October 27, 2005

MetroCorp Bancshares, Inc. Announces Net Income of $2.84 Million, or $0.39 Per Share, in Third Quarter 2005

HOUSTON, Oct 27, 2005 (BUSINESS WIRE) -- MetroCorp Bancshares, Inc. (Nasdaq:MCBI), a Texas corporation which through its subsidiary, MetroBank, N.A., provides community banking services in Houston and Dallas, and through its subsidiary, First United Bank that was acquired on October 5, 2005, provides community banking service in San Diego and Los Angeles, California, today announced net income of $2.84 million for the third quarter of 2005, up approximately $1.2 million or 76.8% compared with the same quarter in 2004. Diluted earnings per share for the third quarter 2005 were $0.39, compared with $0.22 for the same quarter in 2004. The improved performance was mainly a result of growth in both loans and deposits, and an overall increase in the net interest margin. In addition, income in the third quarter of 2004 was reduced by a severance payment to a senior executive.

Third Quarter Highlights

-- Net income of $2.84 million, up 76.8% from same quarter of 2004 and 2.4% from second quarter of 2005

-- Fully diluted earnings per share reached $0.39, increasing 77.3% from same quarter of 2004

-- Total loans increased to $612.9 million

-- Total deposits increased to $788.5 million

-- Return on average equity (ROAE) of 12.48%

-- Return on average assets (ROAA) of 1.22%

George M. Lee, President and CEO of MetroCorp Bancshares, Inc., said, "Our management team is pleased with the Company's delivery of another quarter of record earnings. Our net earnings for the third quarter of 2005 increased by 76.8% over the same period in 2004, and 31.5% if we exclude the $800,000 severance payment made during the third quarter of 2004. The third quarter 2005 net interest margin of 4.57% improved compared with the second quarter of 2005 by 6 basis points while we achieved modest growth in loans and deposits. The efficiency ratio improved from 66.95% for the year ended December 31, 2004 to 62.57% for the third quarter of 2005. We are making consistent progress with our core operations." Lee added, "All the preparatory work relating to the acquisition of First United Bank was completed during the third quarter allowing the successful close of the transaction on October 5, 2005. Management also is pursuing its expansion plans in Texas, and is in the process of finalizing leasehold negotiations and staffing for our largest new branch in the Dallas-Fort Worth region, which is expected to be in operation during the first quarter of 2006. With encouraging results from each additional quarter, we are building more momentum towards the future."

Interest income and expense. Interest income for the three months ended September 30, 2005, was $14.3 million, up approximately $2.8 million or 24.3% compared with $11.5 million for the same period in 2004. The higher interest income in the third quarter of 2005, compared with the same quarter in 2004, was primarily the result of an increase in both average earning assets and average yield. The increase in average earning assets came primarily from loan growth. The average loan balance for the third quarter of 2005 was $603.2 million compared with $559.7 million for the third quarter of 2004, an increase of 7.8%. The yield on average earning assets for the third quarter of 2005 was 6.47% compared with 5.35% for the third quarter of 2004, an increase of 112 basis points. The Federal Reserve's eleven interest rate increases since June 2004 contributed positively to the yield on loans. The majority of the Bank's loan portfolio is comprised of variable and adjustable rate loans that benefit the Company during periods of increases in the prime rate.

Interest income for the nine months ended September 30, 2005 was $40.4 million, up approximately $7.5 million or 23.0% compared with $32.9 million for the same period in 2004. The higher interest income for the nine months was a result of increases in both average earning assets and average yield. The yield on average earning assets for the nine months ended September 30, 2005 was 6.20% compared with 5.26% for the same period in 2004, an increase of 94 basis points, which mainly came from a higher yield on loans.

Interest expense for the three months ended September 30, 2005 was $4.2 million, up approximately $1.3 million or 43.9% compared with $2.9 million for the same period in 2004. The increase in interest expense was primarily due to an increase in interest-bearing deposits and higher interest rates. Average interest-bearing deposits were $614.3 million for the third quarter of 2005 compared with $567.0 million for the third quarter of 2004, an increase of 8.3%. The cost of average interest-bearing liabilities for the third quarter of 2005 was 2.59% compared with 1.83% for the third quarter of 2004, an increase of 76 basis points. The increase in rates primarily reflected the impact of the Federal Reserve's interest rate increases.

Interest expense for the nine months ended September 30, 2005 was $11.1 million, up approximately $3.0 million or 36.8% compared with $8.1 million for the same period in 2004. The increase in interest expense was primarily the result of higher interest-bearing deposits and higher interest rates. The cost of average interest-bearing liabilities for the nine months ended September 30, 2005 was 2.33% compared with 1.77% for the same period in 2004, an increase of 56 basis points.

