##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
      Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2006ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934       Commission file number: 0-25141
      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:
 Common Stock, par value
    $1.00 per share

Nasdaq Global Market(Title of each class)

(Name of each exchange on which
    registered)   Securities registered pursuant to Section 12(g) of the
    Act:
    None
      o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  o þ o
  Rule 12b-2  o þ
      DOCUMENTS INCORPORATED BY REFERENCE:
  Items 10-14 Form 10-K.




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##### 



TABLE OF
    CONTENTS
  PagePART IItem 1.

Business


2Item 1A.

Risk
    Factors


14Item 1B.

Unresolved Staff
    Comments


19Item 2.

Properties


19Item 3.

Legal
    Proceedings


19Item 4.

Submission of
    Matters to a Vote of Security Holders


20PART IIItem 5.

Market for
    Registrants Common Equity, Related Shareholder Matters and
    Issuer of Purchases of Equity Securities


20Item 6.

Selected
    Consolidated Financial Data


23Item 7.

Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


25Item 7A.

Quantitative and
    Qualitative Disclosures About Market Risk


57Item 8.

Financial
    Statements and Supplementary Data


58Item 9.

Changes in and
    Disagreements With Accountants on Accounting and Financial
    Disclosure


58Item 9A.

Controls and
    Procedures


58Item 9B.

Other
    Information


59PART IIIItem 10.

Directors and
    Executive Officers and Corporate Governance


59Item 11.

Executive
    Compensation


60Item 12.

Security Ownership
    of Certain Beneficial Owners and Management and Related
    Shareholder Matters


60Item 13.

Certain
    Relationship and Related Transactions and Director
    Independence


60Item 14.

Principal
    Accountant Fees and Services


60PART IVItem 15.

Exhibits and
    Financial Statement Schedules


61Signatures


63Letter Agreement - David TaiLetter Agreement - David ChoiLetter Agreement - Terry TangenSubsidiariesConsent of PricewaterhouseCoopers LLPCertification of CEO Pursuant to Rule 13a-14(a)Certification of CFO Pursuant to Rule 13a-14(a)Certification of CEO Pursuant to 18 U.S.C. Section 1350Certification of CFO Pursuant to 18 U.S.C. Section 1350   1




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##### Table of Contents



PART I  Item 1.
    Business  General
  (713) 776-3876.
    MetroBank,
    National Association
  Asian-American
  Metro
    United Bank
   2




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##### Table of Contents



Available
    Information
  www.metrobank-na.com. Form 10-K, Form 10-Q, Form 8-K
  Business
      Commercial and Industrial Loans.
  Commercial Mortgage Loans.
  Construction Loans.
 3




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##### Table of Contents



Government Guaranteed Small Business
    Lending.
  Trade Finance.
  Residential Mortgage Brokerage and
    Lending. 15-year
  Retail Banking.
  Competition
   4




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Employees
    Supervision
    and Regulation
      The
    Company
      Regulatory Restrictions on Dividends; Source of
    Strength.
     5




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##### Table of Contents



Scope of Permissible Activities.
        Safe and Sound Banking Practices.
 6




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##### Table of Contents



Anti-Tying Restrictions.
  Capital Adequacy Requirements.
      Imposition of Liability for Undercapitalized
    Subsidiaries.
   7




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##### Table of Contents



Acquisitions by Bank Holding Companies.
  Control Acquisitions.
    The
    Banks  MetroBank, National Association and Metro
    United Bank
      Financial Modernization.
 8




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##### Table of Contents



Branching  MetroBank.
  Branching  Metro United.
  Restrictions on Transactions with Affiliates and
    Insiders.
      Restrictions on Distribution of Subsidiary Bank Dividends and
    Assets.
  MetroBank.
 9




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##### Table of Contents



Metro United.
    Examinations  MetroBank.
  Examinations  Metro United.
  Audit Reports.
  Capital Adequacy Requirements.
 10




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##### Table of Contents



Corrective Measures for Capital
    Deficiencies.
        Deposit Insurance Assessments.
 11




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##### Table of Contents



Enforcement Powers.
  Brokered Deposit Restrictions.
  Cross-Guarantee Provisions.
  Community Reinvestment Act.
 12




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##### Table of Contents



Consumer Laws and Regulations.
  Privacy.
  The USA PATRIOT Act of 2001. non-U.S. persons;
  Legislative
    Initiatives
    Expanding
    Enforcement Authority
   13




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##### Table of Contents



Effect
    of Monetary Policy
      Item 1A.
    Risk
    Factors  Form 10-K
  Risks
    Associated with the Companys Business
  The
    Companys business is subject to interest rate risk and
    fluctuations in interest rates may adversely affect its earnings
    and capital levels.
     14




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##### Table of Contents



A
    large percentage of the Companys loans are collateralized
    by real estate, and an adverse change in the real estate market
    may result in losses and adversely affect its
    profitability.
    The
    Companys allowance for loan losses may not be sufficient
    to cover actual loan losses, which could adversely affect its
    earnings.
       15




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The
    Companys profitability depends significantly on local
    economic conditions.
    The
    Companys small to medium-sized business target market may
    have fewer financial resources to weather a downturn in the
    economy.
    The
    Company could be subject to environmental risks and associated
    costs on its foreclosed real estate assets.
    Potential
    acquisitions may disrupt the Companys business and dilute
    shareholder value.
    
    Potential exposure to unknown or contingent liabilities of the
    target company;
    Exposure to potential asset quality issues of the target company;
    Difficulty and expense of integrating the operations,
    management, products and services of the target company;
    Potential disruption to the Companys business;
    Potential diversion of the Company managements time and
    attention; 16




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##### Table of Contents




    The possible loss of key employees and customers of the target
    company; and
    Difficulty in estimating the value of the target company.  and/or
  An
    interruption in or breach in security of the Companys
    information systems may result in a loss of customer
    business.
    The
    business of the Company is dependent on technology and its
    inability to invest in technological improvements may adversely
    affect its results of operations and financial
    condition.
    The
    Company operates in a highly regulated environment and, as a
    result, is subject to extensive regulation and supervision that
    could adversely affect its financial performance, and the
    Company may be adversely affected by changes in federal and
    local laws and regulations.
   17




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##### Table of Contents



Risks
    Associated with the Companys Common Stock
  The
    Companys corporate organizational documents and the
    provisions of Texas law to which it is subject may delay or
    prevent a change in control of the Company that shareholders may
    favor.
    
    a board of directors classified into three classes of directors,
    with the directors of each class having staggered, three-year
    terms;
    a provision that any special meeting of the Companys
    shareholders may be called only by the chairman of the board,
    the president and chief executive officer, the majority of the
    board of directors or the holders of at least 50% of the
    Companys shares entitled to vote at the meeting;
    a provision establishing certain advance notice procedures for
    nomination of candidates for election as directors and for
    shareholder proposals to be considered at an annual or special
    meeting of shareholders; and
    a provision that denies shareholders the right to amend the
    Companys bylaws.    The
    trading volume in the Company Common Stock has been
    low.
   18




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##### Table of Contents



The
    holders of the Companys junior subordinated debentures
    have rights that are senior to those of the Companys
    shareholders.
     Item 1B.Unresolved
    Staff Comments



None.  Item 2.
    Properties    Owned


Leased


TotalBranches in Houston metropolitan
    area


5



5



10Branches in Dallas metropolitan
    area






3



3Branches in San Diego,
    California






1



1Branches in Los Angeles
    metropolitan area(1)






2



2Loan production office in San
    Mateo, California






1



1Banking office in City of
    Industry, California






1



1Corporate headquarters in Houston,
    Texas






1



1Total


5



14



19     (1)
    
    Los Angeles metropolitan area includes Irvine and Alhambra,
    California    Item 3.
    Legal
    Proceedings   19




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##### Table of Contents



Item 4.
    Submission
    of Matters to a Vote of Security Holders   PART II  Item 5.
    Market
    for Registrants Common Equity, Related Shareholder Matters
    and Issuer Purchases of Equity Securities  Common
    Stock Market Prices
    intra-day 3-for-2
  High


Low2006Fourth quarter

$
23.12


$
20.92Third quarter


23.59



19.91Second quarter


22.13



16.71First quarter


20.67



16.232005Fourth quarter

$
19.87


$
15.46Third quarter


16.70



13.75Second quarter


14.89



11.83First quarter


16.83



14.03   Dividends
  3-for-2
  2006


2005Fourth quarter

$
0.04


$
0.04Third quarter


0.04



0.04Second quarter


0.04



0.04First quarter


0.04



0.04    20




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##### Table of Contents



Recent
    Sales of Unregistered Securities
    Issuer
    Purchases of Equity Securities
   21




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##### Table of Contents



Performance
    Graph
  $500M-$1B $1B-$5B $500M-$1B $1B-$5B
  $1B-$5B $500M-$1B $1B-$5B $1B-$5B
  Composite
    of Cumulative Total Return
    MetroCorp Bancshares, Inc.,
    The Nasdaq Stock Market (US) Index,
    the SNL $500 Million to $1 Billion Bank Asset-Size Index
    and the SNL $1 Billion to $5 Billion Bank Asset-Size
    Index
  Total
    Return Performance
  
  Period EndingIndex

12/31/01


12/31/02


12/31/03


12/31/04


12/31/05


12/31/06MetroCorp Bancshares, Inc.

$
100.00


$
105.69


$
138.52


$
209.43


$
282.67


$
302.27NASDAQ Composite


100.00



68.76



103.67



113.16



115.57



127.58SNL
    $500M-$1B
    Bank Index


100.00



127.67



184.09



208.62



217.57



247.44SNL
    $1B-$5B Bank
    Index


100.00



115.44



156.98



193.74



190.43



220.36     ©
 22




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##### Table of Contents



Item 6.
    Selected
    Consolidated Financial Data  Form 10-K,
  Years Ended December 31,2006


2005


2004


2003


2002(Dollars in thousands, except per share data)Income Statement
    Data:Interest income

$
86,642


$
59,056


$
45,304


$
43,287


$
47,980Interest expense


33,498



17,538



11,349



12,134



14,628Net interest income


53,144



41,518



33,955



31,153



33,352Provision for loan losses


612



1,936



1,343



5,671



3,743Net interest income after provision
    for loan losses


52,532



39,582



32,612



25,482



29,609Noninterest income


7,960



8,109



8,251



8,927



8,967Noninterest expense


39,467



31,852



28,238



28,564



25,161Income before provision for income
    taxes


21,025



15,839



12,625



5,845



13,415Provision for income taxes


7,521



5,059



4,031



1,735



4,445Net income

$
13,504


$
10,780


$
8,594


$
4,110


$
8,970Per Share
    Data(1):Earnings per share:Basic

$
1.24


$
1.00


$
0.80


$
0.39


$
0.85Diluted


1.22



0.98



0.79



0.38



0.83Book value


9.72



8.53



7.97



7.30



7.23Tangible book value


7.61



6.40



7.97



7.30



7.23Cash dividends


0.16



0.16



0.16



0.16



0.16Weighted average shares outstanding
    (in thousands):Basic


10,906



10,812



10,763



10,634



10,536Diluted


11,112



10,959



10,845



10,820



10,731Balance Sheet Data (Period
    End):Total assets

$
1,268,434


$
1,128,204


$
914,312


$
867,156


$
842,066Securities


186,475



236,100



273,720



262,264



264,418Loans(2)


