10QSB 1 sec01.txt MIDSOUTH BANCORP, INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10QSB __X__ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended..................... September 30, 2001 _____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ..... to ..... COMMISSION FILE NUMBER 2-91-000FW MIDSOUTH BANCORP, INC. Louisiana 72 -1020809 102 Versailles Boulevard, Lafayette, Louisiana 70501 (337) 237-8343 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. Outstanding as of October 31, 2001 Common stock, $.10 par value 2,901,142 Transitional Small Business Disclosure Format: Yes _______ No _____X____ Page 1 Page 2 PART 1 - FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Page Financial Highlights 3 Statements of Condition - September 30, 2001 and December 31, 2000 4 Statements of Income - Three and Nine Months Ended September 30, 2001 and 2000 5 Statement of Stockholders' Equity - Nine Months Ended September 30, 2001 6 Statements of Cash Flows - Nine Months Ended September 30, 2001 and 2000 7 Notes to Financial Statements 8 Item 2. Management's Discussion and Analysis or Plan of Operation 9 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 16 Signatures 17
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES FINANCIAL HIGHLIGHTS (UNAUDITED) Three Months Ended Nine Months Ended September 30, September 30, EARNINGS DATA 2001 2000 2001 2000 ______________________________________________________________ Net interest income $4,033,602 $3,710,140 $11,996,444 $10,814,484 Provision for loan losses 439,323 200,727 1,796,667 595,080 Non-interest income 1,241,295 1,144,698 3,790,988 3,339,762 Non-interest expense 3,835,251 3,582,430 11,360,974 10,682,132 Provision for income tax 217,196 276,150 581,650 741,676 Net income 783,127 795,531 2,048,141 2,135,358 Preferred dividend requirement - 139,905 52,751 213,369 Income available to common shareholders $783,127 $655,626 $1,995,390 $1,921,989 ====================================================================================================================== PER COMMON SHARE DATA Basic earnings per share $0.29 $0.26 $0.79 $0.77 Diluted earnings per share $0.27 $0.24 $0.72 $0.70 Book value at end of period $7.71 $6.67 $7.71 $6.67 Market price at end of period $10.85 $8.25 $10.85 $8.25 Weighted average shares outstanding Basic 2,734,556 2,489,829 2,539,255 2,484,202 Diluted 2,947,085 2,901,198 2,863,059 2,916,018 ====================================================================================================================== AVERAGE BALANCE SHEET DATA Total assets $346,466,354 $294,150,115 $343,777,221 $286,946,682 Earning assets 317,629,938 267,852,903 314,937,626 260,948,866 Loans and leases 211,284,662 188,899,108 207,049,089 179,316,245 Interest-bearing deposits 235,974,649 200,080,042 238,212,967 197,278,349 Total deposits 311,691,765 263,390,523 311,134,370 259,816,194 Common stockholders' equity 21,147,781 15,708,534 19,766,463 15,123,417 Total stockholders' equity 21,908,019 17,687,432 21,179,144 17,189,188 ====================================================================================================================== SELECTED RATIOS Return on average assets (annualized) 0.90% 1.07% 0.80% 0.99% Return on average common equity (annualized) 14.69% 19.27% 13.50% 17.87% Return on average total equity ( annualized) 14.18% 17.84% 12.93% 16.55% Leverage capital ratio (FN1) 8.09% 6.31% 8.09% 6.31% Tier 1 risk-based capital ratio 11.82% 8.97% 11.82% 8.97% Total risk-based capital ratio 12.93% 10.02% 12.93% 10.02% Allowance for loan losses as a % of total loans 1.21% 1.13% 1.21% 1.13% ======================================================================================================================= PERIOD ENDING BALANCE SHEET DATA 9/30/01 9/30/00 Net Change % Change Total assets $351,895,745 $303,226,581 $48,669,164 16.05% Earning assets 320,689,613 275,127,836 $45,561,777 16.56% Loans and leases, net 211,530,722 191,634,652 $19,896,070 10.38% Interest-bearing deposits 231,952,055 208,887,685 $23,064,370 11.04% Total deposits 310,803,760 274,543,111 $36,260,649 13.21% Common stockholders' equity 22,373,704 16,773,407 $5,600,297 33.39% Total stockholders' equity (FN2) 22,373,704 18,634,742 $3,738,962 20.06% ======================================================================================================================== (FN1) On February 21, 2001, MidSouth completed the issuance of $7,000,000 of Trust Preferred Securities. For regulatory purposes, these funds qualify as Tier 1 Capital. For financial reporting purposes, these funds are included as a liability under generally accepted accounting principles. (FN2) MidSouth completed the redemption of its Series A Cumulative Convertible Preferred Stock on August 1, 2001. Only 3,527 shares had not been converted to MidSouth Common Stock as of July 26, 2001, the final day for converting. The remaining 3,527 Preferred Shares were redeemed at a Redemption Price of $14.33 per share.
