U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM ___________ TO ___________
Commission File Number 0-23790
-------------------
METROBANCORP
----------------------------------------------
(Name of Small Business Issuer in its charter)
INDIANA 35-1712167
- ----------------------- ---------------------
(State of incorporation) I.R.S. Employer
Identification Number
10333 N. MERIDIAN STREET, SUITE 111, INDIANAPOLIS, INDIANA 46290
----------------------------------------------------------------
(Address of principal executive offices and zip code)
(317) 573-2400
---------------------------
(Issuer's telephone number)
http://www.metb.com
-----------------------------------
(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:
1,765,308 Shares of Common Stock
--------------------------------
Transitional Small Business Disclosure Format (Check one):
Yes [ ] No [X]
<PAGE>
METROBANCORP
FORM 10-QSB
INDEX
PART I. FINANCIAL INFORMATION Page
----
Item 1. Financial Statements
Consolidated Statement of Condition
March 31, 1998 and December 31, 1997 3
Consolidated Statement of Operations
Three Months Ended March 31, 1998 and 1997 4
Consolidated Statement of Cash Flows
Three Months Ended March 31, 1998 and 1997 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 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
EXHIBITS
<PAGE>
METROBANCORP
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CONDITION
(unaudited)
(dollars in thousands)
03/31/98 12/31/97
---------- ----------
<S> <C> <C>
Assets
Cash and Due from Banks $ 13,385 $ 9,595
Federal Funds Sold 9,400 7,500
---------- ----------
Total Cash and Cash Equivalents 22,785 17,095
Investment Securities HTM - at Cost 9,492 9,519
Investment Securities AFS - at Market 19,519 18,518
---------- ----------
Total Investment Securities 29,011 28,037
Loans:
Gross Loans 77,831 77,295
Less: Allowance for Loan Losses (1,081) (998)
---------- ----------
Loans, Net 76,750 76,297
Premises and Equipment, Net 1,426 1,406
Accrued Interest Receivable 777 834
Core Deposit Intangible, Net 146 182
Deferred Tax Asset 392 419
Other Assets 399 448
---------- ----------
Total Assets $131,686 $124,718
========== ==========
Liabilities
Deposits:
Non-Interest Bearing Demand $ 28,997 $ 28,552
Interest Bearing:
Savings and NOW Accounts 45,938 40,500
Time Deposits of $100,000 and over 14,256 12,530
Other Time Deposits 28,885 29,652
---------- ----------
Total Deposits 118,076 111,234
Accrued Interest Payable 443 426
Other Liabilities 942 926
---------- ----------
Total Liabilities 119,461 112,586
---------- ----------
Commitments and Contingencies - -
Shareholders' Equity
Preferred Stock: 1,000,000 Shares Authorized; None Outstanding - -
Common Stock: 3,000,000 Shares Authorized;
1,765,308 Shares Issued and Outstanding 12,134 11,210
Accumulated Earnings 55 880
Net Unrealized Gain on Investment Securities AFS 36 42
---------- ----------
Total Shareholders' Equity 12,225 12,132
---------- ----------
Total Liabilities and Shareholders' Equity $131,686 $124,718
========== ==========
</TABLE>
See "Notes to Consolidated Financial Statements"
3
<PAGE>
METROBANCORP
PART I -FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited) Three Months Ended
(dollars in thousands, except share data) ------------------------------
03/31/98 03/31/97
------------ ------------
<S> <C> <C>
Interest Income
Interest and Fees on Loans $ 1,908 $ 1,595
Interest on Investment Securities 357 414
Interest on Federal Funds Sold 115 4
------------ ------------
Total Interest Income 2,380 2,013
Interest Expense
Interest on Deposits 1,032 869
Other Interest Expense - 9
------------ ------------
Total Interest Expense 1,032 878
------------ ------------
Net Interest Income 1,348 1,135
