##### 



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2006
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
 Commission file number 000-25141
 METROCORP BANCSHARES, INC.
  Texas
    
    76-0579161(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)
 9600 Bellaire Boulevard, Suite 252
Houston, Texas 77036
 (713) 776-3876
 þ o
  o þ o
 o þ




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##### 



PART I
 FINANCIAL INFORMATION
 Item 1. Condensed Consolidated Financial Statements.
 METROCORP BANCSHARES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(Unaudited)
 June 30,
    
    
    December 31,2006
    
    
    2005ASSETSCash and due from banks
    
    $
    26,773
    
    
    $
    28,213Federal funds sold and other short-term
investments
    
    
    79,717
    
    
    
    53,599Total cash and cash equivalents
    
    
    106,490
    
    
    
    81,812Securities available-for-sale, at fair
value
    
    
    211,895
    
    
    
    236,100Loans, net of allowance for loan losses of $12,905 and
$13,169, respectively
    
    
    813,015
    
    
    
    758,304Accrued interest receivable
    
    
    5,295
    
    
    
    4,835Premises and equipment, net
    
    
    6,872
    
    
    
    6,196Goodwill
    
    
    21,607
    
    
    
    21,607Core deposit intangibles
    
    
    1,192
    
    
    
    1,428Customers liability on acceptances
    
    
    6,488
    
    
    
    3,148Foreclosed assets, net
    
    
    4,188
    
    
    
    3,866Other assets
    
    
    10,703
    
    
    
    10,908Total assets
    
    $
    1,187,745
    
    
    $
    1,128,204LIABILITIES AND SHAREHOLDERS EQUITYDeposits:Noninterest-bearing
    
    $
    191,625
    
    
    $
    195,422Interest-bearing
    
    
    820,202
    
    
    
    766,328Total deposits
    
    
    1,011,827
    
    
    
    961,750Junior subordinated debentures
    
    
    36,083
    
    
    
    36,083Other borrowings
    
    
    25,505
    
    
    
    26,054Accrued interest payable
    
    
    1,242
    
    
    
    1,126Acceptances outstanding
    
    
    6,488
    
    
    
    3,148Other liabilities
    
    
    9,465
    
    
    
    7,815Total liabilities
    
    
    1,090,610
    
    
    
    1,035,976Commitments and contingencies
    
    
    
    
    
    
    Shareholders equity:Common stock, $1.00 par value, 50,000,000 shares
authorized; 7,329,977 shares issued and 7,278,820 and
7,232,239 shares outstanding at June 30, 2006 and
December 31, 2005, respectively
    
    
    7,330
    
    
    
    7,330Additional paid-in capital
    
    
    29,199
    
    
    
    28,576Retained earnings
    
    
    65,777
    
    
    
    60,023Accumulated other comprehensive loss
    
    
    (4,588
    )
    
    
    (2,783
    )Treasury stock, at cost
    
    
    (583
    )
    
    
    (918
    )Total shareholders equity
    
    
    97,135
    
    
    
    92,228Total liabilities and shareholders equity
    
    $
    1,187,745
    
    
    $
    1,128,204
  2




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##### 



METROCORP BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
 For the Three Months
    
    
    For the Six MonthsEnded June 30,
    
    
    Ended June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Interest income:Loans
    
    $
    17,831
    
    
    $
    10,657
    
    
    $
    34,254
    
    
    $
    20,727Securities:Taxable
    
    
    2,196
    
    
    
    2,359
    
    
    
    4,460
    
    
    
    4,781Tax-exempt
    
    
    187
    
    
    
    212
    
    
    
    393
    
    
    
    430Federal funds sold and other short-term investments
    
    
    1,021
    
    
    
    82
    
    
    
    1,659
    
    
    
    136Total interest income
    
    
    21,235
    
    
    
    13,310
    
    
    
    40,766
    
    
    
    26,074Interest expense:Time deposits
    
    
    5,801
    
    
    
    2,685
    
    
    
    10,828
    
    
    
    5,060Demand and savings deposits
    
    
    1,392
    
    
    
    427
    
    
    
    2,308
    
    
    
    813Other borrowings
    
    
    316
    
    
    
    482
    
    
    
    639
    
    
    
    1,055Junior subordinated debentures
    
    
    525
    
    
    
    
    
    
    
    1,045
    
    
    
    Total interest expense
    
    
    8,034
    
    
    
    3,594
    
    
    
    14,820
    
    
    
    6,928Net interest income
    
    
    13,201
    
    
    
    9,716
    
    
    
    25,946
    
    
    
    19,146Provision for loan losses
    
    
    188
    
    
    
    454
    
    
    
    446
    
    
    
    928Net interest income after provision for loan losses
    
    
    13,013
    
    
    
    9,262
    
    
    
    25,500
    
    
    
    18,218Noninterest income:Service fees
    
    
    1,445
    
    
    
    1,633
    
    
    
    2,906
    
    
    
    3,261Loan-related fees
    
    
    224
    
    
    
    172
    
    
    
    435
    
    
    
    317Letters of credit commissions and fees
    
    
    207
    
    
    
    133
    
    
    
    378
    
    
    
    275Other noninterest income
    
    
    86
    
    
    
    76
    
    
    
    162
    
    
    
    211Total noninterest income
    
    
    1,962
    
    
    
    2,014
    
    
    
    3,881
    
    
    
    4,064Noninterest expenses:Salaries and employee benefits
    
    
    5,332
    
    
    
    3,868
    
    
    
    10,622
    
    
    
    8,004Occupancy and equipment
    
    
    1,658
    
    
    
    1,398
    
    
    
    3,202
    
    
    
    2,736Foreclosed assets, net
    
    
    118
    
    
    
    14
    
    
    
    161
    
    
    
    424Other noninterest expense
    
    
    2,546
    
    
    
    1,993
    
    
    
    5,180
    
    
    
    3,785Total noninterest expenses
    
    
    9,654
    
    
    
    7,273
    
    
    
    19,165
    
    
    
    14,949Income before provision for income taxes
    
    
    5,321
    
    
    
    4,003
    
    
    
    10,216
    
    
    
    7,333Provision for income taxes
    
    
    1,929
    
    
    
    1,233
    
    
    
    3,593
    
    
    
    2,303Net income
    
    $
    3,392
    
    
    $
    2,770
    
    
    $
    6,623
    
    
    $
    5,030Earnings per common share:Basic
    
    $
    0.47
    
    
    $
    0.38
    
    
    $
    0.91
    
    
    $
    0.70Diluted
    
    $
    0.46
    
    
    $
    0.38
    
    
    $
    0.90
    
    
    $
    0.69Weighted average shares outstanding:Basic
    
    
    7,263
    
    
    
