U.S. Securities and Exchange Commission
Washington D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001.
Commission file number: 0-23790
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MetroBanCorp
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(Exact name of small business issuer as specified in its charter)
Indiana 35-1712167
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10333 N. Meridian Street, Suite 111, Indianapolis, Indiana 46290
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(Address of principal executive offices) (Zip Code)
(317) 573-2400
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(Issuer's telephone number)
http://www.metb.com
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(Issuer's Internet Website Address)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act during the past 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
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date May 14, 2001:
2,044,379 Shares of Common Stock
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Transitional Small Business Disclosure Format:
Yes No X
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MetroBanCorp
FORM 10-QSB
Index
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Condition
March 31, 2001 and December 31, 2000 3
Consolidated Statements of Operations and Comprehensive Income
Three Months Ended March 31, 2001 and 2000 4
Consolidated Statements of Cash Flows
Three Months Ended March 31, 2001 and 2000 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities and Use of Proceeds 13
Item 3. Defaults Under Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
Page 2 of 15
MetroBanCorp
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statements of Condition
(dollars in thousands)
(unaudited)
03/31/01 12/31/00
----------- ----------
Assets
Cash and Due from Banks $ 25,096 $ 22,192
Securities Held to Maturity
(Fair Value: 2001 - $3,213 and 2000 - $3,104) 3,207 3,208
Securities Available for Sale 38,631 37,334
--------- ---------
Total Securities 41,838 40,542
Loans held for sale 1,843 212
Loans, net of allowance of $1,396 and $1,352 104,496 101,312
Premises and Equipment, net 1,483 1,508
Accrued Interest Receivable and Other Assets 2,187 2,566
--------- ---------
Total Assets $ 176,943 $ 168,332
========= =========
Liabilities
Deposits:
Non-Interest Bearing $ 32,758 $ 36,139
Interest Bearing 111,123 102,871
--------- ---------
Total Deposits 143,881 139,010
Repurchase Agreements 11,707 8,868
Other Borrowings 5,000 5,000
Accrued Interest Payable and Other Liabilities 1,809 1,420
--------- ---------
Total Liabilities 162,397 154,298
--------- ---------
Shareholders' Equity
Preferred Stock: 1,000,000 shares authorized; none outstanding -- --
Common Stock: no par value, 3,000,000 shares authorized;
2,038,309 and 2,038,224 issued and outstanding 14,352 14,352
Retained Earnings/(Accumulated Deficit) 6 (191)
Accumulated Other Comprehensive Income/(Loss) 188 (127)
--------- ---------
Total Shareholders' Equity 14,546 14,034
--------- ---------
Total Liabilities and Shareholders' Equity $ 176,943 $ 168,332
========= =========
See accompanying notes.
Page 3 of 15
MetroBanCorp
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statements of Operations and Comprehensive Income
(unaudited)
Three Months Ended
(dollars in thousands, except per share and shares number data) --------------------------
03/31/01 03/31/00
----------- -----------
Interest Income
Loans, including related fees $ 2,536 $ 2,178
Securities 708 572
Other 4 7
----------- -----------
Total Interest Income 3,248 2,757
Interest Expense
Deposits 1,360 1,090
Other 172 65
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Total Interest Expense 1,532 1,155
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Net Interest Income 1,716 1,602
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Provision for Loan Losses 51 21
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Net Interest Income after Provision for Loan Losses 1,665 1,581
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Non-Interest Income
Service Charges on Deposit Accounts 137 102
Securities Gains/(Losses) -- (1)
Other Service Charges, Commissions and Fees 104 90
ATM Fee Income 98 78
----------- -----------
Total Non-Interest Income 339 269
Non-Interest Expense
Salaries and Employee Benefits 683 636
Occupancy, net 134 121
Equipment 98 107
Advertising and Public Relations 59 68
Legal and Professional 60 39
Data Processing 105 95
Other 321 258
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Total Non-Interest Expense 1,460 1,324
Income Before Income Taxes 544 526
Provision for Income Taxes 205 206
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Net Income $ 339 $ 320
=========== ===========
Comprehensive Income $ 654 $ 251
=========== ===========
Basic net income per common share $ 0.17 $ 0.15
Diluted net income per common share $ 0.16 $ 0.15
Weighted Average Shares Outstanding 2,038,367 2,138,825
Weighted Average Shares Outstanding - Assuming Dilution 2,103,307 2,162,677
See accompanying notes.
