Metro Bancorp Reports 16% Growth in Net Income to $5.7 Million; EPS Up 15%; Loans Grow 11% and Deposits Increase 10%

HARRISBURG, Pa., April 23, 2015 (GLOBE NEWSWIRE) -- Metro Bancorp, Inc. (Metro or the Company) (Nasdaq:METR), parent company of Metro Bank, today reported net income of $5.7 million, or $0.39 per diluted common share, for the quarter ended March 31, 2015, compared to net income of $4.9 million, or $0.34 per diluted common share, for the first quarter of 2014. This represents the ninth straight quarter that the Company has produced record net income. The Company also reported net loan growth of $199.6 million, or 11%, over the past twelve months and total deposit growth of $216.2 million, or 10%, for the same period.

"Our continued focus on balancing strong loan and deposit growth with increased revenues and diligent expense control helped to produce our ninth straight quarter of record net income" said Gary L. Nalbandian, the Company's Chairman and Chief Executive Officer. "These financial results, combined with our previously announced shareholder return and cost-saving initiatives, demonstrate our commitment to grow the value of the Metro franchise and drive long-term shareholder value."

"As part of our basic commitment to enhancing shareholder returns, I am pleased to announce that on April 13, 2015, Metro's Board of Directors declared a second quarter cash dividend of $0.07 per common share, payable on May 18, 2015 to shareholders of record on April 27, 2015."

Income Statement Highlights

• The Company recorded net income of $5.7 million, or $0.39 per diluted common share, for the first quarter of 2015 compared to net income of $4.9 million, or $0.34 per diluted common share for the same period one year ago; a $778,000, or 16%, increase. On a linked-quarter basis, net income was up $163,000, or 3%.
   
• Total revenues (net interest income plus noninterest income) for the first quarter of 2015 were $33.6 million, up $3.2 million, or 11%, over total revenues of $30.4 million for the same quarter one year ago and were up $489,000, or 1%, over total revenues of $33.1 million for the previous quarter.
   
• Return on average stockholders' equity (ROE) was 8.62% for the first quarter of 2015 compared to 8.42% for the same period last year and to 8.43% the previous quarter.
   
• The Company's net interest margin on a fully-taxable basis for the first quarter of 2015, was 3.70%, compared to 3.60% recorded in the fourth quarter of 2014 and 3.56% for the first quarter of 2014. This increase is partially due to a special dividend declared and paid in the first quarter 2015 by the Federal Home Loan Bank combined with discount accretion on a large purchased loan which was paid off in full during the quarter. The Company's deposit cost of funds for the first quarter was 0.26%, compared to 0.27% for both the previous quarter and for the same period one year ago.
   
• The provision for loan losses totaled $1.5 million for the first quarter of 2015, compared to $2.7 million for the previous quarter and compared to $900,000 for the first quarter one year ago.
   
• Noninterest expenses for the first quarter of 2015 were $23.9 million, up $1.5 million, or 7%, over the previous quarter and up $1.1 million, or 5%, over the same quarter last year. The increase was primarily the result of the Company reserving $1.0 million of loan expense related to the possibility that the Company may be required to perform under one specific unsecured standby letter of credit.
   
• The efficiency ratio was 71.0% compared to 67.5% for the previous quarter and 74.9% for the first quarter of 2014. The increase in the efficiency ratio for the first quarter is primarily a result of the above-mentioned nonrecurring loan expense.

Balance Sheet Highlights

• Loan growth continues to be strong as net loans grew to $1.98 billion and were up $199.6 million, or 11%, over the first quarter 2014.
   
• Nonperforming assets were 1.43% of total assets at March 31, 2015, compared to 1.44% of total assets for the previous quarter and compared to 1.57% of total assets one year ago.
   
• Total deposits were $2.41 billion, up $216.2 million, or 10%, compared to same quarter last year. Total core deposits grew $192.8 million, or 9%, over the past twelve months and totaled $2.24 billion at March 31, 2015.
   