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CONDITION ____________________________________________________________________________________________________________________ September 30, December 31, 2001 2000 * ASSETS (unaudited) ____________ ___________ Cash and due from banks $17,025,868 $15,698,538 Federal funds sold 800,000 34,100,000 ____________ ___________ Total cash and cash equivalents 17,825,868 49,798,538 Interest bearing deposits in banks 111,192 68,682 Securities available-for-sale, at fair value (cost of $80,521,488 in September 2001 and $53,821,526 in December 2000) 82,039,588 53,969,626 Securities held-to-maturity (estimated market value of $25,230,235 in September 2001 and $24,474,077 in December 2000) 23,610,182 23,611,057 Loans, net of allowance for loan losses of $2,597,929 in September 2001 and $2,276,187 in December 2000 211,530,722 202,308,673 Bank premises and equipment, net 11,580,593 11,739,575 Other real estate owned, net 327,686 446,046 Accrued interest receivable 2,548,000 2,365,350 Goodwill, net 447,258 493,071 Other assets 1,874,656 1,572,815 ____________ ___________ Total assets $351,895,745 $346,373,433 ============ =========== LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Non-interest bearing $78,851,705 $75,151,653 Interest bearing 231,952,055 244,395,552 ____________ ___________ Total deposits 310,803,760 319,547,205 Securities sold under repurchase agreements 1,355,784 997,616 Accrued interest payable 956,728 1,007,302 FHLB advances 5,400,000 - Notes payable 1,686,900 4,650,968 Junior subordinated deferrable interest debenture 7,000,000 - Other liabilities 2,318,869 307,964 ____________ ___________ Total liabilities 329,522,041 326,511,055 ____________ ___________ Commitments and contingencies - - Stockholders' Equity: Preferred Stock, no par value, $14.25 stated value - 5,000,000 shares authorized, no shares issued and outstanding on September 30, 2001 and 130,620 shares issued and outstanding on December 31, 2000, respectively - 1,861,335 Common stock, $.10 par value- 5,000,000 shares authorized, 2,901,142 and 2,515,166 issued and outstanding on September 30, 2001 and December 31, 2000, respectively 290,114 251,517 Surplus 12,953,762 11,147,534 Unearned ESOP shares (158,959) (185,127) Unrealized gains on securities available-for-sale, net of deferred taxes of $526,000 in September 2001 and $62,900 in December 2000 992,100 85,200 Retained earnings 8,296,687 6,701,919 ____________ ___________ Total stockholders' equity 22,373,704 19,862,378 ____________ ___________ Total liabilities and stockholders' equity $351,895,745 $346,373,433 ============ =========== * The consolidated statement of condition at December 31, 2000 is taken from the audited balance sheet on that date. See notes to unaudited consolidated financial statements. _____________________________________________________________________________________________________________________
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME __________________________________________________________________________________________________________ Three Months Ened Nine Months Ended September 30, September 30, 2001 2000 2001 2000 __________________________ __________________________ INTEREST INCOME: Loans, including fees $5,171,942 $5,044,852 $15,759,394 $14,091,971 Securities Taxable 982,619 864,189 2,911,550 2,633,047 Nontaxable 382,437 310,482 1,117,992 904,580 Federal funds sold 58,947 18,795 497,516 86,081 ____________ ____________ ____________ ____________ TOTAL 6,595,945 6,238,318 20,286,452 17,715,679 ____________ ____________ ____________ ____________ INTEREST EXPENSE: Deposits 2,324,703 2,310,882 7,636,773 6,421,514 Securities sold under repurchase agreements, federal funds purchased and advances 25,256 129,218 57,774 237,209 Long term debt 212,384 88,078 595,461 242,472 ____________ ____________ ____________ ____________ TOTAL 2,562,343 2,528,178 8,290,008 6,901,195 ____________ ____________ ____________ ____________ NET INTEREST INCOME 4,033,602 3,710,140 11,996,444 10,814,484 PROVISION FOR LOAN LOSSES 439,323 200,727 1,796,667 595,080 ____________ ____________ ____________ ____________ NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 3,594,279 3,509,413 10,199,777 10,219,404 ____________ ____________ ____________ ____________ OTHER OPERATING INCOME: Service charges on deposits 837,627 826,335 2,477,430 2,399,830 Gains on securities, net - 14,356 46,491 16,126 Credit life insurance 45,800 61,294 180,655 187,023 Other charges and fees 357,868 242,713 1,086,412 736,783 ____________ ____________ ____________ ____________ TOTAL OTHER INCOME 1,241,295 1,144,698 3,790,988 3,339,762 ____________ ____________ ____________ ____________ OTHER EXPENSES: Salaries and employee benefits 1,865,624 1,716,730 5,405,654 5,041,045 Occupancy expense 829,819 828,804 2,504,716 2,399,469 Other 1,139,808 1,036,896 3,450,604 3,241,618 ____________ ____________ ____________ ____________ TOTAL OTHER EXPENSES 3,835,251 3,582,430 11,360,974 10,682,132 ____________ ____________ ____________ ____________ INCOME BEFORE INCOME TAXES 1,000,323 1,071,681 2,629,791 2,877,034 PROVISION FOR INCOME TAXES 217,196 276,150 581,650 741,676 ____________ ____________ ____________ ____________ NET INCOME 783,127 795,531 2,048,141 2,135,358 PREFERRED DIVIDEND REQUIREMENT - 139,905 52,751 213,369 ____________ ____________ ____________ ____________ INCOME AVAILABLE TO COMMON SHAREHOLDERS $783,127 $655,626 $1,995,390 $1,921,989 =========== =========== ============ ============ BASIC EARNINGS PER COMMON SHARE $0.29 $0.26 $0.79 $0.77 =========== =========== ============ ============ DILUTED EARNINGS PER COMMON SHARE $0.27 $0.24 $0.72 $0.70 =========== =========== ============ ============ See notes to unaudited consolidated financial statements.
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR NINE MONTHS ENDED SEPTEMBER 30, 2001 (UNAUDITED) _________________________________________________________________________________________________________________________________ UNREALIZED GAINS (LOSSES) ON SECURITIES AVAILABLE PREFERRED STOCK COMMON STOCK ESOP -FOR-SALE, RETAINED SHARES AMOUNT SHARES AMOUNT SURPLUS OBLIGATION NET EARNINGS TOTAL ____________________ ____________________ ___________ ________________________________ ___________ BALANCE, JANUARY 1, 2001 130,620 $1,861,335 2,515,166 $251,517 $11,147,534 ($185,127) $85,200 $6,701,919 $19,862,378 Issuance of common stock 5,062 506 33,258 33,764 Dividends on common stock (400,622) (400,622) Dividends on preferred stock (52,751) (52,751) Conversion of preferred stock (127,092) ($1,811,061) 380,914 38,091 1,772,970 Redemption of preferred stock (3,528) ($50,274) (50,274) Net income 2,048,141 2,048,141 Increase in ESOP obligation, net of repayments 26,168 26,168 Net change in unrealized gain/ loss on securities available-for-sale, net of tax 906,900 906,900 ________ __________ _________ ________ ___________ _________ ________ __________ ___________ BALANCE, SEPTEMBER 30, 2001 - - 2,901,142 $290,114 $12,953,762 ($158,959) $992,100 $8,296,687 $22,373,704 ======== ========== ========= ======== =========== ========= ======== ========== =========== See notes to unaudited consolidated financial statements.
