Fair values for the Company's off-balance sheet financial instruments (lending commitments and letters of credit) are based on fees currently charged in the market to enter into similar agreements, taking into account, the remaining terms of the agreements and the counterparties' credit standing.

The estimated fair values of the Company's financial instruments were as follows at June 30, 2011 and December 31, 2010:

	June 30, 2011				December 31, 2010
(in thousands)	Carrying Amount		Fair  Value		Carrying Amount		Fair  Value
Financial assets:
Cash and cash equivalents	$	51,946	$	51,946	$	32,858	$	32,858
Securities	713,644		711,411		665,588		662,214
Loans, net (including loans held for sale)	1,443,812		1,424,907		1,376,192		1,358,509
Restricted investments in bank stock	18,610		18,610		20,614		20,614
Accrued interest receivable	7,686		7,686		7,347		7,347
Financial liabilities:
Deposits	$	1,891,376	$	1,894,285	$	1,832,179	$	1,835,782
Long-term debt	54,400		44,153		29,400		18,431
Short-term borrowings	160,000		160,000		140,475		140,475
Accrued interest payable	595		595		669		669
Off-balance sheet instruments:
Standby letters of credit	$	—	$	—	$	—	$	—
Commitments to extend credit	—		—		—		—

XML



Securities

6 Months Ended

Jun. 30, 2011

SECURITIES [Abstract]

Securities

SECURITIES

The amortized cost and fair value of securities are summarized in the following tables:

	June 30, 2011
(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available for Sale:
U.S. Government agency securities	$	22,500	$	—	$	(853	)	$	21,647
Residential mortgage-backed securities	12,407		19		(29		)	12,397
Agency collateralized mortgage obligations	424,709		3,269		(691		)	427,287
Private-label collateralized mortgage obligations	28,598		37		(1,708		)	26,927
Total	$	488,214	$	3,325	$	(3,281	)	$	488,258
Held to Maturity:
U.S. Government agency securities	$	140,000	$	—	$	(5,465	)	$	134,535
Residential mortgage-backed securities	42,890		2,773		(227		)	45,436
Agency collateralized mortgage obligations	32,496		721		(100		)	33,117
Corporate debt securities	10,000		65		—			10,065
Total	$	225,386	$	3,559	$	(5,792	)	$	223,153

	December 31, 2010
(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available for Sale:
U.S. Government agency securities	$	22,500	$	—	$	(1,091	)	$	21,409
Residential mortgage-backed securities	2,383		3		—			2,386
Agency collateralized mortgage obligations	388,414		2,025		(7,225		)	383,214
Private-label collateralized mortgage obligations	33,246		—		(2,243		)	31,003
Total	$	446,543	$	2,028	$	(10,559	)	$	438,012
Held to Maturity:
U.S. Government agency securities	$	140,000	$	—	$	(6,408	)	$	133,592
Residential mortgage-backed securities	48,497		2,727		(311		)	50,913
Agency collateralized mortgage obligations	29,079		878		(209		)	29,748
Corporate debt securities	10,000		—		(51		)	9,949
Total	$	227,576	$	3,605	$	(6,979	)	$	224,202

The amortized cost and fair value of debt securities by contractual maturity at June 30, 2011 are shown in the following table. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations.

	Available for Sale				Held to Maturity
(in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	—	$	—	$	—	$	—
Due after one year through five years	—		—		10,000		10,065
Due after five years through ten years	—		—		50,000		48,798
Due after ten years	22,500		21,647		90,000		85,737
	22,500		21,647		150,000		144,600
Residential mortgage-backed securities	12,407		12,397		42,890		45,436
Agency collateralized mortgage obligations	424,709		427,287		32,496		33,117
Private-label collateralized mortgage obligations	28,598		26,927		—		—
Total	$	488,214	$	488,258	$	225,386	$	223,153

During the second quarter of 2011 the Company sold a total of two securities with a combined fair market value of $38.5 million and realized a net pretax gain of $309,000. Both securities sold had been classified as available for sale. During the second quarter of 2010, the Company sold three mortgage-backed securities (MBSs) with a fair market value of $19.9 million. All of the securities had been classified as available for sale and the Company realized a pretax gross gain of $298,000.

During the first six months of 2011, the Company sold a total of 12 securities with a combined fair market value of $125.3 million. All of the securities were U.S. agency collateralized mortgage obligations (CMOs), had been classified as available for sale and had a combined amortized cost of $125.0 million. The Company realized net pretax gains of $343,000 on the combined sales.  During the first six months of 2010, the Company sold 15 MBSs with a fair market value of $44.9 million. All of the securities had been classified as available for sale and the Company realized a pretax gross gain of $919,000. The securities sold included 11 private-label MBSs with a fair market value of $21.7 million.

The Company does not maintain a trading portfolio and there were no transfers of securities between the AFS and held to maturity (HTM) portfolios. The Company uses the specific identification method to record security sales.

At June 30, 2011 securities with a carrying value of $438.5 million were pledged to secure public deposits and for other purposes as required or permitted by law.

The following table summarizes the Company's gains and losses on the sales of debt securities and credit losses recognized for the OTTI of investments:

(in thousands)	Gross Realized Gains		Gross Realized (Losses)			OTTI Credit Losses			Net Gains (Losses)
Three Months Ended:
June 30, 2011	$	309	$	—		$	(315	)	$	(6	)
June 30, 2010	298		—			(3		)	295
Six Months Ended:
June 30, 2011	976		(633		)	(315		)	28
June 30, 2010	919		—			(916		)	3

In determining fair market values for its portfolio holdings, the Company has consistently relied upon a third-party provider. Under the current guidance, these values are considered Level 2 inputs, based upon matrix pricing and observed data from similar assets.  They are not Level 1 direct quotes, nor do they reflect Level 3 inputs that would be derived from internal analysis or judgment. As the Company does not manage a trading portfolio and typically only sells from its AFS portfolio in order to manage interest rate risk or credit exposure, direct quotes, or street bids, are warranted on an as-needed basis only.

