UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| (Mark One) | ||
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003 | |
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number 000-25141
METROCORP BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
| Texas (State or other jurisdiction of incorporation or organization) |
76-0579161 (I.R.S. Employer Identification No.) |
9600 Bellaire Boulevard, Suite 252
Houston, Texas 77036
(Address of principal executive offices including zip code)
(713) 776-3876
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $1.00 per share
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o.
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes o No x.
As of April 30, 2003, the number of outstanding shares of Common Stock, par value $1.00 per share, was 7,034,668.
1
PART I
FINANCIAL INFORMATION
| Item 1. | Condensed Consolidated Financial Statements. |
METROCORP BANCSHARES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(Unaudited)
| March 31, | December 31, | |||||||||
| 2003 | 2002 | |||||||||
ASSETS |
||||||||||
Cash and due from banks |
$ | 29,429 | $ | 30,195 | ||||||
Federal funds sold and other temporary investments |
15,490 | 7,991 | ||||||||
Total cash and cash equivalents |
44,919 | 38,186 | ||||||||
Securities available-for-sale, at fair value |
235,547 | 260,038 | ||||||||
Other investments |
4,478 | 4,380 | ||||||||
Loans, net of allowance for loan losses of $10,694 and $10,150, respectively |
541,845 | 517,609 | ||||||||
Premises and equipment, net |
5,812 | 5,841 | ||||||||
Accrued interest receivable |
3,180 | 3,391 | ||||||||
Customers’ liability on acceptances |
1,428 | 4,080 | ||||||||
Foreclosed assets, net |
842 | 1,190 | ||||||||
Other assets |
6,574 | 5,350 | ||||||||
Total assets |
$ | 844,625 | $ | 840,065 | ||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||||
Deposits: |
||||||||||
Noninterest-bearing |
$ | 148,237 | $ | 144,544 | ||||||
Interest-bearing |
548,553 | 546,817 | ||||||||
Total deposits |
696,790 | 691,361 | ||||||||
Other borrowings |
65,819 | 65,774 | ||||||||
Accrued interest payable |
680 | 717 | ||||||||
Acceptances outstanding |
1,428 | 4,080 | ||||||||
Other liabilities |
4,399 | 3,670 | ||||||||
Total liabilities |
769,116 | 765,602 | ||||||||
Shareholders’ equity: |
||||||||||
Preferred stock $1.00 par value, 2,000,000 shares authorized;
none of which are issued and outstanding |
— | — | ||||||||
Common stock, $1.00 par value, 20,000,000 shares authorized;
7,199,427 shares and 7,195,927 shares issued and 7,026,722 shares and
7,031,882 shares outstanding at March 31, 2003 and December 31, 2002, respectively |
7,199 | 7,196 | ||||||||
Additional paid-in-capital |
26,406 | 26,344 | ||||||||
Retained earnings |
41,425 | 39,938 | ||||||||
Accumulated other comprehensive income |
1,990 | 2,354 | ||||||||
Treasury stock, at cost |
(1,511 | ) | (1,369 | ) | ||||||
Total shareholders’ equity |
75,509 | 74,463 | ||||||||
Total liabilities and shareholders’ equity |
$ | 844,625 | $ | 840,065 | ||||||
See accompanying notes to condensed consolidated financial statements
2
METROCORP BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
| For the Three Months | ||||||||||
| Ended March 31, | ||||||||||
| 2003 | 2002 | |||||||||
Interest income: |
||||||||||
Loans |
$ | 8,862 | $ | 9,479 | ||||||
Securities: |
||||||||||
Taxable |
1,912 | 1,998 | ||||||||
Tax-exempt |
262 | 310 | ||||||||
Federal funds sold and other investments |
55 | 118 | ||||||||
Total interest income |
11,091 | 11,905 | ||||||||
Interest expense: |
||||||||||
Time deposits |
2,361 | 2,960 | ||||||||
Demand and savings deposits |
383 | 601 | ||||||||
Other borrowings |
505 | 330 | ||||||||
Total interest expense |
3,249 | 3,891 | ||||||||
Net interest income |
7,842 | 8,014 | ||||||||
Provision for loan losses |
800 | 600 | ||||||||
Net interest income after provision for loan losses |
7,042 | 7,414 | ||||||||
Noninterest income: |
||||||||||
Service fees |
1,542 | 1,657 | ||||||||
Other loan-related fees |
428 | 368 | ||||||||
Letters of credit commissions and fees |
134 | 126 | ||||||||
Gain on sale of securities, net |
163 | 2 | ||||||||
Other noninterest income |
27 | 105 | ||||||||