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 1. STATEMENT BY MANAGEMENT CONCERNING THE REVIEW OF UNAUDITED FINANCIAL INFORMATION The accompanying unaudited consolidated financial statements and notes thereto contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position of MidSouth Bancorp, Inc. ("MidSouth") and its subsidiaries as of September 30, 2001 and the results of their operations and their cash flows for the periods presented. The consolidated financial statements should be read in conjunction with the annual consolidated financial statements and the notes thereto included in MidSouth's 2000 annual consolidated report and Form 10-KSB. The results of operations for the nine months period ended September 30, 2001 are not necessarily indicative of the results to be expected for the entire year. 2. ALLOWANCE FOR LOAN AND LOSSES An analysis of the activity in the allowance for loan losses is as follows:
Nine Months Ended September 30, 2001 2000 __________ __________ Balance at beginning of period $2,276,187 $1,967,327 Provision for loan losses 1,796,667 595,080 Recoveries 75,199 99,788 Loans charged off (1,550,124) (481,478) __________ __________ Balance at end of period $2,597,929 $2,180,717 ========== ==========
3. COMPREHENSIVE INCOME Comprehensive income includes net income and other comprehensive income (losses) which, in the case of MidSouth, only includes unrealized gains and losses on securities available-for-sale. Following is a summary of MidSouth's comprehensive income for the three and nine months ended September 30, 2001 and 2000.
Three Months Ended Nine Months Ended September 30, September 30, 2001 2000 2001 2000 __________ __________ __________ __________ Net income $783,127 $795,531 $2,048,141 $2,135,358 Other comprehensive income Unrealized gain on securities available-for-sale, net: Unrealized holding gains arising during the period 492,019 381,675 937,584 435,123 Less reclassification adjustment for gains included in net income (30,219) (9,475) (30,684) (10,643) __________ __________ __________ __________ Total other comprehensive income 461,800 372,200 906,900 424,480 __________ __________ __________ __________ Total comprehensive income $1,244,927 $1,167,731 $2,955,041 $2,559,838 ========== ========== ========== ==========
4. DERIVATIVE INSTRUMENTS Effective January 1, 2001, MidSouth adopted SFAS No. 133. The Statement was issued in June 1998 and requires MidSouth to recognize all derivatives as either assets or liabilities in MidSouth's balance sheet and measure those instruments at fair value. If certain conditions are met, a derivative may be specially designated as a hedge. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. MidSouth is not currently engaged in any significant activities with derivatives; therefore, management believes that the impact of the adoption of this Statement is not significant. 5. JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE On February 22, 2001 MidSouth issued a $7,000,000 Junior Subordinated Deferrable Interest Debenture. This debenture bears interest at 10.20% and is due in 2031. 6. PREFERRED STOCK On August 1, 2001, MidSouth completed the redemption of its Series A Cumulative Convertible Preferred Stock. Only 3,527 shares had not been converted to MidSouth Common Stock as of July 26, 2001, the final day for converting. The remaining 3,527 Preferred Shares were redeemed at a Redemption Price of $14.33 per share.
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 and 2000 __________________________________________________________________________________________________________________ September 30, 2001 September 30, 2000 __________________ __________________ CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $2,048,141 $2,135,358 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 997,412 1,021,680 Provision for loan losses 1,796,667 595,080 Provision for deferred income taxes 10,778 4,548 Discount accretion, net 103,674 64,031 Net gain on sale of securities (46,491) (16,126) Gain on sale of premises and equipment (2,750) (3,720) Loss on sale of other real estate owned 11,542 1,639 Write-down of other real estate owned 38,830 93,000 Change in accrued interest receivable (182,650) (526,338) Change in accrued interest payable (50,574) 69,450 Other, net 1,235,486 69,103 ____________ ____________ NET CASH PROVIDED BY OPERATING ACTIVITIES 5,960,065 3,507,705 ____________ ____________ CASH FLOWS FROM INVESTING ACTIVITIES: Net (increase) decrease in interest-bearing deposits in banks (42,510) 253,102 Proceeds from sales of securities available-for-sale 1,647,500 2,064,519 