• Metro's capital levels remain strong with a Tier 1 Leverage ratio of 9.05%, a common equity tier 1 ratio of 12.23% and a total risk-based capital ratio of 13.48%.
   
• Stockholders' equity totaled $270.8 million, or 9% of total assets, at the end of the first quarter 2015, up $30.0 million, or 12%, over the past twelve months. At March 31, 2015, the Company's book value per common share was $19.04, up from $18.60 per common share at December 31, 2014 and up $2.12, or 13%, per common share from March 31, 2014. The market price of Metro's common stock increased by 30%, over the past twelve months from $21.14 per common share at March 31, 2014 to $27.57 per common share at March 31, 2015.

Income Statement Overview

Metro recorded net income of $5.7 million, or $0.39 per diluted common share, for the first quarter of 2015 compared to net income of $4.9 million, or $0.34 per diluted common share, for the first quarter of 2014.

Total revenues (net interest income plus noninterest income) for the first quarter of 2015 were $33.6 million, up $3.2 million, or 11%, over the first quarter of 2014.

Noninterest expenses for the quarter totaled $23.9 million, up $1.1 million, or 5%, compared to the same period in 2014. On a linked quarter basis, total noninterest expenses were up $1.5 million, or 7%, over the fourth quarter of 2014.

Net Interest Income and Net Interest Margin

Net interest income for the first quarter of 2015 totaled $26.1 million, up $2.7 million, or 12%, over the first quarter of 2014.

Average interest-earning assets for the first quarter of 2015 totaled $2.87 billion versus $2.86 billion for the previous quarter and were up $191.4 million, or 7%, over the first quarter of 2014. Average loans receivable increased by $245.2 million, or 14%, and average investment securities balances decreased by $53.8 million, or 6%, from the first quarter of last year. Average interest-bearing deposits totaled $1.87 billion for the first quarter of 2015, up $146.9 million, or 9%, over the same period of 2014 and average noninterest-bearing deposits for the first quarter 2015 were $509.1 million, up $63.0 million, or 14%, over the first quarter last year.

The net interest margin for the first quarter of 2015 was 3.63%, up 10 basis points (bps) from the 3.53% recorded for the previous quarter and up 15 bps over the 3.48% recorded in the first quarter one year ago. The net interest margin on a fully-taxable basis for the first quarter of 2015 was 3.70%, up 10 bps over the previous quarter and up 14 bps compared to 3.56% for the first quarter of 2014. This increase is partially due to a special dividend in the amount of $555,000 paid in the first quarter 2015 by the Federal Home Loan Bank. Also contributing to the increased net interest margin was the recognition of $121,000 of discount accretion on a previously purchased loan participation which paid off early during the first quarter of 2015.

Metro's deposit cost of funds for the first quarter of 2015 was 0.26%, compared to 0.27% for the previous quarter, and down 1 bp from 0.27% recorded in the first quarter one year ago.The total cost of all funding sources for the first quarter of 2015 was 0.28%, compared to 0.27% for the previous quarter and 0.31% for the same period in 2014.

Change in Net Interest Income and Rate/Volume Analysis

The increase in net interest income on a fully tax-equivalent basis for the first quarter of 2015 over the same period of 2014 was primarily due to an increase in the level of interest-earning assets and, to a lesser extent, a lower total cost of funding sources. 

Noninterest Income

Noninterest income for the first quarter of 2015 totaled $7.6 million, up $487,000, or 7%, over the first quarter one year ago. Service charges, card and other noninterest income for the first quarter were $7.1 million, an increase of $191,000, or 3%, over the first quarter last year. Gains on the sale of loans totaled $471,000 for the first quarter of 2015 versus $136,000 for the same period in 2014. Net losses on investment securities totaled $28,000 for the first quarter of 2015, compared to net gains on investment securities of $11,000 for the first quarter of 2014.

