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**UNITED        STATES**

**SECURITIES        AND EXCHANGE COMMISSION**

**Washington,        D.C. 20549**

**FORM        10-Q**

** (Mark        One)**

|   | T | **QUARTERLY                  REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE                  ACT OF                  1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 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**

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**PART        I**

**FINANCIAL        INFORMATION**

| ** Item 1.** | ***Financial                  Statements.*** |
|------------------------|----------------------------------------------|

**METROCORP          BANCSHARES, INC.**

**CONDENSED          CONSOLIDATED BALANCE SHEETS**

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

**(Unaudited)**

|                                                                                                                                                                                                                                                                                                   |   | **September 30,** |      |   | **December 31,** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|-----------|--------|-----------------------|--------|
|                                                                                                                                                                                                                                                                                                   |   | **2007**               |      |   | **2006**              |   |
| **ASSETS**                                                                                                                                                                                                                                                                                             |   |                   |      |   |                  |   |
|                                                                                                                                                                                                                                                                                                   |   |                   |      |   |                  |   |
| Cash                    and due from banks                                                                                                                                                                                                                                                             |   | $                      | 23,463    |   |                  | $      | 25,709 |   |
| Federal                    funds sold and other short-term investments                                                                                                                                                                                                                                 |   |                   | 23,520    |   |                  |   | 125,649 |   |
| Total                    cash and cash equivalents                                                                                                                                                                                                                                                     |   |                   | 46,983    |   |                  |   | 151,358 |   |
| Securities                    available-for-sale, at fair value                                                                                                                                                                                                                                        |   |                   | 158,475   |   |                  |   | 181,544 |   |
| Other                    investments                                                                                                                                                                                                                                                                   |   |                   | 5,558     |   |                  |   | 4,931 |   |
| Loans,                    net of allowance for loan losses of $12,865 and $11,436,                    respectively                                                                                                                                                                                     |   |                   | 1,120,722 |   |                  |   | 875,120 |   |
| Accrued                    interest receivable                                                                                                                                                                                                                                                         |   |                   | 6,616     |   |                  |   | 5,841 |   |
| Premises                    and equipment, net                                                                                                                                                                                                                                                         |   |                   | 9,115     |   |                  |   | 7,585 |   |
| Goodwill                                                                                                                                                                                                                                                                                               |   |                   | 21,827    |   |                  |   | 21,827 |   |
| Core                    deposit intangibles, net                                                                                                                                                                                                                                                       |   |                   | 843       |   |                  |   | 1,103 |   |
| Customers'                    liability on acceptances                                                                                                                                                                                                                                                 |   |                   | 6,211     |   |                  |   | 7,693 |   |
| Foreclosed                    assets, net                                                                                                                                                                                                                                                              |   |                   | 2,266     |   |                  |   | 2,747 |   |
| Cash                    value of bank owned life insurance (BOLI)                                                                                                                                                                                                                                      |   |                   | 25,407    |   |                  |   | – |   |
| Other                    assets                                                                                                                                                                                                                                                                        |   |                   | 9,744     |   |                  |   | 8,685 |   |
| Total                    assets                                                                                                                                                                                                                                                                        |   | $                      | 1,413,767 |   |                  | $      | 1,268,434 |   |
|                                                                                                                                                                                                                                                                                                   |   |                   |      |   |                  |   |   |   |
| **LIABILITIES                    AND SHAREHOLDERS' EQUITY**                                                                                                                                                                                                                                            |   |                   |      |   |                  |   |   |   |
| Deposits:                                                                                                                                                                                                                                                                                              |   |                   |      |   |                  |   |   |   |
| Noninterest-bearing                                                                                                                                                                                                                                                                                    |   | $                      | 196,581   |   |                  | $      | 208,750 |   |
| Interest-bearing                                                                                                                                                                                                                                                                                       |   |                   | 1,012,987 |   |                  |   | 872,914 |   |
| Total                    deposits                                                                                                                                                                                                                                                                      |   |                   | 1,209,568 |   |                  |   | 1,081,664 |   |
| Junior                    subordinated debentures                                                                                                                                                                                                                                                      |   |                   | 36,083    |   |                  |   | 36,083 |   |
| Other                    borrowings                                                                                                                                                                                                                                                                    |   |                   | 36,029    |   |                  |   | 26,316 |   |
| Accrued                    interest payable                                                                                                                                                                                                                                                            |   |                   | 1,876     |   |                  |   | 1,822 |   |
| Acceptances                    outstanding                                                                                                                                                                                                                                                             |   |                   | 6,211     |   |                  |   | 7,693 |   |
| Other                    liabilities                                                                                                                                                                                                                                                                   |   |                   | 8,549     |   |                  |   | 8,908 |   |
| Total                    liabilities                                                                                                                                                                                                                                                                   |   |                   | 1,298,316 |   |                  |   | 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 10,950,156 shares and 10,946,135 shares outstanding                    at                    September 30, 2007 and December 31, 2006, respectively |   |                   | 10,995    |   |                  |   | 10,995 |   |
| Additional                    paid-in capital                                                                                                                                                                                                                                                          |   |                   | 27,063    |   |                  |   | 25,974 |   |
| Retained                    earnings                                                                                                                                                                                                                                                                   |   |                   | 79,839    |   |                  |   | 71,783 |   |
| Accumulated                    other comprehensive loss                                                                                                                                                                                                                                                |   |                   | (1,773    | )      |                  |   | (2,421 | ) |
| Treasury                    stock, at cost                                                                                                                                                                                                                                                             |   |                   | (673      | )      |                  |   | (383 | ) |
| Total                    shareholders' equity                                                                                                                                                                                                                                                          |   |                   | 115,451   |   |                  |   | 105,948 |   |
| Total                    liabilities and shareholders' equity                                                                                                                                                                                                                                          |   | $                      | 1,413,767 |   |                  | $      | 1,268,434 |   |

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**METROCORP          BANCSHARES, INC.**

**CONDENSED          CONSOLIDATED STATEMENTS OF INCOME**

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

**(Unaudited)**

|                                                                   |   | **For                    the Three Months**     |   |   | **For                    the Nine Months**      |   |
|------------------------------------------------------------------------|--------|-------------------------------------------------|--------|--------|-------------------------------------------------|--------|
|                                                                   |   | **Ended                    September 30,** |   |   | **Ended                    September 30,** |   |
|                                                                   |   | **2007**                                        |   |   | **2006**                                        |   |   | **2007** |   |   | **2006** |   |
| Interest                    income:                                    |   |                                            |   |   |                                            |   |   |   |   |   |   |   |
| Loans                                                                  |   | $                                               | 24,583 |   |                                            | $      | 19,112 |   |   | $ | 68,112 |   |   | $ | 53,382 |   |
| Securities:                                                            |   |                                            |   |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                                                |   |                                            | 1,708  |   |                                            |   | 2,047 |   |   |   | 5,340 |   |   |   | 6,386 |   |
| Tax-exempt                                                             |   |                                            | 73     |   |                                            |   | 179 |   |   |   | 234 |   |   |   | 572 |   |
| Other                    investments                                   |   |                                            | 70     |   |                                            |   | 66 |   |   |   | 208 |   |   |   | 187 |   |
| Federal                    funds sold and other short-term investments |   |                                            | 252    |   |                                            |   | 1,171 |   |   |   | 2,070 |   |   |   | 2,830 |   |
| Total                    interest income                               |   |                                            | 26,686 |   |                                            |   | 22,575 |   |   |   | 75,964 |   |   |   | 63,357 |   |
|                                                                   |   |                                            |   |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| Interest                    expense:                                   |   |                                            |   |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| Time                    deposits                                       |   |                                            | 8,335  |   |                                            |   | 6,665 |   |   |   | 24,098 |   |   |   | 17,493 |   |
| Demand                    and savings deposits                         |   |                                            | 3,054  |   |                                            |   | 1,442 |   |   |   | 7,082 |   |   |   | 3,750 |   |
| Junior                    subordinated debentures                      |   |                                            | 474    |   |                                            |   | 532 |   |   |   | 1,519 |   |   |   | 1,577 |   |
| Other                    borrowings                                    |   |                                            | 164    |   |                                            |   | 318 |   |   |   | 753 |   |   |   | 957 |   |
| Total                    interest expense                              |   |                                            | 12,027 |   |                                            |   | 8,957 |   |   |   | 33,452 |   |   |   | 23,777 |   |
|                                                                   |   |                                            |   |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| Net                    interest income                                 |   |                                            | 14,659 |   |                                            |   | 13,618 |   |   |   | 42,512 |   |   |   | 39,580 |   |
| Provision                    for loan losses                           |   |                                            | 1,168  |   |                                            |   | 114 |   |   |   | 1,773 |   |   |   | 560 |   |
| Net                    interest income after provision for loan losses |   |                                            | 13,491 |   |                                            |   | 13,504 |   |   |   | 40,739 |   |   |   | 39,020 |   |
|                                                                   |   |                                            |   |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest                    income:                                 |   |                                            |   |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| Service                    fees                                        |   |                                            | 1,379  |   |                                            |   | 1,397 |   |   |   | 3,857 |   |   |   | 4,303 |   |
| Loan-related                    fees                                   |   |                                            | 183    |   |                                            |   | 187 |   |   |   | 511 |   |   |   | 622 |   |
| Letters                    of credit commissions and fees              |   |                                            | 230    |   |                                            |   | 219 |   |   |   | 637 |   |   |   | 597 |   |
| Gain                    on sale of loans                               |   |                                            | 21     |   |                                            |   | – |   |   |   | 272 |   |   |   | – |   |
| Increase                    in cash value of bank owned life insurance |   |                                            | 330    |   |                                            |   | – |   |   |   | 407 |   |   |   | – |   |
| Other                    noninterest income                            |   |                                            | 55     |   |                                            |   | 91 |   |   |   | 179 |   |   |   | 237 |   |
| Total                    noninterest income                            |   |                                            | 2,198  |   |                                            |   | 1,894 |   |   |   | 5,863 |   |   |   | 5,759 |   |
|                                                                   |   |                                            |   |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest                    expenses:                               |   |                                            |   |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| Salaries                    and employee benefits                      |   |                                            | 6,594  |   |                                            |   | 5,455 |   |   |   | 18,591 |   |   |   | 16,077 |   |
| Occupancy                    and equipment                             |   |                                            | 2,090  |   |                                            |   | 1,907 |   |   |   | 6,102 |   |   |   | 5,109 |   |
| Foreclosed                    assets, net                              |   |                                            | 39     |   |                                            |   | 52 |   |   |   | (51 | ) |   |   | 213 |   |
| Other                    noninterest expense                           |   |                                            | 2,007  |   |                                            |   | 2,406 |   |   |   | 7,199 |   |   |   | 7,586 |   |
| Total                    noninterest expenses                          |   |                                            | 10,730 |   |                                            |   | 9,820 |   |   |   | 31,841 |   |   |   | 28,985 |   |
|                                                                   |   |                                            |   |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| Income                    before provision for income taxes            |   |                                            | 4,959  |   |                                            |   | 5,578 |   |   |   | 14,761 |   |   |   | 15,794 |   |
| Provision                    for income taxes                          |   |                                            | 1,751  |   |                                            |   | 2,032 |   |   |   | 5,390 |   |   |   | 5,625 |   |
| Net                    income                                          |   | $                                               | 3,208  |   |                                            | $      | 3,546 |   |   | $ | 9,371 |   |   | $ | 10,169 |   |
|                                                                   |   |                                            |   |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| Earnings                    per common share:                          |   |                                            |   |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                  |   | $                                               | 0.29   |   |                                            | $      | 0.32 |   |   | $ | 0.86 |   |   | $ | 0.93 |   |
| Diluted                                                                |   | $                                               | 0.29   |   |                                            | $      | 0.32 |   |   | $ | 0.84 |   |   | $ | 0.92 |   |
| Weighted                    average shares outstanding:                |   |                                            |   |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                  |   |                                            | 10,962 |   |                                            |   | 10,924 |   |   |   | 10,959 |   |   |   | 10,895 |   |
| Diluted                                                                |   |                                            | 11,132 |   |                                            |   | 11,153 |   |   |   | 11,161 |   |   |   | 11,097 |   |
|                                                                   |   |                                            |   |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| Dividends                    per common share                          |   | $                                               | 0.04   |   |                                            | $      | 0.04 |   |   | $ | 0.12 |   |   | $ | 0.12 |   |