The following table shows the fair value and gross unrealized losses associated with the Company's investment portfolio, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:

	June 30, 2011
	Less than 12 months					12 months or more					Total
(in thousands)	Fair Value		Unrealized (Losses)			Fair Value		Unrealized (Losses)			Fair Value		Unrealized (Losses)
Available for Sale:
U.S. Government agency securities	$	21,647	$	(853	)	$	—	$	—		$	21,647	$	(853	)
Residential MBSs	10,236		(29		)	—		—			10,236		(29		)
Agency CMOs	147,919		(691		)	—		—			147,919		(691		)
Private-label CMOs	2,092		(45		)	19,744		(1,663		)	21,836		(1,708		)
Total	$	181,894	$	(1,618	)	$	19,744	$	(1,663	)	$	201,638	$	(3,281	)
Held to Maturity:
U.S. Government agency securities	$	134,535	$	(5,465	)	$	—	$	—		$	134,535	$	(5,465	)
Residential MBSs	7,286		(227		)	—		—			7,286		(227		)
Agency CMOs	5,706		(100		)	—		—			5,706		(100		)
Total	$	147,527	$	(5,792	)	$	—	$	—		$	147,527	$	(5,792	)

	December 31, 2010
	Less than 12 months					12 months or more					Total
(in thousands)	Fair Value		Unrealized (Losses)			Fair Value		Unrealized (Losses)			Fair Value		Unrealized (Losses)
Available for Sale:
U.S. Government agency securities	$	21,409	$	(1,091	)	$	—	$	—		$	21,409	$	(1,091	)
Agency CMOs	261,330		(7,216		)	9,092		(9		)	270,422		(7,225		)
Private-label CMOs	2,644		(9		)	28,359		(2,234		)	31,003		(2,243		)
Total	$	285,383	$	(8,316	)	$	37,451	$	(2,243	)	$	322,834	$	(10,559	)
Held to Maturity:
U.S. Government agency securities	$	133,592	$	(6,408	)	$	—	$	—		$	133,592	$	(6,408	)
Residential MBSs	7,287		(311		)	—		—			7,287		(311		)
Agency CMOs	7,957		(209		)	—		—			7,957		(209		)
Corporate debt securities	9,949		(51		)	—		—			9,949		(51		)
Total	$	158,785	$	(6,979	)	$	—	$	—		$	158,785	$	(6,979	)

The Company's investment securities portfolio consists primarily of U.S. Government agency securities, U.S. Government sponsored agency mortgage-backed obligations and private-label CMOs. The securities of the U.S. Government sponsored agencies and the U.S. Government MBSs have little credit risk because their principal and interest payments are backed by an agency of the U.S. Government.

The unrealized losses in the Company's investment portfolio at June 30, 2011 were associated with two distinct types of securities. The first type, those backed by the U.S. Government or one of its agencies,  includes nine agency debentures, four residential MBSs and 13 government agency sponsored CMOs. Management believes that the unrealized losses on these investments were primarily caused by the sharp rise in mid-term to long-term interest rates that occurred towards the end of 2010 and notes the contractual cash flows of those investments are guaranteed by an agency of the U.S. Government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost of the Company's investment. Because management believes the declines in fair value of these securities are attributable to changes in interest rates and not credit quality and because the Company has the ability and intent to hold those investments until a recovery of fair value, which may be maturity, the Company does not consider any of these investments to be other-than-temporarily impaired at June 30, 2011.

Private-label CMOs were the second type of security in the Company's investment portfolio with unrealized losses at June 30, 2011. Private-label CMOs are not backed by the full faith and credit of the U.S. Government nor are their principal and interest payments guaranteed. Historically, most private-label CMOs have carried a AAA bond rating on the underlying issuer, however, the subprime mortgage problems and the decline in the residential housing market in the U.S. in recent years have led to ratings downgrades and subsequent OTTI of many CMOs. As of June 30, 2011, Metro owned seven such non-agency CMO securities in its investment portfolio with unrealized losses and one non-agency CMO in an unrealized gain position. The total book value for all eight securities was $28.6 million. Management performs no less than quarterly assessments of these securities for OTTI to determine what, if any, portion of the impairment may be credit related. As part of this process, management asserts that (a) we do not have the intent to sell the securities and (b) it is more likely than not we will not be required to sell the securities before recovery of the Company's cost basis. This assertion is based, in part, upon the most recent liquidity analysis prepared for the Company's Asset/Liability Committee (ALCO) which indicates if the Company has sufficient excess funds to consider the potential purchase of investment securities and sufficient unused borrowing capacity available to meet any potential outflows. Furthermore, the Company knows of no contractual or regulatory obligations that would require these bonds to be sold.  

Next, in order to bifurcate the impairment into its components, the Company uses the Bloomberg analytical service to analyze each individual security. The Company looks at the overall bond ratings as well as specific, underlying characteristics such as pool factor, weighted-average coupon, weighted-average maturity, weighted-average life, loan to value, delinquencies, credit score, prepayment speeds, geographic concentration, etc. Using reported data for prepayment speeds, default rates, loss severity rates and lag times, the Company analyzes each bond under a variety of scenarios. As the results may vary depending upon the historic time period analyzed, the Company uses this information for the purpose of managing the investment portfolio and its inherent risk. However, the Company reports its findings based upon the three month data points for Constant Prepayment Rate (CPR) speed, default rate and loss severity as it believes this time point best captures both current and historic trends. For management purposes, the Company also analyzes each bond using an assumed, projected default rate based upon each pool's most recent level of 90-day delinquencies, bankruptcies and foreclosed real estate. This projected analysis also assumes loss severity percentages subjectively assigned to each pool based upon credit ratings. When the analysis shows a bond to have no projected loss, there is considered to be no credit-related loss. When the analysis shows a bond to have a projected loss, a cash flow projection is created, including the projected loss, for the duration of the bond. This projection is then used to calculate the present value of the cash flows expected to be collected and compared to the amortized cost basis. The difference between these two figures is recognized as the amount of OTTI due to credit loss. The difference between the total impairment and this credit loss portion is determined to be the amount related to all other factors. The amount of impairment related to credit loss is to be recognized in current earnings while the amount of impairment related to all other factors is to be recognized in other comprehensive income. Using this method, the Company determined that during the first six months of 2011, a total of six private-label CMOs had losses attributable to credit from prior years and two private-label CMOs have never had losses attributable to credit. Of these six bonds with credit losses, one was no longer projected to be in a loss position as of June 30, 2011. Losses were projected for the remaining five bonds as of June 30, 2011, however, the present value of the cash flows for one of these bonds was greater than its carrying value so that no further write-down was required on it. The remaining four bonds had combined losses attributable to credit of $315,000 at June 30, 2011.