Proceeds from maturities and calls of securities available-for-sale 19,052,128 9,715,737 Proceeds from maturities and calls of securities held-to-maturity 65,000 - Purchases of securities available-for-sale (47,520,898) (7,683,611) Purchases of securities held-to-maturity - (2,031,305) Loan originations, net of repayments (11,059,826) (23,945,440) Purchases of premises and equipment (792,617) (1,566,015) Proceeds from sales of premises and equipment 2,750 10,250 Proceeds from sales of other real estate owned 135,266 131,211 ____________ ____________ NET CASH USED IN INVESTING ACTIVITIES (38,513,207) (23,051,552) ____________ ____________ CASH FLOWS FROM FINANCING ACTIVITIES: Net (decrease) increase in deposits (8,743,445) $22,852,905 Net (decrease) increase in securities sold under repurchase agreements and Federal Home Loan Bank advances 5,758,168 683,854 Issuance of notes payable 20,000 1,340,000 Repayments of notes payable (2,984,068) (320,780) Proceeds from issuance of common stock 33,764 - Payment of dividends (453,373) (481,803) Retirement of preferred stock (50,574) (264,000) Issuance of junior subordinated debentures 7,000,000 - ____________ ____________ NET CASH PROVIDED BY FINANCING ACTIVITIES 580,472 23,810,176 ____________ ____________ NET (DECREASE) INCREASE IN CASH & CASH EQUIVALENTS (31,972,670) 4,266,329 CASH & CASH EQUIVALENTS AT BEGINNING OF PERIOD 49,798,538 14,487,690 ____________ ____________ CASH & CASH EQUIVALENTS AT END OF PERIOD $17,825,868 $18,754,019 ============ ============ See notes to unaudited consolidated financial statements.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION This review should be read in conjunction with MidSouth Bancorp Inc.'s ("MidSouth") consolidated financial statements and accompanying notes contained herein, as well as with MidSouth's 2000 annual consolidated financial statements, the notes thereto and the related Management's Discussion and Analysis. MidSouth recorded income available to common shareholders totaling $783,127 for the third quarter of 2001, compared to $655,626 for the third quarter of 2000. Basic earnings per share were $.29 and $.26 for the quarters ended September 30, 2001 and 2000, respectively. Diluted earnings per share were $.27 for the third quarter of 2001 compared to $.24 for the third quarter of 2000. The increase in income available to common shareholders results primarily from the absence during the current quarter of dividends on preferred stock that was redeemed in full on August 1, 2001. Net income totaled $783,127 for the third quarter of 2001, compared to $795,531 reported for the third quarter of 2000. The decrease resulted primarily from an increase in loss loan provisions of $238,596 over last year's third quarter, including provisions totaling $224,323 at Financial Services of the South, Inc. (the "Finance Company"), MidSouth's finance company subsidiary. Basic earnings per common share were $.79 for the nine months ended September 30, 2001 and $.77 for the nine months ended September 30, 2000. Diluted earnings per common share were $.72 compared to $.70 for the two nine month periods, respectively. Net income for the nine months ended September 30, 2001 totaled $2,048,141 compared to $2,135,358 for the nine months ended September 30, 2000. An increase in net interest income of $1,181,960 offset most of the increase in loan loss provisions of $1,201,587 over the nine months ending September 30, 2001. MidSouth's net interest income continued to improve in quarterly and year-to-date comparisons primarily due to a higher volume of earning assets. Net interest income increased 9%, or $323,462 in quarterly comparison and 11%, or $1,181,960 in year-to-date comparison. Improvement was also noted in non-interest income primarily from fees earned through a mortgage origination program with a third party processor. Non-interest expense, primarily salaries and benefits and occupancy expenses, increased 7% or $252,821, in quarterly comparison and 6%, or $678,842 in year-to-date comparison. Total end-of-period consolidated assets increased 16%, or $48.7 million, from $303.2 million September 30, 2000 to $351.9 million at September 30, 2001. Interest-bearing deposits increased $23.0 million and total deposits increased $36.3 million, from $274.5 million at September 30, 2000 to $310.8 million at September 30, 2001. Loans, net of Allowance for Loan Losses ("ALL"), increased $19.9 million or 10%, from $191.6 million in the third quarter of 2000 to $211.5 million in the third quarter of 2001. Provisions for loan losses totaled $439,323 in the third quarter of 2001 compared to $200,727 in the third quarter of 2001, and $1,796,667 in the first nine months of 2001 compared to $595,080 in the comparable 2000 period. Nonperforming loans as a percentage of total loans increased slightly from .08% at September 30, 2000 to .09% at September 30, 2001. Loans past due ninety days and over increased, from $606,671 at September 30, 2000 to $1,344,389 at September 30, 2001, primarily due to four loans that management considers to be fully collateralized with no loss expected. Three of the four loans are government-guaranteed. Other real estate owned decreased $129,088 for the same period. The ALL represented 355% of nonperforming assets as of September 30, 2000 compared to 497% as of September 30, 2001. MidSouth's leverage ratio was 8.09% at September 30, 2001, up from 6.31% at September 30, 2000. During the first quarter of 2001, MidSouth completed the issuance of $7,000,000 of Trust Preferred Securities. For regulatory purposes, these funds qualify as Tier 1 Capital. For financial reporting purposes, these funds are included as a liability under generally accepted accounting principles. Return on average common equity for the third quarter of 2001 was 14.69% and return on average assets was .90%. During the third quarter of 2001, MidSouth began the process of closing the Finance Company subsidiary. The Jennings and Lafayette offices have been closed and the Lake Charles office is open to accept payments only, with no new loans being made. The loans, net of allowance for loan losses, amounted to approximately $1.9 million at September 30, 2001. Management is of the opinion that the allowance for loan losses is adequate to absorb losses existing in the loan portfolio at September 30, 2001. On August 1, 2001, all remaining shares of MidSouth's Series A Cumulative Convertible Preferred Stock were redeemed at a price of $14.33 per share. The Preferred Stock was convertible until July 26, 2001 into 2.998 shares of MidSouth Common Stock for each share of Preferred Stock. MidSouth's common stock is traded on the American Stock Exchange under the symbol MSL. Earnings Analysis Net Interest Income Average earning assets increased 19%, or $49.7 million, from $267.9 million for the three months ended September 30, 2000 to $317.6 million for the three months ended September 30, 2001. The mix of earning assets shifted from 71% of average earning assets in loans for the third quarter of 2000 down to 67% in the third quarter of 2001. The average yield on loans decreased 89 basis points, from 10.60% to 9.71% at September 30, 2001. Yields decreased due to changes in the prime lending rate over the past nine months. New York Prime decreased 400 basis points from 9.50% at September 30, 2000 to 5.50% at September 30, 2001. Average investment volume increased $21.3 million, from $77.7 million at September 30, 2000 to $99.0 million at September 30, 2001. A greater portion of available funds were used to purchase investment securities due to decreased loan demand. The average taxable-equivalent yield on investments decreased 55 basis points from at 6.69% at September 30, 2000 to 6.14% at September 30, 2001. The decrease in average loan volume as a percentage of average earning assets combined with lower yields decreased the taxable-equivalent yield on quarterly average earning assets 99 basis points, from 9.44% for the third quarter of 2000 to 8.45% for the third quarter of 2001. An average volume increase of $35.9 million in interest- bearing liabilities resulted in increased interest expense despite lower rates for the quarter ended September 30, 2001 compared to the quarter ended September 30, 2000. The average rate paid on interest-bearing liabilities decreased 67 basis points, from 4.58% at September 30, 2000 to 3.91% at September 30, 2001. The percentage of average interest-bearing deposits to average total deposits remained stable at 76% at September 30, 2001. The net effect of changes in rate, volume and mix of average earning assets and interest-bearing liabilities increased net interest income $323,462 in quarterly comparison. The net taxable-equivalent yield on average earning assets declined 45 basis points, from 5.70% for the quarter ended September 30, 2000 to 5.25% for the quarter ended September 30, 2001. Review of the changes in the volume and yields of average earning assets and interest-bearing liabilities between the two nine month periods ended September 30, 2001 and 2000 reflected results similar to the quarterly comparison. The net taxable-equivalent yield on average earning assets for the nine months ended September 30, 2001 decreased 42 basis