    7,205
    
    
    
    7,254
    
    
    
    7,200Diluted
    
    
    7,398
    
    
    
    7,271
    
    
    
    7,381
    
    
    
    7,282Dividends per common share
    
    $
    0.06
    
    
    $
    0.06
    
    
    $
    0.12
    
    
    $
    0.12
  3




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##### 



METROCORP BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
 For the Three Months
    
    
    For the Six MonthsEnded June 30,
    
    
    Ended June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Net income
    
    $
    3,392
    
    
    $
    2,770
    
    
    
    6,623
    
    
    $
    5,030Other comprehensive income (loss), net of tax:Unrealized gain (loss) on investment securities, net:Unrealized holding gain (loss) arising during
the period
    
    
    (1,324
    )
    
    
    456
    
    
    
    (1,804
    )
    
    
    (1,297
    )Less: reclassification adjustment for gain
included
in net income
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    Other comprehensive income (loss)
    
    
    (1,324
    )
    
    
    456
    
    
    
    (1,805
    )
    
    
    (1,297
    )Total comprehensive income
    
    $
    2,068
    
    
    $
    3,226
    
    
    $
    4,818
    
    
    $
    3,733
 METROCORP BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
For the Six Months Ended June 30, 2006
(In thousands)
(Unaudited)
 AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    TreasuryCommon Stock
    
    
    Paid-In
    
    
    Retained
    
    
    Comprehensive
    
    
    StockShares
    
    
    At Par
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    At Cost
    
    
    TotalBalance at December 31, 2005
    
    
    7,232
    
    
    $
    7,330
    
    
    $
    28,576
    
    
    $
    60,023
    
    
    $
    (2,783
    )
    
    $
    (918
    )
    
    $
    92,228Re-issuance of treasury stock
    
    
    47
    
    
    
    
    
    
    
    500
    
    
    
    
    
    
    
    
    
    
    
    335
    
    
    
    835Stock-based compensation
expense recognized in
earnings
    
    
    
    
    
    
    
    
    
    
    111
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    111Tax benefit related to stock-
based compensation
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,623
    
    
    
    
    
    
    
    
    
    
    
    6,623Other comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,805
    )
    
    
    
    
    
    
    (1,805
    )Cash dividends ($0.12 per
share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (869
    )
    
    
    
    
    
    
    
    
    
    
    (869
    )Balance at June 30, 2006
    
    
    7,279
    
    
    $
    7,330
    
    
    $
    29,199
    
    
    $
    65,777
    
    
    $
    (4,588
    )
    
    $
    (583
    )
    
    $
    97,135
  4




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##### 



METROCORP BANCSHARES, INC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 For the Six Months EndedJune 30,2006
    
    
    2005Cash flows from operating activities:Net income
    
    $
    6,623
    
    
    $
    5,030Adjustments to reconcile net income to net cash provided by operating activities:Depreciation
    
    
    671
    
    
    
    701Provision for loan losses
    
    
    446
    
    
    
    928Loss (gain) on foreclosed assets
    
    
    (2
    )
    
    
    384Loss on sale and disposal of premises and equipment
    
    
    98
    
    
    
    100Amortization of premiums and discounts on securities
    
    
    46
    
    
    
    137Amortization of deferred loan fees and discounts
    
    
    (1,192
    )
    
    
    (919
    )Amortization of core deposit intangibles
    
    
    236
    
    
    
    Stock-based compensation
    
    
    111
    
    
    
    Excess tax benefits from stock-based compensation
    
    
    (12
    )
    
    
    Changes in:Accrued interest receivable
    
    
    (461
    )
    
    
    (131
    )Other assets
    
    
    1,358
    
    
    
    (388
    )Accrued interest payable
    
    
    116
    
    
    
    61Other liabilities
    
    
    1,663
    
    
    
    1,506Net cash provided by operating activities
    
    
    9,701
    
    
    
    7,409Cash flows from investing activities:Purchases of securities available-for-sale
    
    
    (1,098
    )
    
    
    (10,304
    )Proceeds from sales, maturities and principal paydowns of securities
available-for-sale
    
    
    22,301
    
    
    
    33,344Net change in loans
    
    
    (54,385
    )
    
    
    (15,440
    )Proceeds from sale of foreclosed assets
    
    
    
    
    
    
    1,182Proceeds from sale of premises and equipment
    
    
    
    
    
    
    4Purchases of premises and equipment
    
    
    (1,347
    )
    
    
    (640
    )Net cash (used in) provided by investing activities
    
    
    (34,529
    )
    
    
    8,146Cash flows from financing activities:Net change in:Deposits
    
    
    50,077
    
    
    
    19,956Other borrowings
    
    
    (549
    )
    
    
    (24,404
    )Proceeds from issuance of common stock
    
    
    
    
    
    
    105Re-issuance of treasury stock
    
    
    835
    
    
    
    182Dividends paid
    
    
    (869
    )
    
    
    (864
    )Excess tax benefits from stock-based compensation
    
    
    12
    
    
    
    Net cash provided by (used in) financing activities
    
    
    49,506
    
    
    
    (5,025
    )Net increase in cash and cash equivalents
    
    
    24,678
    
    
    
    10,530Cash and cash equivalents at beginning of period
    
    
    81,812
    
    
    
    32,073Cash and cash equivalents at end of period
    
    $
    106,490
    
    
    $
    42,603
  5




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##### 



METROCORP BANCSHARES, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 1. BASIS OF PRESENTATION
      2. STOCK-BASED COMPENSATION
   6




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##### 



METROCORP BANCSHARES, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    For the Three
    
    For the SixMonths Ended
    
    Months EndedJune 30, 2005
    
    June 30, 2005Net income:As reported
    
    $
    2,770
    
    
    $
    5,030Pro forma
    
    
    2,676
    
    
    
    4,843Stock-based compensation cost, net of income taxes:As reported
    
    
    
    
    
    
    Pro forma
    
    
    94
    
    
    
    187Basic earnings per common share:As reported
    
    
    0.38
    
    
    
    0.70Pro forma
    
    
    0.37
    
    
    
    0.67Diluted earnings per common share:As reported
    
    
    0.38
    
    
    
    0.69Pro forma
    
    
    0.37
    
    
    
    0.67
  Stock Incentive Plan
 7




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##### 



METROCORP BANCSHARES, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  For the Three Months
    