Page 4 of 15
MetroBanCorp
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statements of Cash Flows
(unaudited)
(dollars in thousands)
Three Months Ended
---------------------
03/31/01 03/31/00
-------- --------
Operating Activities:
Net Income $ 339 $ 320
Adjustments to Reconcile Net Income to Cash Provided by
Operating Activities:
Provision for Loan Losses 51 21
Depreciation and Amortization 95 97
Net Amortization on Securities 7 (33)
Change in Accrued Interest Receivable and Other Assets 148 165
Change in Accrued Interest Payable and Other Liabilities 389 188
Change in Loans Held for Sale (1,631) (360)
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Total Adjustments (941) 78
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Net Cash Provided by (Used in) Operating Activities (602) 398
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Investing Activities:
Proceeds from Maturities and Paydowns of Securities Available for Sale 4,998 996
Proceeds from Sales of Securities Available for Sale 1,405 2,500
Purchases of Securities Available for Sale (7,160) --
Proceeds from the Repayment of Student Loans 101 143
Net Loans Made to Customers (3,336) (3,340)
Purchases of Premises and Equipment (70) (333)
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Net Cash Provided by (Used in) Investing Activities (4,062) (34)
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Financing Activities:
Change in Deposits 4,871 12,109
Change in Fed Funds Purchased -- (3,300)
Change in Repurchase Agreements 2,839 (2,811)
Cash Dividends Paid (142) (128)
Issuance of Common Stock 5 184
Repurchase of Common Stock and fractional shares (5) (149)
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Net Cash Provided by Financing Activities 7,568 5,905
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Net Increase in Cash and Cash Equivalents 2,904 6,269
Cash and Cash Equivalents at Beginning of Period 22,192 9,526
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Cash and Cash Equivalents at End of Period 25,096 15,795
======== ========
See accompanying notes.
Page 5 of 15
MetroBanCorp
Notes to Consolidated Financial Statements
1. Basis of Presentation
---------------------
The consolidated financial statements include the accounts of
MetroBanCorp and its wholly-owned affiliate, MetroBank (together,
"Metro"). All significant intercompany transactions and balances have
been eliminated.
In the opinion of management of Metro, the consolidated financial
statements contain all the normal and recurring adjustments necessary
to present fairly the consolidated financial condition of Metro as of
March 31, 2001 and December 31, 2000, and the results of its operations
and cash flows for the periods ended March 31, 2001 and 2000.
These financial statements should be read in conjunction with Metro's
latest Annual Report on Form 10-KSB for the year ending December 31,
2000.
2. Comprehensive Income
--------------------
Comprehensive Income is defined as the change in equity of a business
enterprise during a period from transactions and other events and
circumstances from non-owner sources. It includes all changes in equity
during a period, except those resulting from investment by owners and
distributions to owners. In Metro's case, comprehensive income includes
net income and change in unrealized gains and losses on available for
sale securities.
3. Per Share Data
--------------
Basic earnings per share is computed by dividing net income by the
weighted average number of common shares outstanding during each
period. Diluted earnings per share is computed the same, except that
the denominator is increased to include the number of additional common
shares that would have been outstanding if the dilutive potential
common shares (stock options) had been issued. Below is a table
reconciling basic earnings per share and diluted earnings per share:
2001 2000
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Basic
Net income $ 339 $ 320
========== ==========
Weighted average common shares outstanding 2,038,367 2,138,825
Basic earnings per common share $ 0.17 $ 0.15
========== ==========
Diluted
Net income $ 339 $ 320
========== ==========
Weighted average common shares outstanding for basic
earnings per common share 2,038,367 2,138,825
Add: Dilutive effects of assumed exercises of stock
options 64,940 23,852
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Average shares and dilutive potential common shares 2,103,307 2,162,677
========== ==========
Diluted earnings per common share $ 0.16 $ 0.15
========== ==========
Page 6 of 15
4. New Accounting Pronouncements
-----------------------------
Beginning January 1, 2001, a new accounting standard required all
derivatives to be recorded at fair value. Unless designated as hedges,
changes in these fair values are recorded in the income statement. Fair
value changes involving hedges are generally recorded by offsetting
gains and losses on the hedge and on the hedged item, even if the fair
value of the hedged item is not otherwise recorded. Adoption of this
pronouncement did not have a material effect on Metro's financial
results.
