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**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,                2007** |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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 incorporation or organization) |   | (I.R.S.                  Employer Identification No.) |

**9600      Bellaire Boulevard, Suite 252**

**Houston,      Texas 77036**

**(713) 776-3876**

| Large                  Accelerated Filer o | Accelerated                  Filer R | Non-accelerated                  Filer o |
|--------------------------------------------|--------------------------------------|------------------------------------------|

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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,****2007** |      |   | **December                  31,****2006** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|-----------|--------|-------------------------------------------|--------|
| **ASSETS**                                                                                                                                                                                                                                                                              |   |                                  |      |   |                                      |   |
|                                                                                                                                                                                                                                                                                    |   |                                  |      |   |                                      |   |
| Cash                  and due from banks                                                                                                                                                                                                                                                |   | $                                     | 22,787    |   |                                      | $      | 25,709 |   |
| Federal                  funds sold and other short-term investments                                                                                                                                                                                                                    |   |                                  | 40,562    |   |                                      |   | 125,649 |   |
| Total                  cash and cash equivalents                                                                                                                                                                                                                                        |   |                                  | 63,349    |   |                                      |   | 151,358 |   |
| Securities                  available-for-sale, at fair value                                                                                                                                                                                                                           |   |                                  | 164,412   |   |                                      |   | 181,544 |   |
| Other                  investments                                                                                                                                                                                                                                                      |   |                                  | 4,796     |   |                                      |   | 4,931 |   |
| Loans,                  net of allowance for loan losses of  $12,661 and $11,436,                  respectively                                                                                                                                                               |   |                                  | 1,067,614 |   |                                      |   | 875,120 |   |
| Accrued                  interest receivable                                                                                                                                                                                                                                            |   |                                  | 6,326     |   |                                      |   | 5,841 |   |
| Premises                  and equipment, net                                                                                                                                                                                                                                            |   |                                  | 8,501     |   |                                      |   | 7,585 |   |
| Goodwill                                                                                                                                                                                                                                                                                |   |                                  | 21,827    |   |                                      |   | 21,827 |   |
| Core                  deposit intangibles, net                                                                                                                                                                                                                                          |   |                                  | 930       |   |                                      |   | 1,103 |   |
| Customers'                  liability on acceptances                                                                                                                                                                                                                                    |   |                                  | 8,828     |   |                                      |   | 7,693 |   |
| Foreclosed                  assets, net                                                                                                                                                                                                                                                 |   |                                  | 2,464     |   |                                      |   | 2,747 |   |
| Cash                  value of bank owned life insurance (BOLI)                                                                                                                                                                                                                         |   |                                  | 25,078    |   |                                      |   | - |   |
| Other                  assets                                                                                                                                                                                                                                                           |   |                                  | 10,403    |   |                                      |   | 8,685 |   |
| Total                  assets                                                                                                                                                                                                                                                           |   | $                                     | 1,384,528 |   |                                      | $      | 1,268,434 |   |
|                                                                                                                                                                                                                                                                                    |   |                                  |      |   |                                      |   |   |   |
| **LIABILITIES                  AND SHAREHOLDERS' EQUITY**                                                                                                                                                                                                                               |   |                                  |      |   |                                      |   |   |   |
| Deposits:                                                                                                                                                                                                                                                                               |   |                                  |      |   |                                      |   |   |   |
| Noninterest-bearing                                                                                                                                                                                                                                                                     |   | $                                     | 210,482   |   |                                      | $      | 208,750 |   |
| Interest-bearing                                                                                                                                                                                                                                                                        |   |                                  | 994,188   |   |                                      |   | 872,914 |   |
| Total                  deposits                                                                                                                                                                                                                                                         |   |                                  | 1,204,670 |   |                                      |   | 1,081,664 |   |
| Junior                  subordinated debentures                                                                                                                                                                                                                                         |   |                                  | 36,083    |   |                                      |   | 36,083 |   |
| Other                  borrowings                                                                                                                                                                                                                                                       |   |                                  | 10,739    |   |                                      |   | 26,316 |   |
| Accrued                  interest payable                                                                                                                                                                                                                                               |   |                                  | 1,954     |   |                                      |   | 1,822 |   |
| Acceptances                  outstanding                                                                                                                                                                                                                                                |   |                                  | 8,828     |   |                                      |   | 7,693 |   |
| Other                  liabilities                                                                                                                                                                                                                                                      |   |                                  | 10,417    |   |                                      |   | 8,908 |   |
| Total                  liabilities                                                                                                                                                                                                                                                      |   |                                  | 1,272,691 |   |                                      |   | 1,162,486 |   |
| Commitments                  and contingencies                                                                                                                                                                                                                                          |   |                                  | -         |   |                                      |   | - |   |
|                                                                                                                                                                                                                                                                                    |   |                                  |      |   |                                      |   |   |   |
| Shareholders'                  equity:                                                                                                                                                                                                                                                  |   |                                  |      |   |                                      |   |   |   |
| Common                  stock, $1.00 par value, 50,000,000 shares authorized; 10,994,965                  shares                  issued and 10,966,887 shares and 10,946,135 shares outstanding                  at June 30,                  2007 and December 31, 2006, respectively |   |                                  | 10,995    |   |                                      |   | 10,995 |   |
| Additional                  paid-in capital                                                                                                                                                                                                                                             |   |                                  | 26,656    |   |                                      |   | 25,974 |   |
| Retained                  earnings                                                                                                                                                                                                                                                      |   |                                  | 77,069    |   |                                      |   | 71,783 |   |
| Accumulated                  other comprehensive loss                                                                                                                                                                                                                                   |   |                                  | (2,657    | )      |                                      |   | (2,421 | ) |
| Treasury                  stock, at cost                                                                                                                                                                                                                                                |   |                                  | (226      | )      |                                      |   | (383 | ) |
| Total                  shareholders' equity                                                                                                                                                                                                                                             |   |                                  | 111,837   |   |                                      |   | 105,948 |   |
| Total                  liabilities and shareholders' equity                                                                                                                                                                                                                             |   | $                                     | 1,384,528 |   |                                      | $      | 1,268,434 |   |

