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, 1997.
Commission file number: 0-23790
-------
MetroBanCorp
- -----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Indiana
- -----------------------------------------------------------------
(State or other jurisdiction of incorporation or organization)
35-1712167
- -----------------------------------------------------------------
(I.R.S. Employer Identification No.)
10333 N. Meridian Street, Suite 111, Indianapolis, Indiana
- -----------------------------------------------------------------
(Address of principal executive offices)
46290 (317) 573-2400
- -------------------------- ------------------------------
(Zip Code) (Issuer's telephone number)
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: 1,681,291
---------
Transitional Small Business Disclosure Format: Yes___ No X
<PAGE>
MetroBanCorp
FORM 10-QSB
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statement of Condition
March 31, 1997 and December 31, 1996 3
Consolidated Statement of Operations
Three Months Ended March 31, 1997 and 1996 4
Consolidated Statement of Cash Flows
Three Months Ended March 31, 1997 and 1996 5
Notes to Consolidated Financial Statements 6
Item 2. Managements's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
EXHIBITS 14
page 2
<PAGE>
<TABLE>
MetroBanCorp
Part I - Financial Information
Item 1. Financial Statements
Consolidated Statement of Condition
(unaudited)
(dollars in thousands)
<CAPTION>
03/31/97 12/31/96
-------- --------
<S> <C> <C>
Assets
Cash and Due from Banks $ 4,732 $ 7,475
Federal Funds Sold - 6,300
-------- --------
Total Cash and Cash Equivalents 4,732 13,775
Investment Securities HTM - at Cost 10,060 10,056
Investment Securities AFS - at Market 20,370 21,160
-------- --------
Total Investment Securities 30,430 31,216
Loans:
Gross Loans 69,956 65,385
Less: Allowance for Loan Losses (891) (866)
-------- --------
Loans, Net 69,065 64,519
Premises and Equipment, Net 1,646 1,821
Accrued Interest Receivable 911 871
Core Deposit Intangible, Net 287 322
Deferred Tax Asset 376 360
Other Assets 427 499
-------- --------
Total Assets $107,874 $113,383
======== ========
Liabiities
Deposits:
Non-Interest Bearing Demand $ 15,057 $ 23,141
Interest Bearing:
Savings and Now Accounts 36,875 35,507
Time Deposit of $100,000 and above 11,152 10,800
Other Time Deposits 29,797 29,836
-------- --------
Total Deposits 92,881 99,284
Federal Funds Purchased 600 -
Securities Sold under Agreements to Repurchase 1,500 1,500
Accrued Interest Payable 462 419
Other Liabilities 881 679
-------- --------
Total Liabilities 96,324 101,882
-------- --------
Commitments and Contingencies - -
Shareholders' Equity
Preferred Stock:
1,000,000 Shares Authorized; None Outstanding - -
Common Stock:
3,000,000 Shares Authorized; 1,681,291 Shares
Issued and Outstanding 11,210 11,210
Accumulated Earnings 479 407
Net Unrealized Loss on Investment Securities AFS (139) (116)
-------- --------
Total Shareholder's Equity 11,550 11,501
-------- --------
Total Liabilities and Shareholders' Equity $107,874 $113,383
======== ========
See "Notes to Consolidated Financial Statements"
</TABLE>
page 3
<PAGE>
<TABLE>
MetroBanCorp
Part I - Financial Information
Item 1. Financial Statements
Consolidated Statement of Operations
(unaudited)
(dollars in thousands, execpt share data)
<CAPTION>
Three Months Ended
-----------------------
03/31/97 03/31/96
-------- --------
<S> <C> <C>
Interest Income
Interest and Fees on Loans $ 1,595 $ 1,444
Interest on Investment Securities 414 373
Interest on Federal Funds Sold 4 68
-------- --------
Total Interest Income 2,013 1,885
Interest Expense
Interest on Deposits 869 859
Other Interest Expense 9 4
-------- --------
Total Interest Expense 878 863
-------- --------
Net Interest Income 1,135 1,022
-------- --------
Provision for Loan Losses 29 16
-------- --------
Net Interest Income after
Provision for Loan Losses 1,106 1,006
-------- --------
Non-Interest Income
Service Charges on Deposit Accounts 75 73
Loss on Sale of Investment Securities - (12)
Other Service Charges, Commissions and Fees 169 87
-------- --------