The net interest margin for the three months ended September 30, 2005, was 4.57%, up 58 basis points compared with 3.99% for the same period in 2004. The increase was primarily the result of an increase in the yield on earning assets of 112 basis points that was the result of a higher yield on loans. The yield on loans for the third quarter of 2005 was 7.60% compared with 6.15% for the third quarter of 2004, an increase of 145 basis points. The increase in net interest margin was partially offset by an increase in the cost of average earning assets of 54 basis points. However, the effect of higher interest rates on the cost of interest-bearing liabilities was reduced by a decrease in other borrowings and an increase in noninterest-bearing deposits.

The net interest margin for the nine months ended September 30, 2005 was 4.49%, up 53 basis points from 3.96% for the same period in 2004. The increase was the result of an increase in the yield on average earning assets of 94 basis points that was partially offset by an increase in the cost of average earning assets of 41 basis points.

Net interest income before the provision for loan losses for the three months ended September 30, 2005 was $10.1 million, up approximately $1.5 million or 17.6% compared with $8.6 million for the same period in 2004. Net interest income before the provision for loan losses for the nine months ended September 30, 2005 was $29.3 million, up approximately $4.6 million or 18.4% from $24.7 million for the same period in 2004.

Noninterest income and expense. Noninterest income for the three months ended September 30, 2005 was $2.1 million, up approximately $248,000 or 13.5% compared with the same three months in 2004. The increase was primarily the result of an increase in service fees in the third quarter of 2005 and the charge-off of uncollectible consumer late fees in the same period of 2004.

Noninterest income for the nine months ended September 30, 2005 was $6.2 million, down approximately $181,000 or 2.9% compared with the same period in 2004. The decrease was primarily the result of lower gain on sale of loans, partially offset by higher other loan-related fees.

Noninterest expense for the three months ended September 30, 2005 was $7.6 million, down approximately $229,000 or 2.9% compared with $7.9 million for the same period in 2004. The decrease was a result of reduced salaries and benefits, partially offset by an increase in other noninterest expense. Salaries and benefits expense for the three months ended September 30, 2005 was $4.2 million, down $575,000 compared with $4.8 million for the same period in 2004, primarily due to a severance payment of approximately $800,000 made to a senior executive in the third quarter of 2004. Other noninterest expense for the three months ended September 30, 2005 was $2.1 million, up $471,000 compared with $1.6 million for the same period in 2004 primarily due to Sarbanes-Oxley compliance costs in the third quarter of 2005 and a franchise tax refund in the same period of 2004.

Noninterest expense for the nine months ended September 30, 2005 was $22.6 million, up $1.8 million or 8.6% compared with $20.8 million for the same period in 2004, primarily due to a write-down on foreclosed assets of approximately $391,000 in the first quarter of 2005 and a $67,000 net gain on the sale of foreclosed assets in the third quarter of 2005, compared with a $844,000 net gain on the sale of foreclosed assets for the nine months ended September 30, 2004. Other noninterest expense for the nine months ended September 30, 2005 was up approximately $757,000 compared with the same period in 2004, primarily due to expenses associated with the First United Bank acquisition, a branch consolidation in Dallas, and Sarbanes-Oxley compliance costs.

Provision for loan losses. The provision for loan losses for the three months ended September 30, 2005 was $468,000, a $253,000 increase compared with $215,000 for the same period in 2004 primarily due to growth of the loan portfolio. The provision for loan losses for the nine months ended September 30, 2005 was $1,368,000, up approximately $303,000 compared with the provision made in the same period of 2004. The allowance for loan losses as a percent of total loans at September 30, 2005 and 2004 was 1.76% and 1.92%, respectively. At December 31, 2004, the allowance for loan losses as a percent of total loans was 1.83%.

Net charge-offs for the three months ended September 30, 2005 were $34,000 compared with $403,000 for the same period in 2004. Net charge-offs for the nine months ended September 30, 2005 were $1.1 million compared with $668,000 for the same period in 2004. The increase in net charge-offs for the nine months ended September 30, 2005 primarily consisted of an $800,000 charge-off on one nonperforming credit, taken against the specific reserve for that credit in the second quarter of 2005. The charge-off was recorded in connection with the sale of the company to match the sales price, which was completed in the third quarter of 2005.

Asset Quality. Total nonperforming assets at September 30, 2005 were $19.6 million compared with $18.3 million at December 31, 2004. The increase was primarily due to one loan relationship being placed on nonaccrual status in the first quarter of 2005 and the result of a customer impacted by Hurricane Rita. A $2.8 million distressed loan to a shrimp processor was placed on nonaccrual status after it suffered severe damage during the recent hurricane. The customer's business is not in operation at this time and it is not known when the inventory will be able to be shipped and sold, nor when shrimp processing, which generates cash flow, will be able to resume. As a result, the Bank placed the loan on nonaccrual status until the ability of the business to generate sufficient cash flow to service debt has been resolved. Management does not currently expect the loss to exceed what was previously accrued, but future changes in circumstances or other factors could cause management to reevaluate its position.