----

**METROCORP      BANCSHARES, INC.**

**CONDENSED      CONSOLIDATED STATEMENTS OF INCOME**

**(In      thousands, except per share amounts)**

**(Unaudited)**

|                                                                 |   | **For                  the Three Months****Ended                  June 30,** |   |   | **For                  the Six Months****Ended                  June 30,** |   |
|----------------------------------------------------------------------|--------|------------------------------------------------------------------------------|--------|--------|----------------------------------------------------------------------------|--------|
|                                                                 |   | **2007**                                                                     |   |   | **2006**                                                                   |   |   | **2007** |   |   | **2006** |   |
| Interest                  income:                                    |   |                                                                         |   |   |                                                                       |   |   |   |   |   |   |   |
| Loans                                                                |   | $                                                                            | 22,908 |   |                                                                       | $      | 17,839 |   |   | $ | 43,529 |   |   | $ | 34,270 |   |
| Securities:                                                          |   |                                                                         |   |   |                                                                       |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                                              |   |                                                                         | 1,768  |   |                                                                       |   | 2,130 |   |   |   | 3,632 |   |   |   | 4,339 |   |
| Tax-exempt                                                           |   |                                                                         | 76     |   |                                                                       |   | 187 |   |   |   | 161 |   |   |   | 393 |   |
| Other                  investments                                   |   |                                                                         | 70     |   |                                                                       |   | 66 |   |   |   | 138 |   |   |   | 121 |   |
| Federal                  funds sold and other short-term investments |   |                                                                         | 850    |   |                                                                       |   | 1,021 |   |   |   | 1,818 |   |   |   | 1,659 |   |
| Total                  interest income                               |   |                                                                         | 25,672 |   |                                                                       |   | 21,243 |   |   |   | 49,278 |   |   |   | 40,782 |   |
|                                                                 |   |                                                                         |   |   |                                                                       |   |   |   |   |   |   |   |   |   |   |   |
| Interest                  expense:                                   |   |                                                                         |   |   |                                                                       |   |   |   |   |   |   |   |   |   |   |   |
| Time                  deposits                                       |   |                                                                         | 8,162  |   |                                                                       |   | 5,801 |   |   |   | 15,763 |   |   |   | 10,828 |   |
| Demand                  and savings deposits                         |   |                                                                         | 2,503  |   |                                                                       |   | 1,392 |   |   |   | 4,028 |   |   |   | 2,308 |   |
| Junior                  subordinated debentures                      |   |                                                                         | 525    |   |                                                                       |   | 525 |   |   |   | 1,045 |   |   |   | 1,045 |   |
| Other                  borrowings                                    |   |                                                                         | 265    |   |                                                                       |   | 316 |   |   |   | 589 |   |   |   | 639 |   |
| Total                  interest expense                              |   |                                                                         | 11,455 |   |                                                                       |   | 8,034 |   |   |   | 21,425 |   |   |   | 14,820 |   |
|                                                                 |   |                                                                         |   |   |                                                                       |   |   |   |   |   |   |   |   |   |   |   |
| Net                  interest income                                 |   |                                                                         | 14,217 |   |                                                                       |   | 13,209 |   |   |   | 27,853 |   |   |   | 25,962 |   |
| Provision                  for loan losses                           |   |                                                                         | 468    |   |                                                                       |   | 188 |   |   |   | 605 |   |   |   | 446 |   |
| Net                  interest income after provision for loan losses |   |                                                                         | 13,749 |   |                                                                       |   | 13,021 |   |   |   | 27,248 |   |   |   | 25,516 |   |
|                                                                 |   |                                                                         |   |   |                                                                       |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest                  income:                                 |   |                                                                         |   |   |                                                                       |   |   |   |   |   |   |   |   |   |   |   |
| Service                  fees                                        |   |                                                                         | 1,262  |   |                                                                       |   | 1,445 |   |   |   | 2,478 |   |   |   | 2,906 |   |
| Loan-related                  fees                                   |   |                                                                         | 151    |   |                                                                       |   | 224 |   |   |   | 328 |   |   |   | 435 |   |
| Letters                  of credit commissions and fees              |   |                                                                         | 203    |   |                                                                       |   | 207 |   |   |   | 407 |   |   |   | 378 |   |
| Gain                  on sale of loans                               |   |                                                                         | 251    |   |                                                                       |   | - |   |   |   | 251 |   |   |   | - |   |
| Other                  noninterest income                            |   |                                                                         | 132    |   |                                                                       |   | 78 |   |   |   | 201 |   |   |   | 146 |   |
| Total                  noninterest income                            |   |                                                                         | 1,999  |   |                                                                       |   | 1,954 |   |   |   | 3,665 |   |   |   | 3,865 |   |
|                                                                 |   |                                                                         |   |   |                                                                       |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest                  expenses:                               |   |                                                                         |   |   |                                                                       |   |   |   |   |   |   |   |   |   |   |   |
| Salaries                  and employee benefits                      |   |                                                                         | 6,251  |   |                                                                       |   | 5,332 |   |   |   | 11,997 |   |   |   | 10,622 |   |
| Occupancy                  and equipment                             |   |                                                                         | 2,042  |   |                                                                       |   | 1,658 |   |   |   | 4,012 |   |   |   | 3,202 |   |
| Foreclosed                  assets, net                              |   |                                                                         | (132   | )      |                                                                       |   | 118 |   |   |   | (90 | ) |   |   | 161 |   |
| Other                  noninterest expense                           |   |                                                                         | 2,725  |   |                                                                       |   | 2,546 |   |   |   | 5,192 |   |   |   | 5,180 |   |
| Total                  noninterest expenses                          |   |                                                                         | 10,886 |   |                                                                       |   | 9,654 |   |   |   | 21,111 |   |   |   | 19,165 |   |
|                                                                 |   |                                                                         |   |   |                                                                       |   |   |   |   |   |   |   |   |   |   |   |
| Income                  before provision for income taxes            |   |                                                                         | 4,862  |   |                                                                       |   | 5,321 |   |   |   | 9,802 |   |   |   | 10,216 |   |
| Provision                  for income taxes                          |   |                                                                         | 1,789  |   |                                                                       |   | 1,929 |   |   |   | 3,639 |   |   |   | 3,593 |   |
| Net                  income                                          |   | $                                                                            | 3,073  |   |                                                                       | $      | 3,392 |   |   | $ | 6,163 |   |   | $ | 6,623 |   |
|                                                                 |   |                                                                         |   |   |                                                                       |   |   |   |   |   |   |   |   |   |   |   |
| Earnings                  per common share:                          |   |                                                                         |   |   |                                                                       |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                |   | $                                                                            | 0.28   |   |                                                                       | $      | 0.31 |   |   | $ | 0.56 |   |   | $ | 0.61 |   |
| Diluted                                                              |   | $                                                                            | 0.28   |   |                                                                       | $      | 0.31 |   |   | $ | 0.55 |   |   | $ | 0.60 |   |
| Weighted                  average shares outstanding:                |   |                                                                         |   |   |                                                                       |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                |   |                                                                         | 10,962 |   |                                                                       |   | 10,895 |   |   |   | 10,957 |   |   |   | 10,881 |   |
| Diluted                                                              |   |                                                                         | 11,171 |   |                                                                       |   | 11,097 |   |   |   | 11,167 |   |   |   | 11,072 |   |
|                                                                 |   |                                                                         |   |   |                                                                       |   |   |   |   |   |   |   |   |   |   |   |
| Dividends                  per common share                          |   | $                                                                            | 0.04   |   |                                                                       | $      | 0.04 |   |   | $ | 0.08 |   |   | $ | 0.08 |   |

----

**METROCORP      BANCSHARES, INC.**

**CONDENSED      CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME**

**(In      thousands)**

**(Unaudited)**

|                                                                                                |   | **For                  the Three Months****Ended                  June 30,** |   |   | **For                  the Six Months****Ended                  June 30,** |   |
|-----------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------|--------|--------|----------------------------------------------------------------------------|--------|
|                                                                                                |   | **2007**                                                                     |   |   | **2006**                                                                   |   |   | **2007** |   |   | **2006** |   |
|                                                                                                |   |                                                                         |   |   |                                                                       |   |   |   |   |   |   |   |
| Net                  income                                                                         |   | $                                                                            | 3,073  |   |                                                                       | $      | 3,392 |   |   | $ | 6,163 |   |   |   | 6,623 |   |
|                                                                                                |   |                                                                         |   |   |                                                                       |   |   |   |   |   |   |   |   |   |   |   |
| Other                  comprehensive loss, net of tax:                                              |   |                                                                         |   |   |                                                                       |   |   |   |   |   |   |   |   |   |   |   |
| Unrealized                  loss on investment securities, net:                                     |   |                                                                         |   |   |                                                                       |   |   |   |   |   |   |   |   |   |   |   |
| Unrealized                  holding  loss arising during the period                       |   |                                                                         | (603   | )      |                                                                       |   | (1,324 | ) |   |   | (236 | ) |   |   | (1,804 | ) |
| Less:                  reclassification adjustment for gain included in net                  income |   |                                                                         | -      |   |                                                                       |   | - |   |   |   | - |   |   |   | 1 |   |
| Other                  comprehensive loss                                                           |   |                                                                         | (603   | )      |                                                                       |   | (1,324 | ) |   |   | (236 | ) |   |   | (1,805 | ) |
| Total                  comprehensive income                                                         |   | $                                                                            | 2,470  |   |                                                                       | $      | 2,068 |   |   | $ | 5,927 |   |   | $ | 4,818 |   |

**METROCORP      BANCSHARES, INC.**

**CONDENSED      CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY**

**For      the Six Months Ended June 30, 2007**

**(In      thousands)**

**(Unaudited)**

|                                              |   | **Common                  Stock** |   |   | **Additional****Paid-In**   |   |   | **Retained** |   |   | **Accumulated****Other****Comprehensive** |   |   | **Treasury****Stock** |   |   |                         |   |
|---------------------------------------------------|--------|-----------------------------------|--------|--------|-----------------------------|--------|--------|--------------|--------|--------|-------------------------------------------|--------|--------|-----------------------|--------|--------|------------------------------|--------|
|                                              |   | **Shares**                        |   |   | **At                  Par** |   |   | **Capital**  |   |   | **Earnings**                              |   |   | **Loss**              |   |   | **At                  Cost** |   |   | **Total** |   |
|                                              |   |                              |   |   |                        |   |   |         |   |   |                                      |   |   |                  |   |   |                         |   |   |   |   |
| Balance                  at December 31, 2006     |   |                              | 10,946 |   |                        | $      | 10,995 |         |   | $      | 25,974                                    |   |   | $                     | 71,783 |   |                         | $      | (2,421 | ) |   | $ | (383 | ) |   | $ | 105,948 |   |
| Re-issuance                  of treasury stock    |   |                              | 21     |   |                        |   | -      |         |   |   | 224                                       |   |   |                  | -      |   |                         |   | - |   |   |   | 157 |   |   |   | 381 |   |
| Stock-based                  compensation expense |   |                              | -      |   |                        |   | -      |         |   |   | 458                                       |   |   |                  | -      |   |                         |   | - |   |   |   | - |   |   |   | 458 |   |
| Net                  income                       |   |                              | -      |   |                        |   | -      |         |   |   | -                                         |   |   |                  | 6,163  |   |                         |   | - |   |   |   | - |   |   |   | 6,163 |   |
| Other                  comprehensive loss         |   |                              | -      |   |                        |   | -      |         |   |   | -                                         |   |   |                  | -      |   |                         |   | (236 | ) |   |   | - |   |   |   | (236 | ) |
| Cash                  dividends ($0.08 per share) |   |                              | -      |   |                        |   | -      |         |   |   | -                                         |   |   |                  | (877   | )      |                         |   | - |   |   |   | - |   |   |   | (877 | ) |
| Balance                  at June 30, 2007         |   |                              | 10,967 |   |                        | $      | 10,995 |         |   | $      | 26,656                                    |   |   | $                     | 77,069 |   |                         | $      | (2,657 | ) |   | $ | (226 | ) |   | $ | 111,837 |   |