Total Non-Interest Income 244 148
Non-Interest Expense
Salaries and Employee Benefits 458 403
Occupancy Expense 74 54
Equipment Expense 82 73
Advertising and Public Relations 46 40
Legal, Professional and Audit Services 42 21
Data Processing 70 59
Student Loan Servicing Fees 22 29
FDIC Insurance Assessment 20 37
Amortization of Core Deposit Intangible 35 35
Other 241 172
-------- --------
Total Non-Interest Expense 1,090 923
Income before Income Taxes 260 231
Applicable Income Taxes 105 102
-------- --------
Net Income $ 155 $ 129
======== ========
Net Income per Weighted Average Share $ 0.09 $ 0.08
Weighted Average Shares Outstanding 1,681,291 1,681,291
See "Notes to Consolidated Financial Statements"
</TABLE>
page 4
<PAGE>
<TABLE>
MetroBanCorp
Part I - Financial Information
Item 1. Financial Statements
Consolidated Statement of Cash Flows
(unaudited)
(dollars in thousands)
<CAPTION>
Three Months Ended
--------------------
03/31/97 03/31/96
-------- --------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 155 $ 129
Adjustments to Reconcile Net Income to Cash
Provided by Operating Activities:
Provision for Loan Losses 29 16
Deferred Income Tax Provision - 9
Depreciation and Amortization 102 94
Gain on Sale of Real Estate (56) -
Net Loss on Sale of Investment Securities - (12)
(Increase)/Decrease in Accrued Interest Receivable (40) 61
Decrease in Other Assets 72 123
Increase/(Decrease) in Accrued Interest Payable 43 (8)
Increase in Other Liabilities 208 64
-------- --------
Total Adjustments 358 347
-------- --------
Net Cash Flows Provided by Operating Activities 513 476
-------- --------
Cash flows from Investing Activities:
Proceeds from Maturities of Investment Securities HTM - 318
Proceeds from Sales of Investment Securities AFS 1,738 2,000
Purchases of Investment Securities AFS (999) (3,136)
Proceeds from the Repayment of Student Loans 373 568
Proceeds from the Sale of Student Loans 170 2
Net Loans made to Customers (5,118) (2,151)
Purchases of Premises and Equipment (294) (194)
Proceeds from the Sale of Real Estate 461 -
-------- --------
Net Cash Flows Used in Investing Activities (3,669) (2,593)
-------- --------
Cash Flows from Financing Activities:
Net Decrease in DDA, NOW and Savings Accounts (6,716) (4,976)
Net Increase in Time Deposits 313 982
Net Increase in Federal Funds Purchased 600 -
Net Securities Sold Under an Agreement to Repurchase - (900)
Payment of Dividends (84) -
-------- --------
Net Cash Flows Used in Financing Acitivities (5,887) (4,894)
-------- --------
Net Decrease in Cash and Cash Equivalents (9,043) (7,011)
Cash and Cash Equivalents at Beginning of Period 13,775 18,082
-------- --------
Cash and Cash Equivalents at End of Period $ 4,732 $ 11,071
======== ========
See "Notes to Consolidated Financial Statements"
</TABLE>
page 5
<PAGE>
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, 1997 and December 31, 1996, and the
results of its operations and its statement of cash flows for the
three months ended March 31, 1997 and 1996.
These financial statements should be read in conjunction with
Metro's latest Annual Report on Form 10-KSB for the year ending
December 31, 1996.
2. Investments
-----------
The market value and amortized cost of investment securities of
Metro as of March 31, 1997 are set forth below:
<TABLE>
<CAPTION>
Market Value Amortized Cost
------------ --------------
<S> <C> <C>
Held to Maturity $ 9,553,000 $ 10,060,000
Available for Sale 20,370,000 20,569,000
------------ --------------
Total Investments $ 29,923,000 $ 30,629,000
============ ==============
</TABLE>
3. Allowance for Loan and Lease Losses
-----------------------------------
Metro adopted the provisions of Statement of Financial Accounting
Standard No. 114, "Accounting by Creditors for Impairment of a
Loan," as amended by Statement of Financial Accounting Standard
No. 118, on January 1, 1995. As of March 31, 1997, Metro had
investments in loans which are impaired in accordance with SFAS
Nos. 114 and 118 of $13,190. Of this amount, $5,756 had no
related specific allowance. The remaining impaired loans had a
specific allowance of $7,434.