At September 30, 2005, nonperforming assets consisted of $19.5 million in nonaccrual loans and $95,000 in accruing loans that were 90 days or more past due. Net nonperforming assets, which are total nonperforming assets net of the portion of loans guaranteed by the Small Business Administration, the Export Import Bank of the United States, or the Overseas Chinese Community Guaranty Fund, at September 30, 2005, were $17.5 million, compared with $15.2 million at December 31, 2004. Approximately $12.6 million of such nonaccrual loans are collateralized by real estate, which represented 64.5% of total nonaccrual loans at September 30, 2005. While future deterioration in the loan portfolio is possible, management has continued its risk assessment and resolution program.

Management conference call. On Friday, October 28, 2005, the Company will hold a conference call at 10:00 a.m. Central (11:00 a.m. Eastern) to discuss the third quarter 2005 results. A brief management presentation will be followed by a question and answer period. To participate by phone, U.S. callers may dial 1.866.578.5784 (International callers may dial 1.617.213.8056) and enter the passcode 90934972 ten minutes before the call and ask for the MetroCorp conference. The call will be webcast by Thomson/CCBN and can be accessed at MetroCorp's web site at www.metrobank-na.com. An audio archive of the call will be available approximately one hour after the call and will be accessible at www.metrobank-na.com in the Investor Relations section.

MetroCorp Bancshares, Inc., provides a full range of commercial and consumer banking services through its wholly owned subsidiaries, MetroBank, N.A. and First United Bank. The Company has 15 full-service banking locations in the greater Houston, Dallas, San Diego and Los Angeles metropolitan areas. The Company acquired First United Banks and its locations in San Diego and Los Angeles, California on October 5, 2005. As of September 30, 2005, the Company had consolidated assets of $934.5 million. For more information, visit the Company's web site at www.metrobank-na.com.

The statements contained in this release that are not historical facts may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements describe the Company's future plans, projections, strategies and expectations, are based on assumptions and involve a number of risks and uncertainties, many of which are beyond the Company's control. Important factors that could cause actual results to differ materially from the results anticipated or projected include, but are not limited to, the following: (1) general business and economic conditions in the markets the Company serves may be less favorable than expected which could decrease the demand for loan, deposit and other financial services and increase loan delinquencies and defaults; (2) changes in the interest rate environment which could reduce the Company's net interest margin; (3) changes in management's assumptions regarding the adequacy of the allowance for loan losses; (4) legislative or regulatory developments including changes in laws concerning taxes, banking, securities, insurance and other aspects of the financial securities industry; (5) the effects of competition from 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; (6) changes in accounting principles, policies or guidelines; and (7) the Company's ability to adapt successfully to technological changes to meet customers' needs and developments in the market place. All written or oral forward-looking statements are expressly qualified in their entirety by these cautionary statements. Please also read the additional risks and factors described from time to time in the Company's reports and other documents filed with the Securities and Exchange Commission.

MetroCorp Bancshares, Inc.
                 (In thousands, except share amounts)
                             (Unaudited)


September 30, December 31, 2005 2004 -------------- --------------- Consolidated Balance Sheets --------------------------- Assets Cash and cash equivalents: Cash and due from banks $23,044 $26,285 Federal funds sold and other investments 42,919 5,788 -------------- --------------- Total cash and cash equivalents 65,963 32,073 Securities available-for-sale, at fair value 246,142 273,720 Loans, net of allowance for loan losses of $10,806 and $10,863 respectively 602,098 581,774 Loans, held-for-sale - 1,899 Accrued interest receivable 3,502 3,308 Premises and equipment, net 6,261 6,512 Deferred tax asset 6,458 5,201 Customers' liability on acceptances 2,367 6,669 Foreclosed assets, net - 1,566 Other assets 1,729 1,228 -------------- --------------- Total assets $934,520 $913,950 ============== ===============

Liabilities and Shareholders' Equity Deposits: Noninterest-bearing $171,789 $163,191 Interest-bearing 616,758 591,862 -------------- --------------- Total deposits 788,547 755,053 Other borrowings 44,034 60,849 Accrued interest payable 680 649 Acceptances outstanding 2,367 6,669 Other liabilities(a) 8,405 5,007 -------------- --------------- Total liabilities 844,033 828,227 Commitments and contingencies - - Shareholders' Equity: Common stock, $1.00 par value, 20,000,000 shares authorized; 7,323,127 shares and 7,312,627 shares are issued and 7,210,735 shares and 7,187,446 shares are outstanding at September 30, 2005 and December 31, 2004, respectively 7,323 7,313 Additional paid-in-capital 28,130 27,859 Retained earnings 57,546 50,976 Accumulated other comprehensive income (loss) (1,478) 710 Treasury stock, at cost (1,034) (1,135) -------------- --------------- Total shareholders' equity 90,487 85,723 -------------- --------------- Total liabilities and shareholders' equity $934,520 $913,950 ============== ===============