----

**METROCORP      BANCSHARES, INC**

**CONDENSED      CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(In      thousands)**

**(Unaudited)**

|                                                                                                                          |   | **For                  the Six Months Ended****June                  30,** |     |
|-------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------|----------|
|                                                                                                                          |   | **2007**                                                                   |     |   | **2006** |   |
|                                                                                                                          |   |                                                                       |     |   |   |   |
| Cash                  flows from operating activities:                                                                        |   |                                                                       |     |   |   |   |
| Net                  income                                                                                                   |   | $                                                                          | 6,163    |   |   | $ | 6,623 |   |
| Adjustments                  to reconcile net income to net cash (used in) provided by operating                  activities: |   |                                                                       |     |   |   |   |   |   |
| Depreciation                                                                                                                  |   |                                                                       | 895      |   |   |   | 671 |   |
| Provision                  for loan losses                                                                                    |   |                                                                       | 605      |   |   |   | 446 |   |
| Gain                  on sale or call of securities, net                                                                      |   |                                                                       | -        |   |   |   | (2 | ) |
| Loss                  (gain) on foreclosed assets                                                                             |   |                                                                       | (268     | ) |   |   | - |   |
| Loss                  on sale and disposal of premises and equipment                                                          |   |                                                                       | -        |   |   |   | 98 |   |
| Gain                  on sale of loans                                                                                        |   |                                                                       | (251     | ) |   |   | - |   |
| Amortization                  of premiums and discounts on securities                                                         |   |                                                                       | 35       |   |   |   | 46 |   |
| Amortization                  of deferred loan fees and discounts                                                             |   |                                                                       | (1,345   | ) |   |   | (1,192 | ) |
| Amortization                  of core deposit intangibles                                                                     |   |                                                                       | 173      |   |   |   | 236 |   |
| Stock-based                  compensation                                                                                     |   |                                                                       | 458      |   |   |   | 111 |   |
| Excess                  tax benefits from stock-based compensation                                                            |   |                                                                       | -        |   |   |   | (12 | ) |
| Changes                  in:                                                                                                  |   |                                                                       |     |   |   |   |   |   |
| Accrued                  interest receivable                                                                                  |   |                                                                       | (485     | ) |   |   | (461 | ) |
| Other                  assets                                                                                                 |   |                                                                       | (1,664   | ) |   |   | 1,358 |   |
| Accrued                  interest payable                                                                                     |   |                                                                       | 132      |   |   |   | 116 |   |
| Other                  liabilities                                                                                            |   |                                                                       | 1,507    |   |   |   | 1,663 |   |
| Net                  cash (used in) provided by operating activities                                                          |   |                                                                       | 5,955    |   |   |   | 9,701 |   |
|                                                                                                                          |   |                                                                       |     |   |   |   |   |   |
| Cash                  flows from investing activities:                                                                        |   |                                                                       |     |   |   |   |   |   |
| Purchases                  of securities available-for-sale                                                                   |   |                                                                       | (378     | ) |   |   | (1,098 | ) |
| Purchase                  of bank owned life insurance                                                                        |   |                                                                       | (25,000  | ) |   |   |   |   |
| Proceeds                  from maturities and principal paydowns of securities                  available-for-sale            |   |                                                                       | 17,242   |   |   |   | 22,301 |   |
| Net                  change in loans                                                                                          |   |                                                                       | (191,503 | ) |   |   | (54,385 | ) |
| Proceeds                  from sale of foreclosed assets                                                                      |   |                                                                       | 551      |   |   |   | - |   |
| Purchases                  of premises and equipment                                                                          |   |                                                                       | (1,811   | ) |   |   | (1,347 | ) |
| Net                  cash used in investing activities                                                                        |   |                                                                       | (200,899 | ) |   |   | (34,529 | ) |
|                                                                                                                          |   |                                                                       |     |   |   |   |   |   |
| Cash                  flows from financing activities:                                                                        |   |                                                                       |     |   |   |   |   |   |
| Net                  change in:                                                                                               |   |                                                                       |     |   |   |   |   |   |
| Deposits                                                                                                                      |   |                                                                       | 123,006  |   |   |   | 50,077 |   |
| Other                  borrowings                                                                                             |   |                                                                       | (15,577  | ) |   |   | (549 | ) |
| Proceeds                  from stock option exercises                                                                         |   |                                                                       | 108      |   |   |   | 350 |   |
| Re-issuance                  of treasury stock                                                                                |   |                                                                       | 273      |   |   |   | 485 |   |
| Dividends                  paid                                                                                               |   |                                                                       | (875     | ) |   |   | (869 | ) |
| Excess                  tax benefits from stock-based compensation                                                            |   |                                                                       | -        |   |   |   | 12 |   |
| Net                  cash provided by financing activities                                                                    |   |                                                                       | 106,935  |   |   |   | 49,506 |   |
|                                                                                                                          |   |                                                                       |     |   |   |   |   |   |
| Net                  (decrease) increase in cash and cash equivalents                                                         |   |                                                                       | (88,009  | ) |   |   | 24,678 |   |
| Cash                  and cash equivalents at beginning of period                                                             |   |                                                                       | 151,358  |   |   |   | 81,812 |   |
| Cash                  and cash equivalents at end of period                                                                   |   | $                                                                          | 63,349   |   |   | $ | 106,490 |   |

----

**METROCORP      BANCSHARES, INC.**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**1.      BASIS OF PRESENTATION**

----

**METROCORP      BANCSHARES, INC.**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**2.          SECURITIES**

|                                                                                    |   | **As                      of June 30, 2007** |    |   | **As                      of December 31, 2006** |   |
|-----------------------------------------------------------------------------------------|--------|----------------------------------------------|---------|--------|--------------------------------------------------|--------|
|                                                                                    |   | **Amortized****Cost**                        |    |   | **Gross****Unrealized****Gains**                 |   |   | **Gross****Unrealized****Losses** |   |   | **Fair****Value** |   |   | **Amortized****Cost** |   |   | **Gross****Unrealized****Gains** |   |   | **Gross****Unrealized****Losses** |   |   | **Fair****Value** |   |
|                                                                                    |   | **(In                      thousands)**      |    |
| **Securities                      available for sale**                                  |   |                                         |    |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S.                      Government agencies                                           |   | $                                            | 26      |   |                                             | $      | 1 |   |   | $ | - |   |   | $ | 27 |   |   | $ | 28 |   |   | $ | 1 |   |   | $ | - |   |   | $ | 29 |   |
| U.S.                      Government sponsored enterprises                              |   |                                         | 36,924  |   |                                             |   | - |   |   |   | (468 | ) |   |   | 36,456 |   |   |   | 36,906 |   |   |   | - |   |   |   | (510 | ) |   |   | 36,396 |   |
| Obligations                      of state and political subdivisions                    |   |                                         | 5,935   |   |                                             |   | 116 |   |   |   | - |   |   |   | 6,051 |   |   |   | 7,425 |   |   |   | 157 |   |   |   | - |   |   |   | 7,582 |   |
| Mortgage-backed                      securities and collateralized mortgage obligations |   |                                         | 105,880 |   |                                             |   | 59 |   |   |   | (3,285 | ) |   |   | 102,654 |   |   |   | 121,196 |   |   |   | 62 |   |   |   | (3,060 | ) |   |   | 118,198 |   |
| Other                      debt securities                                              |   |                                         | 70      |   |                                             |   | 2 |   |   |   | (1 | ) |   |   | 71 |   |   |   | 143 |   |   |   | 1 |   |   |   | (1 | ) |   |   | 143 |   |
| Investment                      in ARM and CRA funds                                    |   |                                         | 19,757  |   |                                             |   | - |   |   |   | (604 | ) |   |   | 19,153 |   |   |   | 19,658 |   |   |   | - |   |   |   | (462 | ) |   |   | 19,196 |   |
| Total                      available for sale securities                                |   | $                                            | 168,592 |   |                                             | $      | 178 |   |   | $ | (4,358 | ) |   | $ | 164,412 |   |   | $ | 185,356 |   |   | $ | 221 |   |   | $ | (4,033 | ) |   | $ | 181,544 |   |
|                                                                                    |   |                                         |    |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Other                      investments**                                              |   |                                         |    |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| FHLB/Federal                      Reserve Bank stock                                    |   | $                                            | 3,713   |   |                                             | $      | - |   |   | $ | - |   |   | $ | 3,713 |   |   | $ | 3,848 |   |   | $ | - |   |   | $ | - |   |   | $ | 3,848 |   |
| Investment                      in subsidiary trust                                     |   |                                         | 1,083   |   |                                             |   | - |   |   |   | - |   |   |   | 1,083 |   |   |   | 1,083 |   |   |   | - |   |   |   | - |   |   |   | 1,083 |   |
| Total                      other investments                                            |   | $                                            | 4,796   |   |                                             | $      | - |   |   | $ | - |   |   | $ | 4,796 |   |   | $ | 4,931 |   |   | $ | - |   |   | $ | - |   |   | $ | 4,931 |   |

|                                                                                    |   | **Less                      Than 12 Months** |   |   | **Greater                      Than 12 Months** |   |   | **Total**         |   |
|-----------------------------------------------------------------------------------------|--------|----------------------------------------------|--------|--------|-------------------------------------------------|--------|--------|-------------------|--------|
|                                                                                    |   | **Fair****Value**                            |   |   | **Gross****Unrealized****Losses**               |   |   | **Fair****Value** |   |   | **Gross****Unrealized****Losses** |   |   | **Fair****Value** |   |   | **Gross****Unrealized****Losses** |   |
|                                                                                    |   | **(In                      thousands)**      |   |
| U.                      S. Government sponsored enterprises                             |   | $                                            | -      |   |                                            | $      | -      |              |   | $ | 36,456 |   |   | $ | (468 | ) |   | $ | 36,456 |   |   | $ | (468 | ) |
| Mortgage-backed                      securities and collateralized mortgage obligations |   |                                         | 10,535 |   |                                            |   | (161   | )                 |   |   | 85,436 |   |   |   | (3,124 | ) |   |   | 95,971 |   |   |   | (3,285 | ) |
| Other                      debt securities                                              |   |                                         | 6      |   |                                            |   | (1     | )                 |   |   | - |   |   |   | - |   |   |   | 6 |   |   |   | (1 | ) |
| Investment                      in ARM and CRA funds                                    |   |                                         | 4,490  |   |                                            |   | (89    | )                 |   |   | 14,663 |   |   |   | (515 | ) |   |   | 19,153 |   |   |   | (604 | ) |
| Total                      securities                                                   |   | $                                            | 15,031 |   |                                            | $      | (251   | )                 |   | $ | 136,555 |   |   | $ | (4,107 | ) |   | $ | 151,586 |   |   | $ | (4,358 | ) |