    For the Six MonthsAssumptions
    
    Ended June 30, 2006
    
    Ended June 30, 2006Expected term (in years)
    
    
    4.55
    
    
    
    4.55Expected stock price volatility
    
    
    22
    %
    
    
    22
    %Expected dividend yield
    
    
    0.80
    %
    
    
    0.80
    %Risk-free interest rate
    
    
    4.92
    %
    
    
    4.92
    %Estimated fair value per option granted
    
    $
    6.99
    
    
    $
    6.99
    WeightedAverageNumber of
    
    
    Weighted
    
    
    Remaining
    
    
    AggregateOptions
    
    
    Average
    
    
    Contractual
    
    
    IntrinsicOutstanding
    
    
    Exercise Price
    
    
    Life
    
    
    ValueOutstanding options at December 31,
2005
    
    
    449,150
    
    
    $
    18.18Options granted
    
    
    117,000
    
    
    
    26.94Options exercised
    
    
    (38,650
    )
    
    
    16.12Options forfeited
    
    
    (20,000
    )
    
    
    24.33Outstanding options at June 30, 2006
    
    
    507,500
    
    
    
    20.11
    
    
    
    5.98
    
    
    $
    4,652Exercisable options at June 30, 2006
    
    
    297,700
    
    
    $
    16.74
    
    
    
    4.81
    
    
    $
    3,733
  Stock Purchase Plan
 8




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##### 



METROCORP BANCSHARES, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  Number of SubscribedShares OutstandingOutstanding subscribed shares at December 31, 2005
    
    
    8,202Subscribed shares issued
    
    
    (1,471
    )Subscribed shares withdrawn from plan
    
    
    (399
    )Outstanding subscribed shares at June 30, 2006
    
    
    6,332
  3. SECURITIES AVAILABLE-FOR-SALE
  As of June 30, 2006
    
    
    As of December 31, 2005Gross
    
    
    Gross
    
    
    
    
    
    
    
    
    
    
    Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Fair
    
    
    Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    Value
    
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Value(In thousands)U.S. Government agencies
    
    $
    30
    
    
    $
    1
    
    
    $
    
    
    
    $
    31
    
    
    $
    32
    
    
    $
    
    
    
    $
    
    
    
    $
    32U.S. Government sponsored
enterprises
    
    
    36,887
    
    
    
    
    
    
    
    (983
    )
    
    
    35,904
    
    
    
    36,869
    
    
    
    
    
    
    
    (526
    )
    
    
    36,343Obligations of state and
political subdivisions
    
    
    15,000
    
    
    
    373
    
    
    
    
    
    
    
    15,373
    
    
    
    17,162
    
    
    
    551
    
    
    
    
    
    
    
    17,713Mortgage-backed securities and
collateralized mortgage
obligations
    
    
    142,512
    
    
    
    37
    
    
    
    (5,998
    )
    
    
    136,551
    
    
    
    162,294
    
    
    
    112
    
    
    
    (3,974
    )
    
    
    158,432Other debt securities
    
    
    234
    
    
    
    2
    
    
    
    (1
    )
    
    
    235
    
    
    
    292
    
    
    
    3
    
    
    
    
    
    
    
    295Investment in ARM and CRA funds
    
    
    19,560
    
    
    
    
    
    
    
    (617
    )
    
    
    18,943
    
    
    
    19,419
    
    
    
    17
    
    
    
    (412
    )
    
    
    19,024FHLB/Federal Reserve Bank stock
    
    
    3,775
    
    
    
    
    
    
    
    
    
    
    
    3,775
    
    
    
    3,178
    
    
    
    
    
    
    
    
    
    
    
    3,178Investment in subsidiary trust
    
    
    1,083
    
    
    
    
    
    
    
    
    
    
    
    1,083
    
    
    
    1,083
    
    
    
    
    
    
    
    
    
    
    
    1,083Total securities
    
    $
    219,081
    
    
    $
    413
    
    
    $
    (7,599
    )
    
    $
    211,895
    
    
    $
    240,329
    
    
    $
    683
    
    
    $
    (4,912
    )
    
    $
    236,100
 9




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##### 



METROCORP BANCSHARES, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  Less Than 12 Months
    
    
    Greater Than 12 Months
    
    
    TotalGross
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    GrossUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedFair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses(In thousands)U. S. Government sponsored enterprises
    
    $
    5,267
    
    
    $
    (232
    )
    
    $
    30,637
    
    
    $
    (751
    )
    
    $
    35,904
    
    
    $
    (983
    )Mortgage-backed securities and
collateralized mortgage obligations
    
    
    55,508
    
    
    
    (2,130
    )
    
    
    79,062
    
    
    
    (3,869
    )
    
    
    134,570
    
    
    
    (5,998
    )Other debt securities
    
    
    59
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    59
    
    
    
    (1
    )Investment in ARM and CRA funds
    
    
    4,262
    
    
    
    (120
    )
    
    
    14,681
    
    
    
    (497
    )
    
    
    18,943
    
    
    
    (617
    )Total securities
    
    $
    65,096
    
    
    $
    (2,483
    )
    
    $
    124,380
    
    
    $
    (5,117
    )
    
    $
    189,476
    
    
    $
    (7,599
    )
  4. ALLOWANCE FOR LOAN LOSSES
  As of and for the Three Months
    
    
    As of and for the Six MonthsEnded June 30,
    
    
    Ended June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(In thousands)Allowance for loan losses at beginning of period
    
    $
    13,729
    
    
    $
    10,787
    
    
    $
    13,169
    
    
    $
    10,501Provision for loan losses
    
    
    188
    
    
    
    454
    
    
    
    446
    
    
    
    928Charge-offs
    
    
    (1,140
    )
    
    
    (954
    )
    
    
    (2,237
    )
    
    
    (1,194
    )Recoveries
    
    
    128
    
    
    
    85
    
    
    
    1,527
    
    
    
    137Allowance for loan losses at end of period
    
    $
    12,905
    
    
    $
    10,372
    
    
    $
    12,905
    
    
    $
    10,372
 5. EARNINGS PER COMMON SHARE
  10




---



##### 



METROCORP BANCSHARES, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 As of and for the
    
    
    As of and for theThree Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(In thousands, except per share amounts)Net income available to common
shareholders
    
    $
    3,392
    
    
    $
    2,770
    
    
    $
    6,623
    
    
    $
    5,030Weighted average common shares outstanding:Basic
    
    
    7,263
    
    
    
    7,205
    
    
    
    7,254
    
    
    
    7,200Shares issuable under stock option
plans
    
    
    135
    
    
    
    66
    
    
    