points from 5.72% at September 30, 2000 to 5.30% at September 30, 2001. The volume increase in earning assets resulted in increased net interest income of $1,181,960 between the two nine month periods reviewed. Non-interest Income MidSouth's non-interest income increased $96,597 for the three months and $451,226 for the nine months ended September 30, 2001 as compared to the same periods for 2000. The increases resulted primarily from additional fees earned through a third party mortgage origination program and additional income on VISA debit card and merchant programs. The additional income on VISA debit card and merchant programs was partially offset by increased expenses associated with these products. Increases in service charge income totaled $11,292 in quarterly comparison and $77,600 in year-to-date comparison, primarily due to increased NSF income. Income from the sale of credit life insurance decreased $15,494 for the quarter and $6,368 for the nine months period ended September 30, 2001 as compared to the same periods ended September 30, 2000. Non-interest Expense Non-interest expense increased $252,821 for the three months and $678,842 for the nine months ended September 30, 2001 compared to the three and nine months ended September 30, 2000. In quarterly comparison, increases were recorded primarily in the categories of salaries and employee benefits, printing and supplies, and postage. In year-to-date comparisons, increases were recorded primarily in salaries and employee benefits, data processing expenses, marketing expenses and postage. The increase in salaries and employee benefits resulted primarily from additions to the lending staff, which included two commercial lenders for the Calcasieu Parish market. In addition, health care costs increased for the quarter and year-to-date. Balance Sheet Analysis MidSouth ended the third quarter of 2001 with consolidated assets of $351,895,745, an increase of $5.5 million from the $346,373,433 reported for December 31, 2000. Included in consolidated assets for December 31, 2000 are federal funds sold totaling $34.1 million, which reflected the impact of a significant short-term deposit of approximately $24.6 million. Excluding the short-term deposit, which was withdrawn in January 2000, MidSouth realized a 9% increase in consolidated assets over the past nine months. Excluding the short-term deposit, total deposits increased over the nine months ended September 30, 2001 by $15.9 million to $310,803,760. Most of the growth in deposits was in interest-bearing deposits, primarily money market indexed accounts. MidSouth's loan portfolio grew $9.5 million in the nine months ended September 30, 2001, with the majority of the increase in commercial and real estate loans. With decreased loan demand, compounded by a competitive rate environment, excess cash flows were used to purchase investment securities. Securities available-for-sale increased $28.0 million, from $54.0 million at December 31, 2000 to $82.0 million at September 30, 2001. The increase reflects purchases of $47.5 million, partially offset by maturities and principal paydowns of $19.1 million. Additionally, MidSouth recorded an increase in the market value of securities available-for-sale of $1,370,000. Unrealized gains in the securities available-for-sale portfolio, net of deferred taxes, were $992,100 at September 30, 2001, compared to net unrealized gains of $85,200 at December 31, 2000. These amounts result from interest rate fluctuations and do not represent permanent adjustment of value. Moreover, classification of securities as available-for-sale does not necessarily indicate that the securities will be sold prior to maturity. Capital As of September 30, 2001, MidSouth's leverage ratio was 8.09% as compared to 6.05% at December 31, 2000. Tier 1 capital to risk-weighted assets was 11.82% and total capital to risk-weighted assets was 12.93% at the end of the third quarter of 2001. At year-end 2000, Tier 1 capital to risk- weighted assets was 8.54% and total capital to risk- weighted assets was 9.55%. During the first quarter of 2001, MidSouth completed the issuance of $7,000,000 of Trust Preferred Securities. For regulatory purposes, these funds qualify as Tier 1 Capital. For financial reporting purposes, these funds are included as a liability under generally accepted accounting principles. Return on average common equity for the third quarter of 2001 was 14.69% and return on average assets was .90%. Nonperforming Assets and Past Due Loans Table 1 summarizes MidSouth's nonaccrual, past due and restructured loans and nonperforming assets.