----

**METROCORP      BANCSHARES, INC.**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**3.      ALLOWANCE FOR LOAN LOSSES**

|                                                              |   | **As                  of and for the Three Months****Ended                  June 30,** |   |   | **As                  of and for the Six Months****Ended                  June 30,** |   |
|-------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------|--------|--------|--------------------------------------------------------------------------------------|--------|
|                                                              |   | **2007**                                                                               |   |   | **2006**                                                                             |   |   | **2007** |   |   | **2006** |   |
|                                                              |   | **(In                  thousands)**                                                    |   |
|                                                              |   |                                                                                   |   |   |                                                                                 |   |   |   |   |   |   |   |
| Allowance                  for loan losses at beginning of period |   | $                                                                                      | 11,900 |   |                                                                                 | $      | 13,729 |   |   | $ | 11,436 |   |   | $ | 13,169 |   |
| Provision                  for loan losses                        |   |                                                                                   | 468    |   |                                                                                 |   | 188 |   |   |   | 605 |   |   |   | 446 |   |
| Charge-offs                                                       |   |                                                                                   | (301   | )      |                                                                                 |   | (1,140 | ) |   |   | (527 | ) |   |   | (2,237 | ) |
| Recoveries                                                        |   |                                                                                   | 594    |   |                                                                                 |   | 128 |   |   |   | 1,147 |   |   |   | 1,527 |   |
| Allowance                  for loan losses at end of period       |   | $                                                                                      | 12,661 |   |                                                                                 | $      | 12,905 |   |   | $ | 12,661 |   |   | $ | 12,905 |   |

**4.      **
**INCOME TAXES**

**5.      EARNINGS PER COMMON SHARE**

----

**METROCORP      BANCSHARES, INC.**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

|                                                                   |   | **As                  of and for the Three Months****Ended                  June 30,** |   |   | **As                  of and for the Six Months****Ended                  June 30,** |   |
|------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------|--------|--------|--------------------------------------------------------------------------------------|--------|
|                                                                   |   | **2007**                                                                               |   |   | **2006**                                                                             |   |   | **2007** |   |   | **2006** |   |
|                                                                   |   | **(In                  thousands, except per share amounts)**                          |   |
|                                                                   |   |                                                                                   |   |   |                                                                                 |   |   |   |   |   |   |   |
| Net                  income available to common shareholders           |   | $                                                                                      | 3,073  |   |                                                                                 | $      | 3,392 |   |   | $ | 6,163 |   |   | $ | 6,623 |   |
|                                                                   |   |                                                                                   |   |   |                                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Weighted                  average common shares outstanding:           |   |                                                                                   |   |   |                                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                  |   |                                                                                   | 10,962 |   |                                                                                 |   | 10,895 |   |   |   | 10,958 |   |   |   | 10,881 |   |
| Shares                  issuable under stock option and purchase plans |   |                                                                                   | 209    |   |                                                                                 |   | 202 |   |   |   | 209 |   |   |   | 191 |   |
| Diluted                                                                |   |                                                                                   | 11,171 |   |                                                                                 |   | 11,097 |   |   |   | 11,167 |   |   |   | 11,072 |   |
|                                                                   |   |                                                                                   |   |   |                                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Earnings                  per common share:                            |   |                                                                                   |   |   |                                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                  |   | $                                                                                      | 0.28   |   |                                                                                 | $      | 0.31 |   |   | $ | 0.56 |   |   | $ | 0.61 |   |
| Diluted                                                                |   | $                                                                                      | 0.28   |   |                                                                                 | $      | 0.31 |   |   | $ | 0.55 |   |   | $ | 0.60 |   |

**6.      LITIGATION**

**7.      **
**OFF-BALANCE SHEET ACTIVITIES**

|                                                                          |   | **As                  of****June                  30, 2007** |    |   | **As                  of****December                  31, 2006** |   |
|-------------------------------------------------------------------------------|--------|--------------------------------------------------------------|---------|--------|------------------------------------------------------------------|--------|
|                                                                          |   | **(Dollars                  in thousands)**                  |    |
| Unfunded                  loan commitments including unfunded lines of credit |   | $                                                            | 306,758 |   |                                                             | $      | 234,501 |   |
| Standby                  letters of credit                                    |   |                                                         | 9,002   |   |                                                             |   | 7,597 |   |
| Commercial                  letters of credit                                 |   |                                                         | 11,846  |   |                                                             |   | 9,596 |   |
| Operating                  leases                                             |   |                                                         | 10,170  |   |                                                             |   | 9,718 |   |
| Total                  financial instruments with off-balance sheet risk      |   | $                                                            | 337,776 |   |                                                             | $      | 261,412 |   |

----

**METROCORP      BANCSHARES, INC.**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**8.      **
**OPERATING SEGMENT INFORMATION**

|                                                                 |   | **For                  the three months ended June 30, 2007** |   |   | **For                  the three months ended June 30, 2006** |   |
|----------------------------------------------------------------------|--------|---------------------------------------------------------------|--------|--------|---------------------------------------------------------------|--------|
|                                                                 |   | **MetroBank**                                                 |   |   | **Metro****United**                                           |   |   | **Other** |   |   | **Consolidated****Company** |   |   | **MetroBank** |   |   | **Metro****United** |   |   | **Other** |   |   | **Consolidated****Company** |   |
|                                                                 |   | **(In                  thousands)**                           |   |
| Total                  interest income                               |   | $                                                             | 19,551 |   |                                                          | $      | 6,105 |   |   | $ | 16 |   |   | $ | 25,672 |   |   | $ | 17,531 |   |   | $ | 3,696 |   |   | $ | 16 |   |   | $ | 21,243 |   |
| Total                  interest expense                              |   |                                                          | 7,773  |   |                                                          |   | 3,157 |   |   |   | 525 |   |   |   | 11,455 |   |   |   | 5,906 |   |   |   | 1,603 |   |   |   | 525 |   |   |   | 8,034 |   |
| Net                  interest income                                 |   |                                                          | 11,778 |   |                                                          |   | 2,948 |   |   |   | (509 | ) |   |   | 14,217 |   |   |   | 11,625 |   |   |   | 2,093 |   |   |   | (509 | ) |   |   | 13,209 |   |
| Provision                  for loan losses                           |   |                                                          | 19     |   |                                                          |   | 449 |   |   |   | - |   |   |   | 468 |   |   |   | 131 |   |   |   | 57 |   |   |   | - |   |   |   | 188 |   |
| Net                  interest income after provision for loan losses |   |                                                          | 11,759 |   |                                                          |   | 2,499 |   |   |   | (509 | ) |   |   | 13,749 |   |   |   | 11,494 |   |   |   | 2,036 |   |   |   | (509 | ) |   |   | 13,021 |   |
| Noninterest                  income                                  |   |                                                          | 2,060  |   |                                                          |   | 134 |   |   |   | (195 | ) |   |   | 1,999 |   |   |   | 1,885 |   |   |   | 69 |   |   |   | - |   |   |   | 1,954 |   |
| Noninterest                  expense                                 |   |                                                          | 8,218  |   |                                                          |   | 2,410 |   |   |   | 258 |   |   |   | 10,886 |   |   |   | 8,079 |   |   |   | 1,272 |   |   |   | 303 |   |   |   | 9,654 |   |
| Income                  before income tax provision                  |   |                                                          | 5,601  |   |                                                          |   | 223 |   |   |   | (962 | ) |   |   | 4,862 |   |   |   | 5,300 |   |   |   | 833 |   |   |   | (812 | ) |   |   | 5,321 |   |
| Provision                  for income taxes                          |   |                                                          | 1,926  |   |                                                          |   | 120 |   |   |   | (257 | ) |   |   | 1,789 |   |   |   | 1,863 |   |   |   | 333 |   |   |   | (267 | ) |   |   | 1,929 |   |
| Net                  income                                          |   | $                                                             | 3,675  |   |                                                          | $      | 103 |   |   | $ | (705 | ) |   | $ | 3,073 |   |   | $ | 3,437 |   |   | $ | 500 |   |   | $ | (545 | ) |   | $ | 3,392 |   |

----

**METROCORP      BANCSHARES, INC.**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

|                                                                 |   | **For                  the six months ended June 30, 2007** |   |   | **For                  the six months ended June 30, 2006** |   |
|----------------------------------------------------------------------|--------|-------------------------------------------------------------|--------|--------|-------------------------------------------------------------|--------|
|                                                                 |   | **MetroBank**                                               |   |   | **Metro****United**                                         |   |   | **Other** |   |   | **Consolidated****Company** |   |   | **MetroBank** |   |   | **Metro****United** |   |   | **Other** |   |   | **Consolidated****Company** |   |
|                                                                 |   | **(In                  thousands)**                         |   |
| Total                  interest income                               |   | $                                                           | 38,140 |   |                                                        | $      | 11,104 |   |   | $ | 34 |   |   | $ | 49,278 |   |   | $ | 33,715 |   |   | $ | 7,034 |   |   | $ | 33 |   |   | $ | 40,782 |   |
| Total                  interest expense                              |   |                                                        | 14,652 |   |                                                        |   | 5,727 |   |   |   | 1,046 |   |   |   | 21,425 |   |   |   | 10,665 |   |   |   | 3,110 |   |   |   | 1,045 |   |   |   | 14,820 |   |
| Net                  interest income                                 |   |                                                        | 23,488 |   |                                                        |   | 5,377 |   |   |   | (1,012 | ) |   |   | 27,853 |   |   |   | 23,050 |   |   |   | 3,924 |   |   |   | (1,012 | ) |   |   | 25,962 |   |
| Provision                  for loan losses                           |   |                                                        | 19     |   |                                                        |   | 586 |   |   |   | - |   |   |   | 605 |   |   |   | 336 |   |   |   | 110 |   |   |   | - |   |   |   | 446 |   |
| Net                  interest income after provision for loan losses |   |                                                        | 23,469 |   |                                                        |   | 4,791 |   |   |   | (1,012 | ) |   |   | 27,248 |   |   |   | 22,714 |   |   |   | 3,814 |   |   |   | (1,012 | ) |   |   | 25,516 |   |
| Noninterest                  income                                  |   |                                                        | 3,683  |   |                                                        |   | 210 |   |   |   | (228 | ) |   |   | 3,665 |   |   |   | 3,719 |   |   |   | 146 |   |   |   | - |   |   |   | 3,865 |   |
| Noninterest                  expense                                 |   |                                                        | 16,074 |   |                                                        |   | 4,502 |   |   |   | 535 |   |   |   | 21,111 |   |   |   | 16,069 |   |   |   | 2,387 |   |   |   | 709 |   |   |   | 19,165 |   |
| Income                  before income tax provision                  |   |                                                        | 11,078 |   |                                                        |   | 499 |   |   |   | (1,775 | ) |   |   | 9,802 |   |   |   | 10,364 |   |   |   | 1,573 |   |   |   | (1,721 | ) |   |   | 10,216 |   |
| Provision                  for income taxes                          |   |                                                        | 3,898  |   |                                                        |   | 245 |   |   |   | (504 | ) |   |   | 3,639 |   |   |   | 3,594 |   |   |   | 579 |   |   |   | (580 | ) |   |   | 3,593 |   |
| Net                  income                                          |   | $                                                           | 7,180  |   |                                                        | $      | 254 |   |   | $ | (1,271 | ) |   | $ | 6,163 |   |   | $ | 6,770 |   |   | $ | 994 |   |   | $ | (1,141 | ) |   | $ | 6,623 |   |