    127
    
    
    
    82Diluted
    
    
    7,398
    
    
    
    7,271
    
    
    
    7,381
    
    
    
    7,282Earnings per common share:Basic
    
    $
    0.47
    
    
    $
    0.38
    
    
    $
    0.91
    
    
    $
    0.70Diluted
    
    $
    0.46
    
    
    $
    0.38
    
    
    $
    0.90
    
    
    $
    0.69
 6. LITIGATION
  7. OFF-BALANCE SHEET ACTIVITIES
   As of
    
    
    As ofJune 30, 2006
    
    
    December 31, 2005Unfunded loan commitments including unfunded lines of credit
    
    $
    168,503
    
    
    $
    152,190Standby letters of credit
    
    
    6,570
    
    
    
    4,589Commercial letters of credit
    
    
    13,864
    
    
    
    6,593Operating leases
    
    
    8,419
    
    
    
    5,467Total financial instruments with off-balance sheet risk
    
    $
    197,356
    
    
    $
    168,839
 8. OPERATING SEGMENT INFORMATION
  11




---



##### 



METROCORP BANCSHARES, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
   For the three months ended June 30, 2006MetroBank
    
    
    Metro United
    
    
    Other
    
    
    Consolidated CompanyTotal interest income
    
    $
    17,523
    
    
    $
    3,696
    
    
    $
    16
    
    
    $
    21,235Total interest expense
    
    
    5,906
    
    
    
    1,603
    
    
    
    525
    
    
    
    8,034Net interest income
    
    
    11,617
    
    
    
    2,093
    
    
    
    (509
    )
    
    
    13,201Provision for loan losses
    
    
    131
    
    
    
    57
    
    
    
    
    
    
    
    188Net interest income after provision
for loan losses
    
    
    11,486
    
    
    
    2,036
    
    
    
    (509
    )
    
    
    13,013Noninterest income
    
    
    1,893
    
    
    
    69
    
    
    
    
    
    
    
    1,962Noninterest expense
    
    
    8,079
    
    
    
    1,272
    
    
    
    303
    
    
    
    9,654Income before income tax
provision
    
    
    5,300
    
    
    
    833
    
    
    
    (812
    )
    
    
    5,321Provision for income taxes
    
    
    1,863
    
    
    
    333
    
    
    
    (267
    )
    
    
    1,929Net income
    
    $
    3,437
    
    
    $
    500
    
    
    $
    (545
    )
    
    $
    3,392For the six months ended June 30, 2006MetroBank
    
    
    Metro United
    
    
    Other
    
    
    Consolidated CompanyTotal interest income
    
    $
    33,699
    
    
    $
    7,034
    
    
    $
    33
    
    
    $
    40,766Total interest expense
    
    
    10,665
    
    
    
    3,110
    
    
    
    1,045
    
    
    
    14,820Net interest income
    
    
    23,034
    
    
    
    3,924
    
    
    
    (1,012
    )
    
    
    25,946Provision for loan losses
    
    
    336
    
    
    
    110
    
    
    
    
    
    
    
    446Net interest income after provision
for loan losses
    
    
    22,698
    
    
    
    3,814
    
    
    
    (1,012
    )
    
    
    25,500Noninterest income
    
    
    3,735
    
    
    
    146
    
    
    
    
    
    
    
    3,881Noninterest expense
    
    
    16,069
    
    
    
    2,387
    
    
    
    709
    
    
    
    19,165Income before income tax
provision
    
    
    10,364
    
    
    
    1,573
    
    
    
    (1,721
    )
    
    
    10,216Provision for income taxes
    
    
    3,594
    
    
    
    579
    
    
    
    (580
    )
    
    
    3,593Net income
    
    $
    6,770
    
    
    $
    994
    
    
    $
    (1,141
    )
    
    $
    6,623As of June 30, 2006MetroBank
    
    
    Metro United
    
    
    Other
    
    
    Consolidated CompanyNet loans
    
    $
    665,538
    
    
    $
    147,477
    
    
    $
    
    
    
    $
    813,015Assets
    
    
    978,472
    
    
    
    208,074
    
    
    
    1,199
    
    
    
    1,187,745Deposits
    
    
    848,520
    
    
    
    165,826
    
    
    
    (2,519
    )
    
    
    1,011,827
 9. NEW ACCOUNTING PRONOUNCEMENTS
   12




---



##### 



METROCORP BANCSHARES, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
   10. SUBSEQUENT EVENTS
    For the Three Months
    
    For the Six MonthsEnded June 30,
    
    Ended June 30,2006
    
    2005
    
    2006
    
    2005Earnings per common share:Basic  as reported
    
    $
    0.47
    
    
    $
    0.38
    
    
    $
    0.91
    
    
    $
    0.70Basic  pro forma
    
    
    0.31
    
    
    
    0.26
    
    
    
    0.61
    
    
    
    0.47Diluted  as reported
    
    $
    0.46
    
    
    $
    0.38
    
    
    $
    0.90
    
    
    $
    0.69Diluted  pro forma
    
    
    0.31
    
    
    
    0.25
    
    
    
    0.60
    
    
    
    0.46
 13




---



##### 



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Special Cautionary Notice Regarding Forward-looking Statements
  
    
    changes in interest rates and market prices, which could reduce the Companys net
interest margins, asset valuations and expense expectations;
    
    changes in the levels of loan prepayments and the resulting effects on the value of the
Companys loan portfolio;
    
    changes in local economic and business conditions which adversely affect the ability of
the Companys customers to transact profitable business with the Company, including the
ability of borrowers to repay their loans according to their terms or a change in the value
of the related collateral;
    
    increased competition for deposits and loans adversely affecting rates and terms;
    
    the Companys ability to identify suitable acquisition candidates;
    
    the timing, impact and other uncertainties of the Companys ability to enter new markets
successfully and capitalize on growth opportunities;
    
    increased credit risk in the Companys assets and increased operating risk caused by a
material change in commercial, consumer and/or real estate loans as a percentage of the
total loan portfolio;
    
    the failure of assumptions underlying the establishment of and provisions made to the allowance for loan losses;
    
    changes in the availability of funds resulting in increased costs or reduced liquidity;
    
    increased asset levels and changes in the composition of assets and the resulting impact
on our capital levels and regulatory capital ratios;
    
    the Companys ability to acquire, operate and maintain cost effective and efficient
systems without incurring unexpectedly difficult or expensive but necessary technological
changes;
    
    the loss of senior management or operating personnel and the potential inability to hire
qualified personnel at reasonable compensation levels; and
    
    changes in statutes and government regulations or their interpretations applicable to
bank holding companies and our present and future banking and other subsidiaries, including
changes in tax requirements and tax rates.
  14