886,556



771,473



594,536



557,136



530,571Allowance for loan losses


11,436



13,169



10,501



10,308



10,029Goodwill and core deposit
    intangibles


22,930



23,035











Total deposits


1,081,664



961,750



755,053



724,941



691,361Junior subordinated debentures


36,083



36,083











Other borrowings


26,316



26,054



60,849



54,173



65,774Total shareholders equity


105,948



92,228



85,723



78,373



76,224 23




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##### Table of Contents



Years Ended December 31,2006


2005


2004


2003


2002(Dollars in thousands, except per share data)Balance Sheet Data
    (Average):Total assets

$
1,191,239


$
963,952


$
882,017


$
852,946


$
791,297Securities


211,941



254,505



271,198



251,827



222,752Loans(3)


819,103



640,703



565,920



551,287



506,901Allowance for loan losses


13,031



11,567



10,944



10,595



9,238Goodwill and core deposit
    intangibles


22,911



5,580











Total deposits


1,012,887



813,457



728,683



708,575



656,824Junior subordinated debentures


36,083



8,897











Other borrowings


25,949



42,877



64,022



60,310



53,056Total shareholders equity


99,104



89,271



81,044



76,333



71,452Performance
    Ratios:Return on average assets


1.13
%


1.12
%


0.97
%


0.48
%


1.13
%Return on average equity


13.63



12.08



10.60



5.38



12.55Net interest margin


4.75



4.51



4.02



3.81



4.44Efficiency ratio(4)


64.60



64.18



66.91



71.27



59.46Asset Quality
    Ratios:Total nonperforming assets to total
    loans and other real estate


1.37
%


2.52
%


3.06
%


5.05
%


3.53
%Total nonperforming assets to total
    assets


0.96



1.73



2.00



3.26



2.23Net charge-offs to average total
    loans


0.29



0.25



0.20



0.98



0.51Allowance for loan losses to total
    loans


1.29



1.71



1.77



1.85



1.89Allowance for loan losses to
    nonperforming loans(5)


121.11



84.21



62.94



40.10



57.02Capital Ratios:Leverage ratio(6)


9.70
%


9.96
%


9.59
%


9.08
%


8.78
%Average shareholders equity
    to average total assets


8.32



9.26



9.19



8.95



9.03Tier 1 risk-based capital
    ratio  period end


11.19



11.18



12.82



12.73



12.98Total risk-based capital
    ratio  period end


13.15



13.73



14.07



13.98



14.24Dividend payout ratio


12.91



16.08



20.05



41.46



18.78     (1)
    
    Per share data for all periods prior to September 1, 2006
    has been restated to give effect to the
    3-for-2
    stock split effective on such date.(2)
    
    Includes loans
    held-for-sale
    of $1.9 million and $6.0 million at December 31,
    2004 and 2003, respectively.(3)
    
    Includes loans
    held-for-sale
    with an average balance of $621,000, $3.4 million, and
    $5.3 million for the years ended December 31, 2005,
    2004, and 2003, respectively.(4)
    
    Calculated by dividing total noninterest expense by net interest
    income plus noninterest income.(5)
    
    Nonperforming loans consist of nonaccrual loans, loans
    contractually past due 90 days or more and restructured
    loans.(6)
    
    The leverage ratio is calculated by dividing Tier 1 capital
    by average assets for the year. 24




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##### Table of Contents



Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Special
    Cautionary Notice Regarding Forward-Looking Statements
  Form 10-K
  
    changes in interest rates and market prices, which could reduce
    the Companys net interest margins, asset valuations and
    expense expectations;
    changes in the levels of loan prepayments and the resulting
    effects on the value of the Companys loan portfolio;
    changes in local economic and business conditions which
    adversely affect the ability of the Companys customers to
    transact profitable business with the Company, including the
    ability of borrowers to repay their loans according to their
    terms or a change in the value of the related collateral;
    increased competition for deposits and loans adversely affecting
    rates and terms;
    the Companys ability to identify suitable acquisition
    candidates;
    the timing, impact and other uncertainties of the Companys
    ability to enter new markets successfully and capitalize on
    growth opportunities;
    increased credit risk in the Companys assets and increased
    operating risk caused by a material change in commercial,
    consumer
    and/or real
    estate loans as a percentage of the total loan portfolio;
    the failure of assumptions underlying the establishment of and
    provisions made to the allowance for loan losses;
    changes in the availability of funds resulting in increased
    costs or reduced liquidity;
    increased asset levels and changes in the composition of assets
    and the resulting impact on our capital levels and regulatory
    capital ratios;
    the Companys ability to acquire, operate and maintain cost
    effective and efficient systems without incurring unexpectedly
    difficult or expensive but necessary technological changes;
    the loss of senior management or operating personnel and the
    potential inability to hire qualified personnel at reasonable
    compensation levels; and
    changes in statutes and government regulations or their
    interpretations applicable to bank holding companies and our
    present and future banking and other subsidiaries, including
    changes in tax requirements and tax rates.   25




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##### Table of Contents



Critical
    Accounting Estimates
         26




---



##### Table of Contents



For the
    Years Ended December 31, 2006, 2005 and 2004
  Overview
           27




---



##### Table of Contents



three-for-two
    Results
    of Operations
  Net
    Interest Income
    2006 versus 2005.
   28




---



##### Table of Contents



2005 versus 2004.
   29




---



##### Table of Contents



Year Ended December 31,2006


2005


2004Average


Interest


Average


Average


Interest


Average


Average


Interest


AverageOutstanding


Earned/


Yield/


Outstanding


Earned/


Yield/


Outstanding


Earned/


Yield/Balance


Paid


Rate


Balance


Paid


Rate


Balance


Paid


Rate(Dollars in thousands)AssetsInterest-earning assets:Loans (including loans
    held-for-sale)

$
819,103


$
73,101



8.92
%

$
640,703


$
47,799



7.46
%

$
565,920


$
34,711



6.13
%Taxable securities


198,448



8,576



4.32



237,220



9,519



4.01



252,691



9,582



3.79Tax-exempt securities


13,493



664



4.92



17,285



853



4.93



18,507



917



4.95Federal funds sold and other
    temporary investments


87,304



4,301



4.93



25,354



885



3.49



7,566



94



1.24Total interest-earning assets


1,118,348



86,642



7.75
%


920,562



59,056



6.42
%


844,684



45,304



5.36
%Less allowance for loan losses


(13,031
)










(11,567
)










(10,944
)Total interest-earning assets, net
    of allowance for loan losses


1,105,317











908,995











833,740Noninterest earning assets


85,922











54,957











48,277Total assets

$
1,191,239










$
963,952










$
882,017Liabilities and
    shareholders equityInterest-bearing liabilities:Interest-bearing demand deposits

$
74,151



822



1.11
%

$
85,579



691



0.81
%

$
79,327



536



0.68
%Saving and money market accounts


162,668



4,441



2.73



122,363



1,625



1.33



113,164



802



0.71Time deposits


584,010



24,851



4.26



428,909



12,948



3.02



367,424



8,133



2.21Junior subordinated debentures


36,083



2,108



5.76



8,897



514



5.76











Other borrowings


25,949



1,276



4.92



42,877



1,760



4.10



64,022



1,878



2.93Total interest-bearing liabilities


882,861



33,498



3.79
%


688,625



17,538



2.55
%


623,937



11,349



1.82
%Noninterest-bearing liabilities:Noninterest-bearing demand deposits


192,058











176,606











168,768Other liabilities


17,216











9,450











8,268Total liabilities


1,092,135











874,681











800,973Shareholders equity


99,104











89,271











81,044Total liabilities and
    shareholders equity

$
1,191,239










$
963,952










$
882,017Net interest income





$
53,144










$
41,518










$
33,955Net interest spread










3.96
%










3.87
%










3.54
%Net interest margin










4.75
%










4.51
%










4.02
%  30




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##### Table of Contents



Years Ended December 31,2006 vs 2005


2005 vs 2004Increase (Decrease)





Increase (Decrease)Due to





Due toVolume


Rate


Total


Volume


Rate


Total(Dollars in thousands)Interest-earning
    assets:Loans (including loans
    held-for-sale)

$
13,309


$
11,993


$
25,302


$
4,587


$
8,501


$
13,088Taxable securities


(1,556
)


613



(943
)


(587
)


524



(63
)Tax-exempt securities


(187
)


(2
)


(189
)


(61
)


(3
)


(64
)Federal funds sold and other
    temporary investments


2,162



1,254



3,416



221



570



791Total increase in interest income


13,728



13,858



27,586



4,160



9,592



13,752Interest-bearing
    liabilities:Interest-bearing demand deposits


(92
)


223



131



42



113



155Saving and money market accounts


535



2,281



2,816



65



758



823Time deposits


4,682



7,221



11,903



1,361



3,454



4,815Junior subordinated debentures


1,594







1,594



514







514Other borrowings


(695
)


211



(484
)


(620
)


502



(118
)Total increase in interest expense


6,024



9,936



15,960



1,362



4,827



6,189Increase in net interest income

$
7,704


$
3,922


$
11,626


$
2,798


$
4,765


$
7,563   Provision
    for Loan Losses
     31




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##### Table of Contents



Noninterest
    Income
      Years Ended December 31,2006


2005


2004(Dollars in thousands)Service fees

$
5,618


$
6,593


$
6,701Loan-related fees


1,627



1,179



977Gain (loss) on sale of securities,
    net


12







(97
)Gain on sale of loans


390







605Other noninterest income


313



337



65Total noninterest income

$
7,960


$
8,109


$
8,251   Noninterest
    Expense
     32




---



##### Table of Contents



Years Ended December 31,2006


2005


2004(Dollars in thousands)Salaries and employee benefits

$
21,743


$
17,555


$
16,104Occupancy and equipment


7,007



5,663



5,723Core deposit intangible
    amortization


495



132



Foreclosed assets, net


461



312



(728
)Legal and professional fees


2,409



2,171



1,145Other noninterest expense


7,352



6,019



5,994Total noninterest expenses

$
39,467


$
31,852


$
28,238   held-for-sale
  Income
    Taxes
     33




---



##### Table of Contents



Impact
    of Inflation
    Business
    Segment Results
    Financial
    Condition
  Loan
    Portfolio
     34




---



##### Table of Contents



As of December 31,2006


2005


2004(1)


2003(1)