The tables below roll forward the cumulative life to date credit losses which have been recognized in earnings for the private-label CMOs previously mentioned for the three months ended June 30, 2011 and June 30, 2010:

	Private-label CMOs
(in thousands)	Available for Sale		Held to Maturity		Total
Cumulative OTTI credit losses at April 1, 2011	$	2,625	$	—	$	2,625
Additions for which OTTI was not previously recognized	—		—		—
Additional increases for OTTI previously recognized when there is no intent to sell and no requirement to sell before recovery of amortized cost basis	315		—		315
Cumulative OTTI credit losses recognized for securities still held at June 30, 2011	$	2,940	$	—	$	2,940

	Private-label CMOs
(in thousands)	Available for Sale		Held to Maturity		Total
Cumulative OTTI credit losses at April 1, 2010	$	3,251	$	3	$	3,254
Additions for which OTTI was not previously recognized	3		—		3
Additional increases for OTTI previously recognized when there is no intent to sell and no requirement to sell before recovery of amortized cost basis	—		—		—
Cumulative OTTI credit losses recognized for securities still held at June 30, 2010	$	3,254	$	3	$	3,257

The tables below roll forward the cumulative life to date credit losses which have been recognized in earnings for the private-label CMOs previously mentioned for the six months ended June 30, 2011 and June 30, 2010:

	Private-label CMOs
(in thousands)	Available for Sale		Held to Maturity		Total
Cumulative OTTI credit losses at January 1, 2011	$	2,625	$	—	$	2,625
Additions for which OTTI was not previously recognized	—		—		—
Additional increases for OTTI previously recognized when there is no intent to sell and no requirement to sell before recovery of amortized cost basis	315		—		315
Cumulative OTTI credit losses recognized for securities still held at June 30, 2011	$	2,940	$	—	$	2,940

	Private-label CMOs
(in thousands)	Available for Sale		Held to Maturity		Total
Cumulative OTTI credit losses at January 1, 2010	$	2,338	$	3	$	2,341
Additions for which OTTI was not previously recognized	650		—		650
Additional increases for OTTI previously recognized when there is no intent to sell and no requirement to sell before recovery of amortized cost basis	266		—		266
Cumulative OTTI credit losses recognized for securities still held at June 30, 2010	$	3,254	$	3	$	3,257

XML



Guarantees

6 Months Ended

Jun. 30, 2011

Guarantees [Abstract]

Guarantees

GUARANTEES

The Company does not issue any guarantees that would require liability recognition or disclosure, other than its standby letters of credit. Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Generally, when issued, letters of credit have expiration dates within two years. The credit risk associated with letters of credit is essentially the same as that of traditional loan facilities. The Company generally requires collateral and/or personal guarantees to support these commitments. The Company had $33.6 million and $32.3 million of standby letters of credit at June 30, 2011 and December 31, 2010, respectively. Management believes that the proceeds obtained through a liquidation of collateral, the enforcement of guarantees and normal collection activities against the borrower would be sufficient to cover the potential amount of future payment required under the corresponding letters of credit. There was no current amount of liability at June 30, 2011 and December 31, 2010 under standby letters of credit issued.

XML



Consolidated Statements of Stockholders' Equity Parentheticals (USD $) In Thousands, except Share data	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Common stock, shares issued under stock option plans	0	11,378
Tax benefit, Stock Option Plans	$ 0	$ 25
Common stock, shares issued under employee stock purchase plan	50	150
Common stock, shares issued in connection with dividend reinvestment and stock purchase plan	178,006	89,893

XML



Stock-Based Compensation

6 Months Ended

Jun. 30, 2011

STOCK BASED COMPENSATION [Abstract]

Stock-Based Compensation

STOCK-BASED COMPENSATION

The fair value of each stock option grant was established at the date of grant using the Black-Scholes option pricing model. The Black-Scholes model used the following weighted-average assumptions for options granted during the six months endedJune 30, 2011 and 2010, respectively: risk-free interest rates of 3.0% and 3.3%; volatility factors of the expected market price of the Company's common stock of .46 and .45; weighted-average expected lives of the options of 7.5 years for both June 30, 2011 and June 30, 2010; and no cash dividends. Using these assumptions, the weighted-average fair value of options granted for the six months endedJune 30, 2011 and 2010 was $6.43 and $6.47 per option, respectively. In the first six months of 2011, the Company granted 239,350 options to purchase shares of the Company's stock at exercise prices ranging from $11.11 to $12.40 per share.

The Company recorded stock-based compensation expense of approximately $544,000 and $527,000 during the six months ended June 30, 2011 and June 30, 2010, respectively. In accordance with Financial Accounting Standards Board (FASB) guidance on stock-based payments, during the first quarters of 2011 and 2010 the Company reversed $165,000 and $200,000, respectively, of expense (that had been recorded in prior periods) as a result of the reconcilement of projected option forfeitures to actual option forfeitures for all stock options granted during the first quarters of 2007 and 2006, respectively.

XML



Recent Accounting Standards

6 Months Ended

Jun. 30, 2011

RECENT ACCOUNTING STANDARDS [Abstract]

Recent Accounting Standards

RECENT ACCOUNTING STANDARDS

In April 2011, the FASB issued guidance that clarifies whether a restructuring constitutes a concession and defines whether or not a debtor is experiencing financial difficulties. The effective date for this guidance for public companies is for interim and annual periods beginning on or after June 15, 2011 and applies retrospectively to restructurings occurring on or after the beginning of 2011. The adoption of this guidance will not have a material impact on our consolidated financial statements. 

