February 2, 2004

MetroCorp Bancshares, Inc. Announces Fourth Quarter and Year 2003 Earnings

HOUSTON--(BUSINESS WIRE)--Feb. 2, 2004--MetroCorp Bancshares, Inc. (Nasdaq:MCBI), a Texas corporation, which through its subsidiary, MetroBank, N.A., provides community banking services in Houston and Dallas, today announced net income of $1.8 million for the fourth quarter 2003, down approximately $170,000 from the same quarter in 2002. Diluted earnings per share for the fourth quarter 2003 were $0.25, compared to $0.28 for the same quarter in 2002. Net income for the twelve months ended December 31, 2003, was $3.7 million, down approximately $5.1 million from the same period in 2002. Diluted earnings per share for the twelve months ended December 31, 2003, were $0.51, compared to $1.23 for the same period in 2002.

Allen Brown, President of MetroCorp Bancshares, Inc. and Chief Executive Officer of MetroBank, N.A., said, "The year 2003 was a challenging period for MetroCorp Bancshares, Inc. as the uncertain economy and our problem loans caused us to allocate considerable time and attention towards strengthening asset quality. We are pleased with the progress we have made in this area. While we will continue allocating resources in an effort to strengthen asset quality, the Board of Directors and management intends to also focus on developing and implementing a strategic plan to position the bank for future growth."

Interest income and expense. Interest income for the three months ended December 31, 2003, was $11.0 million, down approximately $835,000 or 7.0% from $11.9 million for the same three months in 2002. The lower interest income in the fourth quarter 2003, compared to the same quarter in 2002, was primarily the result of a lower yield on earning assets that was partially offset by a 1.8% increase in average earning assets. The yield on average earning assets for the fourth quarter 2003 was 5.34% compared to 5.85% for the fourth quarter of 2002, a decrease of 51 basis points. The decrease in yields primarily reflects the impact of the Federal Reserve's interest rate cuts in June 2003 and November 2002 along with new loan production being added to the portfolio at lower interest rates. In addition, as of December 31, 2003, approximately 64.7% of the total loan portfolio was comprised of loans with interest rate floors that carried a weighted average interest rate of 5.88% compared to 61.3% of the total loan portfolio with a weighted average interest rate of 6.58% at December 31, 2002.

Interest income for the twelve months ended December 31, 2003, was $43.8 million, down approximately $4.9 million or 10.0% from $48.7 million for the same period in 2002. The lower interest income for the twelve months ended December 31, 2003, compared to the same period in 2002, was primarily the result of a lower yield on earning assets that was partially offset by an 8.7% increase in average earning assets. The yield on average earning assets for the twelve months ended December 31, 2003, was 5.37% compared to 6.49% for the same period in 2002, a decrease of 112 basis points.

Interest expense for the three months ended December 31, 2003, was $2.7 million, down approximately $792,000 or 22.4% from $3.5 million for the same three months in 2002. The decrease in interest expense primarily reflected lower interest rates paid on interest-bearing liabilities. The cost of average interest-bearing liabilities for the fourth quarter 2003 was 1.78% compared to 2.28% for the fourth quarter 2002, a decrease of 50 basis points.

Interest expense for the twelve months ended December 31, 2003, was $12.1 million, down approximately $2.5 million or 17.0% from $14.6 million for the same period in 2002. The decline in interest expense for the year 2003 was primarily due to a decrease in interest rates paid was partially offset by a 7.0% increase in average interest-bearing liabilities. The cost of average interest-bearing liabilities for the twelve months ended December 31, 2003, was 1.96% compared to 2.53% for the same period in 2002, a decrease of 57 basis points.

The net interest margin for the three months ended December 31, 2003, was 4.02%, down 9 basis points from 4.11% for the same period in 2002. The decrease was primarily the result of a decrease in the yield on earning assets of 51 basis points that was partially offset by a decrease in the cost of earning-assets of 42 basis points.

The net interest margin for the twelve months ended December 31, 2003, was 3.89%, down 65 basis points from 4.54% for the same period in 2002. The decrease was primarily the result of a decrease in the yield on earning assets of 112 basis points that was partially offset by a decrease in the cost of earning assets of 47 basis points. The Company's net interest margin may experience further pressure depending on the future interest rate environment.

Noninterest income and expense. Noninterest income for the three months ended December 31, 2003, was $2.0 million, down approximately $225,000 compared to the same three months in 2002. Service fees for the fourth quarter 2003 were $1.7 million, up $158,000 compared to the same period in 2002. Other loan-related fees and letters of credit commissions and fees for the fourth quarter 2003 were $58,000 and 117,000, respectively, down $302,000 and $38,000, respectively, compared to the same quarter in 2002.