The breakdown of noninterest income for the first quarters ended March 31, 2015 and 2014, respectively, is shown in the table below: 

Noninterest Expenses

Noninterest expenses for the first quarter of 2015 were $23.9 million, up $1.5 million, or 7%, on a linked quarter basis, and up $1.1 million, or 5%, compared to the first quarter one year ago. The respective increases between quarters is primarily due to the fact that the Company reserved $1.0 million of loan expense in the first quarter of 2015 related to the possibility that the Company may be required to perform under one specific unsecured standby letter of credit.

On March 27, 2015, Metro sent notice to the customers of its Prospect Street store in York, PA and its Carlisle Commons store in Carlisle, PA that both of these stores will be closing permanently effective June 30, 2015. Due to circumstances beyond Metro's control, critical portions of the land on which the Prospect Street store is located have been acquired by the Commonwealth of Pennsylvania Department of Transportation (PennDOT) for road construction and a redesign of the intersection at which the store is located. The impact of this action will permanently remove the ability for Metro customers to conveniently access this store from either road of the intersection. After careful consideration of this impact, the decision was made to close the store effective June 30, 2015.

Metro has also announced that it will be closing its Carlisle Commons store effective June 30, 2015 and consolidating the operations of this store into its other Carlisle store at 65 Ashland Avenue. After careful research and evaluation, Metro believes that it can efficiently and effectively service its Carlisle customers through one Carlisle store location.

As a result of these store closures, Metro is accelerating the remaining depreciation on certain assets at these locations during the first and second quarters of 2015. The accelerated depreciation booked in the first quarter of 2015 totaled $317,000. Partially offsetting this cost was the receipt by Metro during the first quarter of a one-time payment of $244,000 from PennDOT for the taking of the land at the Prospect Street location. Metro will record additional accelerated depreciation associated with these store locations during the second quarter of 2015 in an amount of approximately $500,000 and will then experience a reduction in total occupancy and equipment expenses beginning in the third quarter once the stores are no longer operating.

Excluding the impact of the above-mentioned $1.0 million loan expense and accelerated depreciation, partially offset by the receipt of the one-time payment from PennDOT, total noninterest expenses for the first quarter of 2015 were $22.8 million, basically flat compared to the first quarter one year ago.

The breakdown of noninterest expenses for the first quarters ended March 31, 2015 and 2014, respectively, are shown in the table below: 

Balance Sheet

Lending

Gross loans receivable totaled $2.0 billion at March 31, 2015, an increase of $201.5 million, or 11%, over March 31, 2014. The composition of the Company's loan portfolio at March 31, 2015 and March 31, 2014 was as follows: 

The Company experienced loan growth in every major category over the past twelve months except for commercial tax-exempt loans which represent the smallest segment of Metro's loan portfolio.

Net loan growth on a linked-quarter basis was $4.4 million (non-annualized). This growth was constrained as the result of several large loans being paid off during the first quarter of 2015. During the quarter, the Company received a total of $71.9 million in paydowns or payoffs on 23 different loan balances greater than $1 million. Three loans totaling $14.2 million were paid off early due to sales of the loan collateral properties by the borrowers. Also, the Bank received $4.1 million in paydowns on 17 nonperforming loans during the quarter as well.

Asset Quality

The Company's asset quality ratios are shown below: 

Nonperforming loans totaled $34.7 million at March 31, 2015, a decrease of $679,000 from December 31, 2014, while foreclosed asset balances increased by $256,000 to $7.9 million. Compared to March 31, 2014, nonperforming loans decreased $6.1 million, or 15%, and foreclosed assets increased $3.9 million, or 99%.

Nonperforming assets decreased during the first quarter of 2015 from December 31, 2014 by $423,000, or 1%, to $42.7 million, or 1.43%, of total assets at March 31, 2015, compared to $43.1 million, or 1.44%, of total assets at December 31, 2014, and $44.9 million, or 1.57%, of total assets one year ago. Nonperforming assets were down $2.2 million, or 5%, over the past year.

At March 31, 2015, foreclosed assets totaling $5.7 million were under contract to be sold with no additional net loss to the Company expected.