Page 7 of 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
The following management discussion is presented to provide information
concerning the consolidated financial condition of Metro as of March 31, 2001 as
compared to December 31, 2000, and the results of operations for the three
months ending March 31, 2001 and 2000.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This discussion contains certain forward-looking statements that are subject to
risks and uncertainties and includes information about possible or assumed
future results of operations. Many possible events or factors could affect our
future financial results and performance. This could cause results or
performance to differ materially from those expressed in our forward-looking
statements. Words such as "expects", "anticipates", "believes", "estimates",
variations of such words and other similar expressions are intended to identify
such forward-looking statements. These statements are not guarantees of future
performance and involve certain risks, uncertainties and assumptions which are
difficult to predict. Therefore, actual outcomes and results may differ
materially from what is expressed or forecasted in, or implied by, such
forward-looking statements. Readers should not rely solely on the
forward-looking statements and should consider all uncertainties and risks
discussed throughout this discussion. These statements are representative only
on the date hereof.
The possible events or factors include the following: our loan growth is
dependent on economic conditions, as well as various discretionary factors, such
as decisions to securitize, sell or purchase certain loans or loan portfolios;
syndications or participations of loans; retention of residential mortgage
loans; and the management of borrower, industry, product and geographic
concentrations and the mix of the loan portfolio. The rate of charge-offs and
provision expense can be affected by local, regional and international economic
and market conditions, concentrations of borrowers, industries, products and
geographic locations, the mix of the loan portfolio and management's judgments
regarding the collectibility of loans. Liquidity requirements may change as a
result of fluctuations in assets and liabilities and off-balance sheet
exposures, which will impact our capital and debt financing needs and the mix of
funding sources. Decisions to purchase, hold or sell securities are also
dependent on liquidity requirements and market volatility, as well as on- and
off-balance sheet positions. Factors that may impact interest rate risk include
local, regional and international economic conditions, levels, mix, maturities,
yields or rates of assets and liabilities, utilization and effectiveness of
interest rate contracts and the wholesale and retail funding sources of Metro
and the Bank. We are also exposed to the potential of losses arising from
adverse changes in market rates and prices which can adversely impact the value
of financial products, including securities, loans, deposits, debt and
derivative financial instruments, such as futures, forwards, swaps, options and
other financial instruments with similar characteristics.
In addition, the banking industry in general is subject to various monetary and
fiscal policies and regulations, which include those determined by the Federal
Reserve Board, the OCC, the FDIC, state regulators and the Office of Thrift
Supervision, whose policies and regulations could affect our results. Other
factors that may cause actual results to differ from the forward-looking
statements include the following: competition with other local, regional and
international banks, thrifts, credit unions and other nonbank financial
institutions, such as investment banking firms, investment advisory firms,
brokerage firms, investment companies and insurance companies, as well as other
entities which offer financial services, located both within and outside the
United States and through alternative delivery channels such as the World Wide
Web; interest rate, market and monetary fluctuations; inflation; market
volatility; general economic conditions and economic conditions in the
geographic regions and industries in which we operate; introduction and
acceptance of new banking-related products, services and enhancements; fee
pricing strategies, mergers and acquisitions and our ability to manage these and
Page 8 of 15
other risks.
FINANCIAL CONDITION
At March 31, 2001, Metro had total assets of $176.9 million, an increase of $8.6
million or 5.1 percent from December 31, 2000. Consolidated earning assets
totaled $163.3 million, or 92.3 percent of total assets, at March 31, 2001. The
principal components of earning assets were loans in the amount of $107.4
million or 65.8 percent of total earning assets, securities of $41.8 million or
25.6 percent of total earning assets and interest bearing due from bank accounts
of $14.1 million or 8.6 percent of total earning assets. Earning assets at
December 31, 2000 were $155.0 million, or 92.1 percent of total assets.