TABLE 1 Nonperforming Assets and Loans Past Due 90 Days ============================================================================ September December September 30, 31, 30, 2001 2000 2000 ============================================================================ Nonperforming loans Nonaccrual loans $194,570 $159,726 $157,106 Other real estate owned, net 327,686 446,046 456,774 _____________________________________________ Total nonperforming assets $522,256 $605,772 $613,880 ============================================= Loans past due 90 days Or more and still accruing $1,344,389 $976,721 $606,671 Nonperforming loans as a % of total loans .09% 0.08% 0.08% Nonperforming assets as a % of total loans, other real Estate owned and other assets Repossessed 0.24% 0.30% 0.32% ALL as a % of nonperforming loans and other real estate owned 497.44% 375.75% 355.24%
Nonperforming assets were $522,256 as of September 30, 2001, a decrease of $83,516 from the $605,772 reported for December 31, 2000 and a decrease of $91,624 from the $613,880 reported for September 30, 2000. Loans past due 90 days or more increased from $606,671 in September 2000 to $976,721 in December 2000 and to $1,344,389 as of September 30, 2001. The increase resulted primarily from four loans that management considers to be fully collateralized with no loss expected. Three of the four loans are government-guaranteed. Of the $1,344,389 in loans past due 90 days or more, $56,064 were funded by the Finance Company. Specific reserves have been established in the ALL to cover potential losses on nonperforming assets. The ALL is analyzed quarterly and additional reserves, if needed, are allocated at that time. Management believes the $2,597,929 in the allowance as of September 30, 2001 is sufficient to cover potential losses in nonperforming assets and in the loan portfolio. Loans classified for regulatory purposes but not included in Table 1 do not represent material credits about which management has serious doubts as to the ability of the borrower to comply with loan repayment terms. Item 6. Exhibits and Reports on Form 8-K Page 16 (a) Exhibits Exihibit Number Document Description 3.1 Amended and Restated Articles of Incorporation of MidSouth Bancorp, Inc. is included as Exhibit 3.1 to the MidSouth's Report on Form 10-K for the year ended December 31, 1993, and is incorporated herein by reference. 3.2 Articles of Amendment to Amended and Restated Articles of Incorporation dated July 19, 1995 are included as Exhibit 4.2 to MidSouth's Registration Statement on Form S-8 filed September 20, 1995 and is incorporated herein by reference. 3.3 Amended and Restated By-laws adopted by the Board of Directors on April 12, 1995 are included as Exhibit 3.2 to Amendment No. 1 to MidSouth's Registration Statement on Form S-4 (Reg. No. 33-58499) filed on June 1, 1995. 10.1 MidSouth National Bank Lease Agreement with Southwest Bank Building Limited Partnership is included as Exhibit 10.7 to the Company's annual report on Form 10-K for the Year Ended December 31, 1992, and is incorporated herein y reference. 10.2 First Amendment to Lease between MBL Life Assurance Corporation, successor in interest to Southwest Bank Building Limited Partnership in Commendam, and MidSouth National Bank is included as Exhibit 10.1 to Report on the Company's annual report on Form 10-KSB for the year ended December 31, 1994, and is incorporated herein by reference. 10.3 Amended and Restated Deferred Compensation Plan and Trust is included as Exhibit 10.3 to the Company's annual report on Form 10-K for the year ended December 31, 1992 and is incorporated herein by reference. 10.4 Employment Agreements with C. R. Cloutier and Karen L. Hail are included as Exhibit 5(c) to MidSouth's Form 1-A and are incorporated herein by reference. 10.6 MidSouth Bancorp, Inc.'s 1997 Stock Incentive Plan is included as Exhibit 4.5 to MidSouth's definitive Proxy Statement filed April 11, 1997, and is incorporated herein by reference. Page 17 10.7 The MidSouth Bancorp, Inc. Dividend Reinvestment and Stock Purchase Plan is included as Exhibit 4.6 to MidSouth Bancorp, Inc.'s Form S-3D filed on July 25, 1997 and is incorporated herein by reference. 10.8 Loan Agreements and Master Notes for lines of credit established for MidSouth Bancorp, Inc. and Financial Services of the South, Inc. are included as Exhibit 10.7 of MidSouth's Form 10-QSB filed on August 14, 1997 and is incorporated herein by reference. 10.9 Modification Agreement to the Loan Agreement and Master Note for the Line of Credit established for MidSouth Bancorp, Inc. is included as Exhibit 10.9 of MidSouth's Form 10-QSB filed on August 13, 1999 and is incorporated herein by reference. 11 Computation of earnings per share (b) Reports Filed on Form 8-K (none) Signatures In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MidSouth Bancorp, Inc. (Registrant) Date: November 14, 2001 /s/ C. R. Cloutier ___________________________ C. R. Cloutier, President & CEO /s/ Karen L. Hail ___________________________ Karen L. Hail, Executive Vice President & CFO /s/ Teri S. Stelly ___________________________ Teri S. Stelly, Senior Vice President & Controller