2002Amount


Percent


Amount


Percent


Amount


Percent


Amount


Percent


Amount


Percent(Dollars in thousands)Commercial and industrial

$
367,072



41.25
%

$
331,869



42.84
%

$
345,570



57.88
%

$
332,480



59.36
%

$
325,424



60.94
%Real estate mortgageResidential


4,847



0.55



7,739



1.00



11,199



1.87



14,315



2.56



7,326



1.37Commercial


424,431



47.70



368,508



47.57



188,121



31.51



178,290



31.83



165,608



31.01429,278



48.25



376,247



48.57



199,320



33.38



192,605



34.39



172,934



32.38Real estate constructionResidential


27,781



3.13



12,095



1.56



9,761



1.64



12,652



2.26



10,589



1.99Commercial


58,311



6.55



44,315



5.72



32,868



5.50



11,906



2.12



14,805



2.7686,092



9.68



56,410



7.28



42,629



7.14



24,558



4.38



25,394



4.75Consumer and other


7,332



0.82



10,172



1.31



9,556



1.60



10,447



1.87



10,286



1.93Gross loans


889,774



100.00
%


774,698



100.00
%


597,075



100.00
%


560,090



100.00
%


534,038



100.00
%Less: unearned discounts, interest
    and deferred fees


(3,218
)






(3,225
)






(2,539
)






(2,954
)






(3,467
)Total loans

$
886,556






$
771,473






$
594,536






$
557,136






$
530,571     (1)
    
    Includes loans
    held-for-sale
    of $1.9 million and $6.0 million at December 31,
    2004 and 2003, respectively.    Commercial and Industrial Loans.
  Commercial Mortgage Loans.
 35




---



##### Table of Contents



Construction Loans.
  Government Guaranteed Small Business
    Lending. 7-A
  Trade Finance.
 36




---



##### Table of Contents



Residential Mortgage Brokerage and
    Lending. 15-year
  Consumer Loans.
   37




---



##### Table of Contents



held-for-sale held-for-sale
  As of December 31,2006


2005


2004(Dollars in thousands)Convenience stores/gasoline
    stations

$
31,884


$
36,135


$
42,404Hotels/Motels


94,594



82,420



55,974Nonresidential building for
    rent/lease


279,675



254,954



179,052Restaurants


71,866



56,506



48,370Wholesale trade


76,970



59,394



60,782All other


334,785



285,289



210,493Gross loans

$
889,774


$
774,698


$
597,075     As of December 31, 2006After OneOne Year


Through


Afteror Less


Five Years


Five Years


Total(Dollars in thousands)Commercial and industrial

$
110,593


$
166,626


$
89,853


$
367,072Real estate mortgage:Residential


1,598



2,560



689



4,847Commercial


83,727



224,996



115,708



424,431Real estate construction:Residential


19,160



8,621







27,781Commercial


13,286



20,084



24,941



58,311Consumer


1,426



4,632



1,274



7,332Total

$
229,790


$
427,519


$
232,465


$
889,774Loans with a predetermined
    interest rate

$
28,771


$
135,875


$
77,734


$
242,380Loans with a floating interest rate


201,019



291,644



154,731



647,394Total

$
229,790


$
427,519


$
232,465


$
889,774     Nonperforming
    Assets
   38




---



##### Table of Contents



39




---



##### Table of Contents



2006 versus 2005.
  2005 versus 2004.
   40




---



##### Table of Contents



As of December 31,2006


2005


2004


2003


2002(Dollars in thousands)Nonaccrual loans

$
9,414


$
15,606


$
16,504


$
25,442


$
17,209Accruing loans 90 days or
    more past due


29



32



181



264



380Other real estate
    (ORE) and other assets repossessed (OAR)


2,747



3,866



1,566



2,585



1,190Total nonperforming assets


12,190



19,504



18,251



28,291



18,779Less: nonperforming loans
    guaranteed by the SBA, Ex-Im Bank, or the OCCGF


(2,857
)


(2,210
)


(3,032
)


(3,323
)


(3,310
)Net nonperforming assets

$
9,333


$
17,294


$
15,219


$
24,968


$
15,469Total nonperforming assets to
    total loans and ORE/OAR


1.37
%


2.52
%


3.06
%


5.05
%


3.53
%Total nonperforming assets to
    total assets


0.96



1.73



2.00



3.26



2.23Net nonperforming assets to total
    loans and ORE/OAR


1.05



2.23



2.55



4.46



2.91Net nonperforming assets to total
    assets


0.74



1.53



1.66



2.88



1.84   Allowance
    for Loan Losses and Reserve for Unfunded Lending
    Commitments
       41




---



##### Table of Contents



42




---



##### Table of Contents



As of and for the Years Ended December 31,2006


2005


2004


2003


2002(Dollars in thousands)Average total loans outstanding

$
819,103


$
640,703


$
565,920


$
551,287


$
506,901Total loans outstanding at end of
    period

$
886,556


$
771,473


$
594,536


$
557,136


$
530,571Allowance for loan losses at
    beginning of period

$
13,169


$
10,501


$
10,308


$
10,029


$
8,892Provision for loan losses


612



1,936



1,343



5,671



3,743Allowance acquired through
    acquisition






2,307











Charge-offs:Commercial and industrial


(3,737
)


(2,146
)


(2,660
)


(5,173
)


(2,721
)Real estate  mortgage


(21
)










(755
)


(271
)Real estate 
    construction


(39
)


(5
)










Consumer and other


(202
)


(274
)


(175
)


(193
)


(132
)Total charge-offs


(3,999
)


(2,425
)


(2,835
)


(6,121
)


(3,124
)Recoveries:Commercial and industrial


680



804



1,509



593



450Real estate  mortgage


874



6



104



100



20Consumer and other


100



40



72



36



48Total recoveries


1,654



850



1,685



729



518Net charge-offs


(2,345
)


(1,575
)


(1,150
)


(5,392
)


(2,606
)Allowance for loan losses at end
    of period


11,436



13,169



10,501



10,308



10,029Reserve for unfunded lending
    commitments at beginning of period


546



362



140



121



11Provision for unfunded lending
    commitments


247



174



222



19



110Reserve acquired through
    acquisition






10











Reserve for unfunded lending
    commitments at end of period


793



546



362



140



121Allowance for credit losses

$
12,229


$
13,715


$
10,863


$
10,448


$
10,150Ratio of allowance for loan losses
    to end of period total loans


1.29
%


1.71
%


1.77
%


1.85
%


1.89
%Ratio of net charge-offs to
    average total loans


0.29



0.25



0.20



0.98



0.51Ratio of allowance for loan losses
    to end of period total nonperforming loans


121.11



84.21



62.94



40.10



57.02  43




---



##### Table of Contents



As of December 31,2006


2005


2004


2003


2002Percent





Percent





Percent





Percent





Percentof Loans





of Loans





of Loans





of Loans





of Loansto Gross





to Gross





to Gross





to Gross





to GrossAmount


Loans


Amount


Loans


Amount


Loans


Amount


Loans


Amount


Loans(Dollars in thousands)Balance of allowance for loan
    losses applicable to:Commercial and industrial

$
4,210



41.25
%

$
5,349



42.84
%

$
6,119



57.88
%

$
6,281



59.36
%

$
6,383



60.94
%Real estate  mortgage


4,745



48.25



6,361



48.57



2,669



33.38



2,460



34.39



2,285



32.38Real estate  construction


666



9.68



665



7.28



615



7.14



267



4.38



355



4.75Consumer and other


110



0.82



114



1.31



79



1.60



101



1.87



136



1.93Unallocated


1,705







680







1,019







1,199







870



Total allowance for loan losses

$
11,436



100.00
%

$
13,169



100.00
%

$
10,501



100.00
%

$
10,308



100.00
%

$
10,029



100.00
%   Securities
  held-to-maturity, available-for-sale. available-for-sale
     44




---



##### Table of Contents



available-for-sale held-to-maturity
  As of December 31, 2006


As of December 31, 2005Gross


Gross








Gross


GrossAmortized


Unrealized


Unrealized


Fair


Amortized


Unrealized


Unrealized


FairCost


Gain


Loss


Value


Cost


Gain


Loss


Value(Dollars in thousands)U.S. Government agencies

$
28


$
1


$



$
29


$
32


$



$



$
32U.S. Government sponsored
    enterprises


36,906







(510
)


36,396



36,869







(526
)


36,343Obligations of state and political
    subdivisions


7,425



157







7,582



17,162



551







17,713Mortgage-backed securities and
    collateralized mortgage obligations


121,196



62



(3,060
)


118,198



162,294



112



(3,974
)


158,432Other debt securities


143



1



(1
)


143



292



3







295Investment in ARM and CRA funds


19,658







(462
)


19,196



19,419



17



(412
)


19,024FHLB/Federal Reserve Bank Stock


3,848











3,848



3,178











3,178Investment in subsidiary trust


1,083











1,083



1,083











1,083Total securities

$
190,287


$
221


$
(4,033
)

$
186,475


$
240,329


$
683


$
(4,912
)

$
236,100   As of December 31, 2004Gross


GrossAmortized


Unrealized


Unrealized


FairCost


Gain


Loss


Value(Dollars in thousands)U.S. Government agencies

$
35


$



$



$
35U.S. Government sponsored
    enterprises


4,970







(18
)


4,952Obligations of state and political
    subdivisions


18,105



1,030







19,135Mortgage-backed securities and
    collateralized mortgage obligations


222,977



1,344



(1,179
)


223,142Other debt securities


1,979



14







1,993Investment in ARM and CRA funds


18,772



89



(205
)


18,656FHLB/Federal Reserve Bank Stock


5,807











5,807Total securities

$
272,645


$
2,477


$
(1,402
)