---



##### 



Overview
      Results of Operations
 Net Interest Income and Net Interest Margin.
  15




---



##### 



Total Interest Income.
  Interest Income from Loans.
   Interest Income from Investments.
 16




---



##### 



Total Interest Expense.
 Interest Expense on Deposits.
  Interest Expense on Junior Subordinated Debentures.
 Interest Expense on Other Borrowings.
  17




---



##### 



For The Three Months Ended June 30,2006
    
    
    2005Average
    
    
    Interest
    
    
    Average
    
    
    Average
    
    
    Interest
    
    
    AverageOutstanding
    
    
    Earned/
    
    
    Yield/
    
    
    Outstanding
    
    
    Earned/
    
    
    Yield/Balance
    
    
    Paid
    
    
    Rate(1)
    
    
    Balance
    
    
    Paid
    
    
    Rate(1)(Dollars in thousands)AssetsInterest-earning assets:Total loans
    
    $
    803,132
    
    
    $
    17,831
    
    
    
    8.91
    %
    
    $
    596,615
    
    
    $
    10,657
    
    
    
    7.16
    %Taxable securities
    
    
    203,278
    
    
    
    2,196
    
    
    
    4.33
    
    
    
    237,633
    
    
    
    2,359
    
    
    
    3.98Tax-exempt securities
    
    
    15,295
    
    
    
    187
    
    
    
    4.90
    
    
    
    17,161
    
    
    
    212
    
    
    
    4.96Federal funds sold and other
short-term investments
    
    
    84,154
    
    
    
    1,021
    
    
    
    4.87
    
    
    
    11,856
    
    
    
    82
    
    
    
    2.77Total interest-earning assets
    
    
    1,105,859
    
    
    
    21,235
    
    
    
    7.70
    
    
    
    863,265
    
    
    
    13,310
    
    
    
    6.18Allowance for loan losses
    
    
    (13,910
    )
    
    
    
    
    
    
    
    
    
    
    (11,263
    )Total interest-earning assets, net
of allowance for loan losses
    
    
    1,091,949
    
    
    
    
    
    
    
    
    
    
    
    852,002Noninterest-earning assets
    
    
    87,442
    
    
    
    
    
    
    
    
    
    
    
    44,890Total assets
    
    $
    1,179,391
    
    
    
    
    
    
    
    
    
    
    $
    896,892Liabilities and shareholders equityInterest-bearing liabilities:Interest-bearing demand deposits
    
    $
    74,283
    
    
    
    222
    
    
    
    1.20
    %
    
    $
    85,946
    
    
    
    172
    
    
    
    0.80
    %Savings and money market accounts
    
    
    169,210
    
    
    
    1,170
    
    
    
    2.77
    
    
    
    104,127
    
    
    
    255
    
    
    
    0.98Time deposits
    
    
    573,549
    
    
    
    5,801
    
    
    
    4.06
    
    
    
    385,755
    
    
    
    2,685
    
    
    
    2.79Junior subordinated debentures
    
    
    36,083
    
    
    
    525
    
    
    
    5.76
    
    
    
    
    
    
    
    
    
    
    
    Other borrowings
    
    
    25,746
    
    
    
    316
    
    
    
    4.92
    
    
    
    47,813
    
    
    
    482
    
    
    
    4.04Total interest-bearing liabilities
    
    
    878,871
    
    
    
    8,034
    
    
    
    3.67
    
    
    
    623,641
    
    
    
    3,594
    
    
    
    2.31Noninterest-bearing liabilities:Noninterest-bearing demand deposits
    
    
    188,646
    
    
    
    
    
    
    
    
    
    
    
    178,249Other liabilities
    
    
    15,079
    
    
    
    
    
    
    
    
    
    
    
    6,968Total liabilities
    
    
    1,082,596
    
    
    
    
    
    
    
    
    
    
    
    808,858Shareholders equity
    
    
    96,795
    
    
    
    
    
    
    
    
    
    
    
    88,034Total liabilities and shareholders
equity
    
    $
    1,179,391
    
    
    
    
    
    
    
    
    
    
    $
    896,892Net interest income
    
    
    
    
    
    $
    13,201
    
    
    
    
    
    
    
    
    
    
    $
    9,716Net interest spread
    
    
    
    
    
    
    
    
    
    
    4.04
    %
    
    
    
    
    
    
    
    
    
    
    3.87
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    4.79
    %
    
    
    
    
    
    
    
    
    
    
    4.51
    %
 
 (1)
    
    Annualized. 18




---



##### 



For The Six Months Ended June 30,2006
    
    
    2005Average
    
    
    Interest
    
    
    Average
    
    
    Average
    
    
    Interest
    
    
    AverageOutstanding
    
    
    Earned/
    
    
    Yield/
    
    
    Outstanding
    
    
    Earned/
    
    
    Yield/Balance
    
    
    Paid
    
    
    Rate(1)
    
    
    Balance
    
    
    Paid
    
    
    Rate(1)(Dollars in thousands)AssetsInterest-earning assets:Total loans
    
    $
    788,106
    
    
    $
    34,254
    
    
    
    8.76
    %
    
    $
    596,214
    
    
    $
    20,727
    
    
    
    7.01
    %Taxable securities
    
    
    208,843
    
    
    
    4,460
    
    
    
    4.31
    
    
    
    243,159
    
    
    
    4,781
    
    
    
    3.96Tax-exempt securities
    
    
    15,986
    
    
    
    393
    
    
    
    4.96
    
    
    
    17,411
    
    
    
    430
    
    
    
    4.98Federal funds sold and other
short-term investments
    
    
    72,348
    
    
    
    1,659
    
    
    
    4.62
    
    
    
    10,603
    
    
    
    136
    
    
    
    2.59Total interest-earning assets
    
    
    1,085,283
    
    
    
    40,766
    
    
    
    7.57
    
    
    
    867,387
    
    
    
    26,074
    
    
    
    6.06Allowance for loan losses
    
    
    (13,861
    )
    
    
    
    
    
    
    
    
    
    
    (11,153
    )Total interest-earning assets, net
of allowance for loan losses
    
    
    1,071,422
    
    
    
    
    
    
    
    
    
    
    
    856,234Noninterest-earning assets
    
    
    84,631
    
    
    
    
    
    
    
    
    
    
    
    46,300Total assets
    
    $
    1,156,053
    
    
    
    
    
    
    
    
    