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**METROCORP        BANCSHARES, INC.**

**CONDENSED        CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME**

**(In        thousands)**

**(Unaudited)**

|                                                                                                    |   | **For                    the Three Months**     |    |   | **For                    the Nine Months**      |   |
|---------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------|---------|--------|-------------------------------------------------|--------|
|                                                                                                    |   | **Ended                    September 30,** |    |   | **Ended                    September 30,** |   |
|                                                                                                    |   | **2007**                                        |    |   | **2006**                                        |   |   | **2007** |   |   | **2006** |   |
|                                                                                                    |   |                                            |    |   |                                            |   |   |   |   |   |   |   |
| Net                    income                                                                           |   | $                                               | 3,208   |   |                                            | $      | 3,546 |   |   | $ | 9,371 |   |   | $ | 10,169 |   |
|                                                                                                    |   |                                            |    |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| Other                    comprehensive income (loss), net of tax:                                       |   |                                            |    |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| Unrealized                    gain (loss) on investment securities, net:                                |   |                                            |    |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| Unrealized                    holding gain (loss) arising during the period                             |   |                                            | 884     |   |                                            |   | 1,567 |   |   |   | 648 |   |   |   | (236 | ) |
| Less:                    reclassification adjustment for gain included in net                    income |   |                                            | – |   |                                            |   | 6 |   |   |   | – |   |   |   | 8 |   |
| Other                    comprehensive income (loss)                                                    |   |                                            | 884     |   |                                            |   | 1,561 |   |   |   | 648 |   |   |   | (244 | ) |
| Total                    comprehensive income                                                           |   | $                                               | 4,092   |   |                                            | $      | 5,107 |   |   | $ | 10,019 |   |   | $ | 9,925 |   |

**METROCORP        BANCSHARES, INC.**

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

**For        the Nine Months Ended September 30, 2007**

**(In        thousands)**

**(Unaudited)**

|                                              |   |                              |    |   |                        |   |    | **Additional** |   |   |              |   |   | **Accumulated                  Other** |    |   | **Treasury**                 |   |    |      |   |
|---------------------------------------------------|--------|-----------------------------------|---------|--------|-----------------------------|--------|---------|----------------|--------|--------|-------------------|--------|--------|----------------------------------------|---------|--------|------------------------------|--------|---------|-----------|--------|
|                                              |   | **Common                  Stock** |    |   | **Paid-In**                 |   |    | **Retained**   |   |   | **Comprehensive** |   |   | **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    |   |                              | 40      |   |                        |   | – |           |   |   | 412               |   |   |                                   | – |   |                         |   | – |      |   |   | 312 |   |   |   | 724 |   |
| Repurchase                  of common stock       |   |                              | (36     | )      |                        |   | – |           |   |   | –           |   |   |                                   | – |   |                         |   | – |      |   |   | (602 | ) |   |   | (602 | ) |
| Stock-based                  compensation expense |   |                              | – |   |                        |   | – |           |   |   | 677               |   |   |                                   | – |   |                         |   | – |      |   |   | – |   |   |   | 677 |   |
| Net                  income                       |   |                              | – |   |                        |   | – |           |   |   | –           |   |   |                                   | 9,371   |   |                         |   | – |      |   |   | – |   |   |   | 9,371 |   |
| Other                  comprehensive income       |   |                              | – |   |                        |   | – |           |   |   | –           |   |   |                                   | – |   |                         |   | 648     |      |   |   | – |   |   |   | 648 |   |
| Cash                  dividends ($0.12 per share) |   |                              | – |   |                        |   | – |           |   |   | –           |   |   |                                   | (1,315  | )      |                         |   | – |      |   |   | – |   |   |   | (1,315 | ) |
| Balance                  at September 30, 2007    |   |                              | 10,950  |   |                        | $      | 10,995  |           |   | $      | 27,063            |   |   | $                                      | 79,839  |   |                         | $      | (1,773  | )         |   | $ | (673 | ) |   | $ | 115,451 |   |

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**METROCORP          BANCSHARES, INC**

