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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



FORM 10-Q

(Mark One)

|  |  |                                                                                                                                     
|- |  | ------------------------------------------------------------------------------------------------------------------------------------
|x |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002
|  |  |                                                                                                                                     
|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.(Exact name of registrant as specified in its charter)

|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|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
(Address of principal executive offices including zip code)

(713) 776-3876
(Registrants telephone number, including area code)



Securities registered pursuant to Section 12(b) of the Act:
None

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $1.00 per share
(Title of class)



Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes
x      No
o.

As of August 12, 2002, the number of outstanding shares of Common Stock,
par value $1.00 per share, was 7,028,412.



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TABLE OF CONTENTS



|                                         |                                                                                               |  |  |  |  |  |  | 
|---------------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I FINANCIAL INFORMATION            
|                                         | Item 1. Condensed Financial Statements.                                                      
|                                         | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                         | Item 3. Quantitative and Qualitative Disclosures about Market Risk.                          
|PART II OTHER INFORMATION               
|                                         | Item 1. Legal Proceedings                                                                    
|                                         | Item 2. Changes in Securities and Use of Proceeds                                            
|                                         | Item 3. Defaults Upon Senior Securities                                                      
|                                         | Item 4. Submission of Matters to a Vote of Security Holders                                  
|                                         | Item 5. Other Information                                                                    
|                                         | Item 6A. Exhibits                                                                            
|                                         | Item 6B. Reports on Form 8-K                                                                 
|SIGNATURES                              
|EXHIBIT INDEX                           
|Certification of Chief Executive Officer
|Certification of Chief Financial Officer



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PART I

FINANCIAL INFORMATION

Item 1. Condensed Financial Statements.

METROCORP BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(Unaudited)

|                                                        |                                                                                                                                                                                                         |                                            |                                      |         |         |          |         |              |         |  |  | 
|------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------------------------------------ | ------- | ------- | -------- | ------- | ------------ | ------- |  |  | 
|                                                        |                                                                                                                                                                                                         |                                            |                                      |         |         | June 30, |         | December 31,
|                                                        |                                                                                                                                                                                                         |                                            |                                      |         |         | 2002     |         | 2001        
|                                                        |                                                                                                                                                                                                         |                                            |                                      |         |         |          |         |             
|                                                        |                                                                                                                                                                                                         |                                            |                                      | ASSETS  |         |          |         |              |         |  |  | 
|Cash and cash equivalents:                              |                                                                                                                                                                                                         |                                            |                                      |         |         |          |         |             
|                                                        | Cash and due from banks                                                                                                                                                                                 |                                            | $                                    | 28,148  |         |          | $       | 34,428       |        
|                                                        | Federal funds sold and other temporary investments                                                                                                                                                      |                                            |                                      | 21,726  |         |          |         | 23,678       |        
|                                                        |                                                                                                                                                                                                         |                                            |                                      |         |         |          |         |             
|                                                        |                                                                                                                                                                                                         | Total cash and cash equivalents            |                                      |         | 49,874  |          |         |              | 58,106  | 
|Investment securities available-for-sale, at fair value |                                                                                                                                                                                                         |                                            | 217,089                              |         |         |          | 173,087 |             
|Other investments                                       |                                                                                                                                                                                                         |                                            | 3,855                                |         |         |          | 3,143   |             
|Loans, net                                              |                                                                                                                                                                                                         |                                            | 495,278                              |         |         |          | 484,242 |             
|Premises and equipment, net                             |                                                                                                                                                                                                         |                                            | 5,320                                |         |         |          | 5,623   |             
|Accrued interest receivable                             |                                                                                                                                                                                                         |                                            | 3,444                                |         |         |          | 3,602   |             
|Deferred income taxes                                   |                                                                                                                                                                                                         |                                            | 4,667                                |         |         |          | 5,471   |             
|Due from customers on acceptances                       |                                                                                                                                                                                                         |                                            | 4,039                                |         |         |          | 4,605   |             
|Other real estate and repossessed assets, net           |                                                                                                                                                                                                         |                                            | 921                                  |         |         |          | 1,025   |             
|Other assets                                            |                                                                                                                                                                                                         |                                            | 1,793                                |         |         |          | 3,270   |             
|                                                        |                                                                                                                                                                                                         |                                            |                                      |         |         |          |         |             
|                                                        |                                                                                                                                                                                                         | Total assets                               |                                      | $       | 786,280 |          |         | $            | 742,174 | 
|                                                        |                                                                                                                                                                                                         |                                            |                                      |         |         |          |         |             
|                                                        |                                                                                                                                                                                                         |                                            | LIABILITIES AND SHAREHOLDERS EQUITY |         |         |          |         |              |         |  | 
|Deposits:                                               |                                                                                                                                                                                                         |                                            |                                      |         |         |          |         |             
|                                                        | Noninterest-bearing                                                                                                                                                                                     |                                            | $                                    | 132,326 |         |          | $       | 127,299      |        
|                                                        | Interest-bearing                                                                                                                                                                                        |                                            |                                      | 513,423 |         |          |         | 515,452      |        
|                                                        |                                                                                                                                                                                                         |                                            |                                      |         |         |          |         |             
|                                                        |                                                                                                                                                                                                         | Total deposits                             |                                      |         | 645,749 |          |         |              | 642,751 | 
|Other borrowings                                        |                                                                                                                                                                                                         |                                            | 60,349                               |         |         |          | 25,195  |             
|Accrued interest payable                                |                                                                                                                                                                                                         |                                            | 700                                  |         |         |          | 863     |             
|Acceptances outstanding                                 |                                                                                                                                                                                                         |                                            | 4,039                                |         |         |          | 4,605   |             
|Other liabilities                                       |                                                                                                                                                                                                         |                                            | 4,911                                |         |         |          | 3,531   |             
|                                                        |                                                                                                                                                                                                         |                                            |                                      |         |         |          |         |             
|                                                        |                                                                                                                                                                                                         | Total liabilities                          |                                      |         | 715,748 |          |         |              | 676,945 | 
|Shareholders equity:                                   |                                                                                                                                                                                                         |                                            |                                      |         |         |          |         |             
|                                                        | Preferred stock $1.00 par value, 2,000,000 shares authorized;
none of which are issued and outstanding                                                                                                  |                                            |                                      |        |         |          |         |             |        
|                                                        | Common stock, $1.00 par value, 20,000,000 shares authorized;
7,187,423 shares are issued and 7,021,592 shares and 7,017,823
shares are outstanding at June 30, 2002 and December 31, 2001,
respectively |                                            |                                      | 7,187   |         |          |         | 7,187        |        
|                                                        | Additional paid-in-capital                                                                                                                                                                              |                                            |                                      | 26,209  |         |          |         | 26,144       |        
|                                                        | Retained earnings                                                                                                                                                                                       |                                            |                                      | 36,273  |         |          |         | 32,834       |        
|                                                        | Accumulated other comprehensive income                                                                                                                                                                  |                                            |                                      | 2,191   |         |          |         | 376          |        
|                                                        | Treasury stock, at cost                                                                                                                                                                                 |                                            |                                      | (1,328  | )       |          |         | (1,312       | )      
|                                                        |                                                                                                                                                                                                         |                                            |                                      |         |         |          |         |             
|                                                        |                                                                                                                                                                                                         | Total shareholders equity                 |                                      |         | 70,532  |          |         |              | 65,229  | 
|                                                        |                                                                                                                                                                                                         |                                            |                                      |         |         |          |         |             
|                                                        |                                                                                                                                                                                                         | Total liabilities and shareholders equity |                                      | $       | 786,280 |          |         | $            | 742,174 | 
|                                                        |                                                                                                                                                                                                         |                                            |                                      |         |         |          |         |             

See accompanying notes to condensed consolidated financial statements

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METROCORP BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)

|                                                    |                                                    |            |                           |       |                      |        |                    |        |       |        |        |        |       |        |        |        |       |        | 
|--------------------------------------------------- | -------------------------------------------------- | ---------- | ------------------------- | ----- | -------------------- | ------ | ------------------ | ------ | ----- | ------ | ------ | ------ | ----- | ------ | ------ | ------ | ----- | ------ | 
|                                                    |                                                    |            |                           |       | For the three months |        | For the six months
|                                                    |                                                    |            |                           |       | ended June 30,       |        | ended June 30,    
|                                                    |                                                    |            |                           |       |                      |        |                   
|                                                    |                                                    |            |                           |       | 2002                 |        | 2001               |        | 2002  |        | 2001  
|                                                    |                                                    |            |                           |       |                      |        |                    |        |       |        |       
|Interest income:                                    |                                                    |            |                           |       |                      |        |                    |        |       |        |        |        |       |        |        |       
|                                                    | Loans                                              |            | $                         | 9,592 |                      |        | $                  | 11,207 |       |        | $      | 18,853 |       |        | $      | 23,226 |      
|                                                    | Investment securities:                             |            |                           |       |                      |        |                    |        |       |        |        |        |       |        |        |        |      
|                                                    |                                                    | Taxable    |                           |       | 2,360                |        |                    |        | 2,120 |        |        |        | 4,358 |        |        |        | 4,228 |       
|                                                    |                                                    | Tax-exempt |                           |       | 304                  |        |                    |        | 291   |        |        |        | 614   |        |        |        | 560   |       
|                                                    | Federal funds sold and other temporary investments |            |                           | 98    |                      |        |                    | 578    |       |        |        | 216    |       |        |        | 1,245  |      
|                                                    |                                                    |            |                           |       |                      |        |                    |        |       |        |        |        |       |        |        |       
|                                                    |                                                    |            | Total interest income     |       |                      | 12,354 |                    |        |       | 14,196 |        |        |       | 24,041 |        |        |       | 29,259 | 
|                                                    |                                                    |            |                           |       |                      |        |                    |        |       |        |        |        |       |        |        |       
|Interest expense:                                   |                                                    |            |                           |       |                      |        |                    |        |       |        |        |        |       |        |        |       
|                                                    | Time deposits                                      |            |                           | 2,581 |                      |        |                    | 5,151  |       |        |        | 5,541  |       |        |        | 10,811 |      
|                                                    | Demand and savings deposits                        |            |                           | 580   |                      |        |                    | 951    |       |        |        | 1,181  |       |        |        | 2,129  |      
|                                                    | Other borrowings                                   |            |                           | 435   |                      |        |                    | 315    |       |        |        | 765    |       |        |        | 627    |      
|                                                    |                                                    |            |                           |       |                      |        |                    |        |       |        |        |        |       |        |        |       
|                                                    |                                                    |            | Total interest expense    |       |                      | 3,596  |                    |        |       | 6,417  |        |        |       | 7,487  |        |        |       | 13,567 | 
|                                                    |                                                    |            |                           |       |                      |        |                    |        |       |        |        |        |       |        |        |       
|Net interest income                                 |                                                    |            | 8,758                     |       |                      |        | 7,779              |        |       |        | 16,554 |        |       |        | 15,692 |       
|Provision for loan losses                           |                                                    |            | 970                       |       |                      |        | 356                |        |       |        | 1,570  |        |       |        | 783    |       
|                                                    |                                                    |            |                           |       |                      |        |                    |        |       |        |        |        |       |        |        |       
|Net interest income after provision for loan losses |                                                    |            | 7,788                     |       |                      |        | 7,423              |        |       |        | 14,984 |        |       |        | 14,909 |       
|                                                    |                                                    |            |                           |       |                      |        |                    |        |       |        |        |        |       |        |        |       
|Noninterest income:                                 |                                                    |            |                           |       |                      |        |                    |        |       |        |        |        |       |        |        |       
|                                                    | Service charges                                    |            |                           | 1,740 |                      |        |                    | 1,620  |       |        |        | 3,397  |       |        |        | 3,142  |      
|                                                    | Other loan-related fees                            |            |                           | 326   |                      |        |                    | 363    |       |        |        | 912    |       |        |        | 563    |      
|                                                    | Letters of credit commissions and fees             |            |                           | 153   |                      |        |                    | 184    |       |        |        | 279    |       |        |        | 349    |      
|                                                    | Gain on sale of investment securities, net         |            |                           | 32    |                      |        |                    | 106    |       |        |        | 34     |       |        |        | 176    |      
|                                                    | Other noninterest income                           |            |                           | 46    |                      |        |                    | 66     |       |        |        | 151    |       |        |        | 212    |      
|                                                    |                                                    |            |                           |       |                      |        |                    |        |       |        |        |        |       |        |        |       
|                                                    |                                                    |            | Total noninterest income  |       |                      | 2,297  |                    |        |       | 2,339  |        |        |       | 4,773  |        |        |       | 4,442  | 
|                                                    |                                                    |            |                           |       |                      |        |                    |        |       |        |        |        |       |        |        |       
|Noninterest expense:                                |                                                    |            |                           |       |                      |        |                    |        |       |        |        |        |       |        |        |       
|                                                    | Employee compensation and benefits                 |            |                           | 3,857 |                      |        |                    | 3,504  |       |        |        | 7,427  |       |        |        | 6,823  |      
|                                                    | Occupancy                                          |            |                           | 1,241 |                      |        |                    | 1,321  |       |        |        | 2,476  |       |        |        | 2,687  |      
|                                                    | Other real estate, net                             |            |                           | 155   |                      |        |                    | (10    | )     |        |        | 418    |       |        |        | (3     | )    
|                                                    | Professional fees                                  |            |                           | 226   |                      |        |                    | 368    |       |        |        | 399    |       |        |        | 764    |      
|                                                    | Advertising                                        |            |                           | 77    |                      |        |                    | 104    |       |        |        | 167    |       |        |        | 218    |      
|                                                    | Other noninterest expense                          |            |                           | 1,336 |                      |        |                    | 1,333  |       |        |        | 2,628  |       |        |        | 2,570  |      
|                                                    |                                                    |            |                           |       |                      |        |                    |        |       |        |        |        |       |        |        |       
|                                                    |                                                    |            | Total noninterest expense |       |                      | 6,892  |                    |        |       | 6,620  |        |        |       | 13,515 |        |        |       | 13,059 | 
|                                                    |                                                    |            |                           |       |                      |        |                    |        |       |        |        |        |       |        |        |       
|Income before provision for income taxes            |                                                    |            | 3,193                     |       |                      |        | 3,142              |        |       |        | 6,242  |        |       |        | 6,292  |       
|Provision for income taxes                          |                                                    |            | 1,003                     |       |                      |        | 1,019              |        |       |        | 1,961  |        |       |        | 2,088  |       
|                                                    |                                                    |            |                           |       |                      |        |                    |        |       |        |        |        |       |        |        |       
|Net income                                          |                                                    | $          | 2,190                     |       |                      | $      | 2,123              |        |       | $      | 4,281  |        |       | $      | 4,204  |       
|                                                    |                                                    |            |                           |       |                      |        |                    |        |       |        |        |        |       |        |        |       
|Earnings per common share:                          |                                                    |            |                           |       |                      |        |                    |        |       |        |        |        |       |        |        |       
|                                                    | Basic                                              |            | $                         | 0.31  |                      |        | $                  | 0.30   |       |        | $      | 0.61   |       |        | $      | 0.60   |      
|                                                    | Diluted                                            |            | $                         | 0.30  |                      |        | $                  | 0.30   |       |        | $      | 0.60   |       |        | $      | 0.60   |      
|Weighted average shares outstanding:                |                                                    |            |                           |       |                      |        |                    |        |       |        |        |        |       |        |        |       
|                                                    | Basic                                              |            |                           | 7,020 |                      |        |                    | 6,990  |       |        |        | 7,020  |       |        |        | 6,986  |      
|                                                    | Diluted                                            |            |                           | 7,140 |                      |        |                    | 7,001  |       |        |        | 7,140  |       |        |        | 7,014  |      

