April 23, 2010

MetroCorp Bancshares, Inc. Announces First Quarter 2010 Results

HOUSTON, Apr 23, 2010 (GlobeNewswire via COMTEX News Network) -- MetroCorp Bancshares, Inc. (Nasdaq:MCBI), a Texas corporation, which provides community banking services through its subsidiaries, MetroBank, N.A., serving Texas, and Metro United Bank, serving California, today announced the operating results for the first quarter of 2010.

First Quarter Highlights

  --  Net loss of ($3.4 million) for the first quarter of 2010, which included
      a $2.0 million noncash goodwill impairment charge, compared with net
      loss of ($2.0 million) for first quarter of 2009.
  --  Diluted loss per common share for the first quarter of 2010 of ($0.36),
      which included ($0.18) of goodwill impairment, compared with ($0.23) per
      share for the first quarter of 2009.
  --  Total nonperforming assets declined by $4.3 million during the first
      quarter of 2010 to $98.6 million.
  --  Subsequent to March 31, 2010, total nonperforming assets were reduced
      further by $17.9 million as a result of sales of ORE and one impaired
      loan.
  --  Net interest margin increased to 3.97% for the first quarter of 2010
      compared with 3.44% for the first quarter of 2009 and 3.73% for the
      fourth quarter of 2009.
  --  Net interest income increased to $14.5 million for the first quarter of
      2010 compared with $12.8 million for the first quarter of 2009 and $14.2
      million for the fourth quarter of 2009.
  --  Provision for loan losses for the first quarter of 2010 was $7.9 million
      compared with $7.3 million for the first quarter of 2009.
  --  Allowance for loan losses was 2.75% of total loans at March 31, 2010
      compared with 2.31% at December 31, 2009 and 1.81% at March 31, 2009.
  --  Total risk-based capital ratio increased to 13.92% at March 31, 2010
      compared with 13.80% at December 31, 2009.


George M. Lee, Executive Vice Chairman, President and CEO of MetroCorp Bancshares, Inc. stated, "Our management team was encouraged to see the reduction of nonperforming assets by $4.3 million during the quarter ended March 31, 2010 as compared to December 31, 2009. Subsequent to March 31, 2010 and prior to this earnings release, we further reduced nonperforming assets by $17.9 million, of which $14.0 million was in Texas and $3.9 million was in California. Improvement of asset quality is always difficult to predict as we are still in a very volatile operating environment. One indicator we are closely tracking is the trend of 30 to 89 days past due loans. On a linked-quarter basis, management was encouraged to see a reduction of 28.1% in this category compared with December 31, 2009.

"The Company incurred a net loss of $0.36 per common share for the first quarter 2010, mainly as a result of a $2.0 million noncash goodwill impairment charge as well as increased loan loss provisions at Metro United Bank. On a linked-quarter basis, Metro United Bank's provision for loan losses increased from $2.5 million for fourth quarter of 2009 to $4.3 million for first quarter of 2010 and as a result, its allowance for loan losses as a percentage of total loans increased from 1.82% to 3.02%. On the other hand, MetroBank's provision for loan losses decreased from $10.5 million for the fourth quarter of 2009 to $3.6 million for the first quarter of 2010. In spite of the loss, however, the Company's total risk based capital of 13.9% at the end of March 31, 2010 was comparable to the ratio at the end of December 31, 2010 of 13.8%. Subsequent to the quarter end, the Company raised approximately $4.0 million of new common equity in April through a private placement in a relatively short period of time. The net proceeds of the offering will be used for general corporate purposes.

"We were pleased with our control on deposits cost and with the improvement in loan yields for the first quarter of 2010. On a linked-quarter basis our net interest margin increased from 3.73% for the fourth quarter of 2009 to 3.97% for the first quarter of 2010. Our noninterest expense decreased between the fourth quarter of 2009 and the first quarter of 2010 as a result of reduced ORE and FDIC assessment expenses. Overall the efficiency ratio improved from 70.15% at March 31, 2009, to 68.58% at March 31, 2010 as the result of management's stringent control over other noninterest expenses."

Interest income and expense

Net interest income before the provision for loan losses for the three months ended March 31, 2010 was $14.5 million, an increase of $1.7 million or 13.3% compared to $12.8 million for the same period in 2009. The increase was due primarily to lower deposit costs. On a linked-quarter basis, net interest income before the provision for loan losses for the three months ended March 31, 2010 increased $286,000 or 2.0% compared to $14.2 million for the three months ended December 31, 2009 primarily as a result of lower deposit costs and higher loan yields.