**CONDENSED          CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(In          thousands)**

**(Unaudited)**

|                                                                                                                              |   | **For                    the Nine Months Ended** |     |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------|----------|
|                                                                                                                              |   | **September 30,**                           |     |
|                                                                                                                              |   | **2007**                                         |     |   | **2006** |   |
|                                                                                                                              |   |                                             |     |   |   |   |
| Cash                    flows from operating activities:                                                                          |   |                                             |     |   |   |   |
| Net                    income                                                                                                     |   | $                                                | 9,371    |   |   | $ | 10,169 |   |
| Adjustments                    to reconcile net income to net cash (used in) provided by operating                    activities: |   |                                             |     |   |   |   |   |   |
| Depreciation                                                                                                                      |   |                                             | 1,418    |   |   |   | 1,044 |   |
| Provision                    for loan losses                                                                                      |   |                                             | 1,773    |   |   |   | 560 |   |
| Gain                    on sale or call of securities, net                                                                        |   |                                             | –  |   |   |   | (11 | ) |
| (Gain)                    loss on foreclosed assets                                                                               |   |                                             | (268     | ) |   |   | 98 |   |
| Gain                    on sale of loans                                                                                          |   |                                             | (272     | ) |   |   | – |   |
| Amortization                    of premiums and discounts on securities                                                           |   |                                             | 47       |   |   |   | 64 |   |
| Amortization                    of deferred loan fees and discounts                                                               |   |                                             | (1,999   | ) |   |   | (1,880 | ) |
| Amortization                    of core deposit intangibles                                                                       |   |                                             | 261      |   |   |   | 360 |   |
| Stock-based                    compensation expense                                                                               |   |                                             | 677      |   |   |   | 257 |   |
| Excess                    tax benefits from stock-based compensation expense                                                      |   |                                             | –  |   |   |   | (12 | ) |
| Changes                    in:                                                                                                    |   |                                             |     |   |   |   |   |   |
| Accrued                    interest receivable                                                                                    |   |                                             | (775     | ) |   |   | (165 | ) |
| Other                    assets                                                                                                   |   |                                             | (1,836   | ) |   |   | 2,143 |   |
| Accrued                    interest payable                                                                                       |   |                                             | 54       |   |   |   | 203 |   |
| Other                    liabilities                                                                                              |   |                                             | (360     | ) |   |   | 2,566 |   |
| Net                    cash provided by operating activities                                                                      |   |                                             | 8,091    |   |   |   | 15,396 |   |
|                                                                                                                              |   |                                             |     |   |   |   |   |   |
| Cash                    flows from investing activities:                                                                          |   |                                             |     |   |   |   |   |   |
| Purchases                    of securities available-for-sale                                                                     |   |                                             | (2,079   | ) |   |   | (1,183 | ) |
| Purchase                    of bank owned life insurance                                                                          |   |                                             | (25,000  | ) |   |   | – |   |
| Proceeds                    from maturities and principal paydowns of securities                    available-for-sale            |   |                                             | 25,492   |   |   |   | 42,664 |   |
| Net                    change in loans                                                                                            |   |                                             | (245,104 | ) |   |   | (71,065 | ) |
| Proceeds                    from sale of foreclosed assets                                                                        |   |                                             | 749      |   |   |   | – |   |
| Purchases                    of premises and equipment                                                                            |   |                                             | (2,949   | ) |   |   | (1,911 | ) |
| Cash                    obtained from acquisition, net of cash paid                                                               |   |                                             | –  |   |   |   | 17,065 |   |
| Net                    cash used in investing activities                                                                          |   |                                             | (248,891 | ) |   |   | (14,430 | ) |
|                                                                                                                              |   |                                             |     |   |   |   |   |   |
| Cash                    flows from financing activities:                                                                          |   |                                             |     |   |   |   |   |   |
| Net                    change in:                                                                                                 |   |                                             |     |   |   |   |   |   |
| Deposits                                                                                                                          |   |                                             | 127,904  |   |   |   | 64,945 |   |
| Other                    borrowings                                                                                               |   |                                             | 9,713    |   |   |   | (22 | ) |
| Proceeds                    from stock option exercises                                                                           |   |                                             | 108      |   |   |   | 698 |   |
| Re-issuance                    of treasury stock                                                                                  |   |                                             | 616      |   |   |   | 273 |   |
| Repurchase                    of common stock                                                                                     |   |                                             | (602     | ) |   |   | – |   |
| Dividends                    paid                                                                                                 |   |                                             | (1,314   | ) |   |   | (1,307 | ) |
| Excess                    tax benefits from stock-based compensation                                                              |   |                                             | –  |   |   |   | 12 |   |
| Net                    cash provided by financing activities                                                                      |   |                                             | 136,425  |   |   |   | 64,599 |   |
|                                                                                                                              |   |                                             |     |   |   |   |   |   |
| Net                    (decrease) increase in cash and cash equivalents                                                           |   |                                             | (104,375 | ) |   |   | 65,565 |   |
| Cash                    and cash equivalents at beginning of period                                                               |   |                                             | 151,358  |   |   |   | 81,812 |   |
| Cash                    and cash equivalents at end of period                                                                     |   | $                                                | 46,983   |   |   | $ | 147,377 |   |

----

**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 September 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                                           |   | $                                                  | 25      |   |                                              | $       | 2 |   |   | $ | (1 | ) |   | $ | 26 |   |   | $ | 28 |   |   | $ | 1 |   |   | $  | ─ |   |   | $ | 29 |   |
| U.S.                  Government sponsored enterprises                              |   |                                               | 36,933  |   |                                              | ─ |   |   |   | (248 | ) |   |   | 36,685 |   |   |   | 36,906 |   |   | ─ |   |   |   | (510 | ) |   |   | 36,396 |   |
| Obligations                  of state and political subdivisions                    |   |                                               | 5,935   |   |                                              |    | 123 |   |   | ─ |   |   |   | 6,058 |   |   |   | 7,425 |   |   |   | 157 |   |   | ─ |   |   |   | 7,582 |   |
| Mortgage-backed                  securities and collateralized mortgage obligations |   |                                               | 98,520  |   |                                              |    | 66 |   |   |   | (2,180 | ) |   |   | 96,406 |   |   |   | 121,196 |   |   |   | 62 |   |   |   | (3,060 | ) |   |   | 118,198 |   |
| Other                  debt securities                                              |   |                                               | 49      |   |                                              | ─ |   |   | ─ |   |   |   | 49 |   |   |   | 143 |   |   |   | 1 |   |   |   | (1 | ) |   |   | 143 |   |
| Investment                  in ARM and CRA funds                                    |   |                                               | 19,807  |   |                                              | ─ |   |   |   | (556 | ) |   |   | 19,251 |   |   |   | 19,658 |   |   | ─ |   |   |   | (462 | ) |   |   | 19,196 |   |
| Total                  available for sale securities                                |   | $                                                  | 161,269 |   |                                              | $       | 191 |   |   | $ | (2,985 | ) |   | $ | 158,475 |   |   | $ | 185,356 |   |   | $ | 221 |   |   | $ | (4,033 | ) |   | $ | 181,544 |   |
|                                                                                |   |                                               |    |   |                                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Other                  investments**                                              |   |                                               |    |   |                                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| FHLB/Federal                  Reserve Bank stock                                    |   | $                                                  | 4,475   |   |                                              | $  |                         ─ |   |   | $  | ─ |   |   | $ | 4,475 |   |   | $ | 3,848 |   |   | $  | ─ |   |   | $  |                      ─ |   |   | $ | 3,848 |   |
| Investment                  in subsidiary trust                                     |   |                                               | 1,083   |   |                                              | ─ |   |   | ─ |   |   |   | 1,083 |   |   |   | 1,083 |   |   | ─ |   |   | ─ |   |   |   | 1,083 |   |
| Total                  other investments                                            |   | $                                                  | 5,558   |   |                                              | $  |                       ─ |   |   | $  | ─ |   |   | $ | 5,558 |   |   | $ | 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 agencies                                           |   | $                                        | 11     |   |                                         | $      | (1     | )                               |   | $  | ─ |   |   | $  | ─ |   |   | $ | 11 |   |   | $ | (1 | ) |
| U.                  S. Government sponsored enterprises                             |   |                                     | 1,487  |   |                                         |   | (13    | )                               |   |   | 35,198 |   |   |   | (235 | ) |   |   | 36,685 |   |   |   | (248 | ) |
| Mortgage-backed                  securities and collateralized mortgage obligations |   |                                     | 8,760  |   |                                         |   | (79    | )                               |   |   | 79,410 |   |   |   | (2,101 | ) |   |   | 88,170 |   |   |   | (2,180 | ) |
| Investment                  in ARM and CRA funds                                    |   |                                     | 4,593  |   |                                         |   | (36    | )                               |   |   | 14,658 |   |   |   | (520 | ) |   |   | 19,251 |   |   |   | (556 | ) |
| Total                  securities                                                   |   | $                                        | 14,851 |   |                                         | $      | (129   | )                               |   | $ | 129,266 |   |   | $ | (2,856 | ) |   | $ | 144,117 |   |   | $ | (2,985 | ) |

----

**METROCORP        BANCSHARES, INC.**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**3.        ALLOWANCE FOR LOAN LOSSES**

|                                                              |   | **As                  of and for the Three Months** |   |   | **As                  of and for the Nine Months** |   |
|-------------------------------------------------------------------|--------|-----------------------------------------------------|--------|--------|----------------------------------------------------|--------|
|                                                              |   | **Ended                  September 30,**       |   |   | **Ended                  September 30,**      |   |
|                                                              |   | **2007**                                            |   |   | **2006**                                           |   |   | **2007** |   |   | **2006** |   |
|                                                              |   | **(In                  thousands)**                 |   |
|                                                              |   |                                                |   |   |                                               |   |   |   |   |   |   |   |
| Allowance                  for loan losses at beginning of period |   | $                                                   | 12,661 |   |                                               | $      | 12,905 |   |   | $ | 11,436 |   |   | $ | 13,169 |   |
| Provision                  for loan losses                        |   |                                                | 1,168  |   |                                               |   | 114 |   |   |   | 1,773 |   |   |   | 560 |   |
| Charge-offs                                                       |   |                                                | (1,046 | )      |                                               |   | (1,251 | ) |   |   | (1,573 | ) |   |   | (3,488 | ) |
| Recoveries                                                        |   |                                                | 82     |   |                                               |   | 84 |   |   |   | 1,229 |   |   |   | 1,611 |   |
| Allowance                  for loan losses at end of period       |   | $                                                   | 12,865 |   |                                               | $      | 11,852 |   |   | $ | 12,865 |   |   | $ | 11,852 |   |