See accompanying notes to condensed consolidated financial statements

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METROCORP BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)

|                                               |                                                              |                                                      |       |                      |       |                    |       |      |      |      |       |  |       |   |       |  |     | 
|---------------------------------------------- | ------------------------------------------------------------ | ---------------------------------------------------- | ----- | -------------------- | ----- | ------------------ | ----- | ---- | ---- | ---- | ----- |  | ----- | - | ----- |  | --- | 
|                                               |                                                              |                                                      |       | For the three months |       | For the six months
|                                               |                                                              |                                                      |       | ended June 30,       |       | ended June 30,    
|                                               |                                                              |                                                      |       |                      |       |                   
|                                               |                                                              |                                                      |       | 2002                 |       | 2001               |       | 2002 |      | 2001
|                                               |                                                              |                                                      |       |                      |       |                    |       |      |      |     
|Net income                                     |                                                              | $                                                    | 2,190 |                      |       | $                  | 2,123 |      |      | $    | 4,281 |  |       | $ | 4,204 | 
|Other comprehensive income (loss), net of tax: |                                                              |                                                      |       |                      |       |                    |       |      |      |      |       |  |       |   |       | 
|                                               | Unrealized gain (loss) on investment securities, net of tax: |                                                      |       |                      |       |                    |       |      |      |      |       |  |       |   |       |  |    
|                                               |                                                              | Unrealized holding gain (loss) arising during period |       |                      | 2,179 |                    |       |      | (497 | )    |       |  | 1,815 |   |       |  | 607 | 
|                                               |                                                              |                                                      |       |                      |       |                    |       |      |      |      |       |  |       |   |       | 
|Total comprehensive income                     |                                                              | $                                                    | 4,369 |                      |       | $                  | 1,626 |      |      | $    | 6,096 |  |       | $ | 4,811 | 
|                                               |                                                              |                                                      |       |                      |       |                    |       |      |      |      |       |  |       |   |       | 

METROCORP BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
For The Six Months Ended June 30, 2002 and 2001
(In thousands)
(Unaudited)

|                            |  |              |       |            |  |          |       |               |  |        |        |          |  |       |        |   |  |             |       |  |  |   |        |   |  |   |        |  
|--------------------------- |  | ------------ | ----- | ---------- |  | -------- | ----- | ------------- |  | ------ | ------ | -------- |  | ----- | ------ | - |  | ----------- | ----- |  |  | - | ------ | - |  | - | ------ | -
|                            |  |              |       |            |  |          |       |               |  |        |        |          |  |       |        |   |  | Accumulated |       |  |  |   |        |   |  |  
|                            |  | Common Stock |       | Additional |  |          |       |               |  | Other  |        | Treasury |  |       |        |  
|                            |  |              |       | Paid-in    |  | Retained |       | Comprehensive |  | Stock  |        |          |  |      
|                            |  | Shares       |       | At Par     |  | Capital  |       | Earnings      |  | Income |        | At Cost  |  | Total
|                            |  |              |       |            |  |          |       |               |  |        |        |          |  |      
|Balance at January 1, 2001  |  |              | 6,979 |            |  | $        | 7,180 |               |  | $      | 26,033 |          |  | $     | 26,936 |   |  | $           | 121   |  |  | $ | (1,569 | ) |  | $ | 58,701 |  
|Issuance of common stock    |  |              | 2     |            |  |          | 2     |               |  |        | 35     |          |  |       |       |   |  |             |      |  |  |   |       |   |  |   | 37     |  
|Re-issuance of common stock |  |              |      |            |  |          |      |               |  |        |       |          |  |       |       |   |  |             |      |  |  |   | 88     |   |  |   | 88     |  
|Other comprehensive income  |  |              |      |            |  |          |      |               |  |        |       |          |  |       |       |   |  |             | 607   |  |  |   |       |   |  |   | 607    |  
|Net income                  |  |              |      |            |  |          |      |               |  |        |       |          |  |       | 4,204  |   |  |             |      |  |  |   |       |   |  |   | 4,204  |  
|Dividend payment            |  |              |      |            |  |          |      |               |  |        |       |          |  |       | (838   | ) |  |             |      |  |  |   |       |   |  |   | (838   | )
|                            |  |              |       |            |  |          |       |               |  |        |        |          |  |       |        |   |  |             |       |  |  |   |        |   |  |   |        |  
|Balance at June 30, 2001    |  |              | 6,981 |            |  | $        | 7,182 |               |  | $      | 26,068 |          |  | $     | 30,302 |   |  | $           | 728   |  |  | $ | (1,481 | ) |  | $ | 62,799 |  
|                            |  |              |       |            |  |          |       |               |  |        |        |          |  |       |        |   |  |             |       |  |  |   |        |   |  |   |        |  
|Balance at January 1, 2002  |  |              | 7,017 |            |  | $        | 7,187 |               |  | $      | 26,144 |          |  | $     | 32,834 |   |  | $           | 376   |  |  | $ | (1,312 | ) |  | $ | 65,229 |  
|Repurchase of common stock  |  |              | (14   | )          |  |          |      |               |  |        |       |          |  |       |       |   |  |             |      |  |  |   | (162   | ) |  |   | (162   | )
|Sale of treasury stock      |  |              | 18    |            |  |          |      |               |  |        | 65     |          |  |       |       |   |  |             |      |  |  |   | 146    |   |  |   | 211    |  
|Other comprehensive income  |  |              |      |            |  |          |      |               |  |        |       |          |  |       |       |   |  |             | 1,815 |  |  |   |       |   |  |   | 1,815  |  
|Net income                  |  |              |      |            |  |          |      |               |  |        |       |          |  |       | 4,281  |   |  |             |      |  |  |   |       |   |  |   | 4,281  |  
|Dividend payment            |  |              |      |            |  |          |      |               |  |        |       |          |  |       | (842   | ) |  |             |      |  |  |   |       |   |  |   | (842   | )
|                            |  |              |       |            |  |          |       |               |  |        |        |          |  |       |        |   |  |             |       |  |  |   |        |   |  |   |        |  
|Balance at June 30, 2002    |  |              | 7,021 |            |  | $        | 7,187 |               |  | $      | 26,209 |          |  | $     | 36,273 |   |  | $           | 2,191 |  |  | $ | (1,328 | ) |  | $ | 70,532 |  
|                            |  |              |       |            |  |          |       |               |  |        |        |          |  |       |        |   |  |             |       |  |  |   |        |   |  |   |        |  

See accompanying notes to condensed consolidated financial statements

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METROCORP BANCSHARES, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