------------ ------------
Provision for Loan Losses 75 29
------------ ------------
Net Interest Income after Provision for Loan Losses 1,273 1,106
------------ ------------
Non-Interest Income
Service Charges on Deposit Accounts 79 75
Loss on Sale of Investment Securities (8) -
Other Service Charges, Commissions and Fees 128 169
------------ ------------
Total Non-Interest Income 199 244
Non-Interest Expense
Salaries and Employee Benefits 503 458
Occupancy Expense 104 74
Equipment Expense 87 82
Advertising and Public Relations 65 46
Legal, Professional and Audit Services 54 42
Data Processing 80 70
Student Loan Servicing Fees 11 22
FDIC Insurance Assessment 7 20
Amortization of Core Deposit Intangible 36 35
Other 221 241
------------ ------------
Total Non-Interest Expense 1,168 1,090
Income before Income Taxes 304 260
Applicable Income Taxes 121 105
------------ ------------
Net Income $ 183 $ 155
============ ============
Net Income per Common Share $ 0.10 $ 0.09
Net Income per Common Share - Assuming Dilution $ 0.10 $ 0.09
Weighted Average Shares Outstanding 1,765,308 1,765,308
Weighted Average Shares Outstanding - Assuming Dilution 1,847,241 1,769,503
</TABLE>
See "Notes to Consolidated Financial Statements"
4
<PAGE>
METROBANCORP
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited) Three Months Three Months
(dollars in thousands) Ended Ended
------------ ------------
03/31/98 03/31/97
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 183 $ 155
Adjustments to Reconcile Net Income to
Cash Provided by Operating Activities:
Provision for Loan Losses 75 29
Depreciation and Amortization 106 102
Gain on Sale of Real Estate - (56)
Loss on Sale of Securities 8 -
(Increase)/Decrease in Accrued Interest Receivable 57 (40)
Decrease in Other Assets 49 72
Increase in Accrued Interest Payable 17 43
Increase in Other Liabilities 16 208
------------ ------------
Total Adjustments 328 358
------------ ------------
Net Cash Flows Provided by Operating Activities 511 513
------------ ------------
Cash Flows from Investing Activities:
Proceeds from Maturities of Investment Securities Held to Maturity 19 -
Proceeds from Maturities of Investment Securities Available for Sale - 1,738
Proceeds from Sales of Investment Securities Available for Sale 4,198 -
Purchases of Investment Securities Available for Sale (5,174) (999)
Proceeds from the Sale of Student Loans - 170
Proceeds from the Repayment of Student Loans 77 373
Net Loans Made to Customers (605) (5,118)
Purchases of Premises and Equipment (94) (294)
Proceeds from the Sale of Real Estate - 461
------------ ------------
Net Cash Flows Used in Investing Activities (1,579) (3,669)
------------ ------------
Cash Flows from Financing Activities:
Net Increase/(Decrease) in DDA, NOW and Savings Accounts 5,883 (6,716)
Net Increase in Time Deposits 959 313
Net Decrease in Federal Funds Purchased - (900)
Net Increase in Securities Sold Under Agreements to Repurchase - 1,500
Cash Dividends Paid (84) (84)
------------ ------------
Net Cash Flows Provided by/(Used in) Financing Activities 6,758 (5,887)
------------ ------------
Net Increase/(Decrease) in Cash and Cash Equivalents 5,690 (9,043)
Cash and Cash Equivalents at Beginning of Period 17,095 13,775
------------ ------------
Cash and Cash Equivalents at End of Period $ 22,785 $ 4,732
============ ============
</TABLE>
See "Notes to Consolidated Statements"
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, 1998 and December 31, 1997, and the results of its operations and
cash flows for the three months ended March 31, 1998 and 1997.
These financial statements should be read in conjunction with Metro's
latest Annual Report on Form 10-KSB for the year ending December 31, 1997.