The net interest margin for the three months ended March 31, 2010 was 3.97%, an increase of 53 basis points compared with 3.44% for the same period in 2009. The yield on average earning assets decreased 30 basis points, and the cost of average earning assets decreased 83 basis points. On a linked-quarter basis, the net interest margin for the three months ended March 31, 2010 increased 24 basis points compared with 3.73% for the three months ended December 31, 2009. The yield on average earning assets increased 9 basis points, and the cost of average earning assets decreased 15 basis points.

Interest income for the three months ended March 31, 2010 was $20.2 million, down $1.5 million or 6.8% compared to $21.7 million for the same period in 2009, primarily due to lower loan volume and an increase in nonperforming assets. However, the effect of the decrease in loan yields was partially offset by rate floors set on certain variable rate loans, substantially all of which had reached the applicable floor rate as of March 31, 2010. Average earning assets decreased 1.8% for the first quarter of 2010 compared with the same period in 2009. Average total loans decreased 5.1% to $1.27 billion in the first quarter of 2010 compared with $1.34 billion for the first quarter of 2009. The yield on average earning assets for the first quarter of 2010 was 5.53% compared with 5.83% for the first quarter of 2009.

Interest expense for the three months ended March 31, 2010 was $5.7 million, down $3.2 million or 35.7% compared to $8.9 million for the same period in 2009, primarily due to lower cost of funds. Average interest-bearing deposits were $1.16 billion for the first quarter of 2010, an increase of $40.7 million or 3.6% compared with $1.12 billion for the same period of 2009. The cost of interest-bearing deposits for the first quarter of 2010 was 1.73% compared with 2.93% for the first quarter of 2009. Average other borrowings, excluding junior subordinated debentures, were $26.1 million for the first quarter of 2010, a decrease of $37.7 million or 59.0% compared to $63.8 million for the first quarter of 2009. The cost of other borrowings for the first quarter of 2010 was 3.71% compared with 1.86% for the first quarter of 2009. The cost increased as lower cost short-term FHLB borrowings were repaid and higher cost long-term borrowings remained outstanding.

Noninterest income and expense

Noninterest income for the three months ended March 31, 2010 was $1.6 million, a decrease of $86,000 or 5.1% compared to the same period in 2009. The decrease was primarily related to other-than-temporary impairment ("OTTI") charges and realized losses on securities.

Noninterest expense for the three months ended March 31, 2010 was $13.0 million, an increase of $2.7 million or 26.1% compared with the same period in 2009. The increase was attributable primarily to a $2.0 million goodwill impairment charge. Excluding the goodwill impairment charge, noninterest expense for the three months ended March 31, 2010 was $11.0 million, an increase of $699,000 or 6.8% compared with the same period in 2009. The increase was mainly the result of higher FDIC assessments and expenses related to ORE.

The FDIC assessment for the three months ended March 31, 2010 was $811,000, an increase of $540,000 compared to $271,000 for the same period in 2009. The increase was due to the higher assessment rate.

Salaries and employee benefits expense for the three months ended March 31, 2010 was $5.5 million, an increase of $62,000 or 1.2% compared to $5.4 million for the same period in 2009 primarily due to an increase in employee health care benefits.

Provision for loan losses

The following table summarizes the provision for loan losses and net charge-offs as of and for the quarters indicated:


                                           March 31,       December 31,            March 31,
                                             2010              2009                   2009
                                          -----------     --------------  ----------------------------


  Allowance for Loan Losses
  -----------------------------------
  Balance at beginning of quarter            $ 29,403        $ 25,603                            $ 24,235
  Provision for loan losses for
   quarter                                      7,898          13,003                               7,287

  Net charge-offs for quarter                 (2,569)         (9,203)                             (7,364)
                                          -----------     -----------                      --------------

  Balance at end of quarter                  $ 34,732        $ 29,403                            $ 24,158
                                          ===========     ===========                      ==============

  Total loans (1)                         $ 1,260,842     $ 1,273,997                         $ 1,335,856
  Allowance for loan losses to total
   loans                                        2.75%           2.31%                               1.81%
  Net charge-offs to total loans             (0.20) %         (0.72)%                             (0.55)%


(1) Includes loans held-for-sale of $8.6 million at March 31, 2010

The provision for loan losses for the three months ended March 31, 2010 was $7.9 million, an increase of $611,000 compared with $7.3 million for the same period in 2009, primarily due to an increase in nonperforming assets. On a linked-quarter basis, the provision for loan losses in the first quarter of 2010 decreased $5.1 million from $13.0 million for the fourth quarter of 2009, primarily as a result of a decrease in net charge-offs and nonperforming assets in the first quarter of 2010 compared with the fourth quarter of 2009.