|                                                 |                                                                                             |                  |                                        |                                                     |        |                    |         |         |       |      |         |  
|------------------------------------------------ | ------------------------------------------------------------------------------------------- | ---------------- | -------------------------------------- | --------------------------------------------------- | ------ | ------------------ | ------- | ------- | ----- | ---- | ------- | -
|                                                 |                                                                                             |                  |                                        |                                                     |        | For The Six Months
|                                                 |                                                                                             |                  |                                        |                                                     |        | Ended June 30,    
|                                                 |                                                                                             |                  |                                        |                                                     |        |                   
|                                                 |                                                                                             |                  |                                        |                                                     |        | 2002               |         | 2001   
|                                                 |                                                                                             |                  |                                        |                                                     |        |                    |         |        
|Cash flow from operating activities:             |                                                                                             |                  |                                        |                                                     |        |                    |         |        
|                                                 | Net income                                                                                  |                  | $                                      | 4,281                                               |        |                    | $       | 4,204   |      
|                                                 | Adjustments to reconcile net income to net cash provided by (used in)
operating activities: |                  |                                        |                                                     |        |                    |         |         |      
|                                                 |                                                                                             |                  | Depreciation                           |                                                     |        | 709                |         |         |       | 881  |        
|                                                 |                                                                                             |                  | Provision for loan losses              |                                                     |        | 1,570              |         |         |       | 783  |        
|                                                 |                                                                                             |                  | Gain on securities sales               |                                                     |        | (32                | )       |         |       | (176 | )      
|                                                 |                                                                                             |                  | Loss on sale of other real estate      |                                                     |        | 390                |         |         |       |     |        
|                                                 |                                                                                             |                  | Gain on sale of premises and equipment |                                                     |        | (5                 | )       |         |       |     |        
|                                                 |                                                                                             |                  | Deferred loan fees                     |                                                     |        | 201                |         |         |       | 117  |        
|                                                 |                                                                                             |                  | Deferred income taxes                  |                                                     |        | (96                | )       |         |       | (159 | )      
|                                                 |                                                                                             |                  | Changes in:                            |                                                     |        |                    |         |         |       |      |        
|                                                 |                                                                                             |                  |                                        | Accrued interest receivable                         |        |                    | 158     |         |       |      | 599     |  
|                                                 |                                                                                             |                  |                                        | Accrued interest payable                            |        |                    | (163    | )       |       |      | (780    | )
|                                                 |                                                                                             |                  |                                        | Income taxes payable                                |        |                    | (2      | )       |       |      | (360    | )
|                                                 |                                                                                             |                  |                                        | Other liabilities                                   |        |                    | 1,382   |         |       |      | (14,761 | )
|                                                 |                                                                                             |                  |                                        | Other assets                                        |        |                    | 1,477   |         |       |      | 147     |  
|                                                 |                                                                                             |                  |                                        |                                                     |        |                    |         |        
|                                                 |                                                                                             |                  |                                        | Net cash provided by (used in) operating activities |        |                    | 9,870   |         |       |      | (9,505  | )
|                                                 |                                                                                             |                  |                                        |                                                     |        |                    |         |        
|Cash flows from investing activities:            |                                                                                             |                  |                                        |                                                     |        |                    |         |        
|                                                 | Purchases of securities available-for-sale                                                  |                  |                                        | (83,220                                             | )      |                    |         | (38,264 | )    
|                                                 | Proceeds from sales, maturities and principal paydowns of securities
available-for-sale     |                  |                                        | 41,253                                              |        |                    |         | 30,389  |      
|                                                 | Net change in loans                                                                         |                  |                                        | (13,477                                             | )      |                    |         | 12,689  |      
|                                                 | Proceeds from sale of other real estate                                                     |                  |                                        | 384                                                 |        |                    |         | 6       |      
|                                                 | Proceeds from sale of premises and equipment                                                |                  |                                        | 5                                                   |        |                    |         |        |      
|                                                 | Purchases of premises and equipment                                                         |                  |                                        | (406                                                | )      |                    |         | (276    | )    
|                                                 |                                                                                             |                  |                                        |                                                     |        |                    |         |        
|                                                 |                                                                                             |                  |                                        | Net cash (used in) provided by investing activities |        |                    | (55,461 | )       |       |      | 4,544   |  
|                                                 |                                                                                             |                  |                                        |                                                     |        |                    |         |        
|Cash flows from financing activities:            |                                                                                             |                  |                                        |                                                     |        |                    |         |        
|                                                 | Net change in:                                                                              |                  |                                        |                                                     |        |                    |         |         |      
|                                                 |                                                                                             | Deposits         |                                        |                                                     | 2,998  |                    |         |         | 4,404 |     
|                                                 |                                                                                             | Other borrowings |                                        |                                                     | 35,154 |                    |         |         | 548   |     
|                                                 | Proceeds from issuance of common stock                                                      |                  |                                        |                                                    |        |                    |         | 37      |      
|                                                 | Treasury stock purchased, net                                                               |                  |                                        | 49                                                  |        |                    |         | 88      |      
|                                                 | Dividends paid                                                                              |                  |                                        | (842                                                | )      |                    |         | (837    | )    
|                                                 |                                                                                             |                  |                                        |                                                     |        |                    |         |        
|                                                 |                                                                                             |                  |                                        | Net cash provided by financing activities           |        |                    | 37,359  |         |       |      | 4,240   |  
|                                                 |                                                                                             |                  |                                        |                                                     |        |                    |         |        
|Net decrease in cash and cash equivalents        |                                                                                             |                  | (8,232                                 | )                                                   |        |                    | (721    | )      
|Cash and cash equivalents at beginning of period |                                                                                             |                  | 58,106                                 |                                                     |        |                    | 92,226  |        
|                                                 |                                                                                             |                  |                                        |                                                     |        |                    |         |        
|Cash and cash equivalents at end of period       |                                                                                             | $                | 49,874                                 |                                                     |        | $                  | 91,505  |        
|                                                 |                                                                                             |                  |                                        |                                                     |        |                    |         |        

See accompanying notes to condensed consolidated financial statements

5



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METROCORP BANCSHARES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The unaudited condensed consolidated financial statements include the
accounts of MetroCorp Bancshares, Inc. (the Company) and its wholly-owned
subsidiary MetroBank, National Association (the Bank). All material
intercompany accounts and transactions have been eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements
were prepared in accordance with accounting principles generally accepted in
the United States of America for interim financial information and with the
instructions for Form 10-Q. In the opinion of management, the unaudited
condensed consolidated financial statements reflect all adjustments, consisting
only of normal and recurring adjustments, necessary to present fairly the
Companys consolidated financial position at June 30, 2002, the Companys
consolidated results of operations for the three and six months ended June 30,
2002 and 2001, consolidated cash flows for the six months ended June 30, 2002
and 2001, consolidated comprehensive income for the three and six months ended
June 30, 2002 and 2001,and consolidated changes in shareholders equity for the
six months ended June 30, 2002 and 2001. Interim period results are not
necessarily indicative of results for a full-year period.

Certain amounts applicable to the prior periods have been reclassified to
conform to the classifications currently followed. Such reclassifications do
not affect earnings.

These financial statements and the notes thereto should be read in
conjunction with the Companys annual report on Form 10-K for the year ended
December 31, 2001.

2. EARNINGS PER COMMON SHARE

Basic earnings per share (EPS) is computed by dividing net income
available to common shareholders by the weighted-average number of common
shares outstanding during the period. Diluted EPS is computed by dividing net
income available to common shareholders by the weighted-average number of
potentially dilutive common shares outstanding during the period. Potentially
dilutive common shares are computed using the treasury stock method.

|                                            |         |   |                                          |       |                    |   |       |       |      |   |       |       |  |   |       |       | 
|------------------------------------------- | ------- | - | ---------------------------------------- | ----- | ------------------ | - | ----- | ----- | ---- | - | ----- | ----- |  | - | ----- | ----- | 
|                                            |         |   | For The Three Months                     |       | For The Six Months
|                                            |         |   | Ended June 30,                           |       | Ended June 30,    
|                                            |         |   |                                          |       |                   
|                                            |         |   | 2002                                     |       | 2001               |   | 2002  |       | 2001
|                                            |         |   |                                          |       |                    |   |       |       |     
|                                            |         |   | (In thousands, except per share amounts)
|Net income available to common shareholders |         | $ | 2,190                                    |       |                    | $ | 2,123 |       |      | $ | 4,281 |       |  | $ | 4,204 |      
|                                            |         |   |                                          |       |                    |   |       |       |      |   |       |       |  |   |       |      
|Weighted-average common shares outstanding: |         |   |                                          |       |                    |   |       |       |      |   |       |       |  |   |       |      
|                                            | Basic   |   |                                          | 7,020 |                    |   |       | 6,990 |      |   |       | 7,020 |  |   |       | 6,986 | 
|                                            | Diluted |   |                                          | 7,140 |                    |   |       | 7,001 |      |   |       | 7,140 |  |   |       | 7,014 | 
|Earnings per common share:                  |         |   |                                          |       |                    |   |       |       |      |   |       |       |  |   |       |      
|                                            | Basic   |   | $                                        | 0.31  |                    |   | $     | 0.30  |      |   | $     | 0.61  |  |   | $     | 0.60  | 
|                                            | Diluted |   | $                                        | 0.30  |                    |   | $     | 0.30  |      |   | $     | 0.60  |  |   | $     | 0.60  | 

3. SIGNIFICANT ACCOUNTING PRONOUNCEMENTS

In July 2001, FASB issued SFAS 142, Goodwill and Other Intangible Assets.
The statement requires that goodwill no longer be amortized to earnings, but
instead be reviewed for impairment. The amortization of goodwill ceases upon adoption of the statement,
which for most companies, was to be January 1, 2002. The

6



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##### Table of Contents



adoption of this statement on January 1, 2002 did not have a material impact on
the Companys financial position or results of operations as the Company does
not have any goodwill.

In July 2001, FASB issued SFAS 143, Accounting for Asset Retirement
Obligations. The statement requires entities to record the fair value of a
liability for an asset retirement obligation in the period in which it is
incurred. When the liability is initially recorded, the entity capitalizes a
cost by increasing the carrying amount of the related long-lived asset. Over
time, the liability is accreted to its present value each period, and the
capitalized cost is depreciated over the useful life of the related asset. Upon
settlement of the liability, an entity either settles the obligation for its
recorded amount or incurs a gain or loss upon settlement. The standard is
effective for fiscal years beginning after September 15, 2002, with earlier
application encouraged. Management believes adopting this statement will not
have a material impact on the Companys financial position or results of
operations.

In August 2001, the FASB issued SFAS 144, Accounting for Impairment or
Disposal of Long-lived Assets.SFAS 144 addresses financial accounting and
reporting for the impairment of long-lived assets and for long-lived assets to
be disposed of. It supersedes, with exceptions, SFAS 121, Accounting for the
Impairment of Long-lived assets and Long-lived Assets to be Disposed Of,and is
effective for fiscal years beginning after December 15, 2001. Management
believes adopting this statement will not have a material impact on the
Companys financial position or results of operations.




Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations



| |                                                               
| | --------------------------------------------------------------
| | Special Cautionary Notice Regarding Forward-looking Statements

Statements and financial discussion and analysis contained in this Quarterly Report on Form 10-Q and documents
incorporated herein by reference that are not historical facts are forward-looking statements made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements, describe the
Companys future plans, strategies and expectations, are based on assumptions and involve a number of risks and
uncertainties, many of which are beyond the Companys control. The important factors that could cause actual results
to differ materially from the results, performance or achievements expressed or implied by the forward-looking
statements include, without limitation:



| |  |  | Changes in interest rates and market prices, which could reduce the
Companys net interest margins, asset valuations and expense
expectations;                                                                                                                                                        
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Changes in the levels of loan prepayments and the resulting effects
on the value of the Companys loan portfolio;                                                                                                                                                                                     
|
| |  |  | Changes in local economic and business conditions which adversely
affect the ability of the Companys customers to transact profitable
business with the Company, including the ability of borrowers to repay
their loans according to their terms or a change in the value of the
related collateral;
|
| |  |  | Increased competition for deposits and loans adversely affecting rates and terms;                                                                                                                                                                                                                     
|
| |  |  | The Companys ability to identify suitable acquisition candidates;                                                                                                                                                                                                                                    
|
| |  |  | The timing, impact and other uncertainties of the Companys ability
to enter new markets successfully and capitalize on growth
opportunities;                                                                                                                                                         
|
| |  |  | Increased credit risk in the Companys assets and increased
operating risk caused by a material change in commercial, consumer
and/or real estate loans as a percentage of the total loan portfolio;                                                                                                  
|
| |  |  | The failure of assumptions underlying the establishment of and
provisions made to the allowance for loan losses;                                                                                                                                                                                      
|
| |  |  | Changes in the availability of funds resulting in increased costs
or reduced liquidity;                                                                                                                                                                                                               

7



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| |  |  | 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 our present
and future banking and other subsidiaries, including changes in tax
requirements and tax rates.

The Company undertakes no obligation to publicly update or otherwise
revise any forward-looking statements, unless the securities laws require the
Company to do so. All written or oral forward-looking statements attributable
to the Company are expressly qualified in their entirety by these cautionary
statements.

Overview

Net income for the three months ended June 30, 2002 was $2.2 million, up
$67,000 or 3.2% from the same quarter in 2001. The Companys basic and diluted
earnings per share ("EPS") for the three months ended June 30, 2002 was $0.31 and $0.30, respectively,
compared to $0.30 for the same quarter in 2001.

Net income for the six months ended June 30, 2002 was $4.3 million, up
$77,000 or 1.8% from the same period in 2001. The Companys basic and diluted
EPS for the six months ended June 30, 2002 was $0.61 and $0.60, respectively,
compared to $0.60 for the same period in 2001.

At June 30, 2002, total assets were $786.3 million, up $44.1 million or
5.9% from $742.2 million at December 31, 2001. This was primarily due to
increased investment securities funded by cash and other borrowings as part of
the Companys strategy to maintain earning asset growth during the period.
Investment securities at June 30, 2002 were $217.1 million, up $44.0 million or
25.4% from $173.1 million at December 31, 2001. Net loans at June 30, 2002
were $495.3 million, up $11.0 million or 2.3% from $484.2 at December 31, 2001.
Total deposits at June 30, 2002 were $645.7 million, up $3.0 million or 0.5%
from $642.8 million at December 31, 2001. Other borrowings at June 30, 2002
were $60.3 million, up $35.1 million from $25.2 million at December 31, 2001.