Metro's policy for recognizing income on impaired loans is to
accrue earnings until a loan is classified non-accrual. For
loans which receive the classification of non-accrual during the
current period, interest accrued to date is charged against
current earnings. All payments received on a loan which is
classified as non-accrual are utilized to reduce the principal
outstanding.
For the three months ended March 31, 1997, the average balance of
impaired loans was $66,574. Additionally, there was no interest
income earned on these loans during the first three months of
1997.
page 6
<PAGE>
4. Mortgage Servicing Rights
-------------------------
The Financial Accounting Standards Board has issued SFAS No. 122,
"Accounting for Mortgage Servicing Rights," which modifies the
accounting for mortgage servicing rights to allow the recognition
of servicing assets whether they are purchased or originated.
Metro adopted the provisions of this statement effective January
1, 1996, and it did not have a material effect on Metro's
consolidated financial condition or results of operations.
ITEM 2. 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, 1997 as compared to December 31, 1996, and the results
of operations for the three month periods ending March 31, 1997 and
1996.
FINANCIAL CONDITION
At March 31, 1997, Metro had total assets of $107.9 million, a
decrease of $5.5 million or 4.9 percent from December 31, 1996. This
reduction is due to a decrease in interest bearing deposits and
securities sold under agreements to repurchase.
Consolidated earning assets totaled to $100.4 million or 93.0 percent
of total assets at March 31, 1997. The principal components of
earning assets were loans in the amount of $69.9 million or 69.7
percent of total earning assets, and investment securities of $30.4
million or 30.3 percent of total earning assets. Earning assets at
December 31, 1996 were $102.9 million, and as a percentage of total
assets amounted to 90.7 percent. This $2.5 million decrease in
earning assets in the first quarter of 1997 is due principally to a
reduction of Federal Funds Sold partially offset by an increase in
loans.
LOANS
- -----
Total loans outstanding increased $4.6 million or 7.0 percent since
December 31, 1996 due to an increase in short-term and intermediate-
term commercial and installment loans. This growth is a result of
increased indirect lending in installment and new growth in the
commercial loan portfolio. The overall loan demand has been
relatively strong in Metro's market area.
At March 31, 1997, net loans amounted to 64.0 percent of total assets
as compared to 56.9 percent at year end 1996. The Bank's loan to
deposit ratio, which is one measure of liquidity, was 74.4 percent at
March 31, 1997, as compared to 65.0 percent at year end 1996.
page 7
<PAGE>
<TABLE>
Loan Portfolio at Period-End
(dollars in thousands)
<CAPTION>
03/31/97 12/31/96 % Change
-------- -------- --------
<S> <C> <C> <C>
Commercial $ 39,954 $ 35,064 13.95%
Real Estate - Construction 3,660 3,970 -7.81%
Mortgage 719 787 -8.64%
Installment 16,535 15,933 3.78%
Student Loans 9,088 9,631 -5.64%
-------- -------- --------
Total Loans $ 69,956 $ 65,385 6.99%
Less: Allowance for Loan
Losses (891) (866) 2.89%
-------- -------- --------
Net Loans $ 69,065 $ 64,519 7.05%
======== ======== ========
</TABLE>
Delinquent loans at March 31, 1997 were $1.2 million, representing 1.7
percent of total loans. At December 31, 1996, delinquent loans
amounted to $1.3 million or 2.0 percent of total loans outstanding.
Delinquent loans in both periods shown above consisted primarily of
student loans guaranteed by USA Funds, a subsidiary of USA Group, Inc.
Non-accruing loans at March 31, 1997 amounted to $13,190 as compared
to $157,443 at December 31, 1996. Net charged-off loans amounted to
$3,893 for the three months ending March 31, 1997.