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

**5.        EARNINGS PER COMMON SHARE**

----

**METROCORP        BANCSHARES, INC.**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

|                                                                                                         |   | **As                  of and for the Three Months**           |   |   | **As                  of and for the Nine Months** |   |
|--------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------|--------|--------|----------------------------------------------------|--------|
|                                                                                                         |   | **Ended                  September 30,**                 |   |   | **Ended                  September 30,**      |   |
|                                                                                                         |   | **2007**                                                      |   |   | **2006**                                           |   |   | **2007** |   |   | **2006** |   |
|                                                                                                         |   | **(In                  thousands, except per share amounts)** |   |
|                                                                                                         |   |                                                          |   |   |                                               |   |   |   |   |   |   |   |
| Net                  income available to common shareholders                                                 |   | $                                                             | 3,208  |   |                                               | $      | 3,546 |   |   | $ | 9,371 |   |   | $ | 10,169 |   |
|                                                                                                         |   |                                                          |   |   |                                               |   |   |   |   |   |   |   |   |   |   |   |
| Weighted                  average common shares outstanding:                                                 |   |                                                          |   |   |                                               |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                                                        |   |                                                          | 10,962 |   |                                               |   | 10,924 |   |   |   | 10,959 |   |   |   | 10,895 |   |
| Potentially                  dilutive shares issuable under stock option and purchase                  plans |   |                                                          | 170    |   |                                               |   | 229 |   |   |   | 202 |   |   |   | 202 |   |
| Diluted                                                                                                      |   |                                                          | 11,132 |   |                                               |   | 11,153 |   |   |   | 11,161 |   |   |   | 11,097 |   |
|                                                                                                         |   |                                                          |   |   |                                               |   |   |   |   |   |   |   |   |   |   |   |
| Earnings                  per common share:                                                                  |   |                                                          |   |   |                                               |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                                                        |   | $                                                             | 0.29   |   |                                               | $      | 0.32 |   |   | $ | 0.86 |   |   | $ | 0.93 |   |
| Diluted                                                                                                      |   | $                                                             | 0.29   |   |                                               | $      | 0.32 |   |   | $ | 0.84 |   |   | $ | 0.92 |   |

**6.        LITIGATION**

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

|                                                                          |   | **As                  of September 30, 2007** |    |   | **As                  of December 31, 2006** |   |
|-------------------------------------------------------------------------------|--------|----------------------------------------------------|---------|--------|---------------------------------------------------|--------|
|                                                                          |   | **(In                  thousands)**                |    |
| Unfunded                  loan commitments including unfunded lines of credit |   | $                                                  | 311,467 |   |                                              | $      | 234,501 |   |
| Standby                  letters of credit                                    |   |                                               | 9,831   |   |                                              |   | 7,597 |   |
| Commercial                  letters of credit                                 |   |                                               | 16,240  |   |                                              |   | 9,596 |   |
| Operating                  leases                                             |   |                                               | 9,588   |   |                                              |   | 9,718 |   |
| Total                  financial instruments with off-balance sheet risk      |   | $                                                  | 347,126 |   |                                              | $      | 261,412 |   |

----

**METROCORP        BANCSHARES, INC.**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

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

|                                                                 |   | **For                  the three months ended September 30, 2007** |   |   | **For                  the three months ended September 30, 2006** |   |
|----------------------------------------------------------------------|--------|-------------------------------------------------------------------------|--------|--------|-------------------------------------------------------------------------|--------|
|                                                                 |   | **MetroBank**                                                           |   |   | **Metro                  United**                                       |   |   | **Other** |   |   | **Consolidated                  Company** |   |   | **MetroBank** |   |   | **Metro                  United** |   |   | **Other** |   |   | **Consolidated                  Company** |   |
|                                                                 |   | **(In                  thousands)**                                     |   |
| Total                  interest income                               |   | $                                                                       | 19,976 |   |                                                                    | $      | 6,695 |   |   | $ | 15 |   |   | $ | 26,686 |   |   | $ | 18,438 |   |   | $ | 4,119 |   |   | $ | 18 |   |   | $ | 22,575 |   |
| Total                  interest expense                              |   |                                                                    | 8,100  |   |                                                                    |   | 3,454 |   |   |   | 473 |   |   |   | 12,027 |   |   |   | 6,442 |   |   |   | 1,983 |   |   |   | 532 |   |   |   | 8,957 |   |
| Net                  interest income                                 |   |                                                                    | 11,876 |   |                                                                    |   | 3,241 |   |   |   | (458 | ) |   |   | 14,659 |   |   |   | 11,996 |   |   |   | 2,136 |   |   |   | (514 | ) |   |   | 13,618 |   |
| Provision                  for loan losses                           |   |                                                                    | 760    |   |                                                                    |   | 408 |   |   | ─ |   |   |   | 1,168 |   |   |   | 105 |   |   |   | 9 |   |   | ─ |   |   |   | 114 |   |
| Net                  interest income after provision for loan losses |   |                                                                    | 11,116 |   |                                                                    |   | 2,833 |   |   |   | (458 | ) |   |   | 13,491 |   |   |   | 11,891 |   |   |   | 2,127 |   |   |   | (514 | ) |   |   | 13,504 |   |
| Noninterest                  income                                  |   |                                                                    | 2,658  |   |                                                                    |   | 128 |   |   |   | (588 | ) |   |   | 2,198 |   |   |   | 1,809 |   |   |   | 85 |   |   | ─ |   |   |   | 1,894 |   |
| Noninterest                  expense                                 |   |                                                                    | 7,993  |   |                                                                    |   | 2,583 |   |   |   | 154 |   |   |   | 10,730 |   |   |   | 8,387 |   |   |   | 1,715 |   |   |   | (282 | ) |   |   | 9,820 |   |
| Income                  before income tax provision                  |   |                                                                    | 5,781  |   |                                                                    |   | 378 |   |   |   | (1,200 | ) |   |   | 4,959 |   |   |   | 5,313 |   |   |   | 497 |   |   |   | (232 | ) |   |   | 5,578 |   |
| Provision                  for income taxes                          |   |                                                                    | 1,980  |   |                                                                    |   | 174 |   |   |   | (403 | ) |   |   | 1,751 |   |   |   | 1,881 |   |   |   | 227 |   |   |   | (76 | ) |   |   | 2,032 |   |
| Net                  income                                          |   | $                                                                       | 3,801  |   |                                                                    | $      | 204 |   |   | $ | (797 | ) |   | $ | 3,208 |   |   | $ | 3,432 |   |   | $ | 270 |   |   | $ | (156 | ) |   | $ | 3,546 |   |

----

**METROCORP        BANCSHARES, INC.**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

|                                                                 |   | **For                  the nine months ended September 30, 2007** |      |   | **For                  the nine months ended September 30, 2006** |   |
|----------------------------------------------------------------------|--------|------------------------------------------------------------------------|-----------|--------|------------------------------------------------------------------------|--------|
|                                                                 |   | **MetroBank**                                                          |      |   | **Metro                  United**                                      |   |   | **Other** |   |   | **Consolidated                  Company** |   |   | **MetroBank** |   |   | **Metro                  United** |   |   | **Other** |   |   | **Consolidated                  Company** |   |
|                                                                 |   | **(In                  thousands)**                                    |      |
| Total                  interest income                               |   | $                                                                      | 58,116    |   |                                                                   | $      | 17,799 |   |   | $ | 49 |   |   | $ | 75,964 |   |   | $ | 52,153 |   |   | $ | 11,153 |   |   | $ | 51 |   |   | $ | 63,357 |   |
| Total                  interest expense                              |   |                                                                   | 22,752    |   |                                                                   |   | 9,181 |   |   |   | 1,519 |   |   |   | 33,452 |   |   |   | 17,107 |   |   |   | 5,093 |   |   |   | 1,577 |   |   |   | 23,777 |   |
| Net                  interest income                                 |   |                                                                   | 35,364    |   |                                                                   |   | 8,618 |   |   |   | (1,470 | ) |   |   | 42,512 |   |   |   | 35,046 |   |   |   | 6,060 |   |   |   | (1,526 | ) |   |   | 39,580 |   |
| Provision                  for loan losses                           |   |                                                                   | 779       |   |                                                                   |   | 994 |   |   | ─ |   |   |   | 1,773 |   |   |   | 441 |   |   |   | 119 |   |   | ─ |   |   |   | 560 |   |
| Net                  interest income after provision for loan losses |   |                                                                   | 34,585    |   |                                                                   |   | 7,624 |   |   |   | (1,470 | ) |   |   | 40,739 |   |   |   | 34,605 |   |   |   | 5,941 |   |   |   | (1,526 | ) |   |   | 39,020 |   |
| Noninterest                  income                                  |   |                                                                   | 6,341     |   |                                                                   |   | 338 |   |   |   | (816 | ) |   |   | 5,863 |   |   |   | 5,528 |   |   |   | 231 |   |   | ─ |   |   |   | 5,759 |   |
| Noninterest                  expense                                 |   |                                                                   | 24,067    |   |                                                                   |   | 7,085 |   |   |   | 689 |   |   |   | 31,841 |   |   |   | 24,456 |   |   |   | 4,102 |   |   |   | 427 |   |   |   | 28,985 |   |
| Income                  before income tax provision                  |   |                                                                   | 16,859    |   |                                                                   |   | 877 |   |   |   | (2,975 | ) |   |   | 14,761 |   |   |   | 15,677 |   |   |   | 2,070 |   |   |   | (1,953 | ) |   |   | 15,794 |   |
| Provision                  for income taxes                          |   |                                                                   | 5,878     |   |                                                                   |   | 419 |   |   |   | (907 | ) |   |   | 5,390 |   |   |   | 5,475 |   |   |   | 806 |   |   |   | (656 | ) |   |   | 5,625 |   |
| Net                  income                                          |   | $                                                                      | 10,981    |   |                                                                   | $      | 458 |   |   | $ | (2,068 | ) |   | $ | 9,371 |   |   | $ | 10,202 |   |   | $ | 1,264 |   |   | $ | (1,297 | ) |   | $ | 10,169 |   |
|                                                                 |   |                                                                   |      |   |                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                 |   | **As                  of September 30, 2007**                          |      |   | **As                  of September 30, 2006**                          |   |
|                                                                 |   | **MetroBank**                                                          |      |   | **Metro                  United**                                      |   |   | **Other** |   |   | **Consolidated                  Company** |   |   | **MetroBank** |   |   | **Metro                  United** |   |   | **Other** |   |   | **Consolidated                  Company** |   |
|                                                                 |   | **(In                  thousands)**                                    |      |
| Net                  loans                                           |   | $                                                                      | 816,003   |   |                                                                   | $      | 304,719 |   |   | $ | – |   |   | $ | 1,120,722 |   |   | $ | 671,467 |   |   | $ | 156,953 |   |   | $ | – |   |   | $ | 828,420 |   |
| Total                  assets                                        |   |                                                                   | 1,064,043 |   |                                                                   |   | 348,951 |   |   |   | 773 |   |   |   | 1,413,767 |   |   |   | 975,177 |   |   |   | 249,727 |   |   |   | 1,197 |   |   |   | 1,226,101 |   |
| Deposits                                                             |   |                                                                   | 921,317   |   |                                                                   |   | 295,056 |   |   |   | (6,805 | ) |   |   | 1,209,568 |   |   |   | 840,229 |   |   |   | 206,505 |   |   |   | (2,503 | ) |   |   | 1,044,231 |   |

