-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PIjMafP+XdPdmFpA+HMMph8afGyQwhcSDs/TEltKnGP5fSeXFbedXu4P3D6lm1jo ceMSNJD8YQpmF0ew2G+B8g== 0000948688-04-000003.txt : 20040824 0000948688-04-000003.hdr.sgml : 20040824 20040517133647 ACCESSION NUMBER: 0000948688-04-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20040331 FILED AS OF DATE: 20040517 DATE AS OF CHANGE: 20040824 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MIDSOUTH BANCORP INC CENTRAL INDEX KEY: 0000745981 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 721020809 STATE OF INCORPORATION: LA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11826 FILM NUMBER: 04811205 BUSINESS ADDRESS: STREET 1: 102 VERSAILLES BLVD STREET 2: VERSAILLES CENTRE CITY: LAFAYETTE STATE: LA ZIP: 70501 BUSINESS PHONE: 3182378343 MAIL ADDRESS: STREET 1: 102 VERSAILLES BLVD CITY: LAFAYETTE STATE: LA ZIP: 70501 10QSB 1 ten.txt MIDSOUTH BANCORP, INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10Q __X___QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended...... March 31, 2004 ______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 1-11826 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 _____ Check whether the issuer is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act.) YES _____ NO __X__ 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 April 30, 2004 Common stock, $.10 par value 3,207,080 1 INDEX TO FORM 10-Q REPORT PART 1 - FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Page Consolidated Statements of Condition - March 31, 2004 and December 31, 2003 3 Consolidated Statements of Income - Three Months Ended March 31, 2004 and 2003 4 Consolidated Statement of Stockholders' Equity - Three Months Ended March 31, 2004 5 Statements of Cash Flows - Three Months Ended March 31, 2004 and 2003 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Item 3. Quantitative and Qualitative Disclosures About Market Risk 16 Item 4. Controls and Procedures 16 PART II - OTHER INFORMATION Item 1. Legal Proceedings 17 Item 2. Changes in Securities, Use of Proceeds, and Issuer Purchases of Equity Securities 17 Item 3. Defaults upon Senior Securities 17 Item 4. Submission of Matters to a Vote of Security Holders 17 Item 5. Other Information 17 Item 6. Exhibits and Reports on Form 8-K 17 Signatures 19 2
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CONDITION (UNAUDITED) March 31, December 31, ASSETS 2004 2003 Cash and due from banks $12,209,321 $13,833,857 Federal funds sold 21,900,000 ___________ ___________ Total cash and cash equivalents 34,109,321 13,833,857 Interest bearing deposits in banks 2,087 6,594 Securities available-for-sale, at fair value (cost of $116,665,139 at March 31, 2004 and $116,863,702 at December 31, 2003) 118,561,783 118,226,723 Securities held-to-maturity (estimated market value of $25,477,449 at March 31, 2004 and $25,455,609 at December 31, 2003) 23,368,473 23,366,709 Loans, net of allowance for loan losses of $2,906,598 at March 31, 2004 and $2,789,761 at December 31, 2003 261,286,653 259,083,015 Bank premises and equipment, net 11,790,884 11,984,276 Other real estate owned, net 246,773 218,199 Accrued interest receivable 2,610,706 2,883,376 Goodwill 431,987 431,987 Other assets 2,503,287 2,662,568 ____________ ____________ Total assets $454,911,954 $432,697,305 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Non-interest bearing $95,748,454 $96,948,642 Interest bearing 311,777,990 277,439,840 ____________ ____________ Total deposits 407,526,444 374,388,482 Securities sold under repurchase agreements and federal funds purchased 4,620,553 10,067,503 Accrued interest payable 394,449 558,416 FHLB Advances 7,500,000 Junior subordinated debenture 7,000,000 7,000,000 Other liabilities 1,213,193 954,997 ____________ ____________ Total liabilities 420,754,639 400,469,398 ____________ ____________ Commitments and contingencies - - Stockholders' Equity: Common stock, $.10 par value- 10,000,000 shares authorized, 3,212,801 and 3,198,879 issued and outstanding on March 31, 2004 and December 31, 2003, respectively 321,280 319,888 Surplus 18,816,966 18,733,991 Unearned ESOP shares (78,434) (82,724) Unrealized gains on securities available- for-sale, net of deferred taxes of $655,739 on March 31, 2004 and $471,647 on December 31, 2003 1,240,905 891,374 Treasury stock - 5,721 and 6,318 shares, at cost (85,728) (106,922) Retained earnings 13,942,326 12,472,300 ____________ ____________ Total stockholders' equity 34,157,315 32,227,907 ____________ ____________ Total liabilities and stockholders' equity $454,911,954 $432,697,305 ============ ============