The Companys return on average assets (ROAA) for the three months ended
June 30, 2002 and 2001 was 1.14% and 1.18%, respectively. The decrease in ROAA
for the three months ended June 30, 2002 compared to the same period in 2001
was primarily the result of relatively flat earnings over increased assets in
2002.

Shareholders equity at June 30, 2002 was $70.5 million compared with
$65.2 million at December 31, 2001, an increase of $5.3 million or 5.9%,
primarily the result of year to date 2002 net earnings and an increase in other
comprehensive income (unrealized gains in the market value of investment
securities). The return on average shareholders equity (ROAE) for the three
months ended June 30, 2002 was 12.82% compared with 13.73% for the same period
in 2001. The decrease in ROAE was primarily the result of relatively flat
earnings over increased equity in 2002.

Results of Operations

Net Interest Income and the Net Interest Margin.For the three months
ended June 30, 2002, net interest income, before the provision for loan losses,
was $8.8 million, up $1.0 million or 12.6% from $7.8 million for the same
quarter in 2001. The net interest margin for the quarter ended June 30, 2002
was 4.82%, up 18 basis points from 4.64% for the same quarter in 2001. The
increases in net interest income and the net interest margin for the quarter
ended June 30, 2002 compared to the same quarter in 2001 were primarily due to
the lower interest rates in 2002 resulting in significantly lower interest
expense on interest-bearing liabilities.

For the six months ended June 30, 2002, net interest income, before the
provision for loan losses, was $16.6 million, up $900,000 or 5.5% from $15.7
million for the same period in 2001. The net interest margin for the six months
ended June 30, 2002 was 4.69% compared to 4.70% for the same
period in 2001. The net interest margin
remained relatively unchanged during this period primarily due to a decrease in the yield on interest-earning
assets combined with a $38.4 million increase in earning assets, partially offset by a decrease in the rate
paid on interest-bearing liabilities.

8



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Total Interest Income.Total interest income for the three months ended
June 30, 2002 was $12.4 million, down $1.8 million or 13.0% from $14.2 million
for the same quarter in 2001. The decrease was primarily due to lower interest
rates in 2002 compared to 2001. The loan portfolio is heavily weighted toward
variable rate loans that reprice as the market prime rate moves, and
therefore, is sensitive to interest rate movement. At June 30, 2002, $407.1
million or 79.7% of the total loan portfolio was comprised of variable rate
loans.

Total interest income for the six months ended June 30, 2002 was $24.0
million, down $5.3 million or 17.8% from $29.3 million for the same period in
2001. The decrease was primarily due to lower overall interest rate yield on
the loan portfolio in 2002 compared to 2001.

Interest Income from Loans.Interest income from loans for the three
months ended June 30, 2002 was $9.6 million, down $1.6 million or 14.4% from
$11.2 million for the same period in 2001. For the three months ended June 30,
2002, the average yield on loans was 7.74%, compared to 9.57% for the same
period in 2001. The average yield on loans for the three months ended June 30,
2002 of 7.74%, which was 299 basis points above the prime rate, was supported
by interest rate floors on approximately 55.7% of the loan portfolio that
carried a weighted average yield of 7.18% at June 30, 2002.

Interest income from loans for the six months ended June 30, 2002 was
$18.9 million, down $4.4 million or 18.8% from $23.2 million for the same
period in 2001. For the six months ended June 30, 2002, the average yield on
loans was 7.71%, compared to 9.91% for the same period in 2001. The lower
interest income from loans in 2002, compared to 2001, was primarily the result
of significantly lower market interest rates in 2002. Additional
factors included
an increase in nonaccrual loans (primarily in the first quarter of 2002),
refinancing of existing loans, and lower interest rates on new loan production.

Interest Income from Investments.Interest income from investments for
the three months ended June 30, 2002 was $2.8 million, down $200,000 or 7.6%
compared to $3.0 million for the same period in 2001, primarily due to lower
interest rates in 2002. For the three months ended June 30, 2002, the average
yield on investments (securities, Federal Funds sold and other temporary
investments) was 4.78% compared to 5.89% for the same period in 2001.

Interest income from investments for the six months ended June 30, 2002
was $5.2 million, down $800,000 or 14.0% compared to $6.0 million for the same
period in 2001, primarily due to lower interest rates in 2002. For the six
months ended June 30, 2002, the average yield on investments was 4.79% compared
to 6.06% for the same period in 2001.

Earning Assets.For the three months ended June 30, 2002, total earning
assets averaged $728.6 million with an average yield of 6.80%, compared to
$673.4 million with an average yield of 8.46% for the same period in 2001.
This represented an increase in average earning assets of $55.2 million for the
three months ended June 30, 2002 compared with the same period in 2001, and a
decrease in average yield of 166 basis points.

For the six months ended June 30, 2002, total earning assets averaged
$711.6 million with and average yield of 6.81%, compared to $673.2 million with
an average yield of 8.76% for the same period in 2001. This represented an
increase in average earning assets of $38.4 million for the six months ended
June 30, 2002 compared with the same period in 2001, and a decrease in average
yield of 195 basis points.

Total Interest Expense.Total interest expense for the three months ended
June 30, 2002 was $3.6 million, down $2.8 million or 44.0% compared to $6.4
million for the same period in 2001. The decrease in total interest expense
for the three months ended June 30, 2002 compared to the same period in 2001
was primarily the result of lower market interest rates in 2002 that
contributed to lower rates paid for interest-bearing deposits.

Total interest expense for the six months ended June 30, 2002 was $7.5
million, down $6.1 million or 44.8% compared to $13.6 million for the same
period in 2001. The decrease in total interest expense for the six months
ended June 30, 2002 compared to the same period in 2001 was primarily the
result of lower interest rates paid for interest-bearing deposits, lower volume
of certificates of deposit, and certificates of deposit with shorter terms and
at lower rates. The certificate of deposit portfolio repricing cycles from
higher interest rates in 2001 caught up with the lower interest rates in 2002
primarily during the first quarter of 2002. Many of these deposits either

9



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##### Table of Contents



renewed at the lower 2002 rates with terms of six-months to one-year or
converted to transaction-based non-maturing accounts that reprice monthly.

Interest Expense on Deposits.Interest paid on interest-bearing deposits
for the three months ended June 30, 2002 was $3.2 million, down $2.9 million or
48.2% compared to $6.1 million for the same period in 2001. This was primarily
due to decreases in the rates paid for interest-bearing deposits. Average
interest-bearing deposits for the three months ended June 30, 2002 were $510.9
million compared with average interest-bearing deposits for the same period in
2001 of $519.0 million, a decrease of $8.1 million or 1.6%. The average rate
paid on interest-bearing deposits for the three months ended June 30, 2002 was
2.48% compared with the average rate for the same three months in 2001 at
4.71%, a decrease of 223 basis points.

Interest paid on interest-bearing deposits for the six months ended June
30, 2002 was $6.7 million, down $6.2 million or 48.1% compared to $12.9 million
for the same period in 2001. This was primarily due to decreases in the rates
paid for interest-bearing deposits. Average interest-bearing deposits for the
six months ended June 30, 2002 were $510.7 million compared with average
interest-bearing deposits for the same period in 2001 of $519.2 million, a
decrease of $8.5 million or 1.6%. The average rate paid on interest-bearing
deposits for the six months ended June 30, 2002 was 2.66% compared with the
average rate for the same six months in 2001 at 5.03%, a decrease of 237 basis
points.

Interest Expense on Borrowed Funds.Interest paid on borrowed funds for
the three months ended June 30, 2002 was $435,000 compared to $315,000 for the
same period in 2001, an increase of $120,000 or 38.1%. Average borrowed funds
for the three months ended June 30, 2002 were $49.5 million compared with
average borrowed funds for the same period in 2001 of $25.5 million, an
increase of $24.0 million or 94.1%. The increase in borrowed funds reflected
advances obtained from the Federal Home Loan Bank of Dallas (FHLB) to fund
securities investments. The average rate paid on borrowed funds for the three
months ended June 30, 2002 was 3.52%, compared to the same three months in 2001
at 4.96%, a decrease of 144 basis points.

Interest paid on borrowed funds for the six months ended June 30, 2002 was
$765,000 compared to $627,000 for the same period in 2001, an increase of
$138,000 or 22.0%. Average borrowed funds for the six months ended June 30,
2002 were $39.4 million compared with average borrowed funds for the same
period in 2001 of $25.6 million, an increase of $13.8 million or 53.9%. The
average rate paid on borrowed funds for the six months ended June 30, 2002 was
3.92%, compared to the same six months in 2001 at 4.93%, a decrease of 101
basis points.

10



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##### Table of Contents



The following tables present the total dollar amount of interest income
from average interest-earning assets and the resultant yields, as well as the
interest expense on average interest-bearing liabilities, expressed both in
dollars and rates for the periods indicated. No tax-equivalent adjustments
were made and all average balances are daily average balances. Nonaccruing
loans have been included in the table as loans having a zero yield.