2. Investments
-----------
The market value and amortized cost of investment securities of Metro as
of March 31, 1998 are set forth below:
Market Value Amortized Cost
------------ --------------
Held to Maturity $ 9,351,000 $ 9,492,000
Available for Sale 19,519,000 19,419,000
------------ ------------
Total Investments $ 28,870,000 $ 28,911,000
============ ============
3. Allowance for Loan and Lease Losses
-----------------------------------
As of March 31, 1998, Metro had investments in loans which are impaired
in accordance with SFAS Nos. 114 and 118 of $163,813. Of this amount,
$155,851 had no related specific allowance. The remaining $7,962 of
impaired loans were fully reserved.
Metro's policy for recognizing income on impaired loans is to accrue
earnings until a loan is classified as impaired. For loans which receive
the classification of impaired during the current period, interest
accrued to date is charged against current earnings. All payments
received on a loan which is classified as impaired are utilized to reduce
the principal outstanding.
For the three months ended March 31, 1998, the average balance of
impaired loans was $40,079. Additionally, there was $1,254 in interest
income earned on these loans during the first three months of 1998.
6
<PAGE>
4. Comprehensive Income
--------------------
During the first quarter of 1998, Metro adopted Statement of Financial
Accounting Standards No. 130, "Reporting 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 nonowner 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 unrealized gains and losses of available for sale
securities. Total comprehensive income was $177,000 and $132,000 for the
three month period ended March 31, 1998 and 1997, respectively.
5. Per Share Data
--------------
Basic net income per common share is computed by dividing net income by
the weighted average number of common shares outstanding during each
year. Net income per common share, assuming full dilution, is computed as
above 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 net income per common share and net income per common
share - assuming full dilution:
<TABLE>
<CAPTION>
For the Three Months Ended
-------------------------------------------------------------------------------------
March 31, March 31,
1998 1997
----------------------------------------- ------------------------------------------
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------------------------------------- ------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Income per Common Share
Income Available to Common
Stockholders $ 183,000 $ 1,765,308 $ 0.10 $ 155,000 $ 1,765,308 $ 0.09
========= =========
Effects of Dilutive Options
Stock Options - 81,933 - 4,195
---------------------------- -----------------------------
Net Income per Common
Share - Assuming Dilution $ 183,000 $ 1,847,241 $ 0.10 $ 155,000 $ 1,769,503 $ 0.09
========================================= ==========================================
</TABLE>
Per share data included in Metro's consolidated statement of operations
for the three months ended March 31, 1998 and 1997 was based on the
weighted average number of common shares outstanding.
7
<PAGE>
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, 1998
as compared to December 31, 1997, and the results of operations for the three
month periods ending March 31, 1998 and 1997.
FINANCIAL CONDITION
At March 31, 1998, Metro had total assets of $131.7 million, an increase of
$7.0 million or 5.6 percent from December 31, 1997. This increase is due to an
increase in interest bearing deposits.
Consolidated earning assets totaled to $116.2 million, or 88.3 percent of
total assets, at March 31, 1998. The principal components of earning assets
were loans in the amount of $77.8 million or 67.0 percent of total earning
assets, and investment securities of $29.0 million or 25.0 percent of total
earning assets. Earning assets at December 31, 1997 were $112.8 million, or
90.5 percent of total assets.
LOANS
- -----
Total gross loans outstanding increased $.5 million or .7 percent from
December 31, 1997 to March 31, 1998. This growth is a result of increased
indirect consumer lending and growth in the commercial loan portfolio. The
overall loan demand has been relatively steady in Metro's market area.
At March 31, 1998, net loans amounted to 58.3 percent of total assets as
compared to 61.2 percent at year end 1997. The Bank's loan to deposit ratio,
which is one measure of liquidity, was 65.0 percent at March 31, 1998, as
compared to 68.6 percent at year end 1997.