    
    $
    902,534Liabilities and shareholders equityInterest-bearing liabilities:Interest-bearing demand deposits
    
    $
    77,582
    
    
    
    391
    
    
    
    1.02
    %
    
    $
    87,469
    
    
    
    347
    
    
    
    0.80
    %Savings and money market accounts
    
    
    156,442
    
    
    
    1,917
    
    
    
    2.47
    
    
    
    108,245
    
    
    
    466
    
    
    
    0.87Time deposits
    
    
    561,360
    
    
    
    10,828
    
    
    
    3.89
    
    
    
    383,422
    
    
    
    5,060
    
    
    
    2.66Junior subordinated debentures
    
    
    36,083
    
    
    
    1,045
    
    
    
    5.76
    
    
    
    
    
    
    
    
    
    
    
    Other borrowings
    
    
    26,200
    
    
    
    639
    
    
    
    4.92
    
    
    
    56,949
    
    
    
    1,055
    
    
    
    3.74Total interest-bearing liabilities
    
    
    857,667
    
    
    
    14,820
    
    
    
    3.48
    
    
    
    636,085
    
    
    
    6,928
    
    
    
    2.20Noninterest-bearing liabilities:Noninterest-bearing demand deposits
    
    
    188,706
    
    
    
    
    
    
    
    
    
    
    
    171,989Other liabilities
    
    
    13,968
    
    
    
    
    
    
    
    
    
    
    
    6,966Total liabilities
    
    
    1,060,341
    
    
    
    
    
    
    
    
    
    
    
    815,040Shareholders equity
    
    
    95,712
    
    
    
    
    
    
    
    
    
    
    
    87,494Total liabilities and shareholders
equity
    
    $
    1,156,053
    
    
    
    
    
    
    
    
    
    
    $
    902,534Net interest income
    
    
    
    
    
    $
    25,946
    
    
    
    
    
    
    
    
    
    
    $
    19,146Net interest spread
    
    
    
    
    
    
    
    
    
    
    4.09
    %
    
    
    
    
    
    
    
    
    
    
    3.86
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    4.82
    %
    
    
    
    
    
    
    
    
    
    
    4.45
    %
 
 (1)
    
    Annualized. 19




---



##### 



Three Months Ended June 30,
    
    
    Six Months Ended June 30,2006 vs 2005
    
    
    2006 vs 2005Increase (Decrease)
    
    
    
    
    
    
    Increase (Decrease)Due to
    
    
    
    
    
    
    Due toVolume
    
    
    Rate
    
    
    Total
    
    
    Volume
    
    
    Rate
    
    
    Total(Dollars in thousands)Interest-earning assets:Loans
    
    $
    3,689
    
    
    $
    3,485
    
    
    $
    7,174
    
    
    $
    6,671
    
    
    $
    6,856
    
    
    $
    13,527Taxable securities
    
    
    (341
    )
    
    
    178
    
    
    
    (163
    )
    
    
    (675
    )
    
    
    354
    
    
    
    (321
    )Tax-exempt securities
    
    
    (23
    )
    
    
    (2
    )
    
    
    (25
    )
    
    
    (35
    )
    
    
    (2
    )
    
    
    (37
    )Federal funds sold and other short-term
investments
    
    
    500
    
    
    
    439
    
    
    
    939
    
    
    
    792
    
    
    
    731
    
    
    
    1,523Total increase in interest income
    
    
    3,825
    
    
    
    4,100
    
    
    
    7,925
    
    
    
    6,753
    
    
    
    7,939
    
    
    
    14,692Interest-bearing liabilities:Interest-bearing demand deposits
    
    
    (23
    )
    
    
    73
    
    
    
    50
    
    
    
    (39
    )
    
    
    83
    
    
    
    44Savings and money market accounts
    
    
    159
    
    
    
    756
    
    
    
    915
    
    
    
    207
    
    
    
    1,244
    
    
    
    1,451Time deposits
    
    
    1,307
    
    
    
    1,809
    
    
    
    3,116
    
    
    
    2,348
    
    
    
    3,420
    
    
    
    5,768Junior subordinated debentures
    
    
    525
    
    
    
    
    
    
    
    525
    
    
    
    1,045
    
    
    
    
    
    
    
    1,045Other borrowings
    
    
    (222
    )
    
    
    56
    
    
    
    (166
    )
    
    
    (570
    )
    
    
    154
    
    
    
    (416
    )Total increase in interest expense
    
    
    1,746
    
    
    
    2,694
    
    
    
    4,440
    
    
    
    2,991
    
    
    
    4,901
    
    
    
    7,892Increase in net interest income
    
    $
    2,079
    
    
    $
    1,406
    
    
    $
    3,485
    
    
    $
    3,762
    
    
    $
    3,038
    
    
    $
    6,800
 Provision for Loan Losses.
 Noninterest Income.
 Noninterest Expenses.
  20




---



##### 



Income Taxes.
 Financial Condition
 Loan Portfolio.
  As of June 30, 2006
    
    
    As of December 31, 2005Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent(Dollars in thousands)Commercial and industrial
    
    $
    339,097
    
    
    
    40.90
    %
    
    $
    331,869
    
    
    
    42.84
    %Real estate mortgageResidential
    
    
    6,742
    
    
    
    0.81
    
    
    
    7,739
    
    
    
    1.00Commercial
    
    
    406,815
    
    
    
    49.07
    
    
    
    368,508
    
    
    
    47.57413,557
    
    
    
    49.88
    
    
    
    376,247
    
    
    
    48.57Real estate constructionResidential
    
    
    14,608
    
    
    
    1.76
    
    
    
    12,095
    
    
    
    1.56Commercial
    
    
    53,589
    
    
    
    6.47
    
    
    
    44,315
    
    
    
    5.7268,197
    
    
    
    8.23
    
    
    
    56,410
    
    
    
    7.28Consumer and other
    
    
    8,228
    
    
    
    0.99
    
    
    
    10,172
    
    
    
    1.31Gross loans
    
    
    829,079
    
    
    
    100.00
    %
    
    
    774,698
    
    
    
    100.00
    %Unearned discounts, interest and
deferred fees
    
    
    (3,159
    )
    
    
    
    
    
    
    (3,225
    )Total loans
    
    
    825,920
    
    
    
    
    
    
    
    771,473Allowance for loan losses
    
    
    (12,905
    )
    
    
    
    
    
    
    (13,169
    )Loans, net
    
    $
    813,015
    
    
    
    
    