In May 2011, the FASB amended fair value measurement guidance to clarify the guidance for items such as: the application of the highest and best use concept to non-financial assets and liabilities; the application of fair value measurement to financial instruments classified in a reporting entity's stockholders' equity; and disclosure requirements regarding quantitative information about unobservable inputs used in the fair value measurements of level 3 assets. The update also creates an exception to fair value measurement guidance for entities which carry financial instruments within a portfolio or group, under which the entity is now permitted to base the price used for fair valuation upon a price that would be received to sell the net asset position or transfer a net liability position in an orderly transaction. In addition, the update allows for the application of premiums and discounts in a fair value measurement if the financial instrument is categorized in level 2 or 3 of the fair value hierarchy. Lastly, the updated standard contains new disclosure requirements regarding fair value amounts categorized as level 3 in the fair value hierarchy such as: disclosure of the valuation process used; effects of and relationships between unobservable inputs; usage of nonfinancial assets for purposes other than their highest and best use when that is the basis of the disclosed fair value; and categorization by level of items disclosed at fair value, but not measured at fair value for financial statement purposes. The effective date of this update for public entities, is for interim and annual periods beginning after December 15, 2011. Early adoption is not permitted. We do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.

In June 2011, the FASB updated the guidance on Comprehensive Income. The update prohibits the presentation of the components of comprehensive income in the statements of stockholders' equity. Reporting entities are allowed to present either: a statement of comprehensive income, which reports both net income and other comprehensive income; or separate statements of net income and other comprehensive income. Under previous GAAP, all three presentations were acceptable. Regardless of the presentation selected, the Company will be required to present all reclassifications between other comprehensive and net income on the face of the new statement or statements. The provisions of this update are effective for fiscal years and interim periods beginning after December 31, 2011 for public entities. Early adoption is permitted. The adoption of this guidance will not have a material impact on our consolidated financial statements.

XML



Commitments and Contingencies

6 Months Ended

Jun. 30, 2011

COMMITMENTS AND CONTINGENCIES [Abstract]

Commitments and Contingencies

COMMITMENTS AND CONTINGENCIES

The Company is subject to certain routine legal proceedings and claims arising in the ordinary course of business. It is management's opinion that the ultimate resolution of these claims will not have a material adverse effect on the Company's financial position and results of operations.

In the normal course of business, there are various outstanding commitments to extend credit, such as letters of credit and unadvanced loan commitments. At June 30, 2011, the Company had $369.9 million in unused commitments. Management does not anticipate any material losses as a result of these transactions.

Aggregate Contractual Obligations

The following table represents our on-and-off balance sheet aggregate contractual obligations to make future payments as of June 30, 2011:

	June 30, 2011
(in thousands)	Less than 1 Year		1 to 3 Years		3 to 5 Years		Over 5 Years		Total
Time deposits	$	177,530	$	65,703	$	14,521	$	—	$	257,754
Long-term debt	—		25,000		—		29,400		54,400
Fiserv obligation	7,307		15,907		13,110		—		36,324
Operating leases	2,522		4,561		4,265		20,944		32,292
Sponsorship obligation	393		677		677		677		2,424
Total	$	187,752	$	111,848	$	32,573	$	51,021	$	383,194

During 2011, the Company entered into a new debt agreement that consisted of one $25.0 million FHLB advance bearing interest at 1.01%, due March 18, 2013.

Future Facilities

The Company has purchased the land at the corner of Carlisle Road and Alta Vista Road in Dover Township, York County, Pennsylvania. The Company plans to construct a full-service store on this property to be opened in the future.

The Company has entered into a land lease for the premises located at 2121 Lincoln Highway East, East Lampeter Township, Lancaster County, Pennsylvania. The Company plans to construct a full-service store on this property to be opened in the future.

The Company has purchased land at 105 N. George Street, York City, York County, Pennsylvania. The Company plans to open a store on this property to be opened in the future.

XML



Consolidated Statements of Stockholders' Equity (USD $) In Thousands	Total	Preferred Stock [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income [Member]
Beginning balance at Dec. 31, 2009	$ 200,022	$ 400	$ 13,448	$ 147,340	$ 49,705	$ (10,871)
Comprehensive income: [Abstract]
Net income	366	0	0	0	366	0
Other comprehensive income, net of tax impact	6,725	0	0	0	0	6,725
Total comprehensive income	7,091
Dividends declared on preferred stock	(40)	0	0	0	(40)	0
Common stock of 11,378 shares issued under stock option plans, including tax benefit of $25	103	0	12	91	0	0
Common stock issued under employee stock purchase plan	2	0	0	2	0	0
Proceeds from issuance of common stock in connection with dividend reinvestment and stock purchase plan	1,132	0	90	1,042	0	0
Common stock share-based awards	527	0	0	527	0	0
Ending balance at Jun. 30, 2010	208,837	400	13,550	149,002	50,031	(4,146)
Beginning balance at Dec. 31, 2010	205,351	400	13,748	151,545	45,288	(5,630)
Comprehensive income: [Abstract]
Net income	3,524	0	0	0	3,524	0
Other comprehensive income, net of tax impact	5,659	0	0	0	0	5,659
Total comprehensive income	9,183
Dividends declared on preferred stock	(40)	0	0	0	(40)	0
Common stock issued under employee stock purchase plan	1	0	0	1	0	0
Proceeds from issuance of common stock in connection with dividend reinvestment and stock purchase plan	2,023	0	178	1,845	0	0
Common stock share-based awards	544	0	0	544	0	0
Ending balance at Jun. 30, 2011	$ 217,062	$ 400	$ 13,926	$ 153,935	$ 48,772	$ 29

