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Metrocorp Bancshares

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Metrocorp Bancshares Inc. (MCBI) has surged about 60% year-to-date, due in part to its strong earnings trend. This regional bank has been consistently delivering positive earnings surprises for the last nine quarters with an average beat of 149.6%. Strong fundamentals should help this Zacks #2 Rank (Buy) maintain its growth trend going forward.

Fabulous Second Quarter

On July 20, Metrocorp reported second quarter 2012 earnings per share of 16 cents, topping the Zacks Consensus Estimate of 10 cents by 60.0% and the year-ago earnings of 13 cents by 23.1%. The upsurge was primarily due to growth in revenue and a lower provision for loan losses.

Net interest income climbed 3% year over year to $13.6 million. Non-interest income increased 12.5% to $1.8 million. Moreover, the net interest margin expanded 6 basis points to 3.82%. Yet, the company's non-interest expenses escalated 13% to $11.3 million over the same period.

Credit metrics continued to improve at Metrocorp. The provision for loan losses was $0.2 million, down 84% from the year-ago quarter with net charge-offs exhibiting a declining trend. Net charge-offs amounted to $1.0 million, down from $2.7 million in the prior-year quarter.

Surge in Earnings Momentum

For 2012, the Zacks Consensus Estimate has advanced 5.9% to 54 cents per share in the past 30 days, as 2 of 3 estimates moved higher. For 2013, the Zacks Consensus Estimate jumped 7.9% to 68 cents on 1 upward revision out of 3 estimates.

The Zacks Consensus Estimate for 2012 reflects a year-over-year growth of about 81.1%, while the expected growth rate for 2013 is 24.5%.

Reasonable Valuation

Shares of Metrocorp currently trade at 18.7x 12-month forward earnings, a 27% premium to the peer group average of 14.7x. Its price to book ratio of 1.1 is at a 15% discount to the industry median of 1.3. The company has a trailing 12-month ROE of 5.6%, compared with the peer group average of 6.6%. Considering the recent share price fluctuations and consistent growth trends, there is a strong possibility of considerable upside from these levels.

Chart Resonates Growth Potential

The stock has been continuously outperforming its 200 days moving average since January 2012, showing steady growth.

Headquartered in Houston, Texas, Metrocorp provides various banking products and services. The company was founded in 1987 and conducts business through 19 banking offices, including 13 in the greater Houston and Dallas metropolitan areas and 6 in the greater San Diego, Los Angeles and San Francisco metropolitan areas. With a market cap of about $183.8 million, Metrocorp competes with Texas Capital BancShares Inc. (TCBI), among others.

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