Net charge-offs for the three months ended March 31, 2010 were $2.6 million or 0.20% of total loans compared with net charge-offs of $7.4 million or 0.55% of total loans for the three months ended March 31, 2009. The charge-offs primarily consisted of $2.7 million in loans from Texas and $115,000 in loans from California, partially offset by recoveries of $218,000 from both Texas and California.

Asset Quality

The following table summarizes nonperforming assets as of the dates indicated:


                                         March 31,      December     March 31,
                                                          31,
                                           2010           2009          2009
                                        ----------     ---------     ---------
                                                (dollars in thousands)

  Nonperforming Assets
  ---------------------------------
  Nonaccrual loans (1)                    $ 64,821      $ 75,229      $ 52,753
  Accruing loans 90 days or more
   past due                                  1,106           420            --
  Troubled debt restructurings               5,649         4,927         1,062

  Other real estate                         26,986        22,291         8,561
                                        ----------     ---------     ---------

   Total nonperforming assets               98,562       102,867        62,376
                                        ==========     =========     =========

  Total nonperforming assets to
   total assets                              6.17%         6.47%         3.85%

(1) Includes loans held-for-sale of $8.6 million at March 31, 2010

Total nonperforming assets at March 31, 2010 were $98.6 million compared with $102.9 million at December 31, 2009, a decrease of $4.3 million. The ratio of total nonperforming assets to total assets decreased to 6.17% at March 31, 2010 from 6.47% at December 31, 2009.

On a linked-quarter basis, total nonperforming assets decreased by $8.2 million in Texas, partially offset by a $3.9 million increase in California. The decrease in nonperforming assets in Texas consists of an $10.0 million decline in non-accrual loans and a $3.9 million decline in troubled debt restructurings ("TDR"), which were offset by increases of $5.0 million in ORE and $686,000 in loans over 90 days past due. In Texas, eight loans comprise the majority of the net decrease in non-accrual loans, which included $3.0 million in paydowns, one $917,000 loan rating upgrade, $4.8 million transferred to ORE and $2.6 million in write-downs, partially offset by two loans totaling $1.6 million which moved to non-accrual status. Of the $2.6 million in write-downs, $1.3 million was related to an impaired loan of $9.9 million that was transferred to loans held-for-sale. The decrease in TDRs relates to two loans that have performed according to restructured terms since the second quarter of 2009. In California, two loan relationships totaling $4.6 million were added to TDR status, which were partially offset by declines of $404,000 in nonaccrual loans and $311,000 in ORE.

On a linked-quarter basis, ORE increased by approximately $4.7 million compared with December 31, 2009, which included the addition of five commercial land parcels totaling $4.4 million, residential lots totaling $520,000 and two commercial buildings totaling $407,000 in Texas, and a $208,000 commercial building in California, partially offset by write-downs of approximately $520,000 in California.

In April 2010, subsequent to March 31, 2010, nonperforming assets were reduced by $17.9 million. Several ORE properties were sold resulting in a $9.3 million reduction in ORE. Of the total, $5.4 million was from Texas, and $3.9 million was from California. There were no significant losses recorded in April 2010 on these sales. Additionally, $1.3 million was charged down on a $9.9 million nonperforming loan in the first quarter of 2010. In April 2010, the loan was sold at no gain or loss.

Approximately $59.7 million of the nonaccrual loans are collateralized by real estate, which represented 92.1% of total nonaccrual loans at March 31, 2010. Management has been aggressive in identifying problem loans but continued weak economic conditions could cause further deterioration in the loan portfolio. Management is closely monitoring the loan portfolio and diligently working on problem loan resolutions.

Management conference call. On Monday, April 26, 2010, the Company will hold a conference call at 10:00 a.m. Central (11:00 a.m. Eastern) to discuss the first quarter 2010 results. A brief management presentation will be followed by a question and answer period. To participate by phone, U.S. callers may dial 1.877.407.8291(International callers may dial 1.201.689.8345) and ask for the MetroCorp conference. The call will be webcast by Shareholder.com 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 Metro United Bank. The Company has thirteen full-service banking locations in the greater Houston and Dallas, Texas metropolitan areas, and six full service banking locations in the greater San Diego, Los Angeles and San Francisco, California metropolitan areas. As of March 31, 2010, the Company had consolidated assets of $1.6 billion. For more information, visit the Company's web site at www.metrobank-na.com.