|                                                                |                                                    |                                            |         |                               |         |                                     |         |          |       |          |        |             |      |          |         |          |         |   |         |        |       |  |        |      |      |   |      |  
|--------------------------------------------------------------- | -------------------------------------------------- | ------------------------------------------ | ------- | ----------------------------- | ------- | ----------------------------------- | ------- | -------- | ----- | -------- | ------ | ----------- | ---- | -------- | ------- | -------- | ------- | - | ------- | ------ | ----- |  | ------ | ---- | ---- | - | ---- | -
|                                                                |                                                    |                                            |         |                               |         | For The Three Months Ended June 30,
|                                                                |                                                    |                                            |         |                               |         |                                    
|                                                                |                                                    |                                            |         |                               |         | 2002                                |         | 2001    
|                                                                |                                                    |                                            |         |                               |         |                                     |         |         
|                                                                |                                                    |                                            |         |                               |         | 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                                        |                                            | $       | 496,971                       |         |                                     | $       | 9,592    |       |          |        | 7.74        | %    |          | $       | 469,795  |         |   | $       | 11,207 |       |  |        | 9.57 | %   
|                                                                | Taxable securities                                 |                                            |         | 187,645                       |         |                                     |         | 2,360    |       |          |        | 5.04        |      |          |         | 127,198  |         |   |         | 2,120  |       |  |        | 6.69 |     
|                                                                | Tax-exempt securities                              |                                            |         | 24,446                        |         |                                     |         | 304      |       |          |        | 4.99        |      |          |         | 23,419   |         |   |         | 291    |       |  |        | 4.98 |     
|                                                                | Federal funds sold and other temporary investments |                                            |         | 19,571                        |         |                                     |         | 98       |       |          |        | 2.01        |      |          |         | 53,008   |         |   |         | 578    |       |  |        | 4.38 |     
|                                                                |                                                    |                                            |         |                               |         |                                     |         |          |       |          |        |             |      |          |         |          |         |   |         |        |       |  |        |     
|                                                                |                                                    |                                            |         | Total interest-earning assets |         |                                     | 728,633 |          |       |          | 12,354 |             |      |          | 6.80    | %        |         |   | 673,420 |        |       |  | 14,196 |      |      |   | 8.46 | %
|                                                                | Less allowance for loan losses                     |                                            |         | (8,848                        | )       |                                     |         |          |       |          |        |             |      |          |         | (9,287   | )       |   |         |        |       |  |        |      |     
|                                                                |                                                    |                                            |         |                               |         |                                     |         |          |       |          |        |             |      |          |         |          |         |   |         |        |       |  |        |     
|Total interest-earning assets, net of allowance for
loan losses |                                                    |                                            | 719,785 |                               |         |                                     |         |          |       |          |        |             |      |          | 664,133 |          |         |   |         |        |       |  |        |     
|Noninterest-earning assets                                      |                                                    |                                            | 50,903  |                               |         |                                     |         |          |       |          |        |             |      |          | 57,715  |          |         |   |         |        |       |  |        |     
|                                                                |                                                    |                                            |         |                               |         |                                     |         |          |       |          |        |             |      |          |         |          |         |   |         |        |       |  |        |     
|                                                                |                                                    | Total assets                               |         | $                             | 770,688 |                                     |         |          |       |          |        |             |      |          |         | $        | 721,848 |   |         |        |       |  |        |      |      |  
|                                                                |                                                    |                                            |         |                               |         |                                     |         |          |       |          |        |             |      |          |         |          |         |   |         |        |       |  |        |     
|Liabilities and shareholders equity                            |                                                    |                                            |         |                               |         |                                     |         |          |       |          |        |             |      |          |         |          |         |   |         |        |       |  |        |     
|Interest-bearing liabilities:                                   |                                                    |                                            |         |                               |         |                                     |         |          |       |          |        |             |      |          |         |          |         |   |         |        |       |  |        |     
|                                                                | Interest-bearing demand deposits                   |                                            | $       | 70,271                        |         |                                     |         | 216      |       |          |        | 1.23        | %    |          | $       | 52,164   |         |   |         | 324    |       |  |        | 2.49 | %   
|                                                                | Saving and money market accounts                   |                                            |         | 111,519                       |         |                                     |         | 364      |       |          |        | 1.31        |      |          |         | 101,281  |         |   |         | 627    |       |  |        | 2.48 |     
|                                                                | Time deposits                                      |                                            |         | 329,074                       |         |                                     |         | 2,581    |       |          |        | 3.15        |      |          |         | 365,524  |         |   |         | 5,151  |       |  |        | 5.65 |     
|Federal funds purchased and other repurchase agreements         |                                                    |                                            | 23,993  |                               |         |                                     | 120     |          |       |          | 2.01   |             |      |          |        |          |         |   |        |        |       |  |       |     
|                                                                | Other borrowings                                   |                                            |         | 25,505                        |         |                                     |         | 315      |       |          |        | 4.95        |      |          |         | 25,473   |         |   |         | 315    |       |  |        | 4.96 |     
|                                                                |                                                    |                                            |         |                               |         |                                     |         |          |       |          |        |             |      |          |         |          |         |   |         |        |       |  |        |     
|                                                                |                                                    | Total interest-bearing liabilities         |         |                               | 560,362 |                                     |         |          | 3,596 |          |        |             | 2.57 | %        |         |          | 544,442 |   |         |        | 6,417 |  |        |      | 4.73 | %
|Noninterest-bearing liabilities:                                |                                                    |                                            |         |                               |         |                                     |         |          |       |          |        |             |      |          |         |          |         |   |         |        |       |  |        |     
|                                                                | Noninterest-bearing demand deposits                |                                            |         | 132,524                       |         |                                     |         |          |       |          |        |             |      |          |         | 103,496  |         |   |         |        |       |  |        |      |     
|                                                                | Other liabilities                                  |                                            |         | 9,264                         |         |                                     |         |          |       |          |        |             |      |          |         | 11,736   |         |   |         |        |       |  |        |      |     
|                                                                |                                                    |                                            |         |                               |         |                                     |         |          |       |          |        |             |      |          |         |          |         |   |         |        |       |  |        |     
|                                                                |                                                    | Total liabilities                          |         |                               | 702,150 |                                     |         |          |       |          |        |             |      |          |         |          | 659,674 |   |         |        |       |  |        |      |      |  
|Shareholders equity                                            |                                                    |                                            | 68,538  |                               |         |                                     |         |          |       |          |        |             |      |          | 62,174  |          |         |   |         |        |       |  |        |     
|                                                                |                                                    |                                            |         |                               |         |                                     |         |          |       |          |        |             |      |          |         |          |         |   |         |        |       |  |        |     
|                                                                |                                                    | Total liabilities and shareholders equity |         | $                             | 770,688 |                                     |         |          |       |          |        |             |      |          |         | $        | 721,848 |   |         |        |       |  |        |      |      |  
|                                                                |                                                    |                                            |         |                               |         |                                     |         |          |       |          |        |             |      |          |         |          |         |   |         |        |       |  |        |     
|Net interest income                                             |                                                    |                                            |         |                               |         | $                                   | 8,758   |          |       |          |        |             |      |          |         |          |         | $ | 7,779   |        |       |  |        |     
|                                                                |                                                    |                                            |         |                               |         |                                     |         |          |       |          |        |             |      |          |         |          |         |   |         |        |       |  |        |     
|Net interest spread                                             |                                                    |                                            |         |                               |         |                                     |         |          |       |          | 4.23   | %           |      |          |         |          |         |   |         |        |       |  | 3.73   | %   
|Net interest margin                                             |                                                    |                                            |         |                               |         |                                     |         |          |       |          | 4.82   | %           |      |          |         |          |         |   |         |        |       |  | 4.64   | %   



---

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

11



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##### Table of Contents



|                                                                |                                                    |                                            |         |                               |         |                                   |         |          |       |          |        |             |      |          |         |          |         |   |         |        |        |  |        |      |      |   |      |  
|--------------------------------------------------------------- | -------------------------------------------------- | ------------------------------------------ | ------- | ----------------------------- | ------- | --------------------------------- | ------- | -------- | ----- | -------- | ------ | ----------- | ---- | -------- | ------- | -------- | ------- | - | ------- | ------ | ------ |  | ------ | ---- | ---- | - | ---- | -
|                                                                |                                                    |                                            |         |                               |         | For The Six Months Ended June 30,
|                                                                |                                                    |                                            |         |                               |         |                                  
|                                                                |                                                    |                                            |         |                               |         | 2002                              |         | 2001    
|                                                                |                                                    |                                            |         |                               |         |                                   |         |         
|                                                                |                                                    |                                            |         |                               |         | 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                                        |                                            | $       | 493,406                       |         |                                   | $       | 18,853   |       |          |        | 7.71        | %    |          | $       | 472,479  |         |   | $       | 23,226 |        |  |        | 9.91 | %   
|                                                                | Taxable securities                                 |                                            |         | 171,682                       |         |                                   |         | 4,358    |       |          |        | 5.12        |      |          |         | 126,183  |         |   |         | 4,228  |        |  |        | 6.76 |     
|                                                                | Tax-exempt securities                              |                                            |         | 24,687                        |         |                                   |         | 614      |       |          |        | 5.02        |      |          |         | 22,153   |         |   |         | 560    |        |  |        | 5.10 |     
|                                                                | Federal funds sold and other temporary investments |                                            |         | 21,874                        |         |                                   |         | 216      |       |          |        | 1.99        |      |          |         | 52,416   |         |   |         | 1,245  |        |  |        | 4.79 |     
|                                                                |                                                    |                                            |         |                               |         |                                   |         |          |       |          |        |             |      |          |         |          |         |   |         |        |        |  |        |     
|                                                                |                                                    |                                            |         | Total interest-earning assets |         |                                   | 711,649 |          |       |          | 24,041 |             |      |          | 6.81    | %        |         |   | 673,231 |        |        |  | 29,259 |      |      |   | 8.76 | %
|                                                                | Less allowance for loan losses                     |                                            |         | (8,902                        | )       |                                   |         |          |       |          |        |             |      |          |         | (9,279   | )       |   |         |        |        |  |        |      |     
|                                                                |                                                    |                                            |         |                               |         |                                   |         |          |       |          |        |             |      |          |         |          |         |   |         |        |        |  |        |     
|Total interest-earning assets, net of allowance for
loan losses |                                                    |                                            | 702,747 |                               |         |                                   |         |          |       |          |        |             |      |          | 663,952 |          |         |   |         |        |        |  |        |     
|Noninterest-earning assets                                      |                                                    |                                            | 52,298  |                               |         |                                   |         |          |       |          |        |             |      |          | 56,572  |          |         |   |         |        |        |  |        |     
|                                                                |                                                    |                                            |         |                               |         |                                   |         |          |       |          |        |             |      |          |         |          |         |   |         |        |        |  |        |     
|                                                                |                                                    | Total assets                               |         | $                             | 755,045 |                                   |         |          |       |          |        |             |      |          |         | $        | 720,524 |   |         |        |        |  |        |      |      |  
|                                                                |                                                    |                                            |         |                               |         |                                   |         |          |       |          |        |             |      |          |         |          |         |   |         |        |        |  |        |     
|Liabilities and shareholders equity                            |                                                    |                                            |         |                               |         |                                   |         |          |       |          |        |             |      |          |         |          |         |   |         |        |        |  |        |     
|Interest-bearing liabilities:                                   |                                                    |                                            |         |                               |         |                                   |         |          |       |          |        |             |      |          |         |          |         |   |         |        |        |  |        |     
|                                                                | Interest-bearing demand deposits                   |                                            | $       | 68,554                        |         |                                   |         | 443      |       |          |        | 1.30        | %    |          | $       | 50,804   |         |   |         | 692    |        |  |        | 2.75 | %   
|                                                                | Saving and money market accounts                   |                                            |         | 111,476                       |         |                                   |         | 738      |       |          |        | 1.34        |      |          |         | 98,680   |         |   |         | 1,437  |        |  |        | 2.94 |     
|                                                                | Time deposits                                      |                                            |         | 330,717                       |         |                                   |         | 5,541    |       |          |        | 3.38        |      |          |         | 369,728  |         |   |         | 10,811 |        |  |        | 5.90 |     
|Federal funds purchased and other repurchase agreements         |                                                    |                                            | 13,868  |                               |         |                                   | 138     |          |       |          | 2.01   |             |      |          |        |          |         |   |        |        |        |  |       |     
|                                                                | Other borrowings                                   |                                            |         | 25,532                        |         |                                   |         | 627      |       |          |        | 4.95        |      |          |         | 25,647   |         |   |         | 627    |        |  |        | 4.93 |     
|                                                                |                                                    |                                            |         |                               |         |                                   |         |          |       |          |        |             |      |          |         |          |         |   |         |        |        |  |        |     
|                                                                |                                                    | Total interest-bearing liabilities         |         |                               | 550,147 |                                   |         |          | 7,487 |          |        |             | 2.74 | %        |         |          | 544,859 |   |         |        | 13,567 |  |        |      | 5.02 | %
|Noninterest-bearing liabilities:                                |                                                    |                                            |         |                               |         |                                   |         |          |       |          |        |             |      |          |         |          |         |   |         |        |        |  |        |     
|                                                                | Noninterest-bearing demand deposits                |                                            |         | 128,202                       |         |                                   |         |          |       |          |        |             |      |          |         | 103,103  |         |   |         |        |        |  |        |      |     
|                                                                | Other liabilities                                  |                                            |         | 8,869                         |         |                                   |         |          |       |          |        |             |      |          |         | 11,277   |         |   |         |        |        |  |        |      |     
|                                                                |                                                    |                                            |         |                               |         |                                   |         |          |       |          |        |             |      |          |         |          |         |   |         |        |        |  |        |     
|                                                                |                                                    | Total liabilities                          |         |                               | 687,218 |                                   |         |          |       |          |        |             |      |          |         |          | 659,239 |   |         |        |        |  |        |      |      |  
|Shareholders equity                                            |                                                    |                                            | 67,827  |                               |         |                                   |         |          |       |          |        |             |      |          | 61,285  |          |         |   |         |        |        |  |        |     
|                                                                |                                                    |                                            |         |                               |         |                                   |         |          |       |          |        |             |      |          |         |          |         |   |         |        |        |  |        |     
|                                                                |                                                    | Total liabilities and shareholders equity |         | $                             | 755,045 |                                   |         |          |       |          |        |             |      |          |         | $        | 720,524 |   |         |        |        |  |        |      |      |  
|                                                                |                                                    |                                            |         |                               |         |                                   |         |          |       |          |        |             |      |          |         |          |         |   |         |        |        |  |        |     
|Net interest income                                             |                                                    |                                            |         |                               |         | $                                 | 16,554  |          |       |          |        |             |      |          |         |          |         | $ | 15,692  |        |        |  |        |     
|                                                                |                                                    |                                            |         |                               |         |                                   |         |          |       |          |        |             |      |          |         |          |         |   |         |        |        |  |        |     
|Net interest spread                                             |                                                    |                                            |         |                               |         |                                   |         |          |       |          | 4.07   | %           |      |          |         |          |         |   |         |        |        |  | 3.74   | %   
|Net interest margin                                             |                                                    |                                            |         |                               |         |                                   |         |          |       |          | 4.69   | %           |      |          |         |          |         |   |         |        |        |  | 4.70   | %   