Nonperforming Assets and Asset Quality Ratios -------------------------------------- Nonaccrual loans $19,546 $16,504 Accruing loans 90 days or more past due 95 181 Other real estate ("ORE") - 1,566 -------------- --------------- Total nonperforming assets 19,641 18,251 Less nonperforming loans guaranteed by the SBA, Ex-Im Bank, or the OCCGF (2,101) (3,032) -------------- --------------- Net nonperforming assets $17,540 $15,219 ============== ===============

Net nonperforming assets to total assets 1.88% 1.67% Net nonperforming assets to total loans and ORE 2.86% 2.55% Allowance for loan losses to total loans 1.76% 1.83% Allowance for loan losses to net nonperforming loans 61.61% 79.56% Net charge-offs to total loans 0.18% 0.19% Net charge-offs $1,091 $1,150 Total loans to total deposits 77.73% 78.74%

Total loans $612,904 $594,536 Allowance for loan losses $10,806 $10,863



MetroCorp Bancshares, Inc. (In thousands, except per share amounts) (Unaudited)

As of or for the As of or for the three months nine months ended September 30, ended September 30, -------------------- -------------------- 2005 2004 2005 2004 ---------- --------- ---------- --------- Average Balance Sheet Data -------------------------- Total assets $919,616 $895,554 $908,291 $871,079 Securities 252,333 285,890 257,794 261,866 Total loans 603,225 559,703 598,577 559,430 Allowance for loan losses (10,631) (11,183) (10,977) (10,904) Net loans 592,594 548,520 587,600 548,526 Total deposits 788,259 736,077 763,639 719,706 FHLB and other borrowings 31,026 69,750 48,213 64,703 Total shareholders' equity 90,153 81,460 88,390 79,428

Income Statement Data --------------------- Interest income: Loans $11,552 $8,649 $32,279 $25,108 Securities: Taxable 2,382 2,648 7,163 7,018 Tax-exempt 211 227 641 693 Federal funds sold and other investments 207 25 343 56 ---------- --------- ---------- --------- Total interest income 14,352 11,549 40,426 32,875 Interest expense: Time deposits 3,214 2,087 8,274 5,838 Demand and savings deposits 636 345 1,449 935 Other borrowings 365 498 1,420 1,374 ---------- --------- ---------- --------- Total interest expense 4,215 2,930 11,143 8,147 Net interest income 10,137 8,619 29,283 24,728 Provision for loan losses 468 215 1,368 1,065 ---------- --------- ---------- --------- Net interest income after provision for loan losses 9,669 8,404 27,915 23,663 Noninterest income: Service fees 1,711 1,656 4,972 4,942 Letters of credit commissions and other loan-related fees 313 139 905 755 Other noninterest income 63 44 274 635 ---------- --------- ---------- --------- Total noninterest income 2,087 1,839 6,151 6,332 Noninterest expense: Salaries and employee benefits 4,225 4,800 12,229 12,313 Occupancy and equipment 1,424 1,412 4,160 4,242 Foreclosed assets, net (67) 70 357 (844) Other noninterest expense 2,066 1,595 5,879 5,122 ---------- --------- ---------- --------- Total noninterest expense 7,648 7,877 22,625 20,833 Income before provision for income taxes 4,108 2,366 11,441 9,162 Provision for income taxes 1,272 762 3,575 2,888 ---------- --------- ---------- --------- Net income $2,836 $1,604 $7,866 $6,274 ========== ========= ========== =========

Per Share Data -------------- Earnings per share - basic $0.39 $0.22 $1.09 $0.87 Earnings per share - diluted 0.39 0.22 1.08 0.87 Weighted average shares outstanding: Basic 7,209 7,180 7,203 7,171 Diluted 7,312 7,235 7,292 7,250 Dividends per common share $0.06 $0.06 $0.06 $0.06

Performance Ratio Data ---------------------- Return on average assets 1.22% 0.71% 1.16% 0.96% Return on average shareholders' equity 12.48% 7.83% 11.90% 10.55% Net interest margin 4.57% 3.99% 4.49% 3.96% Efficiency ratio 62.57% 75.32% 63.85% 67.07% Equity to assets (Average) 9.80% 9.10% 9.73% 9.12%

Bank Capital Ratio Data ----------------------- Tier I capital 12.95% 12.79% Total capital (tier I & II) 14.21% 14.05% Leverage (Regulatory) 9.70% 9.04% 9.82% 9.29%

SOURCE: MetroCorp Bancshares, Inc.

MetroCorp Bancshares, Inc., Houston
George Lee, 713-414-3506
or
David Choi, 713-414-3768


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