XML



Consolidated Statements of Cash Flows (USD $) In Thousands	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Operating Activities
Net income	$ 3,524	$ 366
Adjustments to reconcile net income to net cash provided (used) by operating activities:
Provision for loan losses	3,492	5,000
Provision for depreciation and amortization	3,287	3,040
Deferred income taxes (benefit)	(128)	(1,528)
Amortization of securities premiums and accretion of discounts (net)	1,041	38
Gains on sales/calls of securities (net)	(343)	(919)
Other-than-temporary impairment losses on investment securities	315	916
Proceeds from sales and transfers of SBA loans originated for sale	12,063	7,885
Proceeds from sales of other loans originated for sale	27,972	23,856
Loans originated for sale	(27,942)	(42,252)
Gains on sales of loans originated for sale	(2,335)	(327)
Loss on write-down on foreclosed real estate	1,018	532
Gains on sales of foreclosed real estate (net)	(86)	(14)
Loss on disposal of equipment	1,250	36
Stock-based compensation	544	527
Amortization of deferred loan origination fees and costs (net)	1,234	806
Decrease (increase) in other assets	13,735	2,678
Increase (decrease) in other liabilities	(13,314)	(6,686)
Net cash provided (used) by operating activities	25,327	(6,046)
Securities available for sale:
Proceeds from principal repayments, calls and maturities	28,215	73,671
Proceeds from sales	86,765	44,315
Purchases	(155,733)	(152,538)
Securities held to maturity:
Proceeds from principal repayments, calls and maturities	12,140	12,939
Purchases	0	(10,000)
Proceeds from sales of foreclosed real estate	1,693	973
Increase in loans receivable (net)	(86,010)	(2,510)
Redemption (purchase) of restricted investment in bank stock (net)	2,004	(65)
Proceeds from sale of premises and equipment	1	25
Purchases of premises and equipment	(1,019)	(1,335)
Net cash used by investing activities	(111,944)	(34,525)
Financing Activities
Increase in demand, interest checking, money market, and savings deposits (net)	72,097	30,737
Decrease in time deposits (net)	(12,900)	(11,844)
Increase in short-term borrowings (net)	19,525	26,325
Proceeds from long-term borrowings	25,000	0
Proceeds from common stock options exercised	0	78
Proceeds from dividend reinvestment and common stock purchase plan	2,023	1,132
Tax benefit on exercise of stock options	0	25
Cash dividends on preferred stock	(40)	(40)
Net cash provided by financing activities	105,705	46,413
Increase in cash and cash equivalents	19,088	5,842
Cash and cash equivalents at beginning of year	32,858	40,264
Cash and cash equivalents at end of period	51,946	46,106
Supplementary cash flow information on noncash activities:
Transfer of loans to foreclosed assets	3,905	1,177
Trade date accounting settlements for investment sales	38,534	0
Trade date accounting settlements for investment purchases	$ 50,415	$ 0

XML



Loans Receivable and Allowance for Loan Losses

6 Months Ended

Jun. 30, 2011

Loans Receivable and Allowance for Loan Losses [Abstract]

Loans Receivable and Allowance For Loan Losses

LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES

Loans receivable that management has the intent and ability to hold for the foreseeable future, or until maturity or payoff, are stated at their outstanding unpaid principal balances, net of an allowance for loan losses and any deferred fees and costs. Interest income is accrued on the unpaid principal balance. Loan origination fees and costs are deferred and recognized as an adjustment of the yield (interest income) of the related loans. The Company is generally amortizing these amounts over the contractual life of the loan or to the loan's call date. The Bank has a line of credit commitment from the FHLB and certain qualifying assets of the Bank collateralize the line including loans held at the Bank.

During the first quarter of 2011, certain types of loans were reclassified due to their purpose and overall risk characteristics. Therefore, certain loan balances as of December 31, 2010 balances were reclassified to conform to the 2011 presentation.

A summary of loans receivable is as follows:

(in thousands)	June 30, 2011		December 31, 2010
Commercial and industrial	$	357,652	$	337,398
Commercial tax-exempt	83,711		85,863
Owner occupied real estate	269,637		241,553
Commercial construction and land development	122,308		112,094
Commercial real estate	341,961		313,194
Residential	80,481		81,124
Consumer	200,938		207,979
	1,456,688		1,379,205
Less: allowance for loan losses	21,723		21,618
Net loans receivable	$	1,434,965	$	1,357,587

Generally, the Company's policy is to move a loan to nonaccrual status as soon as it becomes 90 days past due or when the Company does not believe it will collect all of its principal and interest payments. Typically commitments are canceled and no additional advances are made when a loan is placed on nonaccrual. In addition, when a loan is placed on nonaccrual status, unpaid interest credited to income in the current year is reversed and unpaid interest accrued in prior years is charged against the allowance for loan losses. Interest received on nonaccrual loans generally is either applied against principal or reported as interest income, according to management's judgment as to the collectibility of principal.  If a loan is substandard and accruing, interest is recognized as accrued. Once a loan is on nonaccrual status, it is not returned to accrual status unless the loan has been current for at least six consecutive months and the borrower and/or any guarantors demonstrate evidence of the ability to repay the loan. Under certain circumstances such as bankruptcy, if a loan is under collateralized, or if the borrower and/or guarantors do not show evidence of the ability to pay, the loan may be placed on nonaccrual status even though it is not past due by 90 days or more. Therefore, the nonaccrual loan balance of $45.5 million exceeds the balance of total loans that are 90 days past due of $29.6 million at June 30, 2011 as presented in the aging analysis.

The Company properly charges down loans based on the fair value of the collateral as determined by the current appraisal or other collateral valuations less any costs to sell before the properties are transferred to foreclosed real estate.