|                          |   | **As                  of June 30, 2007** |      |   | **As                  of June 30, 2006** |   |
|-------------------------------|--------|------------------------------------------|-----------|--------|------------------------------------------|--------|
|                          |   | **MetroBank**                            |      |   | **Metro****United**                      |   |   | **Other** |   |   | **Consolidated****Company** |   |   | **MetroBank** |   |   | **Metro****United** |   |   | **Other** |   |   | **Consolidated****Company** |   |
|                          |   | **(In                  thousands)**      |      |
| Net                  loans    |   | $                                        | 779,941   |   |                                     | $      | 287,673 |   |   | $ | - |   |   | $ | 1,067,614 |   |   | $ | 665,538 |   |   | $ | 147,477 |   |   | $ | - |   |   | $ | 813,015 |   |
| Total                  assets |   |                                     | 1,047,647 |   |                                     |   | 335,561 |   |   |   | 1,320 |   |   |   | 1,384,528 |   |   |   | 978,472 |   |   |   | 208,074 |   |   |   | 1,199 |   |   |   | 1,187,745 |   |
| Deposits                      |   |                                     | 939,625   |   |                                     |   | 272,071 |   |   |   | (7,026 | ) |   |   | 1,204,670 |   |   |   | 848,520 |   |   |   | 165,826 |   |   |   | (2,519 | ) |   |   | 1,011,827 |   |

**9.      **
**NEW ACCOUNTING PRONOUNCEMENTS**

----

| **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 credit 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. |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Overview**

**Results      of Operations**

*Net      Interest Income and Net Interest Margin.*

----

*Total      Interest Income.*

*Interest      Income from Loans.*

*Interest      Income from Investments.*

*Total      Interest Expense.*

*Interest      Expense on Deposits.*

----

*Interest      Expense on Junior Subordinated Debentures.*

*Interest      Expense on Other Borrowings.*

----

|                                                                             |   | **For                  The Three Months Ended June 30,** |      |
|----------------------------------------------------------------------------------|--------|----------------------------------------------------------|-----------|
|                                                                             |   | **2007**                                                 |      |   | **2006** |   |
|                                                                             |   | **Average****Outstanding****Balance**                    |      |   | **Interest****Earned/****Paid** |   |   | **Average****Yield/****Rate(1)** |   |   | **Average****Outstanding****Balance** |   |   | **Interest****Earned/****Paid** |   |   | **Average****Yield/****Rate(1)** |   |
|                                                                             |   | **(Dollars                  in thousands)**              |      |
|                                                                             |   |                                                     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Assets**                                                                       |   |                                                     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-earning                  assets:                                        |   |                                                     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  loans                                                     |   | $                                                        | 1,031,921 |   |   | $ | 22,908 |   |   |   | 8.90 | % |   | $ | 803,132 |   |   | $ | 17,839 |   |   |   | 8.91 | % |
| Taxable                  securities                                              |   |                                                     | 164,353   |   |   |   | 1,768 |   |   |   | 4.31 |   |   |   | 199,122 |   |   |   | 2,130 |   |   |   | 4.29 |   |
| Tax-exempt                  securities                                           |   |                                                     | 6,205     |   |   |   | 76 |   |   |   | 4.91 |   |   |   | 15,295 |   |   |   | 187 |   |   |   | 4.90 |   |
| Other                  investments                                               |   |                                                     | 4,856     |   |   |   | 70 |   |   |   | 5.78 |   |   |   | 4,156 |   |   |   | 66 |   |   |   | 6.37 |   |
| Federal                  funds sold and other short-term investments             |   |                                                     | 65,774    |   |   |   | 850 |   |   |   | 5.18 |   |   |   | 84,154 |   |   |   | 1,021 |   |   |   | 4.87 |   |
| Total                  interest-earning assets                                   |   |                                                     | 1,273,109 |   |   |   | 25,672 |   |   |   | 8.09 |   |   |   | 1,105,859 |   |   |   | 21,243 |   |   |   | 7.70 |   |
| Allowance                  for loan losses                                       |   |                                                     | (12,490   | ) |   |   |   |   |   |   |   |   |   |   | (13,910 | ) |   |   |   |   |   |   |   |   |
| Total                  interest-earning assets, net of allowance for loan losses |   |                                                     | 1,260,619 |   |   |   |   |   |   |   |   |   |   |   | 1,091,949 |   |   |   |   |   |   |   |   |   |
| Noninterest-earning                  assets                                      |   |                                                     | 89,891    |   |   |   |   |   |   |   |   |   |   |   | 87,442 |   |   |   |   |   |   |   |   |   |
| Total                  assets                                                    |   | $                                                        | 1,350,510 |   |   |   |   |   |   |   |   |   |   | $ | 1,179,391 |   |   |   |   |   |   |   |   |   |
|                                                                             |   |                                                     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Liabilities                  and shareholders' equity**                        |   |                                                     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                  liabilities:                                   |   |                                                     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                  demand deposits                                |   | $                                                        | 64,065    |   |   |   | 187 |   |   |   | 1.17 | % |   | $ | 74,283 |   |   |   | 222 |   |   |   | 1.20 | % |
| Savings                  and money market accounts                               |   |                                                     | 237,231   |   |   |   | 2,316 |   |   |   | 3.92 |   |   |   | 169,210 |   |   |   | 1,170 |   |   |   | 2.77 |   |
| Time                  deposits                                                   |   |                                                     | 659,576   |   |   |   | 8,162 |   |   |   | 4.96 |   |   |   | 573,549 |   |   |   | 5,801 |   |   |   | 4.06 |   |
| Junior                  subordinated debentures                                  |   |                                                     | 36,083    |   |   |   | 525 |   |   |   | 5.76 |   |   |   | 36,083 |   |   |   | 525 |   |   |   | 5.76 |   |
| Other                  borrowings                                                |   |                                                     | 21,748    |   |   |   | 265 |   |   |   | 4.89 |   |   |   | 25,746 |   |   |   | 316 |   |   |   | 4.92 |   |
| Total                  interest-bearing liabilities                              |   |                                                     | 1,018,703 |   |   |   | 11,455 |   |   |   | 4.51 |   |   |   | 878,871 |   |   |   | 8,034 |   |   |   | 3.67 |   |
| Noninterest-bearing                  liabilities:                                |   |                                                     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest-bearing                  demand deposits                             |   |                                                     | 203,075   |   |   |   |   |   |   |   |   |   |   |   | 188,646 |   |   |   |   |   |   |   |   |   |
| Other                  liabilities                                               |   |                                                     | 17,057    |   |   |   |   |   |   |   |   |   |   |   | 15,079 |   |   |   |   |   |   |   |   |   |
| Total                  liabilities                                               |   |                                                     | 1,238,835 |   |   |   |   |   |   |   |   |   |   |   | 1,082,596 |   |   |   |   |   |   |   |   |   |
|                                                                             |   |                                                     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shareholders'                  equity                                            |   |                                                     | 111,675   |   |   |   |   |   |   |   |   |   |   |   | 96,795 |   |   |   |   |   |   |   |   |   |
| Total                  liabilities and shareholders' equity                      |   | $                                                        | 1,350,510 |   |   |   |   |   |   |   |   |   |   | $ | 1,179,391 |   |   |   |   |   |   |   |   |   |
|                                                                             |   |                                                     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  interest income                                             |   |                                                     |      |   |   | $ | 14,217 |   |   |   |   |   |   |   |   |   |   | $ | 13,209 |   |   |   |   |   |
| Net                  interest spread                                             |   |                                                     |      |   |   |   |   |   |   |   | 3.58 | % |   |   |   |   |   |   |   |   |   |   | 4.04 | % |
| Net                  interest margin                                             |   |                                                     |      |   |   |   |   |   |   |   | 4.48 | % |   |   |   |   |   |   |   |   |   |   | 4.79 | % |
|                                                                             |   |                                                     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| (1) | Annualized. |
|-----|-------------|