**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 the Company’s 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 the Company’s 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 September 30,** |      |
|----------------------------------------------------------------------------------|--------|--------------------------------------------------------------------|-----------|
|                                                                             |   | **2007**                                                           |      |   | **2006** |   |
|                                                                             |   | **Average**                                                        |      |   | **Interest** |   |   | **Average** |   |   | **Average** |   |   | **Interest** |   |   | **Average** |   |
|                                                                             |   | **Outstanding**                                                    |      |   | **Earned/** |   |   | **Yield/** |   |   | **Outstanding** |   |   | **Earned/** |   |   | **Yield/** |   |
|                                                                             |   | **Balance**                                                        |      |   | **Paid** |   |   | **Rate(1)** |   |   | **Balance** |   |   | **Paid** |   |   | **Rate(1)** |   |
|                                                                             |   | **(Dollars                  in thousands)**                        |      |
|                                                                             |   |                                                               |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Assets**                                                                       |   |                                                               |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-earning                  assets:                                        |   |                                                               |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  loans                                                     |   | $                                                                  | 1,113,551 |   |   | $ | 24,583 |   |   |   | 8.76 | % |   | $ | 833,943 |   |   | $ | 19,112 |   |   |   | 9.09 | % |
| Taxable                  securities                                              |   |                                                               | 155,541   |   |   |   | 1,708 |   |   |   | 4.36 |   |   |   | 188,429 |   |   |   | 2,047 |   |   |   | 4.31 |   |
| Tax-exempt                  securities                                           |   |                                                               | 5,934     |   |   |   | 73 |   |   |   | 4.88 |   |   |   | 14,657 |   |   |   | 179 |   |   |   | 4.85 |   |
| Other                  investments                                               |   |                                                               | 4,600     |   |   |   | 70 |   |   |   | 6.04 |   |   |   | 4,865 |   |   |   | 66 |   |   |   | 5.38 |   |
| Federal                  funds sold and other short-term investments             |   |                                                               | 19,799    |   |   |   | 252 |   |   |   | 5.05 |   |   |   | 90,096 |   |   |   | 1,171 |   |   |   | 5.16 |   |
| Total                  interest-earning assets                                   |   |                                                               | 1,299,425 |   |   |   | 26,686 |   |   |   | 8.15 |   |   |   | 1,131,990 |   |   |   | 22,575 |   |   |   | 7.91 |   |
| Allowance                  for loan losses                                       |   |                                                               | (12,949   | ) |   |   |   |   |   |   |   |   |   |   | (12,603 | ) |   |   |   |   |   |   |   |   |
| Total                  interest-earning assets, net of allowance for loan losses |   |                                                               | 1,286,476 |   |   |   |   |   |   |   |   |   |   |   | 1,119,387 |   |   |   |   |   |   |   |   |   |
| Noninterest-earning                  assets                                      |   |                                                               | 110,980   |   |   |   |   |   |   |   |   |   |   |   | 86,913 |   |   |   |   |   |   |   |   |   |
| Total                  assets                                                    |   | $                                                                  | 1,397,456 |   |   |   |   |   |   |   |   |   |   | $ | 1,206,300 |   |   |   |   |   |   |   |   |   |
|                                                                             |   |                                                               |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Liabilities                  and shareholders' equity**                        |   |                                                               |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                  liabilities:                                   |   |                                                               |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                  demand deposits                                |   | $                                                                  | 63,529    |   |   | $ | 191 |   |   |   | 1.19 | % |   | $ | 71,404 |   |   | $ | 217 |   |   |   | 1.21 | % |
| Savings                  and money market accounts                               |   |                                                               | 283,115   |   |   |   | 2,863 |   |   |   | 4.01 |   |   |   | 166,926 |   |   |   | 1,225 |   |   |   | 2.91 |   |
| Time                  deposits                                                   |   |                                                               | 661,591   |   |   |   | 8,335 |   |   |   | 5.00 |   |   |   | 595,467 |   |   |   | 6,665 |   |   |   | 4.44 |   |
| Junior                  subordinated debentures                                  |   |                                                               | 36,083    |   |   |   | 474 |   |   |   | 5.14 |   |   |   | 36,083 |   |   |   | 532 |   |   |   | 5.77 |   |
| Other                  borrowings                                                |   |                                                               | 13,505    |   |   |   | 164 |   |   |   | 4.82 |   |   |   | 25,669 |   |   |   | 318 |   |   |   | 4.91 |   |
| Total                  interest-bearing liabilities                              |   |                                                               | 1,057,823 |   |   |   | 12,027 |   |   |   | 4.51 |   |   |   | 895,549 |   |   |   | 8,957 |   |   |   | 3.97 |   |
| Noninterest-bearing                  liabilities:                                |   |                                                               |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest-bearing                  demand deposits                             |   |                                                               | 205,816   |   |   |   |   |   |   |   |   |   |   |   | 191,196 |   |   |   |   |   |   |   |   |   |
| Other                  liabilities                                               |   |                                                               | 19,245    |   |   |   |   |   |   |   |   |   |   |   | 19,422 |   |   |   |   |   |   |   |   |   |
| Total                  liabilities                                               |   |                                                               | 1,282,884 |   |   |   |   |   |   |   |   |   |   |   | 1,106,167 |   |   |   |   |   |   |   |   |   |
|                                                                             |   |                                                               |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shareholders'                  equity                                            |   |                                                               | 114,572   |   |   |   |   |   |   |   |   |   |   |   | 100,133 |   |   |   |   |   |   |   |   |   |
| Total                  liabilities and shareholders' equity                      |   | $                                                                  | 1,397,456 |   |   |   |   |   |   |   |   |   |   | $ | 1,206,300 |   |   |   |   |   |   |   |   |   |
|                                                                             |   |                                                               |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  interest income                                             |   |                                                               |      |   |   | $ | 14,659 |   |   |   |   |   |   |   |   |   |   | $ | 13,618 |   |   |   |   |   |
| Net                  interest spread                                             |   |                                                               |      |   |   |   |   |   |   |   | 3.64 | % |   |   |   |   |   |   |   |   |   |   | 3.94 | % |
| Net                  interest margin                                             |   |                                                               |      |   |   |   |   |   |   |   | 4.48 | % |   |   |   |   |   |   |   |   |   |   | 4.77 | % |