    
    $
    758,304
 21




---



##### 



Nonperforming Assets.
    As of
    
    
    As ofJune 30, 2006
    
    
    December 31, 2005(Dollars in thousands)Nonaccrual loans
    
    $
    9,306
    
    
    $
    15,606Accruing loans 90 days or more past due
    
    
    91
    
    
    
    32Other real estate (ORE) and other assets repossessed (OAR)
    
    
    4,188
    
    
    
    3,866Total nonperforming assets
    
    
    13,585
    
    
    
    19,504Nonperforming loans guaranteed by the SBA, Ex-Im Bank and OCCGF
    
    
    (2,079
    )
    
    
    (2,210
    )Total net nonperforming assets
    
    $
    11,506
    
    
    $
    17,294Total nonperforming assets to total assets
    
    
    1.14
    %
    
    
    1.73
    %Total nonperforming assets to total loans and ORE/OAR
    
    
    1.64
    %
    
    
    2.52
    %Net nonperforming assets to total assets (1)
    
    
    0.97
    %
    
    
    1.53
    %Net nonperforming assets to total loans and ORE/OAR (1)
    
    
    1.39
    %
    
    
    2.23
    %
 
 (1)
    
    Net nonperforming assets are net of the loan portions guaranteed by the SBA, Ex-Im Bank and OCCGF.  22




---



##### 



As of
    
    
    As ofJune 30, 2006
    
    
    December 31, 2005(Dollars in thousands)Impaired loans with no SFAS No. 114 valuation reserve
    
    $
    7,773
    
    
    $
    11,865Impaired loans with a SFAS No. 114 valuation reserve
    
    
    4,308
    
    
    
    6,468Total recorded investment in impaired loans
    
    $
    12,081
    
    
    $
    18,333Valuation allowance related to impaired loans
    
    $
    1,627
    
    
    $
    1,783
  Allowance for Loan Losses and Reserve for Unfunded Lending Commitments.
     23




---



##### 



As of and for theThree Months Ended June 30,2006
    
    
    2005(Dollars in thousands)Average total loans outstanding for the period
    
    $
    803,132
    
    
    $
    596,615Total loans outstanding at end of period
    
    $
    825,920
    
    
    $
    609,838Allowance for loan losses at beginning of period
    
    $
    13,729
    
    
    $
    10,787Provision for loan losses
    
    
    188
    
    
    
    454Charge-offs:Commercial and industrial
    
    
    (1,107
    )
    
    
    (889
    )Real estate mortgage
    
    
    
    
    
    
    Real estate construction
    
    
    
    
    
    
    Consumer and other
    
    
    (33
    )
    
    
    (65
    )Total charge-offs
    
    
    (1,140
    )
    
    
    (954
    )Recoveries:Commercial and industrial
    
    
    109
    
    
    
    58Real estate mortgage
    
    
    
    
    
    
    Real estate construction
    
    
    
    
    
    
    Consumer and other
    
    
    19
    
    
    
    27Total recoveries
    
    
    128
    
    
    
    85Net charge-offs
    
    
    (1,012
    )
    
    
    (869
    )Allowance for loan losses at end of period
    
    
    12,905
    
    
    
    10,372Reserve for unfunded lending commitments at beginning of period
    
    
    539
    
    
    
    288Provision for unfunded lending commitments
    
    
    13
    
    
    
    46Reserve for unfunded lending commitments at end of period
    
    
    552
    
    
    
    334Allowance for credit losses at end of period
    
    $
    13,457
    
    
    $
    10,706Ratio of net charge-offs to end of period total loans
    
    
    0.12
    %
    
    
    0.14
    %
 24




---



##### 



As of and for theSix Months Ended June 30,2006
    
    
    2005(Dollars in thousands)Average total loans outstanding for the period
    
    $
    788,106
    
    
    $
    596,214Total loans outstanding at end of period
    
    $
    825,920
    
    
    $
    609,838Allowance for loan losses at beginning of period
    
    $
    13,169
    
    
    $
    10,501Provision for loan losses
    
    
    446
    
    
    
    928Charge-offs:Commercial and industrial
    
    
    (2,104
    )
    
    
    (1,014
    )Real estate mortgage
    
    
    (21
    )
    
    
    Real estate construction
    
    
    
    
    
    
    (5
    )Consumer and other
    
    
    (112
    )
    
    
    (175
    )Total charge-offs
    
    
    (2,237
    )
    
    
    (1,194
    )Recoveries:Commercial and industrial
    
    
    595
    
    
    
    105Real estate mortgage
    
    
    851
    
    
    
    1Real estate construction
    
    
    
    
    
    
    Consumer and other
    
    
    81
    
    
    
    31Total recoveries
    
    
    1,527
    
    
    
    137Net charge-offs
    
    
    (710
    )
    
    
    (1,057
    )Allowance for loan losses at end of period
    
    
    12,905
    
    
    
    10,372Reserve for unfunded lending commitments at beginning of period
    
    
    546
    
    
    
    362Provision for unfunded lending commitments
    
    
    6
    
    
    
    (28
    )Reserve for unfunded lending commitments at end of period
    
    
    552
    
    
    
    334Allowance for credit losses at end of period
    
    $
    13,457
    
    
    $
    10,706Ratio of allowance for loan losses to end of period total loans
    
    
    1.56
    %
    
    
    1.70
    %Ratio of net charge-offs to end of period total loans
    
    
    0.09
    %
    
    
    0.17
    %Ratio of allowance for loan losses to end of period total
nonperforming loans (1)
    
    
    137.33
    %
    
    
    53.56
    %Ratio of allowance for loan losses to end of period net
nonperforming loans (2)
    
    
    176.35
    %
    
    
    61.69
    %
 
 (1)
    
    Total nonperforming loans are nonaccrual loans plus loans over 90 days past due.(2)
    
    Net nonperforming loans are nonaccrual loans plus loans over 90 days past due,
less loan portion guaranteed by the SBA, Ex-Im Bank and OCCGF. Securities.
 Deposits
 25




---



##### 



Junior Subordinated Debentures.
 Other Borrowings.
  As of and for the
    
    As of and for theSix Months Ended
    
    Year EndedJune 30, 2006
    
    December 31, 2005(Dollars in thousands)Federal funds purchased:at end of period
    
    $
    
    
    
    $
    average during the period
    
    
    
    
    
    
    11maximum month-end balance during the period
    
    
    
    
    
    
    FHLB notes:at end of period
    
    $
    25,000
    
    
    $
    25,000average during the period
    
    
    25,497
    
    
    
    42,138maximum month-end balance during the period
    
    
    25,000
    
    
    