Total noninterest income |
2,294 | 2,258 | ||||||||
Noninterest expense: |
||||||||||
Salaries and employee benefits |
3,840 | 3,570 | ||||||||
Occupancy and equipment |
1,282 | 1,235 | ||||||||
Foreclosed assets, net |
(1 | ) | 263 | |||||||
Data processing |
24 | 24 | ||||||||
Other noninterest expense |
1,375 | 1,531 | ||||||||
Total noninterest expense |
6,520 | 6,623 | ||||||||
Income before provision for income taxes |
2,816 | 3,049 | ||||||||
Provision for income taxes |
907 | 958 | ||||||||
Net income |
$ | 1,909 | $ | 2,091 | ||||||
Earnings per common share: |
||||||||||
Basic |
$ | 0.27 | $ | 0.30 | ||||||
Diluted |
$ | 0.27 | $ | 0.29 | ||||||
Weighted average shares outstanding: |
||||||||||
Basic |
7,033 | 7,020 | ||||||||
Diluted |
7,196 | 7,140 | ||||||||
Dividends per common share |
$ | 0.06 | $ | 0.06 | ||||||
See accompanying notes to condensed consolidated financial statements
3
METROCORP BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
| For the Three Months | ||||||||||
| Ended March 31, | ||||||||||
| 2003 | 2002 | |||||||||
Net income |
$ | 1,909 | $ | 2,091 | ||||||
Other comprehensive income, net of tax: |
||||||||||
Unrealized gain on investment securities, net: |
||||||||||
Unrealized
holding losses arising during the period |
(258 | ) | (363 | ) | ||||||
Less: reclassification adjustment for gains included in net
income |
106 | 1 | ||||||||
Other
comprehensive loss |
(364 | ) | (364 | ) | ||||||
Total comprehensive income |
$ | 1,545 | $ | 1,727 | ||||||
METROCORP BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
For The Three Months Ended March 31, 2003
(In thousands)
(Unaudited)
| Accumulated | ||||||||||||||||||||||||||||
| Common Stock | Additional | Other | Treasury | |||||||||||||||||||||||||
| Paid-in | Retained | Comprehensive | Stock | |||||||||||||||||||||||||
| Shares | At Par | Capital | Earnings | Income | At Cost | Total | ||||||||||||||||||||||
Balance at January 1, 2003 |
7,032 | $ | 7,196 | $ | 26,344 | $ | 39,938 | $ | 2,354 | $ | (1,369 | ) | $ | 74,463 | ||||||||||||||
Issuance of common stock |
3 | 3 | 25 | — | — | — | 28 | |||||||||||||||||||||
Repurchase of common stock |
(17 | ) | — | — | — | — | (212 | ) | (212 | ) | ||||||||||||||||||
Re-issuance of treasury stock |
9 | — | 37 | — | — | 70 | 107 | |||||||||||||||||||||
Other comprehensive income |
— | — | — | — | (364 | ) | — | (364 | ) | |||||||||||||||||||
Net income |
— | — | — | 1,909 | — | — | 1,909 | |||||||||||||||||||||
Dividends |
— | — | — | (422 | ) | — | — | (422 | ) | |||||||||||||||||||
Balance at March 31, 2003 |
7,027 | $ | 7,199 | $ | 26,406 | $ | 41,425 | $ | 1,990 | $ | (1,511 | ) | $ | 75,509 | ||||||||||||||
See accompanying notes to condensed consolidated financial statements
4
METROCORP BANCSHARES, INC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| For The Three Months | ||||||||||||
| Ended March 31, | ||||||||||||
| 2003 | 2002 | |||||||||||
Cash flows from operating activities: |
||||||||||||
Net income |
$ | 1,909 | $ | 2,091 | ||||||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||||||
Depreciation |
360 | 366 | ||||||||||
Provision for loan losses |
800 | 600 | ||||||||||
Amortization of securities |
684 | 228 | ||||||||||
Gain
on sale of securities, net |
(163 | ) | (2 | ) | ||||||||
(Gain)
loss on sale of foreclosed assets, net |
(14 | ) | 256 | |||||||||
Gain on sale of premises and equipment |
— | (2 | ) | |||||||||
Amortization of deferred loan fees and discounts |
(19 | ) | (586 | ) | ||||||||
Changes in: |
||||||||||||
Accrued interest receivable |
211 | 406 | ||||||||||
Accrued interest payable |
(37 | ) | (125 | ) | ||||||||
Other liabilities |
730 | 270 | ||||||||||
Other assets |
(1,071 | ) | 207 | |||||||||
Net cash provided by operating activities |
3,390 | 3,709 | ||||||||||
Cash flows from investing activities: |
||||||||||||
Purchases of securities available-for-sale |
(25,541 | ) | (48,207 | ) | ||||||||
Proceeds from sales, maturities and principal paydowns of securities available for sale |
48,895 | 19,198 | ||||||||||
Net change in loans |
(25,017 | ) | 2,810 | |||||||||
Proceeds from sale of foreclosed assets |
362 | 11 | ||||||||||
Proceeds from sale of premises and equipment |