The MetroCorp Bancshares Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=2894

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) the failure of or changes in management's assumptions regarding the adequacy of the allowance for loan losses; (4) an adverse change in the real estate market in the Company's primary market areas; (5) legislative or regulatory developments including changes in laws concerning taxes, banking, securities, insurance and other aspects of the financial securities industry; (6) the effect of compliance, or failure to comply within stated deadlines of the provisions of the formal agreement between MetroBank and the Office of the Comptroller of the Currency; (7) increases in the level of nonperforming assets (8) changes in the availability of funds which could increase costs or decrease liquidity; (9) 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; (10) changes in accounting principles, policies or guidelines; (11) a deterioration or downgrade in the credit quality and credit agency ratings of the securities in the Company's securities portfolio; (12) the incurrence and possible impairment of goodwill associated with an acquisition; and (13) the Company's ability to adapt successfully to technological changes to meet customers' needs and developments in the marketplace. All written or oral forward-looking statements are expressly qualified in their entirety by these cautionary statements. These and other risks and factors are further described from time to time in the Company's 2009 annual report on Form 10-K and other reports and other documents filed with the Securities and Exchange Commission.

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


                                     March 31,    December 31,
                                        2010          2009
                                    ------------  ------------

  Consolidated Balance Sheets
  --------------------------------
               Assets
  Cash and due from banks               $ 25,256      $ 26,087
  Federal funds sold and other
   short-term investments                107,059        82,006
                                    ------------  ------------
    Total cash and cash
     equivalents                         132,315       108,093
  Securities -available-for-sale,
   at fair value                          93,312        98,368
  Securities -held-to-maturity, at
   cost (fair value $4,348 and
   $4,352 at March 31, 2010 and
   December 31, 2009,
   respectively)                           4,044         4,044
  Other investments                       17,329        21,577
  Loans, net of allowance for loan
   losses of $34,732 and $29,403
   respectively                        1,217,510     1,244,594
  Loans, held-for-sale                     8,600            --
  Accrued interest receivable              5,117         5,161
  Premises and equipment, net              6,173         6,042
  Goodwill                                17,327        19,327
  Core deposit intangibles                   297           329
  Customers' liability on
   acceptances                             8,480         3,011
  Foreclosed assets, net                  26,986        22,291
  Cash value of bank owned life
   insurance                              28,887        28,526
  Prepaid FDIC assessment                  9,873        10,637

  Other assets                            20,680        17,548
                                    ------------  ------------

   Total assets                      $ 1,596,930   $ 1,589,548
                                    ============  ============

   Liabilities and Shareholders'
                Equity
  Deposits:
   Noninterest-bearing                 $ 194,814     $ 203,427

   Interest-bearing                    1,171,698     1,160,740
                                    ------------  ------------
    Total deposits                     1,366,512     1,364,167
  Junior subordinated debentures          36,083        36,083
  Other borrowings                        26,217        25,513
  Accrued interest payable                   626           625
  Acceptances outstanding                  8,480         3,011

  Other liabilities                        6,801         4,843
                                    ------------  ------------
   Total liabilities                   1,444,719     1,434,242
  Commitments and contingencies               --            --
  Shareholders' equity:
   Preferred stock, $1.00 par
    value, 2,000,000 shares
    authorized; 45,000 shares are
    issued and outstanding at
    March 31, 2010 and December
    31, 2009                              44,754        44,718
   Common stock, $1.00 par value,
    50,000,000 shares are
    authorized; 11,021,315 shares
    issued and 11,021,315 shares
    and 10,926,315 shares are
    outstanding at March 31, 2010
    and December 31, 2009,
    respectively                          11,021        10,995
   Additional paid-in-capital             28,545        29,114
   Retained earnings                      68,528        72,505
   Accumulated other comprehensive
    loss                                   (637)       (1,106)

   Treasury stock, at cost                    --         (920)
                                    ------------  ------------

    Total shareholders' equity           152,211       155,306
                                    ------------  ------------
    Total liabilities and
     shareholders' equity            $ 1,596,930   $ 1,589,548
                                    ============  ============


  Nonperforming Assets and Asset
   Quality Ratios
  --------------------------------
  Nonaccrual loans (1)                  $ 64,821      $ 75,229
  Accruing loans 90 days or more
   past due                                1,106           420
  Troubled debt restructurings             5,649         4,927