<TABLE>
<CAPTION>
LOAN PORTFOLIO AT PERIOD-END
(dollars in thousands)
March 31, 1998 December 31, 1997 % Change
-------------- ----------------- --------
<S> <C> <C> <C>
Commercial $47,621 $47,527 .20%
Real Estate - Construction 3,417 3,689 -.07%
Mortgage 593 646 -.08%
Installment 21,311 20,467 4.10%
Student Loans 4,889 4,966 -1.60%
--------- --------- --------
Total Loans $77,831 $77,295 .69%
Less:
Allowance for Loan Losses (1,081) (998) 2.89%
--------- --------- --------
Net Loans $76,750 $76,297 .59%
========= ========= ========
</TABLE>
Delinquent loans at March 31, 1998 were $1.3 million, representing 1.6 percent
of total loans. At December 31, 1997, delinquent loans amounted to $915,000 or
1.2 percent of total loans outstanding. Delinquent loans in both periods shown
above consisted primarily of student loans
8
<PAGE>
guaranteed by USA Funds, a subsidiary of USA Group, Inc. Non-accruing loans at
March 31, 1998 amounted to $163,813 as compared to $9,701 at December 31, 1997.
Net recoveries on charged-off loans amounted to $8,305 for the three months
ending March 31, 1998.
At March 31, 1998 and December 31, 1997, the Bank had an allowance for loan
losses of $1,081,000 and $998,000, respectively. The percentage of provision
for loan losses to ending loans amounted to 1.39 percent and 1.29 percent for
March 31, 1998 and December 31, 1997, 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.
ALLOWANCE FOR LOAN LOSSES
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(dollars in thousands)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Allowance for Loan Losses, January 1 $ 998 $ 866
Loans Charged-Off:
Commercial - (9)
Real Estate - -
Mortgage - -
Installment (10) -
Student Loans - -
--------- ---------
Total Charged-Off Loans (10) (9)
--------- ---------
Recoveries on Charged-Off Loans:
Commercial 10 5
Real Estate - -
Mortgage - -
Installment 8 -
Student Loans - -
--------- ---------
Total Recoveries 18 5
--------- ---------
Net Charged-Off Loans 8 (4)
--------- ---------
Provision for Loan Losses 75 29
--------- ---------
Allowance for Loan Losses, March 31 $ 1,081 $ 891
========= =========
Average Loans Outstanding $78,249 $67,456
========= =========
Net Charged-Off loans to Average Loans .006% .006%
========= =========
</TABLE>
9
<PAGE>
INVESTMENT SECURITIES
- ---------------------
Total investments at March 31, 1998 were $29.0 million, increasing by $974,000
or 3.5 percent from the amount at December 31, 1997.
DEPOSITS
- --------
Total deposits at March 31, 1998 amounted to $118.1 million in comparison to
$111.2 million at December 31, 1997, representing an increase of $6.8 million
or 6.2 percent. Since December 31, 1997, non-interest bearing demand deposits
increased by $445,000 or 1.6 percent. In the first three months of 1998,
interest bearing deposits increased by $6.4 million or 7.7 percent.
OTHER LIABILITIES
- -----------------
Other liabilities increased to $942,000 from $926,000 from December 31, 1997.
Total liabilities increased by $6.9 million or 6.1 percent to $119.5 million
since December 31, 1997.
CAPITAL
- -------
Metro's total capital increased by a net amount of $93,000 or .76 percent
during the first three months of 1998. Metro's earnings in the first three
months of 1998 amounted to $183,000. The net unrealized gain on investment
securities available for sale amounted to $36,000 at March 31, 1998,
decreasing by $6,000 or 14.3 percent since December 31, 1997. Capital
decreased by $84,065 in 1998 following the payment of a $.05 quarterly cash
dividend in March, 1998.
During the first quarter of 1998, the Board of Directors of Metro declared a
five percent stock dividend issuable April 6, 1998 to shareholders of record
as of March 18, 1998. Fractional shares resulting from the stock dividend were
paid in cash. As a result, there were 84,017 shares issued, bringing the new
number of common shares outstanding to 1,765,308. A transfer from accumulated
earnings equity account to the common stock equity account in the amount of
$924,000 followed the stock dividend issuance.