Noninterest income for the twelve months ended December 31, 2003, was $8.9 million, down approximately $40,000 compared to the same period in 2002. Service fees for the twelve months ended December 31, 2003, were $6.5 million, down approximately $126,000 compared to the same period in 2002 primarily due to less NSF related activity. Other loan-related fees for the twelve months ended December 31, 2003, were $1.0 million, down approximately $74,000 compared to the same period in 2002. All other categories of noninterest income for the twelve months ended December 31, 2003, were $1.4 million, up approximately $160,000 primarily due to an increase of $131,000 in the gain on sale of securities, and an increase of $278,000 in the gain on sale of loans that was partially offset by approximately $94,000 in lower international letters of credit fees and $155,000 in lower other noninterest income.

Noninterest expense for the three months ended December 31, 2003, was $7.4 million, up approximately $1.4 million or 22.2% compared to $6.0 million for the same period in 2002. The higher noninterest expense for the three months ended December 31, 2003, compared to the same period in 2002, was primarily due to a combination of an increase in salaries and benefits expense of $442,000, and increases in occupancy and equipment expense of $99,000, legal and professional fees of $268,000, and franchise tax expense of $329,000.

Noninterest expense for the twelve months ended December 31, 2003, was $29.7 million, up $3.6 million or 14.0% compared to $26.1 million for the same period in 2002. The higher noninterest expense for the twelve months ended December 31, 2003, compared to the same period in 2002, was primarily due to $2.1 million in lower of cost or market adjustments on loans held-for-sale and a $1.5 million increase in all other categories of noninterest expense. Salaries and benefits expense for the twelve months ended December 31, 2003, increased approximately $437,000 to $15.2 million compared to the same period in 2002. Occupancy and equipment expense for the twelve months ended December 31, 2003, compared to the same period in 2002, was up approximately $272,000. Legal and professional expense for the twelve months ended December 31, 2003, compared to the same period in 2002 was up approximately $987,000.

Provision for loan losses and asset quality. The provision for loan losses for the three months ended December 31, 2003, was $300,000, down $1.2 million from the same period in 2002. The provision for loan losses for the twelve months ended December 31, 2003, was approximately $5.7 million, up $1.8 million from the same period in 2002 primarily due to an additional provision for loan losses recorded in the second quarter 2003 as a result of deterioration in certain hospitality related loans. The allowance for loan losses as a percent of total loans at December 31, 2003, and December 31, 2002, was 1.89% and 1.92%, respectively.

Net charge-offs for the three months ended December 31, 2003, were $336,000 compared to $1.1 million for the same period in 2002. Net charge-offs for the twelve months ended December 31, 2003, were $5.4 million compared to $2.6 million for the same period in 2002. The charge-offs for the twelve months ended December 31, 2003, primarily consisted of $4.5 million charged-off in the second quarter 2003 on certain hospitality and retail related credits.

As of December 31, 2003, the Company had approximately $69.9 million or 12.0% of its loan portfolio concentrated in the hospitality industry, compared to $70.8 million or 13.0% at September 30, 2003 and $82.0 million or 15.4% at December 31, 2002.

Net nonperforming assets at December 31, 2003, were $25.0 million compared to $15.5 million at December 31, 2002. As of December 31, 2003, net nonperforming assets primarily consisted of $22.1 million in net nonaccrual loans, $2.6 million in other real estate, and $264,000 in accruing loans that were 90 days or more past due. Approximately $21.4 million or 85.6% of the net nonperforming assets at December 31, 2003, were loans collateralized by real estate. While future deterioration in the loan portfolio is possible, management has continued its risk assessment and resolution program. In addition, management is continuing to focus its attention on minimizing the Bank's credit risk through more diversified business development.

Management conference call. On Tuesday, February 3, 2004, the Company will hold a conference call at 10:00 a.m. Central (11:00 a.m. Eastern) to discuss the fourth quarter and year 2003 results. A brief management presentation will be followed by a question and answer period. To participate by phone, dial 1.800.915.4836 ten minutes before the call and ask for the MetroCorp conference. The call will be webcast by CCBN and can be accessed at MetroCorp's web site at www.metrobank-na.com. The webcast will be distributed over CCBN's Investor Distribution Network. Individual investors can listen through CCBN's individual investor center at www.companyboardroom.com, or by visiting any of the investor sites in the network. Institutional investors can access the call via CCBN's password-protected event management site, StreetEvents, at www.streetevents.com. A digital replay will be available an hour after the call. It can be accessed until March 3, 2004, at www.metrobank-na.com by clicking the web cast link.