At March 31, 1997 and December 31, 1996, the Bank had an allowance for
loan losses of $891,000 and $866,000, respectively. The percentage
of provision for loan losses to ending loans amounted to 1.27 percent
and 1.32 percent for March 31, 1997 and December 31, 1996,
respectively. The Bank provides for possible loan losses through
regular provisions to the allowance for loan losses. The provisions
are made at a level which is considered necessary by management to
absorb estimated losses in the loan portfolio and is based upon an
assessment of adequacy of the Bank's loan loss reserve account.
page 8
<PAGE>
<TABLE>
Allowance for Loan Losses
(dollars in thousands)
<CAPTION>
Three Months Ended
-----------------------
03/31/97 03/31/96
-------- --------
<S> <C> <C>
Allowance for Loan Losses, January 1 $ 866 $ 910
Loans Charged-Off:
Commercial (9) -
Real Estate - -
Mortgage - -
Installment - (2)
Student Loans - -
-------- --------
Total Charged-Off Loans (9) (2)
-------- --------
Recoveries on Charged-Off Loans:
Commercial 5 1
Real Estate - -
Mortgage - -
Installment - -
Student Loans - -
-------- --------
Total Recoveries 5 1
-------- --------
Net Charged-Off Loans (4) (1)
-------- --------
Provision for Loan Losses 29 16
-------- --------
Allowance for Loan Losses, March 31 $ 891 $ 925
======== ========
Average Loans Outstanding $ 67,456 $ 61,027
======== ========
Net Charged-Off loans to Average Loans .006% .002%
======== ========
</TABLE>
INVESTMENT SECURITIES
- ---------------------
Total investments at March 31, 1997 were $30.4 million, decreasing by
$786,000 or 2.5 percent from the amount at December 31, 1996.
page 9
<PAGE>
DEPOSITS
- --------
Total deposits at March 31, 1997 amounted to $92.9 million in
comparison to $99.3 million at December 31, 1996, representing a
decrease of $6.4 million or 6.4 percent. Since December 31, 1996, non-
interest bearing demand deposits decreased by $8.1 million or 34.9
percent. This change in demand deposits relates to timing differences
of deposits and withdrawals. The Bank historically experiences a
build up of deposits during the fourth quarter, followed by a decline
during the next three quarters. In the first three months of 1997,
interest bearing deposits increased by $1.7 million or 2.2 percent.
OTHER LIABILITIES
- -----------------
Short-term borrowings, which includes federal funds purchased and
securities sold under an agreement to repurchase, increased $600,000
since December 31, 1996. Other liabilities increased to $881,000
from $679,000 from December 31, 1996. Total liabilities decreased
by $5.6 million or 5.5 percent to $96.3 million since December 31,
1996.
CAPITAL
- -------
Metro's total capital increased by a net amount of $49,000 or .43
percent during the first three months of 1997. Metro's earnings in
the first three months of 1997 amounted to $155,000. The net
unrealized loss on investment securities available for sale amounted
to $139,000 at March 31, 1997, increasing by $23,000 or 19.8 percent
since December 31, 1996. During March, 1997, capital decreased by
approximately $84,065 in 1997 following the payment of a $.05 cash
dividend on 1,681,291 common shares outstanding.
Metro is subject to various capital requirements imposed by the
federal banking agencies. Quantitative measures established by
regulation to ensure capital adequacy require Metro to maintain
minimum amounts and ratios of total Tier 1 capital (as defined in the
regulations) to risk-weighted assets, and Tier 1 capital to average
assets. Management believes, as of March 31, 1997, that Metro meets
all capital adequacy requirements to which it is subject. The
following table sets forth the actual and minimum capital amount and
ratio's of Metro and the Bank as of March 31, 1997 (dollars in
thousands):
page 10
<PAGE>
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
Prompt Corrective
Actual Action Provisions
------------------ ---------------------
Amount Ratio Amount Ratio
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Total Capital
(to Risk Weighted Assets)
Consolidated 12,282 17.43% > 7,047 > 10.00%
Bank 8,731 12.53% > 6,967 > 10.00%
Tier 1 Capital
(to Risk Weighted Assets)
Consolidated 11,401 16.18% > 4,228 > 6.00%
Bank 7,860 11.28% > 4,180 > 6.00%
Tier 1 Capital
(to Average Assets)
Consolidated 11,401 10.68% > 5,338 > 5.00%
Bank 7,860 7.59% > 5,178 > 5.00%
</TABLE>
As of December 31, 1996, the most recent notification from the FDIC
categorized the Bank as "well capitalized" under the regulatory
framework for prompt corrective action. To be categorized as "well
capitalized", the Bank 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 its or the Bank's capital category.