---

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

12



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##### Table of Contents



The following tables present the dollar amount of changes in interest
income and interest expense for the major components of interest-earning assets
and interest-bearing liabilities and distinguishes between changes in
outstanding balances and changes in interest rates for the three and six months
ended June 30, 2002 compared with the three and six months ended June 30, 2001.
For purposes of this table, changes attributable to both rate and volume have
been allocated to rate.

|                              |                                            |                                                         |                                              |       |                             |       |      |      |        |        |   |     |        |        |  
|----------------------------- | ------------------------------------------ | ------------------------------------------------------- | -------------------------------------------- | ----- | --------------------------- | ----- | ---- | ---- | ------ | ------ | - | --- | ------ | ------ | -
|                              |                                            |                                                         |                                              |       | Three Months Ended June 30,
|                              |                                            |                                                         |                                              |       | 2002 vs. 2001              
|                              |                                            |                                                         |                                              |       |                            
|                              |                                            |                                                         |                                              |       | Increase (Decrease)         |       |      |      |       
|                              |                                            |                                                         |                                              |       | Due To                      |       |      |      |       
|                              |                                            |                                                         |                                              |       |                             |       |      |      |       
|                              |                                            |                                                         |                                              |       | Volume                      |       | Rate |      | Total 
|                              |                                            |                                                         |                                              |       |                             |       |      |      |       
|                              |                                            |                                                         |                                              |       | (Dollars in thousands)     
|INTEREST- EARNING ASSETS:     |                                            |                                                         |                                              |       |                             |       |      |      |        |        |   |    
|                              |                                            | Loans                                                   |                                              | $     | 648                         |       |      | $    | (2,263 | )      |   | $   | (1,615 | )     
|                              |                                            | Securities                                              |                                              |       | 1,118                       |       |      |      | (865   | )      |   |     | 253    |       
|                              |                                            | Federal funds sold and other temporary investments      |                                              |       | (364                        | )     |      |      | (116   | )      |   |     | (480   | )     
|                              |                                            |                                                         |                                              |       |                             |       |      |      |        |        |   |    
|                              |                                            |                                                         | Total increase (decrease) in interest income |       |                             | 1,402 |      |      |        | (3,244 | ) |     |        | (1,842 | )
|INTEREST-BEARING LIABILITIES: |                                            |                                                         |                                              |       |                             |       |      |      |        |        |   |    
|                              |                                            | Interest-bearing demand deposits                        |                                              |       | 112                         |       |      |      | (220   | )      |   |     | (108   | )     
|                              |                                            | Saving and money market accounts                        |                                              |       | 64                          |       |      |      | (327   | )      |   |     | (263   | )     
|                              |                                            | Time deposits                                           |                                              |       | (226                        | )     |      |      | (2,344 | )      |   |     | (2,570 | )     
|                              |                                            | Federal funds purchased and other repurchase agreements |                                              |       | 70                          |       |      |      | 50     |        |   |     | 120    |       
|                              |                                            | Other borrowings                                        |                                              |       |                            |       |      |      |       |        |   |     |       |       
|                              |                                            |                                                         |                                              |       |                             |       |      |      |        |        |   |    
|                              |                                            |                                                         | Total (decrease) in interest expense         |       |                             | 20    |      |      |        | (2,841 | ) |     |        | (2,821 | )
|                              |                                            |                                                         |                                              |       |                             |       |      |      |        |        |   |    
|                              | Increase (decrease) in net interest income |                                                         | $                                            | 1,382 |                             |       | $    | (403 | )      |        | $ | 979 |       
|                              |                                            |                                                         |                                              |       |                             |       |      |      |        |        |   |    

|                              |                                            |                                                         |                                              |       |                           |       |      |        |        |        |   |     |        |        |  
|----------------------------- | ------------------------------------------ | ------------------------------------------------------- | -------------------------------------------- | ----- | ------------------------- | ----- | ---- | ------ | ------ | ------ | - | --- | ------ | ------ | -
|                              |                                            |                                                         |                                              |       | Six Months Ended June 30,
|                              |                                            |                                                         |                                              |       | 2002 vs. 2001            
|                              |                                            |                                                         |                                              |       |                          
|                              |                                            |                                                         |                                              |       | Increase (Decrease)       |       |      |        |       
|                              |                                            |                                                         |                                              |       | Due To                    |       |      |        |       
|                              |                                            |                                                         |                                              |       |                           |       |      |        |       
|                              |                                            |                                                         |                                              |       | Volume                    |       | Rate |        | Total 
|                              |                                            |                                                         |                                              |       |                           |       |      |        |       
|                              |                                            |                                                         |                                              |       | (Dollars in thousands)   
|INTEREST- EARNING ASSETS:     |                                            |                                                         |                                              |       |                           |       |      |        |        |        |   |    
|                              |                                            | Loans                                                   |                                              | $     | 1,029                     |       |      | $      | (5,402 | )      |   | $   | (4,373 | )     
|                              |                                            | Securities                                              |                                              |       | 1,859                     |       |      |        | (1,675 | )      |   |     | 184    |       
|                              |                                            | Federal funds sold and other temporary investments      |                                              |       | (725                      | )     |      |        | (304   | )      |   |     | (1,029 | )     
|                              |                                            |                                                         |                                              |       |                           |       |      |        |        |        |   |    
|                              |                                            |                                                         | Total increase (decrease) in interest income |       |                           | 2,163 |      |        |        | (7,381 | ) |     |        | (5,218 | )
|INTEREST-BEARING LIABILITIES: |                                            |                                                         |                                              |       |                           |       |      |        |        |        |   |    
|                              |                                            | Interest-bearing demand deposits                        |                                              |       | 242                       |       |      |        | (491   | )      |   |     | (249   | )     
|                              |                                            | Saving and money market accounts                        |                                              |       | 186                       |       |      |        | (885   | )      |   |     | (699   | )     
|                              |                                            | Time deposits                                           |                                              |       | (454                      | )     |      |        | (4,816 | )      |   |     | (5,270 | )     
|                              |                                            | Federal funds purchased and other repurchase agreements |                                              |       | 80                        |       |      |        | 58     |        |   |     | 138    |       
|                              |                                            | Other borrowings                                        |                                              |       | (3                        | )     |      |        | 3      |        |   |     |       |       
|                              |                                            |                                                         |                                              |       |                           |       |      |        |        |        |   |    
|                              |                                            |                                                         | Total (decrease) in interest expense         |       |                           | 51    |      |        |        | (6,131 | ) |     |        | (6,080 | )
|                              |                                            |                                                         |                                              |       |                           |       |      |        |        |        |   |    
|                              | Increase (decrease) in net interest income |                                                         | $                                            | 2,112 |                           |       | $    | (1,250 | )      |        | $ | 862 |       
|                              |                                            |                                                         |                                              |       |                           |       |      |        |        |        |   |    

Provision for Loan Losses.Provisions for loan losses are charged to
income to bring the Companys allowance for loan losses to a level which
management considers adequate to absorb probable losses inherent in the loan
portfolio. The provision for loan losses for the three months ended June 30,
2002 was $970,000, up $614,000 compared with $356,000 for the same quarter in
2001. The provision for loan losses for the six months ended June 30, 2002 was
$1.6 million, up $787,000 compared with $783,000 for the same period in 2001.
This was the result of continued asset quality assessment coupled with a newly
established loan grading system. The allowance for loan losses as a percent of
total loans (net of unearned interest, deferred fees, and discounts) at June
30, 2002 and December 31, 2001 was 1.80% and 1.81%, respectively.

13



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##### Table of Contents



Noninterest Income.Total noninterest income for the three months ended
June 30, 2002 was $2.3 million, relatively unchanged compared to the same
quarter in 2001. For the three months ended June 30, 2002, service charges on
deposit accounts were $1.7 million and represented 75.8% of total noninterest
income, compared to $1.6 million for the same period in 2001 when service
charges on deposit accounts represented 69.3% of total noninterest income.
This was primarily the result of increased transaction accounts. For the three
months ended June 30, 2002, all other noninterest income was $557,000, down
$162,000 from $719,000 for the same quarter in 2001, primarily due to lower
volume of letters of credit and a lower net gain on sale of investment
securities.

Total noninterest income for the six months ended June 30, 2002 was $4.8
million, up $331,000 or 7.5% from $4.4 million for the same period in 2001.
The increase was primarily linked to increased transaction accounts that have
provided additional service charge and NSF fee income as a result of continued
relationship banking initiatives. Additionally, management has discouraged the
waiving of loan late fees, NSF fees, and other service-related fees in order to
maximize noninterest income potential.

The following table presents, for the periods indicated, the major
categories of noninterest income:

|                                           |                          |   |                        |       |                    |   |       |       |      |   |       |       |  |   |       |       | 
|------------------------------------------ | ------------------------ | - | ---------------------- | ----- | ------------------ | - | ----- | ----- | ---- | - | ----- | ----- |  | - | ----- | ----- | 
|                                           |                          |   | For The Three Months   |       | For The Six Months
|                                           |                          |   | Ended June 30,         |       | Ended June 30,    
|                                           |                          |   |                        |       |                   
|                                           |                          |   | 2002                   |       | 2001               |   | 2002  |       | 2001
|                                           |                          |   |                        |       |                    |   |       |       |     
|                                           |                          |   | (Dollars in thousands)
|Service charges                            |                          | $ | 1,740                  |       |                    | $ | 1,620 |       |      | $ | 3,397 |       |  | $ | 3,142 |      
|Other loan-related fees                    |                          |   | 326                    |       |                    |   | 363   |       |      |   | 912   |       |  |   | 563   |      
|Letters of credit commissions and fees     |                          |   | 153                    |       |                    |   | 184   |       |      |   | 279   |       |  |   | 349   |      
|Gain on sale of investment securities, net |                          |   | 32                     |       |                    |   | 106   |       |      |   | 34    |       |  |   | 176   |      
|Other noninterest income                   |                          |   | 46                     |       |                    |   | 66    |       |      |   | 151   |       |  |   | 212   |      
|                                           |                          |   |                        |       |                    |   |       |       |      |   |       |       |  |   |       |      
|                                           | Total noninterest income |   | $                      | 2,297 |                    |   | $     | 2,339 |      |   | $     | 4,773 |  |   | $     | 4,442 | 
|                                           |                          |   |                        |       |                    |   |       |       |      |   |       |       |  |   |       |      

Noninterest Expense.Total noninterest expense for the three months ended
June 30, 2002 was $6.9 million, up $272,000 or 4.1% compared to $6.6 million
for the same quarter in 2001. Total noninterest expense for the six months
ended June 30, 2002 was $13.5 million, up $456,000 or 3.5% compared to $13.1
million for the same period in 2001. The increased noninterest expense in both
periods was primarily due to higher employee compensation and benefits as a
result of increases in officer-level and exempt staff in addition to normal
annual salary increases which became effective in May 2002. All other
non-staff expense for the three months ended June 30, 2002 was $3.0 million,
down $81,000 or 2.6% from $3.1 million for the same quarter in 2001. All
non-staff expense for the six months ended June 30, 2002 was $6.1 million, down
$148,000 or 2.4% from $6.2 million for the same period in 2001. The decreases
in all other operating expense for both periods were primarily in the
categories of occupancy, professional fees, and advertising that were partially
offset by losses incurred in other real estate. The losses incurred
in other real estate were related to liscensing issues on one
property that significantly reduced the market value of the property.

Employee compensation and benefits expense for the three months ended June
30, 2002 was $3.9 million, up $353,000 or 10.1% from $3.5 million for the same
quarter in 2001. Employee compensation and benefits expense for the six months
ended June 30, 2002 was $7.4 million, up $604,000 or 8.9% from $6.8 million for
the same period in 2001. This included a 20% increase in the cost of
medical and dental health benefits. The full-time equivalent (FTE) employees at June
30, 2002 were 294.2 compared with FTE of 291.6 at June 30, 2001, an overall
increase of 2.6 FTE.

The Companys efficiency ratio for the three months ended June 30, 2002
was 62.34%, improved from 65.43% for the same quarter in 2001. The Companys
efficiency ratio for the six months ended June 30, 2002 was 63.37%, improved
from 64.86% for the same period in 2001. The efficiency ratio improvement in
both periods was primarily due to higher net interest income (as a result of
significantly lower interest expense) and higher noninterest income that was
partially offset by higher noninterest expense.