----

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

----

|                                                                             |   | **For                  The Nine Months Ended September 30,** |      |
|----------------------------------------------------------------------------------|--------|-------------------------------------------------------------------|-----------|
|                                                                             |   | **2007**                                                          |      |   | **2006** |   |
|                                                                             |   | **Average**                                                       |      |   | **Interest** |   |   | **Average** |   |   | **Average** |   |   | **Interest** |   |   | **Average** |   |
|                                                                             |   | **Outstanding**                                                   |      |   | **Earned/** |   |   | **Yield/** |   |   | **Outstanding** |   |   | **Earned/** |   |   | **Yield/** |   |
|                                                                             |   | **Balance**                                                       |      |   | **Paid** |   |   | **Rate(1)** |   |   | **Balance** |   |   | **Paid** |   |   | **Rate(1)** |   |
|                                                                             |   | **(Dollars                  in thousands)**                       |      |
|                                                                             |   |                                                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Assets**                                                                       |   |                                                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-earning                  assets:                                        |   |                                                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  loans                                                     |   | $                                                                 | 1,027,092 |   |   | $ | 68,112 |   |   |   | 8.87 | % |   | $ | 803,553 |   |   | $ | 53,382 |   |   |   | 8.88 | % |
| Taxable                  securities                                              |   |                                                              | 163,562   |   |   |   | 5,340 |   |   |   | 4.37 |   |   |   | 199,145 |   |   |   | 6,386 |   |   |   | 4.29 |   |
| Tax-exempt                  securities                                           |   |                                                              | 6,341     |   |   |   | 234 |   |   |   | 4.93 |   |   |   | 15,538 |   |   |   | 572 |   |   |   | 4.92 |   |
| Other                  investments                                               |   |                                                              | 4,797     |   |   |   | 208 |   |   |   | 5.80 |   |   |   | 4,458 |   |   |   | 187 |   |   |   | 5.61 |   |
| Federal                  funds sold and other short-term investments             |   |                                                              | 53,479    |   |   |   | 2,070 |   |   |   | 5.18 |   |   |   | 78,329 |   |   |   | 2,830 |   |   |   | 4.83 |   |
| Total                  interest-earning assets                                   |   |                                                              | 1,225,271 |   |   |   | 75,964 |   |   |   | 8.09 |   |   |   | 1,101,023 |   |   |   | 63,357 |   |   |   | 7.69 |   |
| Allowance                  for loan losses                                       |   |                                                              | (12,365   | ) |   |   |   |   |   |   |   |   |   |   | (13,437 | ) |   |   |   |   |   |   |   |   |
| Total                  interest-earning assets, net of allowance for loan losses |   |                                                              | 1,242,906 |   |   |   |   |   |   |   |   |   |   |   | 1,087,586 |   |   |   |   |   |   |   |   |   |
| Noninterest-earning                  assets                                      |   |                                                              | 94,096    |   |   |   |   |   |   |   |   |   |   |   | 85,400 |   |   |   |   |   |   |   |   |   |
| Total                  assets                                                    |   | $                                                                 | 1,337,002 |   |   |   |   |   |   |   |   |   |   | $ | 1,172,986 |   |   |   |   |   |   |   |   |   |
|                                                                             |   |                                                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Liabilities                  and shareholders' equity**                        |   |                                                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                  liabilities:                                   |   |                                                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                  demand deposits                                |   | $                                                                 | 65,294    |   |   | $ | 583 |   |   |   | 1.19 | % |   | $ | 75,500 |   |   | $ | 608 |   |   |   | 1.08 | % |
| Savings                  and money market accounts                               |   |                                                              | 231,031   |   |   |   | 6,499 |   |   |   | 3.76 |   |   |   | 159,975 |   |   |   | 3,142 |   |   |   | 2.63 |   |
| Time                  deposits                                                   |   |                                                              | 651,203   |   |   |   | 24,098 |   |   |   | 4.95 |   |   |   | 572,854 |   |   |   | 17,493 |   |   |   | 4.08 |   |
| Junior                  subordinated debentures                                  |   |                                                              | 36,083    |   |   |   | 1,519 |   |   |   | 5.55 |   |   |   | 36,083 |   |   |   | 1,577 |   |   |   | 5.76 |   |
| Other                  borrowings                                                |   |                                                              | 20,601    |   |   |   | 753 |   |   |   | 4.89 |   |   |   | 26,021 |   |   |   | 957 |   |   |   | 4.92 |   |
| Total                  interest-bearing liabilities                              |   |                                                              | 1,004,212 |   |   |   | 33,452 |   |   |   | 4.45 |   |   |   | 870,433 |   |   |   | 23,777 |   |   |   | 3.65 |   |
| Noninterest-bearing                  liabilities:                                |   |                                                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest-bearing                  demand deposits                             |   |                                                              | 203,729   |   |   |   |   |   |   |   |   |   |   |   | 189,545 |   |   |   |   |   |   |   |   |   |
| Other                  liabilities                                               |   |                                                              | 17,574    |   |   |   |   |   |   |   |   |   |   |   | 15,806 |   |   |   |   |   |   |   |   |   |
| Total                  liabilities                                               |   |                                                              | 1,225,515 |   |   |   |   |   |   |   |   |   |   |   | 1,075,784 |   |   |   |   |   |   |   |   |   |
|                                                                             |   |                                                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shareholders'                  equity                                            |   |                                                              | 111,487   |   |   |   |   |   |   |   |   |   |   |   | 97,202 |   |   |   |   |   |   |   |   |   |
| Total                  liabilities and shareholders' equity                      |   | $                                                                 | 1,337,002 |   |   |   |   |   |   |   |   |   |   | $ | 1,172,986 |   |   |   |   |   |   |   |   |   |
|                                                                             |   |                                                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  interest income                                             |   |                                                              |      |   |   | $ | 42,512 |   |   |   |   |   |   |   |   |   |   | $ | 39,580 |   |   |   |   |   |
| Net                  interest spread                                             |   |                                                              |      |   |   |   |   |   |   |   | 3.64 | % |   |   |   |   |   |   |   |   |   |   | 4.04 | % |
| Net                  interest margin                                             |   |                                                              |      |   |   |   |   |   |   |   | 4.53 | % |   |   |   |   |   |   |   |   |   |   | 4.81 | % |

----

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

----

|                                                                 |   | **Three                  Months Ended September 30,** |    |   | **Nine                  Months Ended September 30,** |   |
|----------------------------------------------------------------------|--------|------------------------------------------------------------|---------|--------|-----------------------------------------------------------|--------|
|                                                                 |   | **2007                  vs 2006**                          |    |   | **2007                  vs 2006**                         |   |
|                                                                 |   | **Increase                  (Decrease)**                   |    |   |                                                      |   |   | **Increase                  (Decrease)** |   |   |   |   |
|                                                                 |   | **Due                  to**                                |    |   |                                                      |   |   | **Due                  to** |   |   |   |   |
|                                                                 |   | **Volume**                                                 |    |   | **Rate**                                                  |   |   | **Total** |   |   | **Volume** |   |   | **Rate** |   |   | **Total** |   |
|                                                                 |   | **(Dollars                  in thousands)**                |    |
|                                                                 |   |                                                       |    |   |                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Interest-earning                  assets:**                        |   |                                                       |    |   |                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                                                                |   | $                                                          | 6,408   |   |                                                      | $      | (937 | ) |   | $ | 5,471 |   |   | $ | 14,850 |   |   | $ | (120 | ) |   | $ | 14,730 |   |
| Taxable                  securities                                  |   |                                                       | (357    | )      |                                                      |   | 18 |   |   |   | (339 | ) |   |   | (1,141 | ) |   |   | 95 |   |   |   | (1,046 | ) |
| Tax-exempt                  securities                               |   |                                                       | (107    | )      |                                                      |   | 1 |   |   |   | (106 | ) |   |   | (339 | ) |   |   | 1 |   |   |   | (338 | ) |
| Other                  investments                                   |   |                                                       | (4      | )      |                                                      |   | 8 |   |   |   | 4 |   |   |   | 14 |   |   |   | 7 |   |   |   | 21 |   |
| Federal                  funds sold and other short-term investments |   |                                                       | (914    | )      |                                                      |   | (5 | ) |   |   | (919 | ) |   |   | (898 | ) |   |   | 138 |   |   |   | (760 | ) |
| Total                  increase (decrease) in interest income        |   |                                                       | 5,026   |   |                                                      |   | (915 | ) |   |   | 4,111 |   |   |   | 12,486 |   |   |   | 121 |   |   |   | 12,607 |   |
|                                                                 |   |                                                       |    |   |                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Interest-bearing                  liabilities:**                   |   |                                                       |    |   |                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                  demand deposits                    |   |                                                       | (24     | )      |                                                      |   | (2 | ) |   |   | (26 | ) |   |   | (82 | ) |   |   | 57 |   |   |   | (25 | ) |
| Savings                  and money market accounts                   |   |                                                       | 853     |   |                                                      |   | 785 |   |   |   | 1,638 |   |   |   | 1,396 |   |   |   | 1,961 |   |   |   | 3,357 |   |
| Time                  deposits                                       |   |                                                       | 740     |   |                                                      |   | 930 |   |   |   | 1,670 |   |   |   | 2,393 |   |   |   | 4,212 |   |   |   | 6,605 |   |
| Junior                  subordinated debentures                      |   |                                                       | – |   |                                                      |   | (58 | ) |   |   | (58 | ) |   |   | – |   |   |   | (58 | ) |   |   | (58 | ) |
| Other                  borrowings                                    |   |                                                       | (151    | )      |                                                      |   | (3 | ) |   |   | (154 | ) |   |   | (199 | ) |   |   | (5 | ) |   |   | (204 | ) |
| Total                  increase in interest expense                  |   |                                                       | 1,418   |   |                                                      |   | 1,652 |   |   |   | 3,070 |   |   |   | 3,508 |   |   |   | 6,167 |   |   |   | 9,675 |   |
|                                                                 |   |                                                       |    |   |                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Increase                  (decrease) in net interest income          |   | $                                                          | 3,608   |   |                                                      | $      | (2,567 | ) |   | $ | 1,041 |   |   | $ | 8,978 |   |   | $ | (6,046 | ) |   | $ | 2,932 |   |