LOANS
Gross loans outstanding increased $4.9 million or 4.7 percent from December 31,
2000 to March 31, 2001. Metro continued to make a concerted effort to increase
its commercial and installment loan portfolios through the use of an extensive
loan officer calling program aimed at Metro's target market. At March 31, 2001,
net loans amounted to 60.1 percent of total assets, compared to 60.3 percent of
total assets at year end 2000. Metro's loan to deposit ratio, which is one
measure of liquidity, was 74.9 percent at March 31, 2001, compared to 74.0
percent at year end 2000.
Loan Portfolio at Period-End
(dollars in thousands)
March 31, 2001 December 31, 2000 % Change
-------------- ----------------- ----------
Commercial & Agricultural $24,222 $24,261 (0.16%)
Real Estate - Construction 4,297 2,504 71.61%
Real Estate - Mortgage 51,583 49,229 4.78%
Installment 24,699 23,848 3.57%
Student Loans 2,934 3,034 (3.30%)
-------------- ------------------ -----------
Gross Loans 107,735 102,876 4.72%
Less:
Allowance for Loan Losses (1,396) (1,352) 3.25%
-------------- ------------------ -----------
Loans, net $106,339 $101,524 4.74%
============== ================== ===========
Delinquent loans at March 31, 2001 were $1,435,000, representing 1.3 percent of
gross loans, compared to $569,000 of delinquent loans, or 0.6 percent of gross
loans, at year end 2000. Delinquent loans in both periods consisted primarily of
student loans guaranteed by a third party. Non-accruing loans at March 31, 2001
amounted to $363,000, compared to $412,000 at December 31, 2000.
At March 31, 2001 and December 31, 2000, Metro had an allowance for loan losses
of $1,396,000 and $1,352,000, respectively, representing 1.3 percent for each
period. Metro provides for probable loan losses through regular provisions to
the allowance for loan losses. These provisions are made at a level which is
considered necessary by Metro's management to absorb estimated incurred losses
in the loan portfolio and is based upon an assessment of adequacy of Metro's
loan loss reserve account. The increased provision in 2001 reflects higher
levels of delinquent and non-accruing loans as well as growth in the portfolio.
Page 9 of 15
Allowance for Loan Losses Activity
Three months ended March 31, 2001 and 2000
(dollars in thousands)
2001 2000
---- ----
Allowance for Loan Losses, January 1 $1,352 $1,464
Loans Charged-Off:
Commercial - (68)
Real Estate - -
Mortgage - -
Installment (8) (19)
Student Loans - -
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Total Charged-Off Loans (8) (87)
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Recoveries on Charged-Off Loans:
Commercial - 3
Real Estate - -
Mortgage - -
Installment 1 5
Student Loans - -
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Total Recoveries 1 8
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Net Charged-Off Loans (7) (79)
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Provision for Loan Losses 51 21
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Allowance for Loan Losses, March 31 $1,396 $1,406
=========== ==========
Average Loans Outstanding $103,407 $87,631
=========== ==========
Net Charged-Off loans to Average Loans .007% .09%
=========== ==========
SECURITIES
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Total securities at March 31, 2001 were $41.8 million, increasing by $1.3
million or 3.2 percent from the amount at December 31, 2000. Purchases of
securities totaled $7.2 million during the quarter and more than offset
reductions from securities sold, principal paydowns and maturities.
DEPOSITS
- --------
Total deposits at March 31, 2001 amounted to $143.9 million, compared to $139.0
million at December 31, 2000, representing an increase for this period of $4.9
million. Since December 31, 2000, non-interest bearing demand deposits decreased
by $3.4 million or 9.4 percent, while interest bearing deposits increased by
$8.3 million or 8.0 percent.
OTHER LIABILITIES
- -----------------
Liabilities other than deposits increased to $18.5 million from $15.3 million at
December 31, 2000. This includes $5.0 million in borrowings from the Federal
Home Loan Bank. Membership in the Federal Home Loan Bank provides Metro with an
ongoing source of funds to assist in liquidity management and funding loans.