14



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##### Table of Contents



The following table presents, for the periods indicated, the major
categories of noninterest expense:

|                                   |                           |                            |       |                        |       |                    |       |       |       |      |       |       |        |   |       |       |        | 
|---------------------------------- | ------------------------- | -------------------------- | ----- | ---------------------- | ----- | ------------------ | ----- | ----- | ----- | ---- | ----- | ----- | ------ | - | ----- | ----- | ------ | 
|                                   |                           |                            |       | For The Three Months   |       | For The Six Months
|                                   |                           |                            |       | Ended June 30,         |       | Ended June 30,    
|                                   |                           |                            |       |                        |       |                   
|                                   |                           |                            |       | 2002                   |       | 2001               |       | 2002  |       | 2001
|                                   |                           |                            |       |                        |       |                    |       |       |       |     
|                                   |                           |                            |       | (Dollars in thousands)
|Employee compensation and benefits |                           | $                          | 3,857 |                        |       | $                  | 3,504 |       |       | $    | 7,427 |       |        | $ | 6,823 |      
|Non-staff expenses:                |                           |                            |       |                        |       |                    |       |       |       |      |       |       |        |   |       |      
|                                   | Occupancy                 |                            |       | 1,241                  |       |                    |       | 1,321 |       |      |       | 2,476 |        |   |       | 2,687 |       
|                                   | Other real estate, net    |                            |       | 155                    |       |                    |       | (10   | )     |      |       | 418   |        |   |       | (3    | )     
|                                   | Professional fees         |                            |       | 226                    |       |                    |       | 368   |       |      |       | 399   |        |   |       | 764   |       
|                                   | Advertising               |                            |       | 77                     |       |                    |       | 104   |       |      |       | 167   |        |   |       | 218   |       
|                                   | Printing and supplies     |                            |       | 131                    |       |                    |       | 144   |       |      |       | 275   |        |   |       | 251   |       
|                                   | Telecommunications        |                            |       | 138                    |       |                    |       | 142   |       |      |       | 292   |        |   |       | 313   |       
|                                   | Other noninterest expense |                            |       | 1,067                  |       |                    |       | 1,047 |       |      |       | 2,061 |        |   |       | 2,006 |       
|                                   |                           |                            |       |                        |       |                    |       |       |       |      |       |       |        |   |       |      
|                                   |                           | Total non-staff expenses   |       |                        | 3,035 |                    |       |       | 3,116 |      |       |       | 6,088  |   |       |       | 6,236  | 
|                                   |                           |                            |       |                        |       |                    |       |       |       |      |       |       |        |   |       |      
|                                   |                           | Total noninterest expenses |       | $                      | 6,892 |                    |       | $     | 6,620 |      |       | $     | 13,515 |   |       | $     | 13,059 | 
|                                   |                           |                            |       |                        |       |                    |       |       |       |      |       |       |        |   |       |      

Financial Condition

Loan Portfolio.Net loans at June 30, 2002 were $495.3 million, up $11.1
million or 2.3% from $484.2 million at December 31, 2001. The increase was
primarily due to new loan funding that exceeded loan prepayments and scheduled
repayments. The majority of the loan growth during the six months ended June
30, 2002, was in the commercial real estate mortgage category which grew $9.0
million. Commercial and industrial loans grew $3.0 million during the same
period. Historically, the Company has experienced slower loan demand in the
first and second quarters with loan demand increasing in the latter half of the
year. At June 30, 2002 and December 31, 2001, the ratio of total loans to
total deposits was 78.10% and 76.72%, respectively. At the same dates, total
loans represented 64.1% and 66.4% of total assets, respectively.

The following table summarizes the loan portfolio of the Company by type
of loan:

|                          |                                                      |   |                        |         |                         |  |        |       |         |   |         |         |   |  |        |       | 
|------------------------- | ---------------------------------------------------- | - | ---------------------- | ------- | ----------------------- |  | ------ | ----- | ------- | - | ------- | ------- | - |  | ------ | ----- | 
|                          |                                                      |   | As of June 30, 2002    |         | As of December 31, 2001
|                          |                                                      |   |                        |         |                        
|                          |                                                      |   | Amount                 |         | Percent                 |  | Amount |       | Percent
|                          |                                                      |   |                        |         |                         |  |        |       |        
|                          |                                                      |   | (Dollars in thousands)
|Commercial and industrial |                                                      | $ | 315,874                |         |                         |  | 61.85  | %     |         | $ | 312,899 |         |   |  | 62.67  | %    
|Real estate mortgage:     |                                                      |   |                        |         |                         |  |        |       |         |   |         |         |   |  |        |      
|                          | Residential                                          |   |                        | 7,427   |                         |  |        | 1.45  |         |   |         | 7,833   |   |  |        | 1.57  | 
|                          | Commercial                                           |   |                        | 140,068 |                         |  |        | 27.43 |         |   |         | 131,022 |   |  |        | 26.24 | 
|Real estate construction: |                                                      |   |                        |         |                         |  |        |       |         |   |         |         |   |  |        |      
|                          | Residential                                          |   |                        | 8,708   |                         |  |        | 1.71  |         |   |         | 5,962   |   |  |        | 1.19  | 
|                          | Commercial                                           |   |                        | 27,307  |                         |  |        | 5.35  |         |   |         | 30,215  |   |  |        | 6.05  | 
|Consumer and other        |                                                      |   | 11,311                 |         |                         |  | 2.21   |       |         |   | 11,364  |         |   |  | 2.28   |      
|                          |                                                      |   |                        |         |                         |  |        |       |         |   |         |         |   |  |        |      
|Gross loans               |                                                      |   | 510,695                |         |                         |  | 100.00 | %     |         |   | 499,295 |         |   |  | 100.00 | %    
|                          |                                                      |   |                        |         |                         |  |        |       |         |   |         |         |   |  |        |      
|                          | Less: unearned discounts, interest and deferred fees |   |                        | (6,337  | )                       |  |        |       |         |   |         | (6,150  | ) |  |        |       | 
|                          |                                                      |   |                        |         |                         |  |        |       |         |   |         |         |   |  |        |      
|Total loans               |                                                      |   | 504,358                |         |                         |  |        |       |         |   | 493,145 |         |   |  |        |      
|                          | Less: allowance for loan losses                      |   |                        | (9,080  | )                       |  |        |       |         |   |         | (8,903  | ) |  |        |       | 
|                          |                                                      |   |                        |         |                         |  |        |       |         |   |         |         |   |  |        |      
|Loans, net                |                                                      | $ | 495,278                |         |                         |  |        |       |         | $ | 484,242 |         |   |  |        |      
|                          |                                                      |   |                        |         |                         |  |        |       |         |   |         |         |   |  |        |      

Nonperforming Assets.Net nonperforming assets at June 30, 2002 were
$10.7 million, an increase of $7.0 million from net nonperforming assets of
$3.7 million at December 31, 2001. The $7.0 million increase in net
nonperforming assets was primarily due to an increase of $8.0 million in
nonaccrual loans, an increase of $397,000 in loans accruing 90 days or more
past due, that was partially offset by a $104,000 decrease in other real estate
and other repossessed assets, and an increase in the government guaranteed
portions on loans of $1.3 million. The increase in nonperforming assets
primarily occurred during the first quarter of 2002 with approximately $8.0
million added to nonaccrual loans as part of an identification process that
represented an integral part of an overall effort to

15



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##### Table of Contents



improve credit quality. Facilitating this process, loan review and problem
resolution staff were added during the first and second quarters of 2002.
While further deterioration in the loan portfolio is possible, management is
continuing its risk assessment and resolution program. In addition, management
is focusing its attention on minimizing the Banks credit risk through more
diversified business development avenues.

The ratios for net nonperforming assets to total loans and other real
estate were 2.12% and 0.76% at June 30, 2002 and December 31, 2001,
respectively. The ratios for net nonperforming assets to total assets were
1.36% and 0.50% for the same periods, respectively. These figures are net of
the loan portions guaranteed from the United States Department of Commerces
Small Business Administration (the SBA), the Export Import Bank of the United
States (the Ex-Im Bank), an independent agency of the United States
Government, and the Overseas Chinese Community Guaranty Fund (OCCGF), an
agency sponsored by the government of Taiwan, which were $3.2 million at June
30, 2002 compared to $1.8 million at December 31, 2001.

Prior to 2001, the Company was actively involved in the origination and
sale of certain federally guaranteed loans into the secondary market with
servicing retained. Under the terms of the SBA program, the Company is
required to repurchase any loans which may become nonperforming. As a result
of this requirement, the Companys nonperforming loans may increase during the
period of time in which any loan repurchased is either restored to an accrual
status or the Company files a claim with the SBA for the guaranteed portion of
the loan.

The following table presents information regarding nonperforming assets at
the periods indicated:

|                                                                  |                                                                 |   |                        |        |                   |   |       |        |  
|----------------------------------------------------------------- | --------------------------------------------------------------- | - | ---------------------- | ------ | ----------------- | - | ----- | ------ | -
|                                                                  |                                                                 |   | As of                  |        | As of            
|                                                                  |                                                                 |   | June 30, 2002          |        | December 31, 2001
|                                                                  |                                                                 |   |                        |        |                  
|                                                                  |                                                                 |   | (Dollars in thousands)
|Nonaccrual loans                                                  |                                                                 | $ | 11,780                 |        |                   | $ | 3,758 |       
|Accruing loans 90 days or more past due                           |                                                                 |   | 1,180                  |        |                   |   | 783   |       
|Other real estate                                                 |                                                                 |   | 921                    |        |                   |   | 969   |       
|Other assets repossessed                                          |                                                                 |   |                       |        |                   |   | 56    |       
|                                                                  |                                                                 |   |                        |        |                   |   |       |       
|                                                                  | Total nonperforming assets                                      |   |                        | 13,881 |                   |   |       | 5,566  |  
|Less:                                                             |                                                                 |   |                        |        |                   |   |       |       
|                                                                  | Nonperforming loans guaranteed by the SBA, Ex-Im Bank
and OCCGF |   |                        | (3,154 | )                 |   |       | (1,833 | )
|                                                                  |                                                                 |   |                        |        |                   |   |       |       
|                                                                  | Total net nonperforming assets                                  |   | $                      | 10,727 |                   |   | $     | 3,733  |  
|                                                                  |                                                                 |   |                        |        |                   |   |       |       
|Total nonperforming assets to total assets                        |                                                                 |   | 1.77                   | %      |                   |   | 0.75  | %     
|Total nonperforming assets to total loans and other real estate   |                                                                 |   | 2.75                   | %      |                   |   | 1.13  | %     
|Net nonperforming assets to total assets (1)                      |                                                                 |   | 1.36                   | %      |                   |   | 0.50  | %     
|Net nonperforming assets to total loans and other real estate (1) |                                                                 |   | 2.12                   | %      |                   |   | 0.76  | %     



---

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

Allowance for
Loan Losses. At both June 30, 2002 and
December 31, 2001, the allowance for loan losses aggregated $9.1 million and
$8.9 million, respectively, or 1.80% and 1.81% of average total loans,
respectively. For the six months ended June 30, 2002, net
loan charge-offs were $1.4 million or 0.28% of average total loans outstanding.
The Company seeks recovery of charge-offs through all available channels. The
Company continues working to further strengthen its credit administration
systems, policies, and loan review procedures.