*Provision        for Loan Losses.*

*Noninterest        Income.*

*Noninterest        Expense.*

----

*Income        Taxes.*

**Financial        Condition**

*Loan        Portfolio.*

----

|                                                            |   | **As                  of September 30, 2007** |      |   | **As                  of December 31, 2006** |   |
|-----------------------------------------------------------------|--------|----------------------------------------------------|-----------|--------|---------------------------------------------------|--------|
|                                                            |   | **Amount**                                         |      |   | **Percent**                                       |   |   | **Amount** |   |   | **Percent** |   |
|                                                            |   | **(Dollars                  in thousands)**        |      |
|                                                            |   |                                               |      |   |                                              |   |   |   |   |   |   |   |
| Commercial                  and industrial                      |   | $                                                  | 418,729   |   |                                              |   | 36.82 | % |   | $ | 367,072 |   |   |   | 41.25 | % |
| Real                  estate mortgage                           |   |                                               |      |   |                                              |   |   |   |   |   |   |   |   |   |   |   |
| Residential                                                     |   |                                               | 6,093     |   |                                              |   | 0.54 |   |   |   | 4,847 |   |   |   | 0.55 |   |
| Commercial                                                      |   |                                               | 583,891   |   |                                              |   | 51.35 |   |   |   | 424,431 |   |   |   | 47.70 |   |
|                                                            |   |                                               | 589,984   |   |                                              |   | 51.89 |   |   |   | 429,278 |   |   |   | 48.25 |   |
| Real                  estate construction                       |   |                                               |      |   |                                              |   |   |   |   |   |   |   |   |   |   |   |
| Residential                                                     |   |                                               | 40,567    |   |                                              |   | 3.57 |   |   |   | 27,781 |   |   |   | 3.13 |   |
| Commercial                                                      |   |                                               | 76,747    |   |                                              |   | 6.75 |   |   |   | 58,311 |   |   |   | 6.55 |   |
|                                                            |   |                                               | 117,314   |   |                                              |   | 10.32 |   |   |   | 86,092 |   |   |   | 9.68 |   |
| Consumer                  and other                             |   |                                               | 11,081    |   |                                              |   | 0.97 |   |   |   | 7,332 |   |   |   | 0.82 |   |
| Gross                  loans                                    |   |                                               | 1,137,108 |   |                                              |   | 100.00 | % |   |   | 889,774 |   |   |   | 100.00 | % |
| Unearned                  discounts, interest and deferred fees |   |                                               | (3,521    | )      |                                              |   |   |   |   |   | (3,218 | ) |   |   |   |   |
| Total                  loans                                    |   |                                               | 1,133,587 |   |                                              |   |   |   |   |   | 886,556 |   |   |   |   |   |
| Allowance                  for loan losses                      |   |                                               | (12,865   | )      |                                              |   |   |   |   |   | (11,436 | ) |   |   |   |   |
| Loans,                  net                                     |   | $                                                  | 1,120,722 |   |                                              |   |   |   |   | $ | 875,120 |   |   |   |   |   |

*Nonperforming        Assets.*

----

|                                                                             |   | **As                  of**                   |   |   | **As                  of**                  |   |
|----------------------------------------------------------------------------------|--------|----------------------------------------------|--------|--------|---------------------------------------------|--------|
|                                                                             |   | **September 30,                  2007** |   |   | **December 31,                  2006** |   |
|                                                                             |   | **(Dollars                  in thousands)**  |   |
| Nonaccrual                  loans                                                |   | $                                            | 6,079  |   |                                        | $      | 9,414 |   |
| Accruing                  loans 90 days or more past due                         |   |                                         | 1,036  |   |                                        |   | 29 |   |
| Other                  real estate (“ORE”)                           |   |                                         | 2,266  |   |                                        |   | 2,747 |   |
| Total                  nonperforming assets                                      |   |                                         | 9,381  |   |                                        |   | 12,190 |   |
| Nonperforming                  loans guaranteed by the SBA, Ex-Im Bank and OCCGF |   |                                         | (2,667 | )      |                                        |   | (2,857 | ) |
| Net                  nonperforming assets                                        |   | $                                            | 6,714  |   |                                        | $      | 9,333 |   |
|                                                                             |   |                                         |   |   |                                        |   |   |   |
| Total                  nonperforming assets to total assets                      |   |                                         | 0.66   | %      |                                        |   | 0.96 | % |
| Total                  nonperforming assets to total loans and ORE               |   |                                         | 0.83   | %      |                                        |   | 1.37 | % |
| Net                  nonperforming assets to total assets (1)                    |   |                                         | 0.47   | %      |                                        |   | 0.74 | % |
| Net                  nonperforming assets to total loans and ORE (1)             |   |                                         | 0.59   | %      |                                        |   | 1.05 | % |

----

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

|                                                                        |   | **As                  of September 30, 2007** |   |   | **As                  of December 31, 2006** |   |
|-----------------------------------------------------------------------------|--------|---------------------------------------------------------|--------|--------|--------------------------------------------------------|--------|
|                                                                        |   | **(In                  thousands)**                     |   |
| Impaired                  loans with no SFAS No. 114 valuation reserve |   | $                                                       | 3,391  |   |                                                   | $      | 6,715 |   |
| Impaired                  loans with a SFAS No. 114 valuation reserve  |   |                                                    | 2,688  |   |                                                   |   | 2,699 |   |
| Total                  recorded investment in impaired loans                |   | $                                                       | 6,079  |   |                                                   | $      | 9,414 |   |
|                                                                        |   |                                                    |   |   |                                                   |   |   |   |
| Valuation                  allowance related to impaired loans              |   | $                                                       | 1,273  |   |                                                   | $      | 900 |   |

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

----

----

|                                                                             |   | **As                  of and for the****Three                  Months Ended September 30,** |      |
|----------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------|-----------|
|                                                                             |   | **2007**                                                                                         |      |   | **2006** |   |
|                                                                             |   | **(Dollars                  in thousands)**                                                      |      |
| Average                  total loans outstanding for the period                  |   | $                                                                                                | 1,113,551 |   |   | $ | 833,943 |   |
| Total                  loans outstanding at end of period                        |   | $                                                                                                | 1,133,587 |   |   | $ | 840,272 |   |
|                                                                             |   |                                                                                             |      |   |   |   |   |   |
| Allowance                  for loan losses at beginning of period                |   | $                                                                                                | 12,661    |   |   | $ | 12,905 |   |
| Provision                  for loan losses                                       |   |                                                                                             | 1,168     |   |   |   | 114 |   |
| Charge-offs:                                                                     |   |                                                                                             |      |   |   |   |   |   |
| Commercial                  and industrial                                       |   |                                                                                             | (1,031    | ) |   |   | (1,192 | ) |
| Real                  estate mortgage                                            |   |                                                                                             | –   |   |   |   | – |   |
| Real                  estate construction                                        |   |                                                                                             | –   |   |   |   | – |   |
| Consumer                  and other                                              |   |                                                                                             | (15       | ) |   |   | (59 | ) |
| Total                  charge-offs                                               |   |                                                                                             | (1,046    | ) |   |   | (1,251 | ) |
|                                                                             |   |                                                                                             |      |   |   |   |   |   |
| Recoveries:                                                                      |   |                                                                                             |      |   |   |   |   |   |
| Commercial                  and industrial                                       |   |                                                                                             | 42        |   |   |   | 83 |   |
| Real                  estate mortgage                                            |   |                                                                                             | –   |   |   |   | – |   |
| Real                  estate construction                                        |   |                                                                                             | –   |   |   |   | – |   |
| Consumer                  and other                                              |   |                                                                                             | 40        |   |   |   | 1 |   |
| Total                  recoveries                                                |   |                                                                                             | 82        |   |   |   | 84 |   |
| Net                  charge-offs                                                 |   |                                                                                             | (964      | ) |   |   | (1,167 | ) |
| Allowance                  for loan losses at end of period                      |   |                                                                                             | 12,865    |   |   |   | 11,852 |   |
|                                                                             |   |                                                                                             |      |   |   |   |   |   |
| Reserve                  for unfunded lending commitments at beginning of period |   |                                                                                             | 1,026     |   |   |   | 552 |   |
| Provision                  for unfunded lending commitments                      |   |                                                                                             | (8        | ) |   |   | 96 |   |
| Reserve                  for unfunded lending commitments at end of period       |   |                                                                                             | 1,018     |   |   |   | 648 |   |
|                                                                             |   |                                                                                             |      |   |   |   |   |   |
|                                                                             |   |                                                                                             |      |   |   |   |   |   |
| Allowance                  for credit losses at end of period                    |   | $                                                                                                | 13,883    |   |   | $ | 12,500 |   |
|                                                                             |   |                                                                                             |      |   |   |   |   |   |
| Ratio                  of net charge-offs to end of period total loans           |   |                                                                                             | (0.09     | )% |   |   | (0.14 | )% |
|                                                                             |   |                                                                                             |      |   |   |   |   |   |