$
273,720    45




---



##### Table of Contents



As of December 31, 2006After One Year


After Five YearsWithin


But Within


But Within


Non-maturing orOne Year


Five Years


Ten Years


After Ten Years


TotalAmount


Yield


Amount


Yield


Amount


Yield


Amount


Yield


Amount


Yield(Dollars in thousands)U.S. Government agencies

$







$







$
28



8.35
%

$







$
28



8.35
%U.S. Government sponsored
    enterprises


4,995



4.25
%


31,911



4.38
%


















36,906



4.36Obligations of state and political
    subdivisions


500



4.77



60



5.24



3,310



4.93



3,555



4.87
%


7,425



4.89Mortgage-backed securities and
    collateralized mortgage obligations


113



4.24



12,478



4.27



31,932



4.25



76,673



4.04



121,196



4.12Other debt securities










143



6.57



















143



6.57Investment in ARM and CRA funds


























19,658



4.50



19,658



4.50FHLB/Federal Reserve Bank stock


























3,848



4.14



3,848



4.14Investment in subsidiary trust


























1,083



5.76



1,083



5.76Total securities

$
5,608



4.30
%

$
44,592



4.36
%

$
35,270



4.32
%

$
104,817



4.18
%

$
190,287



4.25
%        46




---



##### Table of Contents



Junior Subordinated Debentures.
  Deposits
             47




---



##### Table of Contents



Years Ended December 31,2006


2005


2004Amount


Rate


Amount


Rate


Amount


Rate(Dollars in thousands)Interest-bearing deposits:NOW checking

$
74,151



1.11
%

$
85,579



0.81
%

$
79,327



0.68
%Savings and money market deposits


162,668



2.73



122,363



1.33



113,164



0.71Time deposits less than $100,000


241,212



4.01



198,189



2.82



173,675



1.99Time deposits $100,000 and over


342,798



4.43



230,720



3.19



193,749



2.41Total interest-bearing deposits


820,829



3.67



636,851



2.40



559,915



1.69Noninterest-bearing deposits


192,058







176,606







168,768



Total deposits

$
1,012,887



2.97
%

$
813,457



1.88
%

$
728,683



1.45
%     December 31, 2006(Dollars in thousands)Three months or less

$
119,124Over three through six months


112,546Over six through 12 months


101,739Over 12 months


48,105Total

$
381,514     Junior
    Subordinated Debentures
    3-month
 48




---



##### Table of Contents



Other
    Borrowings
          As of and for theYears Ended December 31,2006


2005


2004(Dollars in thousands)Federal funds purchased:on December 31,

$



$



$
average during the year






11



maximum month end balance during
    the year










FHLB notes and advances:on December 31,

$
25,000


$
25,000


$
59,900average during the year


25,247



42,138



63,288maximum month end balance during
    the year


25,000



72,500



74,300Interest rate at end of period


4.99
%


4.99
%


3.46
%Interest rate during period


5.05



4.23



2.93Federal Reserve TT&L:on December 31,

$
1,316


$
1,054


$
949average during the year


702



728



734maximum month end balance during
    the year


1,316



1,054



1,057  49




---



##### Table of Contents



Contractual
    Obligations
    After One


After ThreeWithin


But Within


But Within


AfterOne Year


Three Years


Five Years


Five Years


Total(Dollars in thousands)Certificates of deposit

$
546,725


$
55,537


$
20,626


$
15


$
622,903Federal Reserve TT&L


1,316















1,316FHLB notes






25,000











25,000Junior subordinated debentures














36,083



36,083Interest on time deposits, junior
    subordinated debentures and borrowings


18,209



5,575



3,431



5,095



32,310Total borrowing obligations

$
566,250


$
86,112


$
24,057


$
41,193


$
717,612Operating lease obligations


1,772



3,616



2,686



1,644



9,718Total contractual obligations

$
568,022


$
89,728


$
26,743


$
42,837


$
727,330   Interest
    Rate Sensitivity and Market Risk
       50




---



##### Table of Contents



Volumes Subject to RepricingGreater0-30


31-180


181-365


1-3


3-5


5-10


ThanDays


Days


Days


Years


Years


Years


10 Years


Total(Dollars in thousands)Interest-earning
    assets:Securities

$
14,026


$
21,092


$
21,778


$
72,208


$
43,170


$
11,510


$
2,691


$
186,475Gross loans


647,539



18,799



17,918



60,052



68,159



55,170



22,137



889,774Federal funds sold and other
    short-term investments


125,649



























125,649Total interest-bearing assets


787,214



39,891



39,696



132,260



111,329



66,680



24,828



1,201,898Interest-bearing
    liabilities:Demand, money market and savings
    deposits


250,011



























250,011Time deposits


64,976



301,244



180,791



55,251



20,626



15







622,903Other borrowings


1,316











25,000















26,316Junior subordinated debentures


















36,083











36,083Total interest-bearing liabilities


316,303



301,244



180,791



80,251



56,709



15







935,313Period GAP

$
470,911


$
(261,353
)

$
(141,095
)

$
52,009


$
54,620


$
66,665


$
24,828


$
266,585Cumulative GAP

$
470,911


$
209,558


$
68,463


$
120,472


$
175,092


$
241,757


$
266,585Period GAP to total assets


37.13
%


(20.61
)%


(11.12
)%


4.10
%


4.31
%


5.26
%


1.96
%Cumulative GAP to total assets


37.13
%


16.52
%


5.40
%


9.50
%


13.80
%


19.06
%


21.02
%Cumulative interest-earning assets
    to cumulative interest-bearing liabilities


248.88
%


133.93
%


108.58
%


113.71
%


118.72
%


125.85
%


128.50
%   one-day
 51




---



##### Table of Contents



:
  Net Interest


Economic Value ofIncome Volatility(1)


Equity (EVE) Volatility(2)Change in Interest
    Rates+200 bp


16.31
%


(2.33
)%+100 bp


8.07



(1.14
)−100 bp


(6.65
)


1.04−200 bp


(11.85
)


1.99     (1)
    
    Net interest income volatility is measured as the percentage
    change in net interest income in the various rate scenarios from
    the net interest income in a stable interest rate environment.(2)
    
    EVE volatility is measured as the percentage change in the EVE
    in the various interest rate scenarios from the EVE in a stable
    interest rate environment.   52




---



##### Table of Contents



Liquidity
      one-to-four-family
 53




---



##### Table of Contents



Off-Balance
    Sheet Arrangements
      After One


After ThreeWithin


but Within


but Within


AfterOne Year


Three Years


Five Years


Five Years


Total(Dollars in thousands)Unfunded loan commitments
    including unfunded lines of credit

$
124,460


$
67,336


$
28,922


$
13,783


$
234,501Standby letters of credit


7,597















7,597Commercial letters of credit


9,596















9,596Operating leases


1,772



3,616



2,686



1,644



9,718Total financial instruments with
    off-balance sheet risk

$
143,425


$
70,952


$
31,608


$
15,427


$
261,412     Capital
    Resources
     54




---



##### Table of Contents



To Be Categorizedas Well CapitalizedMinimum Required


Under Prompt


Actual Ratio AtFor Capital


Corrective


December 31,Adequacy Purposes


Action Provisions


2006The CompanyLeverage ratio


4.00
%(1)


N/A



9.70
%Tier 1 risk-based capital
    ratio


4.00



N/A



11.19Total risk-based capital ratio


8.00



N/A



13.15MetroBankLeverage ratio


4.00
%(2)


5.00
%


10.23
%Tier 1 risk-based capital
    ratio


4.00



6.00



11.95Total risk-based capital ratio


8.00



10.00



13.11Metro UnitedLeverage ratio


4.00
%(3)


5.00
%


9.22
%Tier 1 risk-based capital
    ratio


4.00



6.00



10.08Total risk-based capital ratio


8.00



10.00



11.33     (1)
    
    The Federal Reserve Board may require the Company to maintain a
    leverage ratio above the required minimum.(2)
    
    The OCC may require MetroBank to maintain a leverage ratio above
    the required minimum.(3)
    
    The FDIC may require Metro United to maintain a leverage ratio
    above the required minimum. 55




---



##### Table of Contents



30-year
  New
    Accounting Pronouncements
       56




---



##### Table of Contents



Item 7A.
    Quantitative
    and Qualitative Disclosure About Market Risk   57




---



##### Table of Contents



Item 8.
    Financial
    Statements and Supplementary Data  Form 10-K,
  Quarterly
    Financial Data (Unaudited)
    2006


2005Fourth


Third


Second


First


Fourth


Third


Second


FirstQuarter


Quarter


Quarter


Quarter


Quarter


Quarter


Quarter


QuarterInterest income

$
23,310


$
22,566


$
21,235


$
19,531


$
18,630


$
14,352


$
13,310


$
12,764Interest expense


9,721



8,957



8,034



6,786



6,395



4,215



3,594



3,334Net interest income


13,589



13,609



13,201



12,745



12,235



10,137



9,716



9,430Provision for loan losses


52



114



188



258



540



468



455



473Net interest income after provision
    for loan losses


13,537



13,495



13,013



12,487



11,695



9,669



9,261



8,957Noninterest income


2,176



1,903



1,962



1,919



1,958



2,087



2,014



2,050Noninterest expense


10,482



9,820



9,654



9,511



9,255



7,648



7,272



7,677Income before income taxes


5,231



5,578



5,321



4,895



4,398



4,108



4,003



3,330Provision for income taxes


1,896



2,032



1,929



1,664



1,484



1,272



1,233



1,070Net income

$
3,335


$
3,546


$
3,392


$
3,231


$
2,914


$
2,836


$
2,770


$
2,260Earnings per share(1):Basic

$
0.30


$
0.32


$
0.31


$
0.30


$
0.27


$
0.26


$
0.26


$
0.21Diluted

$
0.30


$
0.32


$
0.31


$
0.29


$
0.27


$
0.26


$
0.25


$
0.21Weighted average shares
    outstanding(1):Basic


10,938



10,924



10,895



10,868



10,835



10,814



10,808



10,791Diluted


11,173



11,153



11,097



11,030



11,049



10,968



10,907



10,938Dividends per common share(1)

$
0.04


$
0.04


$
0.04


$
0.04


$
0.04


$
0.04


$
0.04


$
0.04     (1)
    
    The share and per share information presented above have been
    adjusted retroactively for the
    3-for-2
    stock split effective on September 1, 2006.  Item 9.
    Changes
    in and Disagreements With Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Evaluation of Disclosure Controls and
    Procedures. Rule 13a-15(e) 15d-15(e)
 58




---



##### Table of Contents



Changes in Internal Control over Financial
    Reporting.
  Managements
    Report on Internal Control Over Financial Reporting
  Rule 13a-15(f)).
        Item 9B.
    Other
    Information   PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance   59




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##### Table of Contents



Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Shareholder Matters    Securities
    Authorized for Issuance Under Equity Compensation
    Plans
  3-for-2
  EQUITY
    COMPENSATION PLAN INFORMATION
  (a)


(b)


(c)Number of SecuritiesNumber of Securities





Remaining Availableto be Issued Upon





for Future IssuanceExercise of





Under EquityOutstanding


Weighted Average


Compensation PlansOptions, Warrants


Exercise Price of


(excluding securitiesPlan category

and Rights


Outstanding Options


reflected in column (a))Equity compensation plans approved
    by security holders


817,125


$
14.08



108,210Equity compensation plans not
    approved by security holders










Total


817,125


$
14.08



108,210   Item 13.
    Certain
    Relationships, Related Transactions and Director
    Independence    Item 14.
    Principal
    Accountant Fees and Services   60




---



##### Table of Contents



PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules  Consolidated
    Financial Statements and Financial Statement Schedules
  Form 10-K.
                 61




---



##### Table of Contents



Exhibits
  ExhibitNumber(1)

Description3.1

Amended and Restated Articles of
    Incorporation of the Company (incorporated herein by reference
    to Exhibit 3.1 to the Companys Registration Statement
    on
    Form S-1
    (Registration
    No. 333-62667)
    (the Registration Statement)).3.2

Articles of Amendment to the
    Articles of Incorporation of the Company (incorporated herein by
    reference to Exhibit 3.2 to the Companys Quarterly
    Report of
    Form 10-Q
    for the quarter ended March 31, 2006).3.3

Amended and Restated Bylaws of the
    Company (incorporated herein by reference to Exhibit 3.2 to
    the Registration Statement).4

Specimen form of certificate
    evidencing the Common Stock (incorporated herein by reference to
    Exhibit 4 to the Registration Statement).10.1