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, 1998,
that 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 the Bank as of March 31, 1998 (dollars in thousands):
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 $13,123 15.59% > $8,418 > 10.00%
Bank $ 9,959 11.91% > $8,362 > 10.00%
Tier 1 Capital
(to Risk Weighted Assets)
Consolidated $12,042 14.31% > $5,051 > 6.00%
Bank $ 8,878 10.62% > $5,017 > 6.00%
Tier 1 Capital
(to Average Assets)
Consolidated $12,042 9.67% > $6,228 > 5.00%
Bank $ 8,878 7.15% > $6,211 > 5.00%
</TABLE>
As of December 31, 1997, 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.
11
<PAGE>
RESULTS OF OPERATIONS
NET INTEREST INCOME
- -------------------
Net interest income after provision for loan losses was $1.3 million for the
three months ending March 31, 1998, compared to $1.1 million for the
comparable period of 1997, an increase of 15.1 percent. Net Interest income
increased principally due to growth in earning assets for the first quarter of
1998. The Bank's provision for loan loss expense was $75,000 at March 31,
1998, compared to $29,000 for the same period in 1997. The provision made in
1998 was 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.
NON-INTEREST EXPENSE
- --------------------
Non-interest expense amounted to $1.2 million for the three month period
ending March 31, 1998, compared to $1.1 million for the same period in 1997.
NET INCOME
- ----------
Metro recognized net income of $183,000 for the three month period ending
March 31, 1998, compared to $155,000 for the same period one year earlier.
PART II-OTHER INFORMATION
-------------------------
Item 5. Other Information
- --------------------------
During the first quarter of 1998, the Bank opened its sixth branch office
located at 16825 Clover Road, Noblesville, Indiana. This new facility
commenced operations on February 11, 1998. With the continuing commercial
expansion of Noblesville's east side, MetroBank's presence will provide
greater convenience and accessibility for local businesses and area residents
with extended hours and an increased emphasis on sales of financial products
and services.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits:
Exhibit 27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended March 31, 1998.
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 13, 1998 By: /S/ Ike G. Batalis
------------------------------------
Ike G. Batalis
Chairman and
President (Principal
Executive Officer)
May 13, 1998 By: /S/ Charles V. Turean
------------------------------------
Charles V. Turean
Executive Vice President
(Principal Financial and
Accounting Officer)
13
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 13,385
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 9,400
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 19,519
<INVESTMENTS-CARRYING> 9,492
<INVESTMENTS-MARKET> 28,870
<LOANS> 77,831
<ALLOWANCE> 1,081
<TOTAL-ASSETS> 131,686
<DEPOSITS> 118,076
<SHORT-TERM> 0
<LIABILITIES-OTHER> 942
<LONG-TERM> 0
0
0
<COMMON> 12,134
<OTHER-SE> 91
<TOTAL-LIABILITIES-AND-EQUITY> 131,686
<INTEREST-LOAN> 1,908
<INTEREST-INVEST> 357
<INTEREST-OTHER> 115
<INTEREST-TOTAL> 2,380
<INTEREST-DEPOSIT> 1,032
<INTEREST-EXPENSE> 0
<INTEREST-INCOME-NET> 1,348
<LOAN-LOSSES> 75
<SECURITIES-GAINS> (8)
<EXPENSE-OTHER> 1,168
<INCOME-PRETAX> 304
<INCOME-PRE-EXTRAORDINARY> 183
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 183
<EPS-PRIMARY> .11
<EPS-DILUTED> .11
<YIELD-ACTUAL> 4.39
<LOANS-NON> 164
<LOANS-PAST> 239
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,023
<ALLOWANCE-OPEN> 998
<CHARGE-OFFS> 10
<RECOVERIES> 18
<ALLOWANCE-CLOSE> 1,081
<ALLOWANCE-DOMESTIC> 1,081
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,032
</TABLE>