Net loan charge-offs totaled $743,000 for the first quarter of 2015, comprised of $819,000 in gross loan charge-offs offset partially by $76,000 in recoveries. One loan relationship accounted for $437,000, or 59%, of the total net charge-offs for the quarter.

The Company recorded a provision for loan losses of $1.5 million for the first quarter of 2015 as compared to $2.7 million for the previous quarter and $900,000 recorded in the first quarter of 2014. The allowance for loan losses totaled $25.8 million as of March 31, 2015, compared to $25.0 million at December 31, 2014 and $23.9 million at March 31, 2014.

Deposits

The Company's deposit balances at March 31, 2015 were $2.41 billion, compared to total deposits of $2.38 billion at December 31, 2014 and $2.20 billion one year ago. The change in core deposits over the past twelve months by type of account is as follows: 

Total core deposits, excluding time deposits, increased $189.7 million, or 10%, over the past twelve months. The cost of core deposits, excluding time deposits, during the first quarter of 2015 was 0.20%, compared to the same amount for the previous quarter and 0.21% for the first quarter one year ago. The cost of total core deposits for the first quarter of 2015 was 0.26%, which was the same as the previous quarter and down 1 bp from first quarter of 2014.

Change in total core deposits by type of customer was as follows: 

Total consumer core deposits increased by $49.8 million, or 5%, and total commercial core deposits grew by $136.5 million, or 20%, over the past twelve months.

Investments

At March 31, 2015, the Company's investment portfolio totaled $809.1 million, down $43.9 million, or 5%, on a linked quarter basis and down $50.8 million, or 6%, compared to March 31, 2014. Detailed below is information regarding the composition and characteristics of the portfolio at March 31, 2015: 

At March 31, 2015, the after-tax unrealized loss on the Company's available for sale portfolio was $1.2 million, as compared to an after-tax unrealized loss of $3.9 million at December 31, 2014 and compared to an after-tax unrealized loss of $11.0 million at March 31, 2014.

Capital

Stockholders' equity at March 31, 2015 totaled $270.8 million, compared to $240.8 million at March 31, 2014. Return on average stockholders' equity (ROE) for the first quarter of 2015 was 8.62%, compared to 8.43% for the previous quarter and 8.42% for the first quarter last year.

The Company's capital ratios at March 31, 2015 and 2014 were as follows: 

Both the Company and its subsidiary bank continue to maintain strong capital ratios and are well capitalized under various regulatory capital guidelines as required by federal banking agencies.

During the first quarter, the Company repurchased 117,000 shares of its common stock as part of its previously announced stock buyback program which began late in the fourth quarter of 2014. Total shares repurchased to date under this program are 129,300.

At March 31, 2015, the Company's book value per common share was $19.04, compared to $16.92 one year ago, up 13%.

The market price of the Company's common stock increased by 30% from $21.14 per common share at March 31, 2014 to $27.57 per common share at March 31, 2015.

As previously mentioned, Metro's Board of Directors declared a second quarter cash dividend of $0.07 per common share payable on May 18, 2015 to shareholders of record on April 27, 2015.

Forward-Looking Statements

This document contains forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, which we refer to as the Securities Act and Section 21E of the Securities Exchange Act of 1934, which we refer to as the Exchange Act, with respect to the financial condition, liquidity, results of operations, future performance and business of Metro Bancorp, Inc. These forward-looking statements are intended to be covered by the safe harbor for "forward-looking statements" provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are those that are not historical facts. These forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions that are subject to significant risks and uncertainties and are subject to change based on various factors (some of which are beyond our control). The words "may," "could," "should," "would," "believe," "anticipate," "estimate," "expect," "intend," "plan" and similar expressions are intended to identify forward-looking statements.