----

|                                                                             |   | **For                  The Six Months Ended June 30,** |      |
|----------------------------------------------------------------------------------|--------|--------------------------------------------------------|-----------|
|                                                                             |   | **2007**                                               |      |   | **2006** |   |
|                                                                             |   | **Average****Outstanding****Balance**                  |      |   | **Interest****Earned/****Paid** |   |   | **Average****Yield/****Rate(1)** |   |   | **Average****Outstanding****Balance** |   |   | **Interest****Earned/****Paid** |   |   | **Average****Yield/****Rate(1)** |   |
|                                                                             |   | **(Dollars                  in thousands)**            |      |
|                                                                             |   |                                                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Assets**                                                                       |   |                                                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-earning                  assets:                                        |   |                                                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  loans                                                     |   | $                                                      | 983,146   |   |   | $ | 43,529 |   |   |   | 8.93 | % |   | $ | 788,106 |   |   | $ | 34,270 |   |   |   | 8.77 | % |
| Taxable                  securities                                              |   |                                                   | 167,639   |   |   |   | 3,632 |   |   |   | 4.37 |   |   |   | 204,592 |   |   |   | 4,339 |   |   |   | 4.28 |   |
| Tax-exempt                  securities                                           |   |                                                   | 6,548     |   |   |   | 161 |   |   |   | 4.96 |   |   |   | 15,986 |   |   |   | 393 |   |   |   | 4.96 |   |
| Other                  investments                                               |   |                                                   | 4,897     |   |   |   | 138 |   |   |   | 5.68 |   |   |   | 4,251 |   |   |   | 121 |   |   |   | 5.74 |   |
| Federal                  funds sold and other short-term investments             |   |                                                   | 70,598    |   |   |   | 1,818 |   |   |   | 5.19 |   |   |   | 72,348 |   |   |   | 1,659 |   |   |   | 4.62 |   |
| Total                  interest-earning assets                                   |   |                                                   | 1,232,828 |   |   |   | 49,278 |   |   |   | 8.06 |   |   |   | 1,085,283 |   |   |   | 40,782 |   |   |   | 7.58 |   |
| Allowance                  for loan losses                                       |   |                                                   | (12,068   | ) |   |   |   |   |   |   |   |   |   |   | (13,861 | ) |   |   |   |   |   |   |   |   |
| Total                  interest-earning assets, net of allowance for loan losses |   |                                                   | 1,220,760 |   |   |   |   |   |   |   |   |   |   |   | 1,071,422 |   |   |   |   |   |   |   |   |   |
| Noninterest-earning                  assets                                      |   |                                                   | 85,514    |   |   |   |   |   |   |   |   |   |   |   | 84,631 |   |   |   |   |   |   |   |   |   |
| Total                  assets                                                    |   | $                                                      | 1,306,274 |   |   |   |   |   |   |   |   |   |   | $ | 1,156,053 |   |   |   |   |   |   |   |   |   |
|                                                                             |   |                                                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Liabilities                  and shareholders' equity**                        |   |                                                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                  liabilities:                                   |   |                                                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                  demand deposits                                |   | $                                                      | 66,191    |   |   |   | 392 |   |   |   | 1.19 | % |   | $ | 77,582 |   |   |   | 391 |   |   |   | 1.02 | % |
| Savings                  and money market accounts                               |   |                                                   | 204,557   |   |   |   | 3,636 |   |   |   | 3.58 |   |   |   | 156,442 |   |   |   | 1,917 |   |   |   | 2.47 |   |
| Time                  deposits                                                   |   |                                                   | 645,923   |   |   |   | 15,763 |   |   |   | 4.92 |   |   |   | 561,360 |   |   |   | 10,828 |   |   |   | 3.89 |   |
| Junior                  subordinated debentures                                  |   |                                                   | 36,083    |   |   |   | 1,045 |   |   |   | 5.76 |   |   |   | 36,083 |   |   |   | 1,045 |   |   |   | 5.76 |   |
| Other                  borrowings                                                |   |                                                   | 24,208    |   |   |   | 589 |   |   |   | 4.91 |   |   |   | 26,200 |   |   |   | 639 |   |   |   | 4.92 |   |
| Total                  interest-bearing liabilities                              |   | $                                                      | 976,962   |   |   |   | 21,425 |   |   |   | 4.42 |   |   | $ | 857,667 |   |   |   | 14,820 |   |   |   | 3.48 |   |
| Noninterest-bearing                  liabilities:                                |   |                                                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest-bearing                  demand deposits                             |   |                                                   | 202,668   |   |   |   |   |   |   |   |   |   |   |   | 188,706 |   |   |   |   |   |   |   |   |   |
| Other                  liabilities                                               |   |                                                   | 16,725    |   |   |   |   |   |   |   |   |   |   |   | 13,968 |   |   |   |   |   |   |   |   |   |
| Total                  liabilities                                               |   |                                                   | 1,196,355 |   |   |   |   |   |   |   |   |   |   |   | 1,060,341 |   |   |   |   |   |   |   |   |   |
|                                                                             |   |                                                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shareholders'                  equity                                            |   |                                                   | 109,919   |   |   |   |   |   |   |   |   |   |   |   | 95,712 |   |   |   |   |   |   |   |   |   |
| Total                  liabilities and shareholders' equity                      |   | $                                                      | 1,306,274 |   |   |   |   |   |   |   |   |   |   | $ | 1,156,053 |   |   |   |   |   |   |   |   |   |
|                                                                             |   |                                                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  interest income                                             |   |                                                   |      |   |   | $ | 27,853 |   |   |   |   |   |   |   |   |   |   | $ | 25,962 |   |   |   |   |   |
| Net                  interest spread                                             |   |                                                   |      |   |   |   |   |   |   |   | 3.64 | % |   |   |   |   |   |   |   |   |   |   | 4.10 | % |
| Net                  interest margin                                             |   |                                                   |      |   |   |   |   |   |   |   | 4.56 | % |   |   |   |   |   |   |   |   |   |   | 4.82 | % |
|                                                                             |   |                                                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| (1) | Annualized. |
|-----|-------------|

----

|                                                                 |   | **Three                  Months Ended June 30,**                    |   |   | **Six                  Months Ended June 30,** |   |
|----------------------------------------------------------------------|--------|---------------------------------------------------------------------|--------|--------|------------------------------------------------|--------|
|                                                                 |   | **2007                  vs 2006**                                   |   |   | **2007                  vs 2006**              |   |
|                                                                 |   | **Increase                  (Decrease)****Due                  to** |   |   |                                           |   |   | **Increase                  (Decrease)****Due                  to** |   |   |   |   |
|                                                                 |   | **Volume**                                                          |   |   | **Rate**                                       |   |   | **Total** |   |   | **Volume** |   |   | **Rate** |   |   | **Total** |   |
|                                                                 |   | **(Dollars                  in thousands)**                         |   |
|                                                                 |   |                                                                |   |   |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Interest-earning                  assets:**                        |   |                                                                |   |   |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                                                                |   | $                                                                   | 5,082  |   |                                           | $      | (13 | ) |   | $ | 5,069 |   |   | $ | 8,481 |   |   | $ | 778 |   |   | $ | 9,259 |   |
| Taxable                  securities                                  |   |                                                                | (372   | )      |                                           |   | 10 |   |   |   | (362 | ) |   |   | (784 | ) |   |   | 77 |   |   |   | (707 | ) |
| Tax-exempt                  securities                               |   |                                                                | (111   | )      |                                           |   | - |   |   |   | (111 | ) |   |   | (232 | ) |   |   | - |   |   |   | (232 | ) |
| Other                  investments                                   |   |                                                                | 11     |   |                                           |   | (7 | ) |   |   | 4 |   |   |   | 18 |   |   |   | (1 | ) |   |   | 17 |   |
| Federal                  funds sold and other short-term investments |   |                                                                | (223   | )      |                                           |   | 52 |   |   |   | (171 | ) |   |   | (40 | ) |   |   | 199 |   |   |   | 159 |   |
| Total                  increase in interest income                   |   |                                                                | 4,387  |   |                                           |   | 42 |   |   |   | 4,429 |   |   |   | 7,443 |   |   |   | 1,053 |   |   |   | 8,496 |   |
|                                                                 |   |                                                                |   |   |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Interest-bearing                  liabilities:**                   |   |                                                                |   |   |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                  demand deposits                    |   |                                                                | (31    | )      |                                           |   | (4 | ) |   |   | (35 | ) |   |   | (57 | ) |   |   | 58 |   |   |   | 1 |   |
| Savings                  and money market accounts                   |   |                                                                | 470    |   |                                           |   | 676 |   |   |   | 1,146 |   |   |   | 590 |   |   |   | 1,129 |   |   |   | 1,719 |   |
| Time                  deposits                                       |   |                                                                | 870    |   |                                           |   | 1,491 |   |   |   | 2,361 |   |   |   | 1,631 |   |   |   | 3,304 |   |   |   | 4,935 |   |
| Other                  borrowings                                    |   |                                                                | (49    | )      |                                           |   | (2 | ) |   |   | (51 | ) |   |   | (49 | ) |   |   | (1 | ) |   |   | (50 | ) |
| Total                  increase in interest expense                  |   |                                                                | 1,260  |   |                                           |   | 2,161 |   |   |   | 3,421 |   |   |   | 2,115 |   |   |   | 4,490 |   |   |   | 6,605 |   |
|                                                                 |   |                                                                |   |   |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Increase                  (decrease) in net interest income          |   | $                                                                   | 3,127  |   |                                           | $      | (2,119 | ) |   | $ | 1,008 |   |   | $ | 5,328 |   |   | $ | (3,437 | ) |   | $ | 1,891 |   |