— | 2 | ||||||||||
Purchases of premises and equipment |
(331 | ) | (144 | ) | ||||||||
Net cash used in investing activities |
(1,632 | ) | (26,330 | ) | ||||||||
Cash flows from financing activities: |
||||||||||||
Net change in: |
||||||||||||
Deposits |
5,429 | (4,221 | ) | |||||||||
Other borrowings |
45 | 17,628 | ||||||||||
Proceeds from issuance of common stock |
28 | — | ||||||||||
Treasury stock sold |
107 | 105 | ||||||||||
Treasury stock purchased |
(212 | ) | (150 | ) | ||||||||
Dividends paid |
(422 | ) | (421 | ) | ||||||||
Net cash provided by financing activities |
4,975 | 12,941 | ||||||||||
Net
increase (decrease) in cash and cash equivalents |
6,733 | (9,680 | ) | |||||||||
Cash and cash equivalents at beginning of period |
38,186 | 58,106 | ||||||||||
Cash and cash equivalents at end of period |
$ | 44,919 | $ | 48,426 | ||||||||
See accompanying notes to condensed consolidated financial statements
5
METROCORP BANCSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Basis of Presentation
The unaudited condensed consolidated financial statements include the accounts of MetroCorp Bancshares, Inc. (the “Company”) and its wholly-owned subsidiary MetroBank, National Association (the “Bank”). The Bank was formed in 1987 and is engaged in commercial banking activities through its fourteen branches in Houston and Dallas, Texas. The Company considers itself one reporting segment. All material intercompany accounts and transactions have been eliminated in consolidation.
The accompanying unaudited condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions for Form 10-Q. In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal and recurring adjustments, necessary for a fair statement of the Company’s consolidated financial position at March 31, 2003, consolidated results of operations for the three months ended March 31, 2003 and 2002, consolidated cash flows for the three months ended March 31, 2003 and 2002, consolidated comprehensive income for the three months ended March 31, 2003 and 2002, and consolidated changes in shareholders’ equity for the three months ended March 31, 2003. Interim period results are not necessarily indicative of results for a full-year period.
Certain amounts applicable to the prior periods have been reclassified to conform to the classifications currently followed. Such reclassifications had no effect on net income or shareholders’ equity.
These financial statements and the notes thereto should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2002.
Stock Compensation
The Company grants stock options under several stock-based incentive compensation plans. The Company utilizes the intrinsic value method for its stock compensation plans. No compensation cost is recognized for fixed stock options in which the exercise price is equal to or greater than the estimated market price on the date of grant. Statement of Financial Accounting Standards (“SFAS”) No. 123, Accounting for Stock-Based Compensation, which, if fully adopted by the Company, would change the methods the Company applies in recognizing the cost of the plans. Adoption of the cost recognition provisions of SFAS No. 123 is optional and the Company has decided not to elect these provisions of SFAS No. 123. However, pro forma disclosures as if the Company adopted the cost recognition provisions of SFAS No. 123 are required by SFAS No. 123, and by SFAS No. 148, Accounting for Stock-Based Compensation—Transaction and Disclosure, an amendment of FASB Statement No. 123, on a quarterly basis.
If the fair value based method of accounting under SFAS No. 123 had been applied, the Company’s net income available for common shareholders and earnings per common share would have been reduced to the pro forma amounts indicated below (assuming that the fair value of options granted during the year are amortized over the vesting period) (in thousands except per share amounts):
6
| For The Three Months | |||||||||
| Ended March 31, | |||||||||
| 2003 | 2002 | ||||||||
Net income: |
|||||||||
As reported |
$ | 1,909 | $ | 2,091 | |||||
Pro forma |
$ | 1,870 | $ | 2,051 | |||||
Stock-based compensation cost, net of income taxes: |
|||||||||
As reported |
$ | — | $ | — | |||||