    72,500Interest rate at end of period
    
    
    4.99
    %
    
    
    4.99
    %Interest rate during the period
    
    
    5.05
    
    
    
    4.23Federal Reserve TT&L:at end of period
    
    $
    505
    
    
    $
    1,054average during the period
    
    
    703
    
    
    
    705maximum month-end balance during the period
    
    
    645
    
    
    
    1,054
 Liquidity.
 Capital Resources.
 26




---



##### 



Minimum
    
    To Be Categorized asRequired For
    
    Well Capitalized UnderCapital Adequacy
    
    Prompt Corrective
    
    Actual Ratio AtPurposes
    
    Action Provisions
    
    June 30, 2006The CompanyLeverage ratio
    
    
    4.00
    %(1)
    
    
    N/A
    %
    
    
    9.03
    %Tier 1 risk-based capital ratio
    
    
    4.00
    
    
    
    N/A
    
    
    
    11.20Risk-based capital ratio
    
    
    8.00
    
    
    
    N/A
    
    
    
    13.51MetroBankLeverage ratio
    
    
    4.00
    %(2)
    
    
    5.00
    %
    
    
    9.52
    %Tier 1 risk-based capital ratio
    
    
    4.00
    
    
    
    6.00
    
    
    
    11.81Risk-based capital ratio
    
    
    8.00
    
    
    
    10.00
    
    
    
    13.06Metro United BankLeverage ratio
    
    
    4.00
    %(3)
    
    
    5.00
    %
    
    
    9.87
    %Tier 1 risk-based capital ratio
    
    
    4.00
    
    
    
    6.00
    
    
    
    12.18Risk-based capital ratio
    
    
    8.00
    
    
    
    10.00
    
    
    
    13.44
 
 (1)
    
    The Federal Reserve Board may require the Company to maintain a leverage ratio above the required minimum.(2)
    
    The OCC may require MetroBank to maintain a leverage ratio above the required minimum.(3)
    
    The FDIC may require Metro United to maintain a leverage ratio above the required minimum. Critical Accounting Policies.
 Allowance for Loan Losses and Reserve for Unfunded Lending
Commitments.
   27




---



##### 



Item 3. Quantitative and Qualitative Disclosures about Market Risk.
  Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures.
 Changes in Internal Control over Financial Reporting.
 28




---



##### 



PART II
 OTHER INFORMATION
 Item 1. Legal Proceedings
  Item 1A. Risk Factors
  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  Item 3. Defaults Upon Senior Securities
  Item 4. Submission of Matters to a Vote of Security Holders
   Director
    
    For
    
    WithheldClass IIMay P. Chu
    
    
    5,472,926
    
    
    
    36,954John Lee
    
    
    5,472,926
    
    
    
    36,954Edward A. Monto
    
    
    5,503,380
    
    
    
    6,500Don J. Wang
    
    
    5,472,926
    
    
    
    36,954Class IIIJohn E. Peterson, Jr.
    
    
    5,503,380
    
    
    
    6,500
    29




---



##### 



Item 5. Other Information
  30




---



##### 



Item 6. Exhibits
 ExhibitNumber
    
    Identification of Exhibit3.1
    
     Amended and Restated Articles of Incorporation of the Company
(incorporated herein by reference to Exhibit 3.1 to the Companys
Registration Statement on Form S-1 (Registration No. 333-62667)
(the Registration Statement)).3.2
    
     Articles of Amendment to Amended and Restated Articles of
Incorporation. (incorporated herein by reference to Exhibit 3.2 to
the Companys Quarterly Report on Form 10-Q for the quarter ended
March 31, 2006)3.3
    
     Amended and Restated Bylaws of the Company (incorporated herein
by reference to Exhibit 3.2 to the Registration Statement).4
    
     Specimen form of certificate evidencing the Common Stock
(incorporated herein by reference to Exhibit 4 to the Registration
Statement).11
    
     Computation of Earnings Per Common Share, included as Note (5)
to the unaudited Condensed Consolidated Financial Statements on
Page 10 of this Form 10-Q.31.1*
    
     Certification of the Chief Executive Officer pursuant to Rule
13a-14(a) of the Securities Exchange Act of 1934, as amended.31.2*
    
     Certification of the Chief Financial Officer pursuant to Rule
13a-14(a) of the Securities Exchange Act of 1934, as amended.32.1*
    
     Certification of the Chief Executive Officer pursuant to 18
U.S.C. Section 1350, adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2*
    
     Certification of the Chief Financial Officer pursuant to 18
U.S.C. Section 1350, adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 
 *
    
    Filed herewith. 31




---



##### 



SIGNATURES
  METROCORP BANCSHARES, INC.Date: August 9, 2006
    
    By:
    
    /s/ George M. LeeGeorge M. LeeChief Executive Officer (principal
executive officer)Date: August 9, 2006
    
    By:
    
    /s/ David C. ChoiDavid C. ChoiChief Financial Officer (principal
financial officer/ principal
accounting officer)
 32




---



##### 



EXHIBIT INDEX
 ExhibitNumber
    
    
    
    Identification of Exhibit3.1
    
    
    
    Amended and Restated Articles of Incorporation of the
Company (incorporated herein by reference to Exhibit
3.1 to the Companys Registration Statement on Form
S-1 (Registration No. 333-62667) (the Registration
Statement)).3.2
    
    
    
    Articles of Amendment to Amended and Restated
Articles of Incorporation. (incorporated herein by
reference to Exhibit 3.2 to the Companys Quarterly
Report on Form 10-Q for the quarter ended March 31,
2006)3.3
    
    
    
    Amended and Restated Bylaws of the Company
(incorporated herein by reference to Exhibit 3.2 to
the Registration Statement).4
    
    
    
    Specimen form of certificate evidencing the Common
Stock (incorporated herein by reference to Exhibit 4
to the Registration Statement).11
    
    
    
    Computation of Earnings Per Common Share, included as
Note (5) to the unaudited Condensed Consolidated
Financial Statements on Page 10 of this Form 10-Q.31.1*
    
    
    
    Certification of the Chief Executive Officer pursuant
to Rule 13a-14(a) of the Securities Exchange Act of
1934, as amended.31.2*
    
    
    
    Certification of the Chief Financial Officer pursuant
to Rule 13a-14(a) of the Securities Exchange Act of
1934, as amended.32.1*
    
    
    
    Certification of the Chief Executive Officer pursuant
to 18 U.S.C. Section 1350, adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.32.2*
    
    
    
    Certification of the Chief Financial Officer pursuant
to 18 U.S.C. Section 1350, adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Filed herewith.