*Provision      for Loan Losses.*

*Noninterest      Income.*

*Noninterest      Expenses.*

----

*Income      Taxes.*

**Financial      Condition**

*Loan      Portfolio.*

|                                                            |   | **As                  of June 30, 2007**    |      |   | **As                  of December 31, 2006** |   |
|-----------------------------------------------------------------|--------|---------------------------------------------|-----------|--------|----------------------------------------------|--------|
|                                                            |   | **Amount**                                  |      |   | **Percent**                                  |   |   | **Amount** |   |   | **Percent** |   |
|                                                            |   | **(Dollars                  in thousands)** |      |
|                                                            |   |                                        |      |   |                                         |   |   |   |   |   |   |   |
| Commercial                  and industrial                      |   | $                                           | 419,834   |   |                                         |   | 38.73 | % |   | $ | 367,072 |   |   |   | 41.25 | % |
| Real                  estate mortgage                           |   |                                        |      |   |                                         |   |   |   |   |   |   |   |   |   |   |   |
| Residential                                                     |   |                                        | 7,410     |   |                                         |   | 0.69 |   |   |   | 4,847 |   |   |   | 0.55 |   |
| Commercial                                                      |   |                                        | 535,034   |   |                                         |   | 49.36 |   |   |   | 424,431 |   |   |   | 47.70 |   |
|                                                            |   |                                        | 542,444   |   |                                         |   | 50.05 |   |   |   | 429,278 |   |   |   | 48.25 |   |
| Real                  estate construction                       |   |                                        |      |   |                                         |   |   |   |   |   |   |   |   |   |   |   |
| Residential                                                     |   |                                        | 37,895    |   |                                         |   | 3.50 |   |   |   | 27,781 |   |   |   | 3.13 |   |
| Commercial                                                      |   |                                        | 76,762    |   |                                         |   | 7.08 |   |   |   | 58,311 |   |   |   | 6.55 |   |
|                                                            |   |                                        | 114,657   |   |                                         |   | 10.58 |   |   |   | 86,092 |   |   |   | 9.68 |   |
| Consumer                  and other                             |   |                                        | 6,942     |   |                                         |   | 0.64 |   |   |   | 7,332 |   |   |   | 0.82 |   |
| Gross                  loans                                    |   |                                        | 1,083,877 |   |                                         |   | 100.00 | % |   |   | 889,774 |   |   |   | 100.00 | % |
| Unearned                  discounts, interest and deferred fees |   |                                        | (3,602    | )      |                                         |   |   |   |   |   | (3,218 | ) |   |   |   |   |
| Total                  loans                                    |   |                                        | 1,080,275 |   |                                         |   |   |   |   |   | 886,556 |   |   |   |   |   |
| Allowance                  for loan losses                      |   |                                        | (12,661   | )      |                                         |   |   |   |   |   | (11,436 | ) |   |   |   |   |
| Loans,                  net                                     |   | $                                           | 1,067,614 |   |                                         |   |   |   |   | $ | 875,120 |   |   |   |   |   |

*Nonperforming      Assets.*

----

|                                                                             |   | **As                  of****June                  30, 2007** |   |   | **As                  of****December                  31, 2006** |   |
|----------------------------------------------------------------------------------|--------|--------------------------------------------------------------|--------|--------|------------------------------------------------------------------|--------|
|                                                                             |   | **(Dollars                  in thousands)**                  |   |
| Nonaccrual                  loans                                                |   | $                                                            | 5,474  |   |                                                             | $      | 9,414 |   |
| Accruing                  loans 90 days or more past due                         |   |                                                         | 411    |   |                                                             |   | 29 |   |
| Other                  real estate (“ORE”)                           |   |                                                         | 2,464  |   |                                                             |   | 2,747 |   |
| Total                  nonperforming assets                                      |   |                                                         | 8,349  |   |                                                             |   | 12,190 |   |
| Nonperforming                  loans guaranteed by the SBA, Ex-Im Bank and OCCGF |   |                                                         | (2,746 | )      |                                                             |   | (2,857 | ) |
| Net                  nonperforming assets                                        |   | $                                                            | 5,603  |   |                                                             | $      | 9,333 |   |
|                                                                             |   |                                                         |   |   |                                                             |   |   |   |
| Total                  nonperforming assets to total assets                      |   |                                                         | 0.60   | %      |                                                             |   | 0.96 | % |
| Total                  nonperforming assets to total loans and ORE               |   |                                                         | 0.77   | %      |                                                             |   | 1.37 | % |
| Net                  nonperforming assets to total assets (1)                    |   |                                                         | 0.40   | %      |                                                             |   | 0.74 | % |
| Net                  nonperforming assets to total loans and ORE (1)             |   |                                                         | 0.52   | %      |                                                             |   | 1.05 | % |
|                                                                             |   |                                                         |   |   |                                                             |   |   |   |

| (1) | Net                nonperforming assets are net of the loan portions guaranteed by the                SBA,                Ex-Im Bank and OCCGF. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                        |   | **As                  of****June                  30, 2007** |   |   | **As                  of****December                  31, 2006** |   |
|-----------------------------------------------------------------------------|--------|--------------------------------------------------------------|--------|--------|------------------------------------------------------------------|--------|
|                                                                        |   | **(In                  thousands)**                          |   |
| Impaired                  loans with no SFAS No. 114 valuation reserve |   | $                                                            | 3,775  |   |                                                             | $      | 6,715 |   |
| Impaired                  loans with a SFAS No. 114 valuation reserve  |   |                                                         | 1,699  |   |                                                             |   | 2,699 |   |
| Total                  recorded investment in impaired loans                |   | $                                                            | 5,474  |   |                                                             | $      | 9,414 |   |
|                                                                        |   |                                                         |   |   |                                                             |   |   |   |
| Valuation                  allowance related to impaired loans              |   | $                                                            | 1,250  |   |                                                             | $      | 900 |   |

----

*Allowance      for Loan Losses and Reserve for Unfunded Lending Commitments. *

----

|                                                                                                 |   | **As                  of and for the****Three                  Months Ended June 30,** |      |
|------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------|-----------|
|                                                                                                 |   | **2007**                                                                               |      |   | **2006** |   |
|                                                                                                 |   | **(Dollars                  in thousands)**                                            |      |
| Average                  total loans outstanding for the period                                      |   | $                                                                                      | 1,031,921 |   |   | $ | 803,132 |   |
| Total                  loans outstanding at end of period                                            |   | $                                                                                      | 1,080,275 |   |   | $ | 825,920 |   |
|                                                                                                 |   |                                                                                   |      |   |   |   |   |   |
| Allowance                  for loan losses at beginning of period                                    |   | $                                                                                      | 11,900    |   |   | $ | 13,729 |   |
| Provision                  for loan losses                                                           |   |                                                                                   | 468       |   |   |   | 188 |   |
| Charge-offs:                                                                                         |   |                                                                                   |      |   |   |   |   |   |
| Commercial                  and industrial                                                           |   |                                                                                   | (301      | ) |   |   | (1,107 | ) |
| Real                  estate mortgage                                                                |   |                                                                                   | -         |   |   |   | - |   |
| Real                  estate construction                                                            |   |                                                                                   | -         |   |   |   | - |   |
| Consumer                  and other                                                                  |   |                                                                                   | -         |   |   |   | (33 | ) |
| Total                  charge-offs                                                                   |   |                                                                                   | (301      | ) |   |   | (1,140 | ) |
|                                                                                                 |   |                                                                                   |      |   |   |   |   |   |
| Recoveries:                                                                                          |   |                                                                                   |      |   |   |   |   |   |
| Commercial                  and industrial                                                           |   |                                                                                   | 592       |   |   |   | 109 |   |
| Real                  estate mortgage                                                                |   |                                                                                   | -         |   |   |   | - |   |
| Real                  estate construction                                                            |   |                                                                                   | -         |   |   |   | - |   |
| Consumer                  and other                                                                  |   |                                                                                   | 2         |   |   |   | 19 |   |
| Total                  recoveries                                                                    |   |                                                                                   | 594       |   |   |   | 128 |   |
| Net                  (charge-offs)/recoveries                                                        |   |                                                                                   | 293       |   |   |   | (1,012 | ) |
| Allowance                  for loan losses at end of period                                          |   |                                                                                   | 12,661    |   |   |   | 12,905 |   |
|                                                                                                 |   |                                                                                   |      |   |   |   |   |   |
| Reserve                  for unfunded lending commitments at beginning of period                     |   |                                                                                   | 919       |   |   |   | 539 |   |
| Provision                  for unfunded lending commitments                                          |   |                                                                                   | 107       |   |   |   | 13 |   |
| Reserve                  for unfunded lending commitments at end of period                           |   |                                                                                   | 1,026     |   |   |   | 552 |   |
|                                                                                                 |   |                                                                                   |      |   |   |   |   |   |
|                                                                                                 |   |                                                                                   |      |   |   |   |   |   |
| Allowance                  for credit losses at end of period                                        |   | $                                                                                      | 13,687    |   |   | $ | 13,457 |   |
|                                                                                                 |   |                                                                                   |      |   |   |   |   |   |
| Ratio                  of net (charge-offs)/recoveries to end of period total                  loans |   |                                                                                   | 0.03      | % |   |   | (0.12 | )% |