MetroCorp Bancshares, Inc. 1998
    Employee Stock Purchase Plan (incorporated herein by reference
    to Exhibit 10.4 to the Registration Statement).10.2

MetroCorp Bancshares, Inc. 1998
    Stock Incentive Plan (incorporated herein by reference to
    Exhibit 10.5 to the Registration Statement).10.3

First Amendment to the MetroCorp
    Bancshares, Inc. 1998 Employee Stock Purchase Plan (incorporated
    herein by reference to Exhibit 10.6 to the Companys
    Annual Report on
    Form 10-K
    for the year ended December 31, 1998).10.4

Employment Agreement between the
    Company and George M. Lee dated as of January 26, 2007
    (incorporated herein by reference to the Companys Current
    Report on
    Form 8-K
    filed on February 1, 2007).10.5

Employment Agreement between the
    Company and Mitchell W. Kitayama dated as of July 15, 2005
    (incorporated herein by to the Companys Current Report on
    Form 8-K
    filed on July 21, 2006)10.6

Separation Agreement and Release
    between MetroBank, N.A. and Allen Cournyer (incorporated herein
    by reference to Exhibit 2.1 to the Companys Current
    Report on
    Form 8-K
    filed on February 2, 2006).10.7*

Letter Agreement between
    MetroBank, N.A. and David Tai dated as of February 14, 2005.10.8*

Letter Agreement between
    MetroBank, N.A. and David Choi dated as of February 14,
    2005.10.9*

Letter Agreement between
    MetroBank, N.A. and Terry Tangen dated as of February 14,
    2005.11

Computation of Earnings Per Common
    Share, included as Note (17) to the Consolidated Financial
    Statements of this
    Form 10-K.21*

Subsidiaries of MetroCorp
    Bancshares, Inc.23.1*

Consent of PricewaterhouseCoopers
    LLP.31.1*

Certification of the Chief
    Executive Officer pursuant to
    Rule 13a-14(a)
    of the Securities Exchange Act of 1934, as amended.31.2*

Certification of the Chief
    Financial Officer pursuant to
    Rule 13a-14(a)
    of the Securities Exchange Act of 1934, as amended.32.1**

Certification of the Chief
    Executive Officer pursuant to 18 U.S.C Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002.32.2**

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.     (1)
    
    The Company has other long-term debt agreements that meet the
    exclusion set forth in Section 601(b)(4)(iii)(A) of
    Regulation S-K.
    The Company hereby agrees to furnish a copy of such agreements
    to Securities and Exchange Commission upon request.
    
    Management contract or compensatory plan or arrangement.*
    
    Filed herewith.**
    
    Furnished herewith. 62




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##### Table of Contents



SIGNATURES    Metrocorp Bancshares, Inc.
  Date: March 14, 2007

By: /s/  George
    M. LeeGeorge
    M. Lee
    Chief Executive Officer
    (principal executive officer)     Signature

Title

Date/s/  Don
    J. WangDon
    J. Wang

Chairman of the Board

March 14, 2007/s/  George
    M. LeeGeorge
    M. Lee

Chief Executive Officer (principal
    executive officer)

March 14, 2007/s/  David
    TaiDavid
    Tai

Director

March 14, 2007/s/  David
    C. ChoiDavid
    C. Choi

Chief Financial Officer (principal
    financial officer and principal accounting officer)

March 14, 2007/s/  Tiong
    L. AngTiong
    L. Ang

Director

March 14, 2007/s/  Helen
    F. ChenHelen
    F. Chen

Director

March 14, 2007/s/  Tommy
    F. ChenTommy
    F. Chen

Director

March 14, 2007/s/  May
    P. ChuMay
    P. Chu

Director

March 14, 2007/s/  Shirley
    L. ClaytonShirley
    L. Clayton

Director

March 14, 2007/s/  John
    LeeJohn
    Lee

Director

March 14, 2007/s/  Edward
    A. MontoEdward
    A. Monto

Director

March 14, 2007 63




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##### Table of Contents



Signature

Title

Date/s/  John
    E. Peterson,
    Jr.John
    E. Peterson, Jr.

Director

March 14, 2007/s/  Charles
    L. RoffCharles
    L. Roff

Director

March 14, 2007/s/  Joe
    TingJoe
    Ting

Director

March 14, 2007/s/  Daniel
    B. WrightDaniel
    B. Wright

Director

March 14, 2007  64




---



##### 



INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
  METROCORP
    BANCSHARES, INC. AND SUBSIDIARIES
  Report of
    Independent Registered Public Accounting Firm

66Consolidated
    Balance Sheets as of December 31, 2006 and 2005

68Consolidated
    Statements of Income for the Years Ended December 31, 2006,
    2005, and 2004

69Consolidated
    Statements of Comprehensive Income for the Years Ended
    December 31, 2006, 2005, and 2004

70Consolidated
    Statements of Changes in Shareholders Equity for the Years
    Ended December 31, 2006, 2005, and 2004

71Consolidated
    Statements of Cash Flows for the Years Ended December 31,
    2006, 2005, and 2004

72Notes to
    Consolidated Financial Statements

73   65




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM       Consolidated
    Financial Statements
      Internal
    Control Over Financial Reporting
  Internal Control  Integrated Framework Internal Control 
    Integrated Framework
 66




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##### Table of Contents



67




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##### Table of Contents



METROCORP
    BANCSHARES, INC.
    CONSOLIDATED BALANCE SHEETS
    (In thousands, except share amounts) December 31,2006


2005ASSETSCash and due from banks

$
25,709


$
28,213Federal funds sold and other
    short-term investments


125,649



53,599Total cash and cash equivalents


151,358



81,812Securities
    available-for-sale,
    at fair value


186,475



236,100Loans, net of allowance for loan
    losses of $11,436 and $13,169, respectively


875,120



758,304Accrued interest receivable


5,841



4,835Premises and equipment, net


7,585



6,196Goodwill


21,827



21,607Core deposit intangibles


1,103



1,428Deferred tax asset


7,162



8,531Customers liability on
    acceptances


7,693



3,148Foreclosed assets, net


2,747



3,866Other assets


1,523



2,377Total assets

$
1,268,434


$
1,128,204LIABILITIES AND
    SHAREHOLDERS EQUITYDeposits:Noninterest-bearing

$
208,750


$
195,422Interest-bearing


872,914



766,328Total deposits


1,081,664



961,750Junior subordinated debentures


36,083



36,083Other borrowings


26,316



26,054Accrued interest payable


1,822



1,126Acceptances outstanding


7,693



3,148Other liabilities


8,908



7,815Total liabilities


1,162,486



1,035,976Commitments and contingencies






Shareholders equity:Common stock, $1.00 par
    value, 50,000,000 shares authorized; 10,994,965 shares
    and 7,329,977 shares issued and 10,946,135 shares and
    7,232,239 shares outstanding at December 31, 2006 and
    2005, respectively


10,995



7,330Additional
    paid-in-capital


25,974



28,576Retained earnings


71,783



60,023Accumulated other comprehensive
    loss


(2,421
)


(2,783
)Treasury stock, at cost, 48,830
    and 97,738 shares at December 31, 2006 and 2005,
    respectively


(383
)


(918
)Total shareholders equity


105,948



92,228Total liabilities and
    shareholders equity

$
1,268,434


$
1,128,204    68




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##### Table of Contents



METROCORP
    BANCSHARES, INC.
    CONSOLIDATED STATEMENTS OF INCOME
    (In thousands, except per share amounts) Years Ended December 31,2006


2005


2004Interest income:Loans

$
73,101


$
47,799


$
34,711Securities:Taxable


8,576



9,519



9,582Tax-exempt


664



853



917Federal funds sold and other
    short-term investments


4,301



885



94Total interest income


86,642



59,056



45,304Interest expense:Time deposits


24,851



12,948



8,133Demand and savings deposits


5,263



2,316



1,338Junior subordinated debentures


2,108



514



Other borrowings


1,276



1,760



1,878Total interest expense


33,498



17,538



11,349Net interest income


53,144



41,518



33,955Provision for loan losses


612



1,936



1,343Net interest income after
    provision for loan losses


52,532



39,582



32,612Noninterest income:Service fees


5,618



6,593



6,701Loan-related fees


1,627



1,179



977Gain (loss) on sale of securities,
    net


12







(97
)Gain on sale of loans


390







605Other noninterest income


313



337



65Total noninterest income


7,960



8,109



8,251Noninterest expense:Salaries and employee benefits


21,743



17,555



16,104Occupancy and equipment


7,007



5,663



5,723Foreclosed assets, net


461



312



(728
)Legal and other professional fees


2,409



2,171



1,145Other noninterest expense


7,847



6,151



5,994Total noninterest expense


39,467



31,852



28,238Income before provision for income
    taxes


21,025



15,839



12,625Provision for income taxes


7,521



5,059



4,031Net income

$
13,504


$
10,780


$
8,594Earnings per common share*:Basic

$
1.24


$
1.00


$
0.80Diluted

$
1.22


$
0.98


$
0.79Weighted average shares
    outstanding*:Basic


10,906



10,812



10,763Diluted


11,112



10,959



10,845Dividends per common share*

$
0.16


$
0.16


$
0.16     *
    
    The share and per share information presented above have been
    adjusted retroactively for the
    3-for-2
    stock split effected in the form of a 50% stock dividend on
    September 1, 2006.   69




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##### Table of Contents



METROCORP
    BANCSHARES, INC.
    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
    (In thousands) Years Ended December 31,2006


2005


2004Net income

$
13,504


$
10,780


$
8,594Other comprehensive income (loss),
    net of tax:Unrealized gains (losses) on
    investment securities, net of tax:Unrealized holding gains (losses)
    arising during the period


370



(3,493
)


(24
)Less: reclassification adjustment
    for gains (losses) included in net income


8







(63
)Other comprehensive income (loss)


362



(3,493
)


39Total comprehensive income

$
13,866


$
7,287


$
8,633    70




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##### Table of Contents



METROCORP
    BANCSHARES, INC.
    CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS
    EQUITY
    Years Ended December 31, 2006, 2005 and 2004
    (In thousands) AccumulatedAdditional





Other


TreasuryCommon Stock


Paid-In


Retained


Comprehensive


Stock AtShares


At Par


Capital


Earnings


Income (Loss)


Cost


TotalBalance at December 31, 2003


7,157



7,307



27,620



44,105



671



(1,330
)


78,373Issuance of common stock


6



6



44















50Re-issuance of treasury stock


25







195











195



390Net income














8,594











8,594Other comprehensive income


















39







39Dividends ($0.24 per share)














(1,723
)










(1,723
)Balance at December 31, 2004


7,188



7,313



27,859



50,976



710



(1,135
)


85,723Issuance of common stock


17



17



203















220Re-issuance of treasury stock


27







369











217



586Stock-based compensation expense
    recognized in earnings










145















145Net income














10,780











10,780Other comprehensive (loss)


















(3,493
)






(3,493
)Dividends ($0.24 per share)














(1,733
)