  Other real estate ("ORE")               26,986        22,291
                                    ------------  ------------

  Total nonperforming assets            $ 98,562     $ 102,867
                                    ============  ============

  Total nonperforming assets to
   total assets                            6.17%         6.47%
  Total nonperforming assets to
   total loans (1) and ORE                 7.65%         7.94%
  Allowance for loan losses to
   total loans (1)                         2.75%         2.31%
  Allowance for loan losses to
   total nonperforming loans              48.52%        36.49%
  Net year-to-date charge-offs to
   total loans (1)                         0.20%         1.61%
  Net year-to-date charge-offs          $ 2,569%     $ 20,545%
  Total loans (1) to total
   deposits                               92.27%        93.39%


  --------------------------------
  (1) Includes loans held-for-sale
   of $8.6 million at March 31,
   2010

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

                                   For the three months

                                      ended March 31
                                --------------------------

                                    2010          2009
                                ------------  ------------

  Average Balance Sheet Data
  ----------------------------
  Total assets                   $ 1,593,480   $ 1,604,989
  Securities                         100,910       101,445
  Total loans                      1,273,656     1,342,104
  Allowance for loan losses         (31,381)      (23,691)
  Net loans                        1,242,275     1,318,413
  Total interest-earning
   assets                          1,483,089     1,510,839
  Total deposits                   1,361,559     1,328,225
  Other borrowings and junior
   subordinated debt                  62,223        99,905
  Total shareholders' equity         157,807       159,315


  Income Statement Data
  ----------------------------
  Interest income:
   Loans                            $ 19,186      $ 20,390
   Securities:
    Taxable                              790         1,084
    Tax-exempt                           121            48
   Federal funds sold and
    other short-term
    investments                          131           187
                                ------------  ------------
     Total interest income            20,228        21,709
  Interest expense:
   Time deposits                       3,346         5,865
   Demand and savings deposits         1,621         2,234

   Other borrowings                      759           812
                                ------------  ------------
    Total interest expense             5,726         8,911
  Net interest income                 14,502        12,798

  Provision for loan losses            7,898         7,287
                                ------------  ------------
  Net interest income after
   provision for loan losses           6,604         5,511
  Noninterest income:
   Service fees                        1,039         1,089
   Loan-related fees                      95           132
   Letters of credit
    commissions and fees                 199           255
   Loss on securities, net             (138)            --

    Total other-than-temporary
     impairment ("OTTI") on
     securities                           41         (240)
     Less: Noncredit portion
      of "OTTI"                         (18)            --
                                ------------  ------------
      Net impairments on
       securities                         23         (240)

   Other noninterest income              386           454
                                ------------  ------------
     Total noninterest income          1,604         1,690
  Noninterest expense:
   Salaries and employee
    benefits                           5,450         5,388
   Occupancy and equipment             1,961         1,992
   Foreclosed assets, net                837           423
   FDIC assessment                       811           271
   Goodwill impairment                 2,000            --

   Other noninterest expense           1,971         2,257
                                ------------  ------------
     Total noninterest expense        13,030        10,331
  Loss before provision for
   income taxes                      (4,822)       (3,130)

  Benefit for income taxes           (1,444)       (1,096)
                                ------------  ------------

  Net loss                         $ (3,378)     $ (2,034)
                                ============  ============


  Dividends - preferred stock        $ (563)       $ (469)
                                ------------  ------------
  Net loss applicable to
   common stock                    $ (3,941)     $ (2,503)
                                ============  ============


  Per Common Share Data
  ----------------------------
  Earnings (loss) per share -
   basic                            $ (0.36)      $ (0.23)
  Earnings (loss) per share -
   diluted                            (0.36)        (0.23)
  Weighted average shares
   outstanding:
   Basic                              10,918        10,875
   Diluted                            10,918        10,875
  Dividends per common share            $ --        $ 0.04


  Performance Ratio Data
  ----------------------------
  Return on average assets           (0.86)%       (0.51)%
  Return on average
   shareholders' equity              (8.68)%       (5.18)%
  Net interest margin                  3.97%         3.44%
  Efficiency ratio                    68.58%        70.15%
  Equity to assets (average)           9.90%         9.93%

This news release was distributed by GlobeNewswire, www.globenewswire.com

SOURCE: MetroCorp Bancshares Inc.

CONTACT:  MetroCorp Bancshares, Inc., Houston
George Lee, Executive Vice Chairman, President & CEO
(713) 776-3876
David Choi, EVP/Chief Financial Officer
(713) 776-3876

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