----

|                                                                                                                                 |   | **As                  of and for the****Six                  Months Ended June 30,** |      |
|--------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------|-----------|
|                                                                                                                                 |   | **2007**                                                                             |      |   | **2006** |   |
|                                                                                                                                 |   | **(Dollars                  in thousands)**                                          |      |
| Average                  total loans outstanding for the period                                                                      |   | $                                                                                    | 983,146   |   |   | $ | 788,106 |   |
| Total                  loans outstanding at end of period                                                                            |   | $                                                                                    | 1,080,275 |   |   | $ | 825,920 |   |
|                                                                                                                                 |   |                                                                                 |      |   |   |   |   |   |
| Allowance                  for loan losses at beginning of period                                                                    |   | $                                                                                    | 11,436    |   |   | $ | 13,169 |   |
| Provision                  for loan losses                                                                                           |   |                                                                                 | 605       |   |   |   | 446 |   |
| Charge-offs:                                                                                                                         |   |                                                                                 |      |   |   |   |   |   |
| Commercial                  and industrial                                                                                           |   |                                                                                 | (520      | ) |   |   | (2,104 | ) |
| Real                  estate mortgage                                                                                                |   |                                                                                 | -         |   |   |   | (21 | ) |
| Real                  estate construction                                                                                            |   |                                                                                 | -         |   |   |   | - |   |
| Consumer                  and other                                                                                                  |   |                                                                                 | (7        | ) |   |   | (112 | ) |
| Total                  charge-offs                                                                                                   |   |                                                                                 | (527      | ) |   |   | (2,237 | ) |
|                                                                                                                                 |   |                                                                                 |      |   |   |   |   |   |
| Recoveries:                                                                                                                          |   |                                                                                 |      |   |   |   |   |   |
| Commercial                  and industrial                                                                                           |   |                                                                                 | 1,044     |   |   |   | 595 |   |
| Real                  estate mortgage                                                                                                |   |                                                                                 | 99        |   |   |   | 851 |   |
| Real                  estate construction                                                                                            |   |                                                                                 | -         |   |   |   | - |   |
| Consumer                  and other                                                                                                  |   |                                                                                 | 4         |   |   |   | 81 |   |
| Total                  recoveries                                                                                                    |   |                                                                                 | 1,147     |   |   |   | 1,527 |   |
| Net                  (charge-offs)/recoveries                                                                                        |   |                                                                                 | 620       |   |   |   | (710 | ) |
| Allowance                  for loan losses at end of period                                                                          |   |                                                                                 | 12,661    |   |   |   | 12,905 |   |
|                                                                                                                                 |   |                                                                                 |      |   |   |   |   |   |
| Reserve                  for unfunded lending commitments at beginning of period                                                     |   |                                                                                 | 793       |   |   |   | 546 |   |
| Provision                  for unfunded lending commitments                                                                          |   |                                                                                 | 233       |   |   |   | 6 |   |
| Reserve                  for unfunded lending commitments at end of period                                                           |   |                                                                                 | 1,026     |   |   |   | 552 |   |
|                                                                                                                                 |   |                                                                                 |      |   |   |   |   |   |
|                                                                                                                                 |   |                                                                                 |      |   |   |   |   |   |
| Allowance                  for credit losses at end of period                                                                        |   | $                                                                                    | 13,687    |   |   | $ | 13,457 |   |
|                                                                                                                                 |   |                                                                                 |      |   |   |   |   |   |
| Ratio                  of allowance for loan losses to end of period total loans                                                     |   |                                                                                 | 1.17      | % |   |   | 1.56 | % |
| Ratio                  of net (charge-offs)/recoveries to end of period total                  loans                                 |   |                                                                                 | 0.06      | % |   |   | (0.09 | )% |
| Ratio                  of allowance for loan losses to end of period total nonperforming                  loans                  (1) |   |                                                                                 | 215.14    | % |   |   | 137.33 | % |
| Ratio                  of allowance for loan losses to end of period net nonperforming                  loans                  (2)   |   |                                                                                 | 403.35    | % |   |   | 176.35 | % |
|                                                                                                                                 |   |                                                                                 |      |   |   |   |   |   |

| (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 portions guaranteed by the SBA, Ex-Im Bank and                OCCGF. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Securities.*

*Bank      Owned Life Insurance (“BOLI”).*

----

*Deposits*

*Junior      Subordinated Debentures.  *

*Other      Borrowings.*

|                                                         |   | **As                  of and for the****Six                  Months Ended****June                  30, 2007** |   |   | **As                  of and for the****Year                  Ended****December                  31, 2006** |   |
|--------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------|--------|--------|-------------------------------------------------------------------------------------------------------------|--------|
|                                                         |   | **(Dollars                  in thousands)**                                                                   |   |
| FHLB                  notes:                                 |   |                                                                                                          |   |   |                                                                                                        |   |
| at                  end of period                            |   | $                                                                                                             | 10,000 |   |                                                                                                        | $      | 25,000 |   |
| average                  during the period                   |   |                                                                                                          | 23,404 |   |                                                                                                        |   | 25,247 |   |
| maximum                  month-end balance during the period |   |                                                                                                          | 25,000 |   |                                                                                                        |   | 25,000 |   |
| Interest                  rate at end of period              |   |                                                                                                          | 5.48   | %      |                                                                                                        |   | 4.99 | % |
| Interest                  rate during the period             |   |                                                                                                          | 5.08   | %      |                                                                                                        |   | 5.05 | % |
| Federal                  Reserve TT&L:                   |   |                                                                                                          |   |   |                                                                                                        |   |   |   |
| at                  end of period                            |   | $                                                                                                             | 739    |   |                                                                                                        | $      | 1,316 |   |
| average                  during the period                   |   |                                                                                                          | 804    |   |                                                                                                        |   | 702 |   |
| maximum                  month-end balance during the period |   |                                                                                                          | 1,062  |   |                                                                                                        |   | 1,316 |   |

*Liquidity.*

*Capital      Resources.*

----

|                                             |   | **Minimum****Required                  For****Capital                  Adequacy****Purposes** |   |                 | **To                  Be Categorized as****Well                  Capitalized Under****Prompt                  Corrective****Action                  Provisions** |   |   | **Actual                  Ratio At****June                  30, 2007** |   |
|--------------------------------------------------|--------|-----------------------------------------------------------------------------------------------|--------|----------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|------------------------------------------------------------------------|--------|
| **The                  Company**                 |   |                                                                                          |   |                 |                                                                                                                                                             |   |   |                                                                   |   |
| Leverage                  ratio                  |   |                                                                                          | 4.00   | %                (1) |                                                                                                                                                             | N/A    |   |                                                                   |   | 9.16 | % |
| Tier                  1 risk-based capital ratio |   |                                                                                          | 4.00   |                 |                                                                                                                                                             | N/A    |   |                                                                   |   | 9.63 |   |
| Risk-based                  capital ratio        |   |                                                                                          | 8.00   |                 |                                                                                                                                                             | N/A    |   |                                                                   |   | 11.16 |   |
| **MetroBank**                                    |   |                                                                                          |   |                 |                                                                                                                                                             |   |   |                                                                   |   |   |   |
| Leverage                  ratio                  |   |                                                                                          | 4.00   | %                (2) |                                                                                                                                                             |   | 5.00   | %                                                                      |   |   | 8.72 | % |
| Tier                  1 risk-based capital ratio |   |                                                                                          | 4.00   |                 |                                                                                                                                                             |   | 6.00   |                                                                   |   |   | 9.47 |   |
| Risk-based                  capital ratio        |   |                                                                                          | 8.00   |                 |                                                                                                                                                             |   | 10.00  |                                                                   |   |   | 10.57 |   |
| **Metro                  United Bank**           |   |                                                                                          |   |                 |                                                                                                                                                             |   |   |                                                                   |   |   |   |   |
| Leverage                  ratio                  |   |                                                                                          | 4.00   | %                (3) |                                                                                                                                                             |   | 5.00   | %                                                                      |   |   | 9.85 | % |
| Tier                  1 risk-based capital ratio |   |                                                                                          | 4.00   |                 |                                                                                                                                                             |   | 6.00   |                                                                   |   |   | 9.34 |   |
| Risk-based                  capital ratio        |   |                                                                                          | 8.00   |                 |                                                                                                                                                             |   | 10.00  |                                                                   |   |   | 10.38 |   |
|                                             |   |                                                                                          |   |                 |                                                                                                                                                             |   |   |                                                                   |   |   |   |   |

| (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 Estimates**

** **

----

| **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.*

----

**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**   |   | **Withheld** |
|----------------------------------|--------|-----------|--------|--------------|
| **Class                  III**   |   |      |   |         |
| Tiong                  Loi Ang   |   | 5,645,792 |   | 2,377,275    |
| Tommy                  F. Chen   |   | 7,775,888 |   | 247,179      |
| Charles                  L. Roff |   | 7,780,590 |   | 242,477      |
| Joe                  Ting        |   | 7,775,888 |   | 247,179      |

| **Item                5.** | ***Other                Information*** |
|----------------------------|----------------------------------------|

----

| **Item                6.** | ***Exhibits*** |
|----------------------------|----------------|

| **Exhibit****Number** |   | **Identification                  of Exhibit**                                                                                                                                                                                                                                                                                         |
|-----------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1                   | -      | 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 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.                                                                                                                       |
|             |   |

----

**SIGNATURES**

|                                  | METROCORP                  BANCSHARES, INC. |                                                                                                                        |
|---------------------------------------|---------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------|
|                                  |                                        |                                                                                                                        |   |
|                                  | By:                                         | /s/                  George M. Lee                                                                                     |   |
| Date:                  August 8, 2007 |                                        | George                  M. Lee                                                                                         |   |
|                                  |                                        | Chief                  Executive Officer (principal executive officer)                                                 |   |
|                                  |                                        |                                                                                                                        |   |
|                                  |                                        |                                                                                                                        |   |
| Date:                  August 8, 2007 | By:                               | /s/                  David C. Choi                                                                                     |   |
|                                  |                                        | David                  C. Choi                                                                                         |   |
|                                  |                                        | Chief                  Financial Officer (principal financial officer/ principal accounting                  officer)  |   |

----

**EXHIBIT      INDEX**

| **Exhibit****Number** |   | **Identification                  of Exhibit**                                                                                                                                                                                                                                                                                         |
|-----------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1                   | -      | 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 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.                                                                                                                       |
|             |   |

----