(1,733
)Balance at December 31, 2005


7,232


$
7,330


$
28,576


$
60,023


$
(2,783
)

$
(918
)

$
92,228Re-issuance of treasury stock


72







692











535



1,227Stock-based compensation expense
    recognized in earnings










359















359Tax benefit related to stock-based
    compensation expense










12















12Issuance of common stock in
    connection with
    3-for-2
    stock split in the form of a 50% stock dividend


3,642



3,665



(3,665
)














Net income














13,504











13,504Other comprehensive income


















362







362Dividends ($0.16 per share)














(1,744
)










(1,744
)Balance at December 31, 2006


10,946


$
10,995


$
25,974


$
71,783


$
(2,421
)

$
(383
)

$
105,948    71




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##### Table of Contents



METROCORP
    BANCSHARES, INC.
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (In thousands) Years Ended December 31,2006


2005


2004Cash flows from operating
    activities:Net income

$
13,504


$
10,780


$
8,594Adjustments to reconcile net income
    to net cash provided by operating activities:Depreciation


1,440



1,360



1,345Provision for loan losses


612



1,936



1,343(Gain) loss on securities sales, net


(12
)






97(Gain) loss on sale of foreclosed
    assets


167



316



(1,108
)(Gain) loss on sale of premises and
    equipment






100



(5
)Gain on sale of loans, net


(390
)






(605
)Amortization of premiums and
    discounts on securities


83



228



547Amortization of deferred loan fees
    and discounts


(2,578
)


(1,870
)


(1,463
)Amortization of core deposit
    intangibles


495



132



Stock-based compensation expense


359



145



Excess tax benefits from
    stock-based compensation


(12
)






Deferred income taxes


1,135



(412
)


(115
)Changes in; net of acquisition:Accrued interest receivable


(1,006
)


(984
)


144Other assets


971



229



(260
)Accrued interest payable


620



279



82Other liabilities


1,105



(2,276
)


(383
)Net cash provided by operating
    activities


16,493



9,963



8,213Cash flows from investing
    activities:Purchases of securities
    available-for-sale


(1,270
)


(27,159
)


(100,998
)Proceeds from sales, maturities and
    principal paydowns of securities
    available-for-sale


51,240



65,829



88,957Net change in loans


(117,627
)


(44,530
)


(38,263
)Proceeds from sale of foreclosed
    assets


4,119



2,450



3,908Proceeds from sale of premises and
    equipment






27



5Purchases of premises and equipment


(2,609
)


(990
)


(2,183
)Investment in subsidiary trust






(1,083
)


Acquisition of Irvine branch, net
    of cash paid


17,065







Acquisition of Metro United Bank,
    net of cash paid






1,851



Net cash used in investing
    activities


(49,082
)


(3,605
)


(48,574
)Cash flows from financing
    activities:Net change in:Deposits


102,378



45,014



30,112Other borrowings


262



(36,795
)


6,676Proceeds from issuance of junior
    subordinated debentures






36,083



Proceeds from issuance of common
    stock






220



50Re-issuance of treasury stock


1,227



586



390Dividends paid


(1,744
)


(1,727
)


(1,721
)Excess tax benefits from
    stock-based compensation


12







Net cash provided by financing
    activities


102,135



43,381



35,507Net increase (decrease) in cash and
    cash equivalents


69,546



49,739



(4,854
)Cash and cash equivalents at
    beginning of period


81,812



32,073



36,927Cash and cash equivalents at end of
    period

$
151,358


$
81,812


$
32,073    72




---



##### Table of Contents



METROCORP
    BANCSHARES, INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1.
    Summary
    of Significant Accounting Policies  Business
    Basis
    of Financial Statement Presentation
      Use of
    Estimates
    Cash
    and Cash Equivalents
   73




---



##### Table of Contents



METROCORP
    BANCSHARES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Securities
    Loans,
    Allowance for Loan Losses and Reserve for Unfunded Lending
    Commitments
             74




---



##### Table of Contents



METROCORP
    BANCSHARES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Nonrefundable
    Fees and Costs Associated with Lending Activities
      Loan
    Sales Recognition
      Premises
    and Equipment
   75




---



##### Table of Contents



METROCORP
    BANCSHARES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Goodwill
    and Core Deposit Intangibles
    Foreclosed
    Assets
    Other
    Borrowings
    Junior
    Subordinated Debentures
    Income
    Taxes
    Earnings
    Per Share
   76




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##### Table of Contents



METROCORP
    BANCSHARES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Stock-Based
    Compensation
    Off-Balance
    Sheet Instruments
    New
    Accounting Pronouncements
       77




---



##### Table of Contents



METROCORP
    BANCSHARES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Reclassifications
    2.
    Stock
    Split     78




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##### Table of Contents



METROCORP
    BANCSHARES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   3.
    Acquisitions  Irvine
    Branch
      Cash

$
17,603Premises and equipment, net


220Goodwill


220Core deposit intangibles


170Other assets


9Deposits


(17,536
)Accrued interest payable


(76
)Deferred taxes and other
    liabilities


(72
)Purchase price including
    capitalized costs

$
538   Metro
    United Bank
     79




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##### Table of Contents



METROCORP
    BANCSHARES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Cash and cash equivalents

$
35,877Securities


5,474Loans, net of allowance for loan
    losses of $2,307


134,871Goodwill


21,607Core deposit intangibles


1,560Other assets


3,820Deposits


(161,683
)Borrowings


(2,000
)Deferred tax liabilities


(586
)Other liabilities


(4,914
)Purchase price including
    capitalized costs

$
34,026     2005


2004Net interest income

$
45,231


$
37,614Income before income taxes


16,540



12,608Net income


11,034



8,436Earnings per common share, basic

$
1.02


$
0.79Earnings per common share, diluted


1.01



0.78     4.
    Cash and
    Cash Equivalents    5.
    Securities  available-for-sale available-for-sale
 80




---



##### Table of Contents



METROCORP
    BANCSHARES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   available-for-sale
  As of December 31, 2006Gross


GrossAmortized


Unrealized


Unrealized


FairCost


Gains


Losses


ValueU.S. Government agencies

$
28


$
1


$



$
29U.S. Government sponsored
    enterprises


36,906







(510
)


36,396Obligations of state and political
    subdivisions


7,425



157







7,582Mortgage-backed securities and
    collateralized mortgage obligations


121,196



62



(3,060
)


118,198Other debt securities


143



1



(1
)


143Investment in ARM and CRA funds


19,658







(462
)


19,196FHLB and Federal Reserve Bank
    stock(1)(2)


3,848











3,848Investment in subsidiary trust(3)


1,083











1,083Total securities

$
190,287


$
221


$
(4,033
)

$
186,475   As of December 31, 2005Gross


GrossAmortized


Unrealized


Unrealized


FairCost


Gains


Losses


ValueU.S. Government agencies

$
32


$



$



$
32U.S. Government sponsored
    enterprises


36,869







(526
)


36,343Obligations of state and political
    subdivisions


17,162



551







17,713Mortgage-backed securities and
    collateralized mortgage obligations


162,294



112



(3,974
)


158,432Other debt securities


292



3







295Investment in ARM and CRA funds


19,419



17



(412
)


19,024FHLB and Federal Reserve Bank
    stock(1)(2)


3,178











3,178Investment in subsidiary trust(3)


1,083











1,083Total securities

$
240,329


$
683


$
(4,912
)

$
236,100     (1)
    
    FHLB stock held by MetroBank is subject to certain restrictions
    under a credit policy of the FHLB dated May 1, 1997.
    Redemption of FHLB stock is dependent upon repayment of
    borrowings from the FHLB.(2)
    
    Federal Reserve Bank stock held by MetroBank is subject to
    certain restrictions under Federal Reserve Bank Policy.(3)
    
    The Companys ownership of trust common securities of the
    MCBI Statutory Trust I is carried at cost. 81




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##### Table of Contents



METROCORP
    BANCSHARES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Years Ended December 31,2006


2005


2004Amortized cost

$
13,003


$



$
8,107Proceeds


13,015







8,010Gross realized gains


189







7Gross realized losses


177







104       Amortized


FairCost


ValueWithin one year

$
5,495


$
5,453Within two to five years


31,971



31,504Within six to ten years


3,338



3,375After ten years


3,555



3,675Mortgage-backed securities and
    collateralized mortgage obligations


121,339



118,341Total debt securities

$
165,698


$
162,348       As of December 31, 2006Less Than


Greater Than12 Months


12 Months


TotalFair


Unrealized


Fair


Unrealized


Fair


UnrealizedValue


Loss


Value


Loss


Value


LossU.S. Government sponsored
    enterprises

$



$



$
36,396


$
(510
)

$
36,396


$
(510
)Mortgage-backed securities and
    collateralized mortgage obligations


11,818



(162
)


101,519



(2,898
)


113,337



(3,060
)Other debt securities


29



(1
)










29



(1
)Investment in ARM and CRA funds


4,461



(19
)


14,735



(443
)


19,196



(462
)Total securities

$
16,308


$
(182
)

$
152,650


$
(3,851
)

$
168,958


$
(4,033
)   82




---



##### Table of Contents



METROCORP
    BANCSHARES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  As of December 31, 2005Less Than


Greater Than12 Months


12 Months


TotalFair


Unrealized


Fair


Unrealized


Fair


UnrealizedValue


Loss


Value


Loss


Value


LossU.S. Government sponsored
    enterprises

$
31,500


$
(394
)

$
4,843


$
(132
)

$
36,343


$
(526
)Mortgage-backed securities and
    collateralized mortgage obligations


102,859



(2,169
)


50,108



(1,805
)


152,967



(3,974
)Investment in ARM and CRA funds










14,717



(412
)


14,717



(412
)Total securities

$
134,359


$
(2,563
)

$
69,668


$
(2,349
)

$
204,027


$
(4,912
)        83




---



##### Table of Contents



METROCORP
    BANCSHARES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   6.
    Loans and
    Allowance for Loan Losses    As of December 31,2006


2005Commercial and industrial

$
367,072


$
331,869Real estate-mortgage


429,278



376,247Real estate-construction


86,092



56,410Consumer and other


7,332



10,172Gross loans


889,774



774,698Unearned discounts and interest


(147
)


(204
)Deferred loan fees


(3,071
)


(3,021
)Total loans


886,556



771,473Allowance for loan losses


(11,436
)


(13,169
)Loans, net

$
875,120


$
758,304Variable rate loans

$
647,394


$
641,224Fixed rate loans


242,380



133,474Gross loans

$
889,774


$
774,698     As of December 31,2006


2005Convenience stores/gasoline
    stations

$
31,884


$
36,135Hotels/motels


94,594



82,420Nonresidential building for
    rent/lease


279,675



254,954Restaurants


71,866



56,506Wholesale trade


76,970



59,394All other


334,785



285,289Gross loans

$
889,774


$
774,698  84




---



##### Table of Contents



METROCORP
    BANCSHARES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    As of December 31,2006


2005


2004Balance at beginning of year

$
13,169


$
10,501


$
10,308Provision for loan losses


612



1,936



1,343Allowance acquired through
    acquisition






2,307



Charge-offs


(3,999
)