A loan is considered past due or delinquent if payment is not received on or before the due date. The following table summarizes nonperforming loans by loan type at June 30, 2011 and December 31, 2010:

(in thousands)	June 30, 2011		December 31, 2010
Nonaccrual loans:
Commercial and industrial	$	19,312	$	23,103
Commercial tax-exempt	—		—
Owner occupied real estate	2,450		4,318
Commercial construction and land development	12,629		14,155
Commercial real estate	5,125		5,424
Residential	3,663		3,609
Consumer	2,310		1,579
Total nonaccrual loans	45,489		52,188
Loans past due 90 days or more and still accruing	—		650
Renegotiated loan	—		177
Total nonperforming loans	$	45,489	$	53,015

The following tables are an age analysis of past due loan receivables as of June 30, 2011 and December 31, 2010:

			Past Due Loans										Recorded Investment in Loans 90 Days and Greater and Still Accruing
(in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days Past Due and Greater		Total Past Due		Total Loan Receivables
June 30, 2011
Commercial and industrial	$	345,278	$	851	$	4,558	$	6,965	$	12,374	$	357,652	$	—
Commercial tax-exempt	83,711		—		—		—		—		83,711		—
Owner occupied real estate	265,650		909		834		2,244		3,987		269,637		—
Commercial construction and land development	107,760		794		1,125		12,629		14,548		122,308		—
Commercial real estate	329,448		1,177		6,628		4,708		12,513		341,961		—
Residential	77,220		267		645		2,349		3,261		80,481		—
Consumer	196,950		2,785		456		747		3,988		200,938		—
Total	$	1,406,017	$	6,783	$	14,246	$	29,642	$	50,671	$	1,456,688	$	—

			Past Due Loans										Recorded Investment in Loans 90 Days and Greater and Still Accruing
(in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days Past Due and Greater		Total Past Due		Total Loan Receivables
December 31, 2010
Commercial and industrial	$	316,750	$	1,213	$	521	$	18,914	$	20,648	$	337,398	$	23
Commercial tax-exempt	85,863		—		—		—		—		85,863		—
Owner occupied real estate	235,738		1,314		258		4,243		5,815		241,553		—
Commercial construction and land development	97,939		—		—		14,155		14,155		112,094		—
Commercial real estate	306,032		1,214		77		5,871		7,162		313,194		624
Residential	73,670		3,724		1,606		2,124		7,454		81,124		—
Consumer	203,235		2,547		903		1,294		4,744		207,979		3
Total	$	1,319,227	$	10,012	$	3,365	$	46,601	$	59,978	$	1,379,205	$	650

A summary of the allowance for loan losses and balance of loans receivable by loan class and by impairment method as of June 30, 2011 and December 31, 2010 is detailed in the table that follows. As mentioned previously, during the first quarter of 2011, certain types of loans were reclassified due to their purpose and overall risk characteristics. This impacted the allocation of the allowance for loan losses as reported at December 31, 2010, therefore the allocation as of that date has been reclassified to conform to the 2011 presentation.

(in thousands)	Comm. and industrial		Comm. tax-exempt		Owner occupied real estate		Comm. construc-tion and land devel-opment		Comm. real estate		Resi-dential		Con-sumer		Unallo-cated		Total
June 30, 2011
Allowance for loan losses
Quantitative analysis:
Individually evaluated for impairment	$	2,113	$	—	$	260	$	810	$	—	$	—	$	—	$	—	$	3,183
Collectively evaluated for impairment	3,888		—		399		2,288		3,414		246		377		—		10,612
Qualitative analysis:
Collectively evaluated for impairment	2,950		81		335		2,293		1,621		192		396		—		7,868
Unallocated:	—		—		—		—		—		—		—		60		60
Total allowance for loan   losses	$	8,951	$	81	$	994	$	5,391	$	5,035	$	438	$	773	$	60	$	21,723
Loans receivable
Loans evaluated   collectively	$	338,063	$	83,711	$	266,125	$	109,460	$	334,663	$	76,818	$	198,628	$	—	$	1,407,468
Loans evaluated   individually	19,589		—		3,512		12,848		7,298		3,663		2,310		—		49,220
Total loans receivable	$	357,652	$	83,711	$	269,637	$	122,308	$	341,961	$	80,481	$	200,938	$	—	$	1,456,688
December 31, 2010
Allowance for loan losses
Quantitative analysis:
Individually evaluated for impairment	$	2,055	$	—	$	260	$	1,310	$	—	$	—	$	—	$	—	$	3,625
Collectively evaluated for impairment	3,866		—		302		2,475		2,551		248		289		—		9,731
Qualitative analysis:
Collectively evaluated for impairment	3,758		86		348		1,635		1,451		194		413		—		7,885
Unallocated:	—		—		—		—		—		—		—		377		377
Total allowance for loan   losses	$	9,679	$	86	$	910	$	5,420	$	4,002	$	442	$	702	$	377	$	21,618
Loans receivable
Loans evaluated   collectively	$	306,801	$	85,863	$	232,316	$	91,345	$	307,149	$	77,515	$	206,400	$	—	$	1,307,389
Loans evaluated   individually	30,597		—		9,237		20,749		6,045		3,609		1,579		—		71,816
Total loans receivable	$	337,398	$	85,863	$	241,553	$	112,094	$	313,194	$	81,124	$	207,979	$	—	$	1,379,205

The Bank may create a specific reserve for all of or a part of a particular loan in lieu of a charge-off or charge-down as a result of management's evaluation of impaired loans. These circumstances are often credits in transition or in which a legal matter is pending. In these instances, the Bank has determined that a loss is not imminent based upon available information surrounding the credit at the time of the analysis, however management believes a reserve is appropriate to acknowledge the potential risk of loss.

Generally, construction and land development and commercial real estate loans present a greater risk of non-payment by a borrower than other types of loans. The market value of real estate, particularly real estate held for investment, can fluctuate significantly in a relatively short period of time. Commercial and industrial, tax exempt and owner occupied real estate loans carry a lower risk factor because the repayment of these loans relies primarily on the cash flow from a business, a municipality, or a school district.

Consumer loan collections are dependent on the borrower's continued financial stability and thus are more likely to be affected by adverse personal circumstances. Residential loans also are impacted by the market value of real estate. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount that can be recovered on these loans. The risk of non-payment is affected by changes in economic conditions, the credit risks of a particular borrower, the duration of the loan and, in the case of a collateralized loan, uncertainties as to the future value of the collateral and other factors.