MetroCorp Bancshares, Inc., with $864.8 million in assets, provides a full range of commercial and consumer banking services through its wholly owned subsidiary, MetroBank, N.A. The Company has 14 full-service banking locations in the greater Houston and Dallas metropolitan areas. 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 MetroCorp's future plans, projections, strategies and expectations, are based on assumptions and involve a number of risks and uncertainties, many of which are beyond MetroCorp'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 MetroCorp 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 MetroCorp's net interest margin; (3) changes in management's assumptions regarding of 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 MetroCorp's reports and other documents filed with the Securities and Exchange Commission.



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



December 31, ------------------- Change 2003 2002 % --------- --------- ------- Consolidated Balance Sheet -------------------------- Assets Cash and cash equivalents: Cash and due from banks $26,347 $30,195 (12.7) Federal funds sold and other temporary investments 10,580 7,991 32.4 --------- --------- Total cash and cash equivalents 36,927 38,186 (3.3) Investment securities available-for-sale 257,064 260,038 (1.1) Other investments 5,200 4,380 18.7 Loans, held-for-investment, net 537,305 517,609 3.8 Loans, held-for-sale, net 6,030 - 100.0 Premises and equipment, net 5,674 5,841 (2.9) Accrued interest receivable 3,452 3,391 1.8 Customers' liability on acceptances 3,352 4,080 (17.8) Foreclosed assets, net 2,585 1,190 117.2 Other assets 7,184 5,350 34.3 --------- --------- Total assets $864,773 $840,065 2.9 ========= =========

Liabilities and Shareholders' Equity Deposits: Noninterest-bearing $169,097 $144,544 17.0 Interest-bearing 555,844 546,817 1.7 --------- --------- Total deposits 724,941 691,361 4.9 Other borrowings 54,173 65,774 (17.6) Accrued interest payable 567 717 (20.9) Acceptances outstanding 3,352 4,080 (17.8) Other liabilities 5,530 3,670 50.7 --------- --------- Total liabilities 788,563 765,602 3.0 Shareholders' Equity: Preferred stock, $1.00 par value, 2,000,000 shares authorized; none of which are issued and outstanding - - - Common stock, $1.00 par value, 20,000,000 shares authorized; 7,306,627 shares and 7,195,927 shares are issued and 7,156,689 shares and 7,031,882 shares are outstanding at December 31, 2003 and 2002, respectively 7,307 7,196 1.5 Additional paid-in-capital 27,620 26,344 4.8 Retained earnings 41,942 39,938 5.0 Accumulated other comprehensive income 671 2,354 (71.5) Treasury stock, at cost (1,330) (1,369) (2.8) --------- --------- Total shareholders' equity 76,210 74,463 2.3 --------- --------- Total liabilities and shareholders' equity $864,773 $840,065 2.9 ========= =========



Nonperforming Assets and Asset Quality Ratios --------------------------------------------- Nonaccrual loans $25,442 $17,209 47.8 Accruing loans 90 days or more past due 264 380 (30.5) Other real estate ("ORE") 2,585 1,186 118.0 Other assets repossessed ("OAR") - 4 (100.0) --------- --------- Total nonperforming assets 28,291 18,779 50.7 Less nonperforming loans guaranteed by the SBA, Ex-Im Bank, or the OCCGF (3,323) (3,310) 0.4 --------- --------- Net nonperforming assets $24,968 $15,469 61.4 ========= =========

Net nonperforming assets to total assets 2.89% 1.84% 56.8 Net nonperforming assets to total loans and ORE/OAR 4.49% 2.92% 53.5 Allowance for loan losses to total loans 1.89% 1.92% (1.9) Allowance for loan losses to net nonperforming loans 46.68% 71.08% (34.3) Net loan charge-offs to total loans 0.97% 0.49% 97.2 Net loan charge-offs $5,392 $2,606 106.9 Total loans to total deposits 76.39% 76.34% 0.1