(2,425
)


(2,835
)Recoveries


1,654



850



1,685Balance at end of year

$
11,436


$
13,169


$
10,501           As of December 31,2006


2005Impaired loans with no
    SFAS No. 114 valuation reserve

$
6,714


$
11,865Impaired loans with
    SFAS No. 114 valuation reserve


2,699



6,468Total recorded investment in
    impaired loans

$
9,413


$
18,333Valuation allowance related to
    impaired loans

$
900


$
1,783      85




---



##### Table of Contents



METROCORP
    BANCSHARES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   7.
    Premises
    and Equipment    Estimated useful


As of December 31,lives (in years)


2006


2005Furniture, fixtures and equipment


3-10


$
15,220


$
14,264Building and improvements


3-20



4,817



4,800Land






1,679



1,679Leasehold improvements


5



4,385



3,37226,101



24,115Accumulated depreciation






(18,516
)


(17,919
)Premises and equipment, net





$
7,585


$
6,196   8.
    Goodwill
    and Core Deposit Intangibles    Core DepositGoodwill


IntangiblesBalance, December 31, 2004

$



$
Acquisition of Metro United


21,607



1,560Amortization






(132
)Balance, December 31, 2005


21,607



1,428Acquisition of Irvine Branch


220



170Amortization






(495
)Balance, December 31, 2006

$
21,827


$
1,103   Goodwill and Other Intangible
    Assets.
   86




---



##### Table of Contents



METROCORP
    BANCSHARES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2007

$
3482008


2502009


1772010


1262011


88Thereafter


114Total

$
1,103   9.
    Interest-Bearing
    Deposits    As of December 31,2006


2005Interest-bearing demand deposits

$
71,838


$
87,784Savings and money market accounts


178,173



139,254Time deposits less than $100,000


241,389



240,048Time deposits $100,000 and over


381,514



299,242Interest-bearing deposits

$
872,914


$
766,328     2007

$
546,7252008


38,8842009


16,6532010


10,6972011


9,944$
622,903     10.
    Junior
    Subordinated Debentures     87




---



##### Table of Contents



METROCORP
    BANCSHARES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      3-month
    11.
    Other
    Borrowings    As of December 31,2006


2005FHLB loans

$
25,000


$
25,000TT&L deposits


1,316



1,054$
26,316


$
26,054      88




---



##### Table of Contents



METROCORP
    BANCSHARES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     12.
    Income
    Taxes    As of December 31,2006


2005Deferred tax assets:Allowance for loan losses

$
4,226


$
4,791Deferred loan fees


867



851Premises and equipment


1,317



1,223Interest on nonaccrual loans


304



716Unrealized losses on investment
    securities available-for-sale


1,392



1,446Net operating loss carryforward






476Gross deferred tax assets


8,106



9,503Deferred tax liabilities:Core deposit intangibles


423



556FHLB stock dividends


288



250Other


233



166Gross deferred tax liabilities


944



972Net deferred tax assets

$
7,162


$
8,531       Years Ended December 31,2006


2005


2004Current provision for federal
    income taxes

$
6,386


$
5,471


$
4,146Deferred federal income tax
    provision (benefit)


1,135



(412
)


(115
)Total provision for income taxes

$
7,521


$
5,059


$
4,031  89




---



##### Table of Contents



METROCORP
    BANCSHARES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Years Ended December 31,2006


2005


2004Amount


Percent


Amount


Percent


Amount


PercentFederal income tax expense at
    statutory rate

$
7,359



35
%

$
5,544



35
%

$
4,293



34
%Tax-exempt interest income


(252
)


(1
)


(274
)


(2
)


(312
)


(2
)State income tax


433



2



130



1







Other, net


(19
)






(341
)


(2
)


50



Provision for income taxes

$
7,521



36
%

$
5,059



32
%

$
4,031



32
%     Years Ended December 31,2006


2005


2004Unrealized gains (losses) arising
    during the period

$
208


$
(1,799
)

$
(15
)Reclassification adjustment for
    gains (losses) realized in net income


4







(34
)Other comprehensive income

$
204


$
(1,799
)

$
19   13.
    Shareholders
    Equity        14.
    Regulatory
    Matters   90




---



##### Table of Contents



METROCORP
    BANCSHARES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        91




---



##### Table of Contents



METROCORP
    BANCSHARES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     To be Categorized asWell CapitalizedMinimum Required


under PromptFor Capital


Corrective ActionActual


Adequacy Purposes


ProvisionsAmount


Ratio


Amount


Ratio


Amount


RatioAs of December 31,
    2006Total risk-based capital ratioMetroCorp Bancshares, Inc.

$
133,438



13.15
%

$
81,170



8.00
%

$
N/A



N/A
%MetroBank, N.A.


108,398



13.11



66,127



8.00



82,659



10.00Metro United Bank


21,086



11.33



14,887



8.00



18,609



10.00Tier 1 risk-based capital ratioMetroCorp Bancshares, Inc.


113,503



11.19



40,585



4.00



N/A



N/AMetroBank, N.A


98,786



11.95



33,063



4.00



49,595



6.00Metro United Bank


18,756



10.08



7,444



4.00



11,166



6.00Leverage ratioMetroCorp Bancshares, Inc.


113,503



9.70



46,794



4.00



N/A



N/AMetroBank, N.A


98,786



10.23



38,611



4.00



48,264



5.00Metro United Bank


18,756



9.22



8,135



4.00



10,169



5.00As of December 31,
    2005Total risk-based capital ratioMetroCorp Bancshares, Inc.

$
117,439



13.73
%

$
68,447



8.00
%

$
N/A



N/A
%MetroBank, N.A.


95,764



13.38



57,242



8.00



71,552



10.00Metro United Bank


19,010



13.63



11,161



8.00



13,951



10.00Tier 1 risk-based capital ratioMetroCorp Bancshares, Inc.


95,620



11.18



34,223



4.00



N/A



N/AMetroBank, N.A


86,792



12.13



28,621



4.00



42,931



6.00Metro United Bank


17,258



12.37



5,580



4.00



8,371



6.00Leverage ratioMetroCorp Bancshares, Inc.


95,620



9.96



38,396



4.00



N/A



N/AMetroBank, N.A


86,792



9.52



36,448



4.00



45,561



5.00Metro United Bank


17,258



9.02



7,655



4.00



9,569



5.00     30-year
 92




---



##### Table of Contents



METROCORP
    BANCSHARES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   15.
    401(k)
    Profit Sharing Plan      16.
    Stock-Based
    Compensation          No. FAS 123R-3,
 93




---



##### Table of Contents



METROCORP
    BANCSHARES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  paid-in-capital
    Year Ended December 31,2005


2004Net income:As reported

$
10,780


$
8,594Pro forma

$
10,538


$
8,423Stock-based compensation expense,
    net of income taxes:As reported

$
145


$
Pro forma

$
387


$
171Basic earnings per common share:As reported

$
1.00


$
0.80Pro forma

$
0.97


$
0.78Diluted earnings per common share:As reported

$
0.99


$
0.79Pro forma

$
0.96


$
0.77   Stock Incentive Plan.
 94




---



##### Table of Contents



METROCORP
    BANCSHARES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Assumptions

2006


2005


2004Expected term (in years)


4.55



3.00



3.00Expected stock price volatility


22.75
%


26.35
%


22.00
%Expected dividend yield


0.80
%


1.00
%


1.40
%Risk-free interest rate


4.94
%


4.41
%


3.25
%Estimated weighted average
    grant-date fair value per option granted

$
4.91


$
3.95


$
2.26         WeightedAverage


AggregateNumber of


Weighted


Remaining


IntrinsicOptions


Average


Contractual


ValueOutstanding


Exercise Price


Life


(In thousands)Outstanding options at
    December 31, 2005


673,725


$
12.12Options granted


241,500



18.76Options exercised


(68,100
)


10.34Options forfeited


(30,000
)


16.22Outstanding options at
    December 31, 2006


817,125


$
14.08



5.99


$
8,115Exercisable options at
    December 31, 2006


466,350


$
11.47



5.92


$
5,849    95




---



##### Table of Contents



METROCORP
    BANCSHARES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     WeightedAverage GrantNonvested Shares

Shares


Date Fair ValueNonvested at December 31, 2005


169,200


$
3.79Granted


241,500



4.91Vested


(29,925
)


3.64Forfeited


(30,000
)


4.13Nonvested at December 31, 2006


350,775


$
4.54       Options Outstanding


Options ExercisableWeightedNumber


Weighted


Average


Number


WeightedOutstanding


Average


Remaining


Outstanding


AverageRange of Exercise Prices

at
    12/31/06


Exercise Price


Contractual Life


at
    12/31/06


Exercise Price$4.83 - $12.72


329,625


$
10.01



6.10 years



320,625


$
9.98$12.73 - $22.09


487,500



16.83



5.91 years



145,725



14.75817,125



14.08



5.99 years



466,350



11.47   Stock Purchase Plan.
 96




---



##### Table of Contents



METROCORP
    BANCSHARES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Number of SubscribedShares OutstandingOutstanding subscribed shares at
    December 31, 2004


Shares subscribed


28,901Subscribed shares issued


(16,343
)Subscribed shares withdrawn from
    plan


(255
)Outstanding subscribed shares at
    December 31, 2005


12,303Subscribed shares issued


(11,701
)Subscribed shares withdrawn from
    plan


(599
)Fractional shares adjustment


(3
)Outstanding subscribed shares at
    December 31, 2006


    97




---



##### Table of Contents



METROCORP
    BANCSHARES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   17.
    Earnings
    Per Share    Years Ended December 31,2006


2005


2004Net income

$
13,504


$
10,780


$
8,594Weighted average common shares in
    basic EPS


10,906



10,812



10,763Effect of dilutive securities


206



147



82Weighted average common and
    potentially dilutive common shares used in diluted EPS


11,112



10,959



10,845Earnings per common share:Basic

$
1.24


$
1.00


$
0.80Diluted

$
1.22


$
0.98


$
0.79   18.
    Off-Balance
    Sheet Activities   98




---



##### Table of Contents



METROCORP
    BANCSHARES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     2006


2005Unfunded loan commitments
    including unfunded lines of credit

$
234,501


$
152,190Standby letters of credit


7,597



4,589Commercial letters of credit


9,596



6,593Operating leases


9,718



5,467Total financial instruments with
    off-balance sheet risk

$
261,412


$
168,839   19.
    Fair
    Value of Financial Instruments  Disclosures About Fair Value of
    Financial Instruments,
   99




---



##### Table of Contents



METROCORP
    BANCSHARES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     As of December 31,2006