As part of the quantitative analysis of the adequacy of the allowance for loan losses on those loans collectively reviewed for impairment, management now bases its calculation of probable loan losses on a two year period of actual historical losses.  The Company has experienced a much higher level of loan charge-offs over the most recent two year period compared to previous years. Given the continued state of the economy and its impact on borrowers and on loan collateral values, management feels this is an appropriate analysis, valid until such time that the economy, borrower repayment ability and loan collateral values show sustained signs of improvement.  Management may expand or reduce the historical loss period used as part of its continuous analysis of the adequacy of the allowance for loan losses.

The qualitative factors such as changes in lending policies, changes in the experience of lending staff and the changes in international, national, regional and local economic conditions represent a portion of the allowance established for losses inherent in the loan portfolio, which have not been identified by the quantitative processes. The determination inherently involves a higher degree of subjectivity and considers risk factors that may not have yet manifested themselves in historical loss experience.

The following tables summarize the transactions in the allowance for loan losses for the three and six months ended June 30, 2011:

(in thousands)	Comm. and industrial			Comm. tax-exempt			Owner occupied real estate		Comm. construction and land development			Comm. real estate			Resi-dential			Consumer			Unallo-cated			Total
2011
Balance at April 1	$	8,861		$	83		$	942	$	6,016		$	4,583		$	461		$	761		$	143		$	21,850
Provision charged to operating expenses	734			(2		)	52		375			492			(52		)	184			(83		)	1,700
Recoveries of loans previously charged-off	15			—			—		—			2			29			32			—			78
Loans charged-off	(659		)	—			—		(1,000		)	(42		)	—			(204		)	—			(1,905		)
Balance at June 30	$	8,951		$	81		$	994	$	5,391		$	5,035		$	438		$	773		$	60		$	21,723

(in thousands)	Comm. and industrial			Comm. tax-exempt			Owner occupied real estate			Comm. construction and land development			Comm. real estate			Resi-dential			Consumer			Unallo-cated			Total
2011
Balance at January 1	$	9,679		$	86		$	910		$	5,420		$	4,002		$	442		$	702		$	377		$	21,618
Provision charged to operating expenses	132			(5		)	86			1,353			1,503			68			672			(317		)	3,492
Recoveries of loans previously charged-off	53			—			—			—			8			29			34			—			124
Loans charged-off	(913		)	—			(2		)	(1,382		)	(478		)	(101		)	(635		)	—			(3,511		)
Balance at June 30	$	8,951		$	81		$	994		$	5,391		$	5,035		$	438		$	773		$	60		$	21,723

The following table summarizes the transactions in the allowance for loan losses for the three and six months ended June 30, 2010. The table is presented in summary due to the FASB guidance issued in July 2010 related to an entity's allowance for credit losses and the credit quality of its financing receivables requiring the activity by portfolio segment be disclosed only for periods beginning on or after December 15, 2010.

(in thousands)
2010	Three Months Ended			Six Months Ended
Balance at beginning of period	$	15,178		$	14,391
Provision charged to operating expenses	2,600			5,000
Recoveries of loans previously charged-off	231			276
Loans charged-off	(1,831		)	(3,489		)
Balance at June 30	$	16,178		$	16,178

The following table presents additional information regarding the Company's impaired loans as of and for the three and six months endedJune 30, 2011:

							Average Recorded Investment				Interest Income Recognized
(in thousands)	Recorded Invest-ment		Unpaid Principal Balance		Related Allow-ance		Three Months Ended		Six Months Ended		Three Months Ended		Six Months Ended
Loans with no related allowance:
Commercial and industrial	$	10,988	$	16,409	$	—	$	13,566	$	16,717	$	4	$	90
Commercial tax-exempt	—		—		—		—		—		—		—
Owner occupied real estate	2,768		3,098		—		4,156		5,759		30		100
Commercial construction and land      development	11,358		17,271		—		10,148		12,096		2		115
Commercial real estate	7,298		7,727		—		7,209		7,509		37		75
Residential	3,663		4,131		—		3,674		3,784		—		—
Consumer	2,310		2,606		—		2,273		2,149		—		—
Total impaired loans with no related   allowance	38,385		51,242		—		41,026		48,014		73		380
Loans with an allowance recorded:
Commercial and industrial	8,601		8,601		2,113		8,634		8,742		—		—
Owner occupied real estate	744		744		260		739		743		—		—
Commercial construction and land      development	1,490		1,490		810		3,365		3,857		—		—
Total impaired loans with an   allowance recorded	10,835		10,835		3,183		12,738		13,342		—		—
Total impaired loans:
Commercial and industrial	19,589		25,010		2,113		22,200		25,459		4		90
Commercial tax-exempt	—		—		—		—		—		—		—
Owner occupied real estate	3,512		3,842		260		4,895		6,502		30		100
Commercial construction and land      development	12,848		18,761		810		13,513		15,953		2		115
Commercial real estate	7,298		7,727		—		7,209		7,509		37		75
Residential	3,663		4,131		—		3,674		3,784		—		—
Consumer	2,310		2,606		—		2,273		2,149		—		—
Total impaired loans as of June 30,   2011	$	49,220	$	62,077	$	3,183	$	53,764	$	61,356	$	73	$	380

The following table presents additional information regarding the Company's impaired loans as of December 31, 2010:

(in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
Loans with no related allowance:
Commercial and industrial	$	21,630	$	24,817	$	—
Commercial tax-exempt	—		—		—
Owner occupied real estate	8,483		8,758		—
Commercial construction and land development	16,401		17,173		—
Commercial real estate	6,045		6,853		—
Residential	3,609		3,609		—
Consumer	1,579		1,579		—
Total impaired loans with no related allowance	57,747		62,789		—
Loans with an allowance recorded:
Commercial and industrial	8,967		9,022		2,055
Owner occupied real estate	754		768		260
Commercial construction and land development	4,348		8,108		1,310
Total impaired loans with an allowance recorded	14,069		17,898		3,625
Total impaired loans:
Commercial and industrial	30,597		33,839		2,055
Commercial tax-exempt	—		—		—
Owner occupied real estate	9,237		9,526		260
Commercial construction and land development	20,749		25,281		1,310
Commercial real estate	6,045		6,853		—
Residential	3,609		3,609		—
Consumer	1,579		1,579		—
Total impaired loans as of December 31, 2010	$	71,816	$	80,687	$	3,625

Impaired loans averaged approximately $61.4 million and $74.6 million for the six months endedJune 30, 2011 and for the twelve months ended December 31, 2010, respectively. Interest income on impaired loans that were still accruing totaled $380,000 and $1.3 million for the six months ended June 30, 2011 and for the year ended December 31, 2010, respectively. The decrease in total and average impaired loan balances during the second quarter was partially due to pay downs as well as the transfer of certain loans to foreclosed assets as a result of the Bank's foreclosure on the collateral associated with these loans. Certain substandard accruing loans considered impaired as of December 31, 2010 were no longer considered to be impaired at June 30, 2011.