RESULTS OF OPERATIONS
NET INTEREST INCOME
- -------------------
Net interest income after provision for loan losses was $1.1 million
for the three months ending March 31, 1997, compared to $1.0 million
for the comparable period of 1996, an increase of 9.9 percent. Net
interest income increased principally due to growth in the loan
portfolio for the first quarter of 1997. The Bank's provision for
loan loss expense was $29,000 for three months ended March 31, 1997,
compared to $16,000 for the same period in 1996. The provisions made
in 1997 were at a level considered necessary by management to absorb
estimated losses in the loan portfolio and is based upon an assessment
of the adequacy of the Bank's loan loss reserve account.
page 11
<PAGE>
NON-INTEREST EXPENSE
- --------------------
Non-interest expense amounted to $1.1 million for three months ending
March 31, 1997, compared to $923,000 for the same period in 1996,
amounting to a $167,000 or an 18.1 percent increase. This increase in
Metro's non-interest expense is due principally to growth in addition-
al staffing, placement of offsite automated teller machines and the
opening of a new branch office facility.
NET INCOME
- ----------
Metro recognized net income of $155,000 for the three month period
ending March 31, 1997, compared to $129,000 for the same period one
year earlier.
PART II-OTHER INFORMATION
-------------------------
Item 5. Other Information
- ------- -----------------
During the first quarter of 1997, the Bank opened its Noble Creek
banking office located at 2025 Cherry Street , Noblesville, Indiana.
This new facility commenced operations on March 18, 1997. The
development of the Bank's Noble Creek office is part of the continuing
commercial expansion of Noblesville's east side. The new office
allows the bank to provide greater convenience and accessibility
for local businesses and area residents.
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibits:
Exhibit 10 Lease dated March 18, 1997 between Registrant and
Riverview Hospital with respect to property at
2025 Cherry Street, Noblesville, Indiana
Exhibit 27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended
March 31, 1997.
page 12
<PAGE>
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 12, 1997 By: /S/ Ike G. Batalis
-----------------------
Ike G. Batalis
Chairman and
President (Principal
Executive Officer)
May 12, 1997 By: /S/ Charles V. Turean
-----------------------
Charles V. Turean
Executive Vice President
(Principal Financial and
Accounting Officer)
page 13
<PAGE>
EXHIBIT 10 LEASE AGREEMENT
The Bank entered into a renewable lease agreement with Riverview
Hospital, a non-affiliated corporation, for a retail banking facility.
A summary of the lease terms is provided below.
Lessee: MetroBank
Location: 2025 Cherry Street, Noblesville, Indiana
Purpose: Retail Banking Office
Space: 1,410 Square Feet
Commencement Date: 03/18/1997
Expiration Date: 03/18/2002
Renewal Options: Three (3) additional terms of five (5) years each
Basic Rent: $17.76 per rentable square foot per year
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 4,732
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 20,370
<INVESTMENTS-CARRYING> 30,629
<INVESTMENTS-MARKET> 29,923
<LOANS> 69,956
<ALLOWANCE> 891
<TOTAL-ASSETS> 107,874
<DEPOSITS> 92,881
<SHORT-TERM> 2,100
<LIABILITIES-OTHER> 1,343
<LONG-TERM> 0
0
0
<COMMON> 11,210
<OTHER-SE> 340
<TOTAL-LIABILITIES-AND-EQUITY> 107,874
<INTEREST-LOAN> 1,595
<INTEREST-INVEST> 414
<INTEREST-OTHER> 4
<INTEREST-TOTAL> 2,013
<INTEREST-DEPOSIT> 869
<INTEREST-EXPENSE> 9
<INTEREST-INCOME-NET> 1,135
<LOAN-LOSSES> 29
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,090
<INCOME-PRETAX> 260
<INCOME-PRE-EXTRAORDINARY> 155
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 155
<EPS-PRIMARY> .09
<EPS-DILUTED> 0
<YIELD-ACTUAL> 4.26
<LOANS-NON> 13
<LOANS-PAST> 325
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 837
<ALLOWANCE-OPEN> 866
<CHARGE-OFFS> 9
<RECOVERIES> 5
<ALLOWANCE-CLOSE> 891
<ALLOWANCE-DOMESTIC> 891
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