Total loans $553,783 $527,759 4.9 Allowance for loan losses $10,448 $10,150 2.9







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



As of or for the As of or for the three months twelve months ended December 31, ended December 31, ------------------- Change ------------------- Change 2003 2002 % 2003 2002 % --------- --------- ------ --------- --------- ------ Average Balance Sheet Summary ----------------------------- Total assets $858,426 $840,673 2.1 $851,960 $790,752 7.7 Securities 251,686 247,587 1.7 251,827 222,752 13.1 Total loans 551,987 524,937 5.2 549,610 505,495 8.7 Allowance for loan losses 10,637 9,745 9.2 10,595 9,238 14.7 Net loans 541,350 515,192 5.1 539,015 496,257 8.6 Total deposits 719,827 686,329 4.9 708,576 656,824 7.9 FHLB and other borrowings 54,803 67,911 (19.3) 60,309 53,056 13.7 Total shareholders' equity 75,137 74,248 1.2 75,306 70,607 6.7

Income Statement ---------------- Interest income: Loans $8,661 $9,254 (6.4) $35,242 $37,987 (7.2) Investment securities: Taxable 2,079 2,211 (6.0) 7,321 9,080 (19.4) Tax-exempt 235 273 (13.9) 997 1,160 (14.1) Federal funds sold and other temporary investments 57 129 (55.8) 278 484 (42.6) --------- --------- --------- --------- Total interest income 11,032 11,867 (7.0) 43,838 48,711 (10.0) Interest expense: Time deposits 2,020 2,531 (20.2) 8,942 10,595 (15.6) Demand and savings deposits 290 470 (38.3) 1,345 2,215 (39.3) Other borrowings 430 531 (19.0) 1,847 1,818 1.6 --------- --------- --------- --------- Total interest expense 2,740 3,532 (22.4) 12,134 14,628 (17.0) Net interest income 8,292 8,335 (0.5) 31,704 34,083 (7.0) Provision for loan losses 300 1,533 (80.4) 5,690 3,853 47.7 --------- --------- --------- --------- Net interest income after provision for loan losses 7,992 6,802 17.5 26,014 30,230 (13.9) Noninterest income: Service fees 1,746 1,588 9.9 6,544 6,670 (1.9) Other loan- related fees 58 360 (83.9) 1,009 1,083 (6.8) Letters of credit commissions and fees 117 155 (24.5) 516 610 (15.4) Gain on sale of securities, net - - - 165 34 385.3 Gain on sale of loans, net 89 113 (21.2) 600 322 86.3 Other noninterest income 24 43 (44.2) 93 248 (62.5) --------- --------- --------- --------- Total noninterest income 2,034 2,259 (10.0) 8,927 8,967 (0.4) Noninterest expense: Salaries and employee benefits 3,826 3,384 13.1 15,183 14,746 3.0 Lower of cost or market adjustment - loans held-for- sale - - - 2,149 - 100.0 Occupancy and equipment 1,392 1,293 7.7 5,361 5,089 5.3 Foreclosed assets, net 245 197 24.4 248 680 (63.5) Other noninterest expense 1,895 1,149 64.9 6,763 5,543 22.0 --------- --------- --------- --------- Total noninterest expense 7,358 6,023 22.2 29,704 26,058 14.0 Income before provision for income taxes 2,668 3,038 (12.2) 5,237 13,139 (60.1) Provision for income taxes 860 1,060 (18.9) 1,529 4,350 (64.9) --------- --------- --------- --------- Net income $1,808 $1,978 (8.6) $3,708 $8,789 (57.8) ========= ========= ========= =========

Per Share Data -------------- Earnings per share - basic $0.25 $0.28 (10.2) $0.52 $1.25 (58.2) Earnings per share - diluted 0.25 0.28 (9.4) 0.51 1.23 (58.2) Weighted average shares outstanding: Basic 7,154 7,031 1.7 7,089 7,024 0.9 Diluted 7,242 7,179 0.9 7,213 7,154 0.8 Dividends per common share $0.06 $0.06 - $0.24 $0.24 -

Performance Ratios ------------------ Return on average assets 0.84% 0.93% (10.5) 0.44% 1.11% (60.8) Return on average shareholders' equity 9.55% 10.57% (9.7) 4.92% 12.45% (60.4) Net interest margin 4.02% 4.11% (2.2) 3.89% 4.54% (14.3) Efficiency ratio 71.26% 56.85% 25.3 73.11% 60.53% 20.8 Equity to assets 8.75% 8.83% (0.9) 8.84% 8.93% (1.0)

Bank Capital Ratios ------------------- Tier I capital 11.78% 12.16% (3.1) Total capital (tier I & II) 13.04% 13.41% (2.8) Leverage (Regulatory) 8.31% 8.20% 1.3



CONTACT: MetroCorp Bancshares, Inc., Houston
Allen Brown or David D. Rinehart, 713-776-3876
www.metrobank-na.com

SOURCE: MetroCorp Bancshares, Inc.


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