2005Carrying or





Carrying orContract


Estimated


Contract


EstimatedAmount


Fair Value


Amount


Fair ValueFinancial AssetsCash and cash equivalents

$
151,358


$
151,358


$
81,812


$
81,812Investment securities
    available-for-sale


186,475



186,475



236,100



236,100Loans held-for-investment, net


875,120



858,807



758,304



756,392Accrued interest receivable


5,841



5,841



4,835



4,835Financial LiabilitiesDepositsTransaction accounts


458,761



458,761



422,460



422,460Time deposits


622,903



622,977



539,290



537,636Total deposits


1,081,664



1,081,738



961,750



960,096Other borrowings


26,316



26,194



26,054



26,177Junior subordinated debentures


36,083



37,119



36,083



37,507Accrued interest payable


1,822



1,822



1,126



1,126Off-balance sheet financial
    instrumentsUnfunded loan commitments,
    including unfunded lines of credit


234,501







152,190



Standby letters of credit


7,597







4,589



Commercial letters of credit


9,596







6,593



     Assets
    for Which Fair Value Approximates Carrying Value
    Investment
    Securities
    Loans
   100




---



##### Table of Contents



METROCORP
    BANCSHARES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Liabilities
    for Which Fair Value Approximates Carrying Value
    Time
    Deposits
    Other
    Borrowings
    Junior
    Subordinated Debentures
    Commitments
    to Extend Credit and Letters of Credit
    20.
    Commitments
    and Contingencies  Litigation
   101




---



##### Table of Contents



METROCORP
    BANCSHARES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Leases
    Year

Amount2007

$
1,7722008


1,8062009


1,8112010


1,7332011


952Thereafter


1,644$
9,718   21.
    Operating
    Segment Information   102




---



##### Table of Contents



METROCORP
    BANCSHARES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     As of and for the Year Ended December 31, 2006ConsolidatedMetroBank


Metro United


Other


CompanyNet interest income

$
46,917


$
8,267


$
(2,040
)

$
53,144Provision for loan losses


451



161







612Net interest income after
    provision for loan losses


46,466



8,106



(2,040
)


52,532Noninterest income


7,760



310



(110
)


7,960Noninterest expense


33,059



5,895



513



39,467Income before income tax provision


21,167



2,521



(2,663
)


21,025Provision for income taxes


7,373



1,061



(913
)


7,521Net income

$
13,794


$
1,460


$
(1,750
)

$
13,504Assets

$
1,009,996


$
257,211


$
1,227


$
1,268,434Net loans


693,538



181,582







875,120Goodwill and core deposit
    intangibles






22,930







22,930Deposits


870,394



213,241



(1,971
)


1,081,664Shareholders equity


96,746



41,618



(32,416
)


105,948   As of and for the Year Ended December 31, 2005ConsolidatedMetroBank


Metro United


Other


CompanyNet interest income

$
40,168


$
1,847


$
(497
)

$
41,518Provision for loan losses


1,874



62







1,936Net interest income after
    provision for loan losses


38,294



1,785



(497
)


39,582Noninterest income


7,984



125







8,109Noninterest expense


30,550



1,150



152



31,852Income before income tax provision


15,728



760



(649
)


15,839Provision for income taxes


4,935



299



(175
)


5,059Net income

$
10,793


$
461


$
(474
)

$
10,780Assets

$
914,748


$
212,782


$
674


$
1,128,204Net loans


625,825



132,479







758,304Goodwill and core deposit
    intangibles






23,035







23,035Deposits


793,451



171,587



(3,288
)


961,750Shareholders equity


84,340



40,156



(32,268
)


92,228  103




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##### Table of Contents



METROCORP
    BANCSHARES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  22.
    Supplemental
    Statement of Cash Flow Information  Years Ended December 31,2006


2005


2004(In thousands)Cash payments during the year for:Interest

$
29,637


$
17,259


$
11,267Income taxes


5,050



4,550



3,850Noncash investing and financing
    activities:Dividends declared not paid


437



437



431Foreclosed assets acquired


3,167



5,066



1,781Loans to facilitate the sale of
    foreclosed assets










505Transfer of loans receivable from
    loans
    held-for-sale






(1,899
)


  104




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##### Table of Contents



METROCORP
    BANCSHARES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  23.
    Parent
    Company Financial Information    Condensed
    Balance Sheets
    (In thousands, except share amounts)
  As of December 31,2006


2005AssetsCash and due from subsidiary banks

$
2,059


$
3,367Investment in subsidiary trust


1,083



1,083Investment in bank subsidiaries


138,375



124,514Other assets


1,195



3Total assets

$
142,712


$
128,967Liabilities and
    Shareholders EquityAccrued interest payable

$
127


$
98Junior subordinated debentures


36,083



36,083Other liabilities


554



558Total liabilities


36,764



36,739Shareholders equity:Common stock, $1.00 par
    value, 50,000,000 shares authorized; 10,994,965 and
    7,329,977 shares issued and 10,946,135 and 7,232,239 shares
    outstanding at December 31, 2006 and 2005, respectively


10,995



7,330Additional
    paid-in-capital


25,974



28,576Retained earnings


71,783



60,023Other comprehensive income


(2,421
)


(2,783
)Treasury stock, at cost


(383
)


(918
)Total shareholders equity


105,948



92,228Total liabilities and
    shareholders equity

$
142,712


$
128,967  105




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##### Table of Contents



METROCORP
    BANCSHARES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Condensed
    Statements of Income
    (In thousands)
  Years Ended December 31,2006


2005


2004IncomeEquity in undistributed income of
    subsidiaries

$
13,499


$
4,513


$
6,872Interest income on deposits


4



2



Dividends received from subsidiary
    trust


63



15



Dividends received from bank
    subsidiaries


1,749



6,734



1,722Total income


15,315



11,264



8,594ExpenseInterest expense on junior
    subordinated debentures


2,108



514



Stock-based compensation


359



145



Other expenses


257







Total expense


2,724



659



Income before taxes


12,591



10,605



8,594Income tax benefit


913



175



Net income

$
13,504


$
10,780


$
8,594  106




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##### Table of Contents



METROCORP
    BANCSHARES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Condensed
    Statements of Cash Flows
    (In thousands)
  Years Ended December 31,2006


2005


2004Cash flow from operating
    activities:Net income

$
13,504


$
10,780


$
8,594Stock-based compensation


359



145



Equity in undistributed income of
    subsidiaries


(13,499
)


(4,513
)


(6,872
)Increase in other assets


(962
)


(3
)


Increase (decrease) in other
    liabilities


(193
)


(68
)


2Net cash used in operating
    activities


(791
)


6,341



1,724Cash flow from investment
    activities:Investment in bank subsidiaries






(39,425
)


(3,025
)Investment in subsidiary trust






(1,083
)


Net cash used in investing
    activities






(40,508
)


(3,025
)Cash flow from financing
    activities:Proceeds from issuance junior
    subordinated debentures

$



$
36,083


$
Proceeds from issuance of common
    stock






220



50Re-issuance of treasury stock


1,227



586



390Dividends


(1,744
)


(1,727
)


(1,721
)Net cash provided by (used in)
    financing activities


(517
)


35,162



(1,281
)Net increase (decrease) in cash
    and cash equivalents


(1,308
)


995



(2,582
)Cash and cash equivalents at
    beginning of year


3,367



2,372



4,954Cash and cash equivalents at end
    of year

$
2,059


$
3,367


$
2,372Dividends declared but not paid

$
437


$
437


$
431   24.
    Related
    Party Transactions   107




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##### Table of Contents



METROCORP
    BANCSHARES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     2006


2005Balance at January 1,

$
758


$
265New loans and advances


827



1,077Repayments


(758
)


(584
)Balance at December 31,

$
827


$
758         2006


2005Gross balance

$
38,376


$
17,018Less: participation portion sold
    to New Era


(12,753
)


(6,691
)Net balance outstanding

$
25,623


$
10,327      108




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##### Table of Contents



EXHIBIT INDEX
  ExhibitNumber(1)

Description3.1

Amended and Restated Articles of
    Incorporation of the Company (incorporated herein by reference
    to Exhibit 3.1 to the Companys Registration Statement
    on
    Form S-1
    (Registration
    No. 333-62667)
    (the Registration Statement)).3.2

Articles of Amendment to the
    Articles of Incorporation of the Company (incorporated herein by
    reference to Exhibit 3.2 to the Companys Quarterly
    Report on
    Form 10-Q
    for the quarter ended March 31, 2006).3.3

Amended and Restated Bylaws of the
    Company (incorporated herein by reference to Exhibit 3.2 to
    the Registration Statement).4

Specimen form of certificate
    evidencing the Common Stock (incorporated herein by reference to
    Exhibit 4 to the Registration Statement).10.1

MetroCorp Bancshares, Inc. 1998
    Employee Stock Purchase Plan (incorporated herein by reference
    to Exhibit 10.4 to the Registration Statement).10.2

MetroCorp Bancshares, Inc. 1998
    Stock Incentive Plan (incorporated herein by reference to
    Exhibit 10.5 to the Registration Statement).10.3

Metro Amendment to the MetroCorp
    Bancshares, Inc. 1998 Employee Stock Purchase Plan (incorporated
    herein by reference to Exhibit 10.6 to the Companys
    Annual Report on
    Form 10-K
    for the year ended December 31, 1998).10.4

Employment Agreement between the
    Company and George M. Lee dated as of January 26, 2007
    (incorporated herein by reference to the Companys Current
    Report on
    Form 8-K
    filed on February 1, 2007).10.5

Employment Agreement between the
    Company and Mitchell W. Kitayama dated as of July 15, 2005
    (incorporated herein by to the Companys Current Report on
    Form 8-K
    filed on July 21, 2006).10.6

Separation Agreement and Release
    between MetroBank, N.A. and Allen Cournyer (incorporated herein
    by reference to Exhibit 2.1 to the Companys Current
    Report on
    Form 8-K
    filed on February 2, 2006).10.7*

Letter Agreement between
    MetroBank, N.A. and David Tai dated as of February 14, 2005.10.8*

Letter Agreement between
    MetroBank, N.A. and David Choi dated as of February 14,
    2005.10.9*

Letter Agreement between
    MetroBank, N.A. and Terry Tangen dated as of February 14,
    2005.11

Computation of Earnings Per Common
    Share, included as Note (17) to the Consolidated Financial
    Statements of this
    Form 10-K.21*

Subsidiaries of MetroCorp
    Bancshares, Inc.23.1*

Consent of PricewaterhouseCoopers
    LLP.31.1*

Certification of the Chief
    Executive Officer pursuant to
    Rule 13a-14(a)
    of the Securities Exchange Act of 1934, as amended.31.2*

Certification of the Chief
    Financial Officer pursuant to
    Rule 13a-14(a)
    of the Securities Exchange Act of 1934, as amended.32.1**

Certification of the Chief
    Executive Officer pursuant to 18 U.S.C Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002.32.2**

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.     (1)
    
    The Company has other long-term debt agreements that meet the
    exclusion set forth in Section 601(b)(4)(iii)(A) of
    Regulation S-K.
    The Company hereby agrees to furnish a copy of such agreements
    to Securities and Exchange Commission upon request.
    
    Management contract or compensatory plan or arrangement.*
    
    Filed herewith.**
    
    Furnished herewith.