Metro Bank uses the following descriptions as credit quality indicators of its loan portfolio: pass-rated, special mention, substandard accrual and substandard nonaccrual loans. Monthly, we track commercial loans that are no longer pass rated.  We review the cash flow, operating results and financial condition of the borrower and any guarantors, as well as the collateral position against established policy guidelines as a means of providing a targeted list of loans and loan relationships that require additional attention within the loan portfolio. We categorize loans possessing increased risk as either special mention, substandard accrual or substandard nonaccrual. Special mention loans are those loans that are currently adequately collateralized, but potentially weak.  The potential weaknesses may, if not corrected, weaken the loan's credit quality or inadvertently jeopardize our credit position in the future.  Substandard accrual and substandard nonaccrual assets are characterized by well-defined weaknesses that jeopardize the liquidation of the debt and by the possibility that Metro Bank will sustain some loss if the weaknesses are not corrected.  Substandard accrual loans would move from accrual to nonaccrual when the Bank does not believe it will collect all of its principal and interest payments.  Some identifiers to determine the collectability are as follows: when the loan is 90 days past due in principal or interest, there are triggering events in the borrowers financial statements that show continuing deterioration, the borrowers source of repayment is depleting, or if bankruptcy or other legal matters are present, regardless if the loan is 90 days past due or not.  Special mention and substandard loans are reviewed monthly as well.  Pass rated loans are reviewed throughout the year through the recurring review process of our independent loan review department.

Credit quality indicators for commercial loans broken out by loan type are presented in the following tables for the periods ended June 30, 2011 and December 31, 2010. As previously mentioned, certain December 31, 2010 balances have been reclassified to conform to the 2011 presentation.

	June 30, 2011
(in thousands)	Pass Rated Loans		Special Mention		Substandard Accrual		Substandard Nonaccrual		Total
Commercial credit exposure:
Commercial and industrial	$	312,518	$	9,570	$	16,252	$	19,312	$	357,652
Commercial tax-exempt	83,711		—		—		—		83,711
Owner occupied real estate	245,672		14,400		7,115		2,450		269,637
Commercial construction and land development	96,822		8,149		4,708		12,629		122,308
Commercial real estate	325,283		9,290		2,263		5,125		341,961
Total	$	1,064,006	$	41,409	$	30,338	$	39,516	$	1,175,269

	December 31, 2010
(in thousands)	Pass Rated Loans		Special Mention		Substandard Accrual		Substandard Nonaccrual		Total
Commercial credit exposure:
Commercial and industrial	$	301,075	$	5,726	$	7,494	$	23,103	$	337,398
Commercial tax-exempt	85,863		—		—		—		85,863
Owner occupied real estate	228,224		4,093		4,918		4,318		241,553
Commercial construction and land development	84,155		7,190		6,594		14,155		112,094
Commercial real estate	296,537		10,611		622		5,424		313,194
Total	$	995,854	$	27,620	$	19,628	$	47,000	$	1,090,102

Consumer loan credit exposures are rated either performing or nonperforming as detailed below at June 30, 2011 and December 31, 2010:

	June 30, 2011
(in thousands)	Performing		Nonperforming		Total
Consumer credit exposure:
Residential	$	76,818	$	3,663	$	80,481
Consumer	198,628		2,310		200,938
Total	$	275,446	$	5,973	$	281,419

	December 31, 2010
(in thousands)	Performing		Nonperforming		Total
Consumer credit exposure:
Residential	$	77,515	$	3,609	$	81,124
Consumer	206,400		1,579		207,979
Total	$	283,915	$	5,188	$	289,103

XML



Consolidated Balance Sheets (USD $) In Thousands	Jun. 30, 2011	Dec. 31, 2010
Assets
Cash and due from banks	$ 42,271	$ 32,858
Federal funds sold	9,675	0
Cash and cash equivalents	51,946	32,858
Securities, available for sale at fair value	488,258	438,012
Securities, held to maturity at cost (fair value 2011: $223,153; 2010: $224,202)	225,386	227,576
Loans, held for sale	8,847	18,605
Loans receivable, net of allowance for loan losses (allowance 2011: $21,723; 2010: $21,618)	1,434,965	1,357,587
Restricted investments in bank stock	18,610	20,614
Premises and equipment, net	84,643	88,162
Other assets	74,351	51,058
Total assets	2,387,006	2,234,472
Deposits:
Noninterest-bearing	389,992	340,956
Interest-bearing	1,501,384	1,491,223
Total deposits	1,891,376	1,832,179
Short-term borrowings	160,000	140,475
Long-term debt	54,400	29,400
Other liabilities	64,168	27,067
Total liabilities	2,169,944	2,029,121
Stockholders' Equity:
Preferred stock - Series A noncumulative; $10.00 par value; (1,000,000 shares authorized; 40,000 shares issued and outstanding)	400	400
Common stock - $1.00 par value; 25,000,000 shares authorized; (issued and outstanding shares 2011: 13,926,440; 2010: 13,748,384)	13,926	13,748
Surplus	153,935	151,545
Retained earnings	48,772	45,288
Accumulated other comprehensive income (loss)	29	(5,630)
Total stockholders' equity	217,062	205,351
Total liabilities and stockholders' equity	$ 2,387,006	$ 2,234,472