----

|                                                                                                                                 |   | **As                  of and for the****Nine                  Months Ended September 30,** |      |
|--------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------|-----------|
|                                                                                                                                 |   | **2007**                                                                                        |      |   | **2006** |   |
|                                                                                                                                 |   | **(Dollars                  in thousands)**                                                     |      |
| Average                  total loans outstanding for the period                                                                      |   | $                                                                                               | 1,027,092 |   |   | $ | 803,553 |   |
| Total                  loans outstanding at end of period                                                                            |   | $                                                                                               | 1,133,587 |   |   | $ | 840,272 |   |
|                                                                                                                                 |   |                                                                                            |      |   |   |   |   |   |
| Allowance                  for loan losses at beginning of period                                                                    |   | $                                                                                               | 11,436    |   |   | $ | 13,169 |   |
| Provision                  for loan losses                                                                                           |   |                                                                                            | 1,773     |   |   |   | 560 |   |
| Charge-offs:                                                                                                                         |   |                                                                                            |      |   |   |   |   |   |
| Commercial                  and industrial                                                                                           |   |                                                                                            | (1,551    | ) |   |   | (3,296 | ) |
| Real                  estate mortgage                                                                                                |   |                                                                                            | –   |   |   |   | (21 | ) |
| Real                  estate construction                                                                                            |   |                                                                                            | –   |   |   |   | – |   |
| Consumer                  and other                                                                                                  |   |                                                                                            | (22       | ) |   |   | (171 | ) |
| Total                  charge-offs                                                                                                   |   |                                                                                            | (1,573    | ) |   |   | (3,488 | ) |
|                                                                                                                                 |   |                                                                                            |      |   |   |   |   |   |
| Recoveries:                                                                                                                          |   |                                                                                            |      |   |   |   |   |   |
| Commercial                  and industrial                                                                                           |   |                                                                                            | 1,086     |   |   |   | 678 |   |
| Real                  estate mortgage                                                                                                |   |                                                                                            | 99        |   |   |   | 851 |   |
| Real                  estate construction                                                                                            |   |                                                                                            | –   |   |   |   | – |   |
| Consumer                  and other                                                                                                  |   |                                                                                            | 44        |   |   |   | 82 |   |
| Total                  recoveries                                                                                                    |   |                                                                                            | 1,229     |   |   |   | 1,611 |   |
| Net                  charge-offs                                                                                                     |   |                                                                                            | (344      | ) |   |   | (1,877 | ) |
| Allowance                  for loan losses at end of period                                                                          |   |                                                                                            | 12,865    |   |   |   | 11,852 |   |
|                                                                                                                                 |   |                                                                                            |      |   |   |   |   |   |
| Reserve                  for unfunded lending commitments at beginning of period                                                     |   |                                                                                            | 793       |   |   |   | 546 |   |
| Provision                  for unfunded lending commitments                                                                          |   |                                                                                            | 225       |   |   |   | 102 |   |
| Reserve                  for unfunded lending commitments at end of period                                                           |   |                                                                                            | 1,018     |   |   |   | 648 |   |
|                                                                                                                                 |   |                                                                                            |      |   |   |   |   |   |
|                                                                                                                                 |   |                                                                                            |      |   |   |   |   |   |
| Allowance                  for credit losses at end of period                                                                        |   | $                                                                                               | 13,883    |   |   | $ | 12,500 |   |
|                                                                                                                                 |   |                                                                                            |      |   |   |   |   |   |
| Ratio                  of allowance for loan losses to end of period total loans                                                     |   |                                                                                            | 1.13      | % |   |   | 1.41 | % |
| Ratio                  of net charge-offs to end of period total loans                                                               |   |                                                                                            | (0.03     | )% |   |   | (0.22 | )% |
| Ratio                  of allowance for loan losses to end of period total nonperforming                  loans                  (1) |   |                                                                                            | 180.81    | % |   |   | 119.14 | % |
| Ratio                  of allowance for loan losses to end of period net nonperforming                  loans                  (2)   |   |                                                                                            | 289.23    | % |   |   | 157.02 | % |

----

| (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****Nine                      Months Ended****September 30,                        2007** |   |   | **As                    of and for the****Year                      Ended****December 31,                        2006** |   |
|----------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------|--------|--------|------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                           |   | **(Dollars                    in thousands)**                                                                                        |   |
| FHLB                    notes:                                 |   |                                                                                                                                 |   |   |                                                                                                                         |   |
| at                    end of period                            |   | $                                                                                                                                    | 35,000 |   |                                                                                                                         | $      | 25,000 |   |
| average                    during the period                   |   |                                                                                                                                 | 19,773 |   |                                                                                                                         |   | 25,247 |   |
| maximum                    month-end balance during the period |   |                                                                                                                                 | 35,000 |   |                                                                                                                         |   | 25,000 |   |
| Interest                    rate at end of period              |   |                                                                                                                                 | 4.75   | %      |                                                                                                                         |   | 4.99 | % |
| Interest                    rate during the period             |   |                                                                                                                                 | 5.09   | %      |                                                                                                                         |   | 5.05 | % |
| Federal                    Reserve TT&L:                   |   |                                                                                                                                 |   |   |                                                                                                                         |   |   |   |
| at                    end of period                            |   | $                                                                                                                                    | 1,029  |   |                                                                                                                         | $      | 1,316 |   |
| average                    during the period                   |   |                                                                                                                                 | 828    |   |                                                                                                                         |   | 702 |   |
| maximum                    month-end balance during the period |   |                                                                                                                                 | 1,067  |   |                                                                                                                         |   | 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 September 30, 2007** |   |
|----------------------------------------------------|--------|-----------------------------------------------------------------------|--------|--------|---------------------------------------------------------------------------------------------------------------------------|--------|--------|----------------------------------------------------------------|--------|
|                                               |   |                                                                  |   |   |                                                                                                                      |   |   |                                                           |   |
|                                               |   |                                                                  |   |   |                                                                                                                      |   |   |                                                           |   |
| **The                    Company**                 |   |                                                                  |   |   |                                                                                                                      |   |   |                                                           |   |
| Leverage                    ratio                  |   |                                                                  | 4.00   | %(1)   |                                                                                                                      | N/A    |   |                                                           |   | 9.12 | % |
| Tier                    1 risk-based capital ratio |   |                                                                  | 4.00   |   |                                                                                                                      | N/A    |   |                                                           |   | 9.51 |   |
| Risk-based                    capital ratio        |   |                                                                  | 8.00   |   |                                                                                                                      | N/A    |   |                                                           |   | 10.84 |   |
| **MetroBank**                                      |   |                                                                  |   |   |                                                                                                                      |   |   |                                                           |   |   |   |
| Leverage                    ratio                  |   |                                                                  | 4.00   | %(2)   |                                                                                                                      |   | 5.00   | %                                                              |   |   | 8.86 | % |
| Tier                    1 risk-based capital ratio |   |                                                                  | 4.00   |   |                                                                                                                      |   | 6.00   |                                                           |   |   | 9.42 |   |
| Risk-based                    capital ratio        |   |                                                                  | 8.00   |   |                                                                                                                      |   | 10.00  |                                                           |   |   | 10.45 |   |
| **Metro                    United Bank**           |   |                                                                  |   |   |                                                                                                                      |   |   |                                                           |   |   |   |   |
| Leverage                    ratio                  |   |                                                                  | 4.00   | %(3)   |                                                                                                                      |   | 5.00   | %                                                              |   |   | 9.16 | % |
| Tier                    1 risk-based capital ratio |   |                                                                  | 4.00   |   |                                                                                                                      |   | 6.00   |                                                           |   |   | 9.01 |   |
| Risk-based                    capital ratio        |   |                                                                  | 8.00   |   |                                                                                                                      |   | 10.00  |                                                           |   |   | 10.13 |   |

| (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*** |
|------------------------------|-----------------------------------------------------------------------------------------------------|

| Period                                                   |   | Total                  Number of Shares Purchased |    |   | Average                  Price Paid per Share |   |    | Total                  Number of Shares Purchased as Part of Publicly Announced Plan (1) |   |   | Maximum                  Number of Shares That May Yet Be Purchased Under the Plan at the                  End of                  the Period |   |
|----------------------------------------------------------|--------|---------------------------------------------------|---------|--------|-----------------------------------------------|--------|---------|------------------------------------------------------------------------------------------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                     |   |                                              |    |   |                                          |   |    |                                                                                     |   |   |                                                                                                                                          |   |
| July                  1, 2007 to July 31, 2007           |   |                                              | – |   |                                          | $      | – |                                                                                     |   |   | –                                                                                                                                       |   |   |   | – |   |
| August                  1, 2007 to August 31, 2007       |   |                                              | – |   |                                          | $      | – |                                                                                     |   |   | –                                                                                                                                       |   |   |   | 500,000 |   |
| September                  1, 2007 to September 30, 2007 |   |                                              | 36,061  |   |                                          | $      | 16.69   |                                                                                     |   |   | 36,061                                                                                                                                        |   |   |   | 463,939 |   |

----

| **Item 3.** | ***Defaults                  Upon Senior                  Securities*** |
|------------------|-------------------------------------------------------------------------|

|   | Not                  applicable |
|--------|---------------------------------|

| **Item 4.** | ***Submission                  of Matters to a Vote of Security                  Holders*** |
|------------------|---------------------------------------------------------------------------------------------|

|   | Not                  applicable |
|--------|---------------------------------|

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

|   | Not                  applicable |
|--------|---------------------------------|

----

| **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.                                                                                                      |

| *                  Filed herewith.      |
|-----------------------------------------|
| **                  Furnished herewith. |

----

** SIGNATURES**

|                                    |                                        |                                                                                                                        |   |   |
|-----------------------------------------|---------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------|--------|--------|
|                                    | METROCORP                  BANCSHARES, INC. |                                                                                                                        |
|                                    | By:                               | /s/                  George M. Lee                                                                                     |   |
| Date:                  November 8, 2007 |                                        | George                  M. Lee                                                                                         |   |
|                                    |                                        | Chief                  Executive Officer (principal executive officer)                                                 |   |
|                                    |
|                                    |                                        |                                                                                                                        |
| Date:                  November 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.                                                                                                          |

| *                    Filed herewith.     |
|------------------------------------------|
| **                    Furnished herewith |

----