16



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##### Table of Contents



The following table presents an analysis of the allowance for loan
losses and other related data:

|                                                              |                            |                   |         |                        |        |                   |         |        |        |  
|------------------------------------------------------------- | -------------------------- | ----------------- | ------- | ---------------------- | ------ | ----------------- | ------- | ------ | ------ | -
|                                                              |                            |                   |         | As of and for the      |        | As of and for the
|                                                              |                            |                   |         | six months ended       |        | year ended       
|                                                              |                            |                   |         | June 30, 2002          |        | December 31, 2001
|                                                              |                            |                   |         |                        |        |                  
|                                                              |                            |                   |         | (Dollars in thousands)
|Average year-to-date total loans outstanding                  |                            | $                 | 493,406 |                        |        | $                 | 474,986 |       
|                                                              |                            |                   |         |                        |        |                   |         |       
|Total loans outstanding at end of period                      |                            | $                 | 504,358 |                        |        | $                 | 493,145 |       
|                                                              |                            |                   |         |                        |        |                   |         |       
|Allowance for loan losses at beginning of period              |                            | $                 | 8,903   |                        |        | $                 | 9,271   |       
|Provision for loan losses                                     |                            |                   | 1,570   |                        |        |                   | 3,799   |       
|Charge-offs:                                                  |                            |                   |         |                        |        |                   |         |       
|                                                              | Commercial and industrial  |                   |         | (1,468                 | )      |                   |         | (4,075 | )     
|                                                              | Real estate  mortgage     |                   |         | (21                    | )      |                   |         |       |       
|                                                              | Real estate  construction |                   |         |                       |        |                   |         |       |       
|                                                              | Consumer and other         |                   |         | (89                    | )      |                   |         | (201   | )     
|                                                              |                            |                   |         |                        |        |                   |         |       
|                                                              |                            | Total charge-offs |         |                        | (1,578 | )                 |         |        | (4,276 | )
|                                                              |                            |                   |         |                        |        |                   |         |       
|Recoveries:                                                   |                            |                   |         |                        |        |                   |         |       
|                                                              | Commercial and industrial  |                   |         | 151                    |        |                   |         | 54     |       
|                                                              | Real estate  mortgage     |                   |         | 2                      |        |                   |         | 11     |       
|                                                              | Real estate  construction |                   |         |                       |        |                   |         |       |       
|                                                              | Consumer and other         |                   |         | 32                     |        |                   |         | 44     |       
|                                                              |                            |                   |         |                        |        |                   |         |       
|                                                              |                            | Total recoveries  |         |                        | 185    |                   |         |        | 109    |  
|                                                              |                            |                   |         |                        |        |                   |         |       
|Net loan charge-offs                                          |                            |                   | (1,393  | )                      |        |                   | (4,167  | )     
|                                                              |                            |                   |         |                        |        |                   |         |       
|Allowance for loan losses at end of period                    |                            | $                 | 9,080   |                        |        | $                 | 8,903   |       
|                                                              |                            |                   |         |                        |        |                   |         |       
|Ratio of allowance to end of period total loans               |                            |                   | 1.80    | %                      |        |                   | 1.81    | %     
|Ratio of net loan charge-offs to average total loans          |                            |                   | 0.28    | %                      |        |                   | 0.88    | %     
|Ratio of allowance to end of period total nonperforming loans |                            |                   | 70.06   | %                      |        |                   | 196.06  | %     
|Ratio of allowance to end of period net nonperforming loans   |                            |                   | 92.60   | %                      |        |                   | 328.77  | %     

Securities.At June 30, 2002, the securities portfolio totaled $217.1
million, reflecting an increase of $44.0 million or 25.4% from $173.1 million
at December 31, 2001. The securities portfolio is primarily comprised of
mortgage-backed securities, collateralized mortgage obligations, tax-free
municipal bonds, and U.S. government agency securities. The securities
portfolio has been funded primarily by the liquidity created from deposit
growth and loan prepayments in excess of loan funding requirements. However,
during the three and six months ended June 30, 2002, approximately $34.8
million in short-term borrowings, obtained from the FHLB, were utilized to
purchase approximately the same amount of mortgage-backed securities in order
to increase earning assets.

Deposits. At June 30, 2002, total deposits were $645.7 million, up $2.9
million or 0.05% from $642.8 million at December 31, 2001. Noninterest-bearing
demand deposits at June 30, 2002 increased by $5.0 million or 3.9% to $132.3
million from $127.3 million at December 31, 2001. The Companys ratios of
noninterest-bearing demand deposits to total deposits at June 30, 2002 and
December 31, 2001 were 20.5% and 19.8%, respectively. Interest-bearing
deposits at June 30, 2002 decreased by $2.1 million or 0.4% to $513.4 million
from $515.5 million at December 31, 2001. Management believes, based on its
historical experience, that its large time deposits continue to have core-type
characteristics and anticipates that this source of funding will continue to
sustain a substantial portion of the Companys asset growth in the future.

Other Borrowings.Other borrowings at June 30, 2002 were $60.3 million,
compared to $25.2 million at June 30, 2001, an increase of $35.1 million that
was primarily the result of short-term advances obtained from the FHLB to fund
securities investments. The Company has two ten-year loans totaling $25.0
million from the FHLB to further leverage its balance sheet and diversify its
funding sources. The ten-year loans bear interest at an average rate of 4.99%
per annum until the fifth year anniversary of the loans, September 2003, at
which time the loans may be repaid or the interest rate may be renegotiated.
With its current level of collateral, the Company has the ability to borrow an additional $107.6 million
from the FHLB. Other short-term borrowings
principally consist of U.S. Treasury tax note option accounts. Additionally,
the Company had several unused, unsecured lines of credit with correspondent
banks totaling $15.0 million at June 30, 2002 and at December 31, 2001,
respectively.

Capital Resources.Shareholders equity at June 30, 2002 was $70.5
million, up $5.3 million or 8.1% from $65.2 million at December 31, 2001. The
increase for the six months ended June 30, 2002 was primarily due to net

17



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##### Table of Contents



income of $4.3 million, and increase in other comprehensive income and the
unrealized gains on investment securities of $1.8 million, that was partially
offset by dividend payments of $842,000, and a net change in treasury stock of
$16,000 that was the result of dividend reinvestments and treasury stock
repurchases. During the first quarter 2002, the Company announced a plan to
repurchase up to 350,000 shares of its common stock on the open market or in
privately negotiated block transactions. As of June 30, 2002, the Company had
repurchased 14,476 shares.

The following table provides a comparison of the Companys and the Banks
leverage and risk-weighted capital ratios as of June 30, 2002 to the minimum
and well-capitalized regulatory standards:

|            |                                 |  |                  |      |                   |  |                 |       |   |  |  |       |  
|----------- | ------------------------------- |  | ---------------- | ---- | ----------------- |  | --------------- | ----- | - |  |  | ----- | -
|            |                                 |  | Minumum          |      | To Be Well        |  |                 |       |  
|            |                                 |  | Required For     |      | Capitalized Under |  |                 |       |  
|            |                                 |  | Capital Adequacy |      | Prompt Corrective |  | Actual Ratio At
|            |                                 |  | Purposes         |      | Action Provisions |  | June 30, 2002  
|            |                                 |  |                  |      |                   |  |                
|The
Company |                                 |  |                  |      |                   |  |                 |       |   |  |  |      
|            | Leverage ratio                  |  |                  | 4.00 | %(1)              |  |                 | N/A   |   |  |  | 9.05  | %
|            | Tier 1 risk-based capital ratio |  |                  | 4.00 |                   |  |                 | N/A   |   |  |  | 12.50 |  
|            | Risk-based capital ratio        |  |                  | 8.00 |                   |  |                 | N/A   |   |  |  | 13.75 |  
|The Bank    |                                 |  |                  |      |                   |  |                 |       |   |  |  |      
|            | Leverage ratio                  |  |                  | 4.00 | %(2)              |  |                 | 5.00  | % |  |  | 8.65  | %
|            | Tier 1 risk-based capital ratio |  |                  | 4.00 |                   |  |                 | 6.00  |   |  |  | 11.94 |  
|            | Risk-based capital ratio        |  |                  | 8.00 |                   |  |                 | 10.00 |   |  |  | 13.19 |  



---

|(1) |  | The Federal Reserve Board may require the Company to maintain a leverage ratio above the
required minimum.
|--- |  | ----------------------------------------------------------------------------------------------------------
|   
|(2) |  | The OCC may require the Bank to maintain a leverage ratio above the required minimum.                     




Item 3.Quantitative and Qualitative Disclosures about Market Risk.

There have been no material changes in the market risk information
previously disclosed in the Companys Form 10-K for the year ended December 31,
2001. See Form 10-K, Item 7 Managements Discussion and Analysis of Financial
Condition and Results of Operations  Financial Condition  Interest Rate
Sensitivity and Liquidity.

18



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##### Table of Contents






PART II

OTHER INFORMATION




Item 1. Legal Proceedings



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




Item 2. Changes in Securities and Use of Proceeds



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




Item 3. Defaults Upon Senior Securities



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




Item 4. Submission of Matters to a Vote of Security Holders



| |                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Companys Annual Meeting of Shareholders was held on May 24,
2002. At the meeting, the shareholders of the Company considered and
acted upon the proposals listed below.



| | 1. |  | Allen D. Brown, Helen F. Chen, George M. Lee, and David Tai
were elected at Class I directors to serve on the Board of
Directors of the Company until the Companys 2005 Annual Meeting of
Shareholders and until their successors are duly elected and
qualified. A total of 5,370,415 shares were voted in favor of each
Class I director and 659,844 shares were withheld from voting for
each Class I director.
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |    |  | The other directors whose term of office as a director continued
after the meeting include Don J. Wang, Tiong L. Ang, Tommy F. Chen,
May P. Chu, Kuan-Chi (John) M. Lee, and Joe Ting.                                                                                                                                                                                                                             
|
| | 2. |  | The shareholders approved a
proposal to amend the Companys 1998 Stock Incentive Plan to increase the number of
shares of Common Stock issuable thereunder from 200,000 shares to
700,000 shares. A total of 4,875,746 shares were voted in favor of the
proposal, 238,374 shares were voted against the proposal and
916,139 shares abstained from voting on the proposal.                                        
|
| | 3. |  | The shareholders ratified the appointment of Deloitte &
Touche LLP as the independent auditors of the books and accounts of
the Company for the year ending December 31, 2002. A total of
5,847,399 shares were voted in favor of the proposal, 182,260
shares were voted against the proposal and 600 shares abstained
from voting on the proposal.                                                               




Item 5. Other Information



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




Item 6A. Exhibits

|        |  |                |  |                                                                                                                                                   
|------- |  | -------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  | Identification
|Number  |  | of Exhibit    
|        |  |               
|11      |  |               |  | Computation of Earnings Per Common Share, included as Note (2)
to the Condensed Consolidated Financial Statements on Page 6 of
this Form 10-Q.    
|       
|99.1    |  |               |  | Certification of
Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|       
|99.2    |  |               |  | Certification of
Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.




Item 6B. Reports on Form 8-K



| |                                                                                     
| | ------------------------------------------------------------------------------------
| | The following reports on Form 8-K were filed during the quarter ended June
30, 2002:



| |  |  | (1) |  | The Company filed a current report on Form 8-K on May 3, 2002
announcing the Companys earnings for the first quarter of 2002.
| |  |  | --- |  | ------------------------------------------------------------------------------------------------------------------------------

19



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##### Table of Contents






SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

| |  |       |  |                 |  |                            |  |                                                                                                                                      
| |  | ----- |  | --------------- |  | -------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------
| |  |       |  |                 |  | METROCORP BANCSHARES, INC.
| |  |       |  |                 |  |                            |  |                                                                                                                                      
| |  |       |  |                 |  |                            |  |                                                                                                                                      
| |  |       |  |                 |  |                            |  |                                                                                                                                      
| |  |       |  |                 |  | By:                        |  | /s/ Allen D. Brown                                                                                                                   
| |  |       |  |                 |  |                            |  |                                                                                                                                      
| |  | Date: |  | August 13, 2002 |  |                            |  | Allen D. Brown
President
(principal executive officer)                                                                               
| |  |       |  |                 |  |                            |  |                                                                                                                                      
| |  |       |  |                 |  |                            |  |                                                                                                                                      
| |  | Date: |  | August 13, 2002 |  | By:                        |  | /s/ David D. Rinehart                                                                                                                
| |  |       |  |                 |  |                            |  |                                                                                                                                      
| |  |       |  |                 |  |                            |  | David D. Rinehart
Executive Vice President and
Chief Financial Officer
(principal accounting officer and
principal financial officer)

20



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##### Table of Contents






EXHIBIT INDEX



|        |  |                |  |                                                                                                                                                   
|------- |  | -------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  | Identification
|Number  |  | of Exhibit    
|        |  |               
|11      |  |               |  | Computation of Earnings Per Common Share, included as Note (2)
to the Condensed Consolidated Financial Statements on Page 6 of
this Form 10-Q.    
|       
|99.1    |  |               |  | Certification of
Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|       
|99.2    |  |               |  | Certification of
Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.