CAPITAL
- -------
For the three months ending March 31, 2001, Metro's total capital increased by a
net amount of $512,000. Year to date earnings amounted to $339,000. Capital
increased by $5,000, resulting from
Page 10 of 15
grants of Metro's common stock to employees under the MetroBanCorp Equity
Ownership Plan. Additionally, improvement in the securities portfolio caused
accumulated other comprehensive income to increase by $315,000. The total
decrease in capital amounted to $147,000, and resulted from the repurchase of
400 shares of Metro common stock and fractional shares from the stock dividend
for $5,000, and the payment of a $0.07 quarterly cash dividend per common share
to Metro shareholders in the total amount of $142,000 during the quarter.
Metro is subject to various capital requirements imposed by the federal banking
regulatory authorities. Quantitative measures established by regulation to
ensure capital adequacy require Metro to maintain minimum amounts and ratios of
total and Tier 1 capital (as defined in the regulations) to risk-weighted
assets, and Tier 1 capital to average assets. Management believes that, as of
March 31, 2001, Metro meets all capital adequacy requirements to which it is
subject. The following table sets forth the actual and minimum capital amount
and ratios of Metro and MetroBank as of March 31, 2001 (dollars in thousands):
To Be Well Capitalized
Under Prompt Corrective
Actual Action Provisions
------------------ -----------------------------
Amount Ratio Amount Ratio
--------- ------- ----------- -----------
Total Capital
(to Risk Weighted Assets)
Metro $15,754 13.41% > $11,744 > 10.00%
- -
MetroBank $13,453 11.51% > $11,688 > 10.00%
- -
Tier 1 Capital
(to Risk Weighted Assets)
Metro $14,358 12.23% > $7,046 > 6.00%
- -
MetroBank $12,057 10.32% > $7,013 > 6.00%
- -
Tier 1 Capital
(to Average Assets)
Metro $14,358 8.74% > $8,210 > 5.00%
- -
MetroBank $12,057 7.44% > $8,101 > 5.00%
- -
As of December 31, 2000, the most recent notification from the FDIC categorized
MetroBank as "well capitalized" under the regulatory framework for prompt
corrective action. To be categorized as "well capitalized", MetroBank must
maintain minimum total risk-weighted, Tier 1 capital and leverage ratios as set
forth in the table. There are no conditions or events since this notification
that management believes have changed MetroBank's capital category.
RESULTS OF OPERATIONS
NET INTEREST INCOME
- -------------------
Net interest income after provision for loan losses was $1.7 million for the
three months ended March 31, 2001, compared to $1.6 million for the comparable
period of 2000, an increase of 5.3 percent. The increase in net interest income
was driven primarily by an increase in loan volume. Metro's provision for loan
loss expense was $51,000 for the three months ended March 31, 2001, compared to
$21,000 for the same period in 2000. The loan loss provision made in 2001 was at
a level considered necessary by Metro management to absorb estimated incurred
losses in the loan portfolio and is based upon an assessment of the adequacy of
Metro's loan loss reserve account.
Page 11 of 15
NON-INTEREST EXPENSE
- --------------------
Non-interest expense amounted to $1.5 million for the three month period ending
March 31, 2001, compared to $1.3 million for the same period one year earlier,
an increase of 10.3 percent. Approximately thirty-five percent of this increase
resulted from a 7.4 percent increase in salaries and employee benefits driven by
annual merit increases and additional staff hired to support Metro's growth.
NET INCOME
- ----------
Metro recorded net income of $339,000 for the three month period ending March
31, 2001, compared to $320,000 for the same period one year earlier, an increase
of 5.9 percent.
Page 12 of 15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - none.
- ------- -----------------
Item 2. Changes in Securities and Use of Proceeds - none.
- ------- -----------------------------------------
Item 3. Defaults Upon Senior Securities - none.
- ------- -------------------------------
Item 4. Submission of Matters to a Vote of Security Holders - none.
- ------- ---------------------------------------------------
Item 5. Other Information - none.
- ------- -----------------
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibits - none.
(b) Reports on Form 8-K: No reports on Form 8-K were filed during the
quarterly period ending March 31, 2001.
Page 13 of 15
SIGNATURES
----------
In accordance with the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
METROBANCORP
(Registrant)
May 15, 2001 By: /S/ Ike G. Batalis
---------------------
Ike G. Batalis
President (Principal
Executive Officer)
May 15, 2001 By: /S/ Charles V. Turean
----------------------
Charles V. Turean
Executive Vice President
(Principal Financial and
Accounting Officer)
Page 14 of 15