While we believe our plans, objectives, goals, expectations, anticipations, estimates and intentions as reflected in these forward-looking statements are reasonable based on the information available to us at the time, we can give no assurance that any of them will be achieved. You should understand that various factors, in addition to those discussed elsewhere in this document, could affect our future results and could cause results to differ materially from those expressed in these forward-looking statements, including:

• the effects of and changes in, trade, monetary and fiscal policies, including in particular interest rate policies of the Board of Governors of the Federal Reserve System, including the duration of such policies;
• general economic or business conditions, either nationally, regionally or in the communities in which we do business, may be less favorable than expected, resulting in, among other things, a deterioration in credit quality and loan performance or a reduced demand for credit;
• federal budget and tax negotiations and their effects on economic and business conditions in general and our customers in particular;
• the federal government's inability to reach a deal to permanently raise the debt ceiling and the potential negative results on economic and business conditions;
• the impact of the Dodd-Frank Act and other changes in laws and regulations affecting the financial services industry (including laws concerning taxes, banking, securities and insurance as well as enhanced expectations of regulators);
• possible impacts of the capital and liquidity requirements of the Basel III standards as implemented or to be implemented by the Federal Reserve and other US regulators, as well as other regulatory pronouncements and prudential standards;
• changes in regulatory policies on positions relating to capital distributions;
• our ability to generate sufficient earnings to justify capital distributions;
• continued effects of the aftermath of recessionary conditions and the impacts on the economy in general and our customers in particular, including adverse impacts on loan utilization rates as well as delinquencies, defaults and customers' ability to meet credit obligations;
• our ability to manage current levels of impaired assets;
• continued levels of loan volume origination;
• the adequacy of the allowance for loan losses or any provisions;
• the views and actions of the Consumer Financial Protection Bureau regarding consumer credit protection laws and regulations;
• changes resulting from legislative and regulatory actions with respect to the current economic and financial industry environment;
• changes in the FDIC deposit fund and the associated premiums that banks pay to the fund;
• interest rate, market and monetary fluctuations;
• the results of the regulatory examination and supervision process;
• unanticipated regulatory or legal proceedings and liabilities and other costs;
• compliance with laws and regulatory requirements of federal, state and local agencies, including regulatory expectations regarding enhanced compliance programs;
• our ability to continue to grow our business internally or through acquisitions and successful integration of new or acquired entities while controlling costs;
• deposit flows;
• the inability to achieve anticipated cost savings in the amount of time expected, and the emergence of unexpected offsetting costs in the compliance or risk management areas or otherwise;
• changes in consumer spending and saving habits relative to the financial services we provide;
• the ability to hedge certain risks economically and effectively;
• the loss of key officers or other personnel;
• changes in accounting principles, policies and guidelines as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board (FASB), and other accounting standards setters;
• the timely development of competitive new products and services by us and the acceptance of such products and services by customers;
• the willingness of customers to substitute competitors' products and services for our products and services and vice versa, based on price, quality, relationship or otherwise;
• other economic, competitive, governmental, regulatory and technological factors affecting the Company's operations, pricing, products and services;
• rapidly changing technology;
• our continued relationships with major customers;
• the effect of terrorist attacks and threats of actual war;
• interruption or breach in security of our information systems, including cyber-attacks, resulting in failures or disruptions in customer account management, general ledger processing and loan or deposit systems or disclosure of confidential information;
• our ability to maintain compliance with the exchange rules of The Nasdaq Stock Market, Inc.;
• our ability to maintain the value and image of our brand and protect our intellectual property rights;
• disruptions due to flooding, severe weather or other natural disasters or Acts of God; and
• our success at managing the risks involved in the foregoing.

Because such forward-looking statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such statements. The foregoing list of important factors is not exclusive and you are cautioned not to place undue reliance on these factors or any of our forward-looking statements, which speak only as of the date of this document or, in the case of documents incorporated by reference, the dates of those documents. We do not undertake to update any forward-looking statements, whether written or oral, that may be made from time to time by or on behalf of us except as required by applicable law. 

CONTACT: Gary L. Nalbandian
         Chairman/President
         
         Mark A. Zody
         Chief Financial Officer
         
         (717) 412-6301