See notes to unaudited consolidated financial statements. 3
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Three Months Ended March 31, 2004 2003 ________________________ INTEREST INCOME: Loans, including fees $4,943,932 $4,733,805 Securities Taxable 627,543 640,595 Nontaxable 538,508 467,911 Federal funds sold 20,258 10,601 __________ __________ TOTAL 6,130,241 5,852,912 __________ __________ INTEREST EXPENSE: Deposits 895,199 1,072,949 Securities sold under repurchase agreements, federal funds purchased and FHLB advances 17,900 13,370 Long term debt 183,703 179,390 __________ __________ TOTAL 1,096,802 1,265,709 __________ __________ NET INTEREST INCOME 5,033,439 4,587,203 PROVISION FOR LOAN LOSSES 230,000 200,000 __________ __________ NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 4,803,439 4,387,203 __________ __________ OTHER OPERATING INCOME: Service charges on deposits 1,402,986 1,207,553 Gains (Losses) on securities, net (5,303) Credit life insurance 20,173 51,462 Other charges and fees 438,213 459,387 __________ __________ TOTAL OTHER INCOME 1,861,372 1,713,099 __________ __________ OTHER EXPENSES Salaries and employee benefits 2,151,300 2,077,728 Occupancy expense 980,593 906,345 Other 1,265,687 1,327,801 __________ __________ TOTAL OTHER EXPENSES 4,397,580 4,311,874 __________ __________ INCOME BEFORE INCOME TAXES 2,267,231 1,788,428 PROVISION FOR INCOME TAXES 606,283 478,876 __________ __________ NET INCOME $1,660,948 $1,309,552 ========== ========== BASIC EARNINGS PER COMMON SHARE $0.52 $0.41 ========== ========== DILUTED EARNINGS PER COMMON SHARE $0.50 $0.40 ========== ==========
See notes to unaudited consolidated financial statements. 4
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE QUARTER ENDED MARCH 31, 2004 (UNAUDITED) ____________________________________________________________________________________________ UNREALIZED GAINS (LOSSES) ON COMMON STOCK ESOP SECURITIES TREASURY RETAINED SHARES AMOUNT SURPLUS OBLIGATION AFS, NET STOCK EARNINGS TOTAL ____________________ ___________ __________ __________ ________ __________ ___________ BALANCE, JANUARY 1, 2004 3,198,879 $319,888 $18,733,991 ($82,724) $891,374 ($106,922) $12,472,300 $32,227,907 Dividends on common stock, $.06 per share (190,922) (190,922) Issuance of common stock 13,922 1,392 82,975 84,367 Transfer of treasury stock to ESOP 21,194 21,194 Net income 1,660,948 1,660,948 ESOP obligation, repayments 4,290 4,290 Net change in unrealized gain/loss on securities available-for-sale, net of income taxes 349,531 349,531 _________ ________ ___________ ________ __________ ________ ___________ ___________ BALANCE, MARCH 31, 2004 3,212,801 $321,280 $18,816,966 ($78,434) $1,240,905 ($85,728) $13,942,326 $34,157,315 ========= ======== =========== ======== ========== ======== =========== ===========
See notes to unaudited consolidated financial statements. 5
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003 March 31, 2004 March 31, 2003 ______________ ______________ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $1,660,948 $1,309,552 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 386,126 371,335 Provision for loan losses 230,000 200,000 Provision for deferred taxes 69,828 (80,566) Amortization of premiums on securities, net 232,271 230,838 Net loss on sale of securities 5,303 (Gain)/loss on sale of premises and equipment (12,834) Change in accrued interest receivable 272,670 171,851 Change in accrued interest payable (163,967) (211,994) Other, net 467,024 788,555 ______________ ______________ NET CASH PROVIDED BY OPERATING ACTIVITIES 3,154,900 2,772,040 ______________ ______________ CASH FLOWS FROM INVESTING ACTIVITIES: Net decrease (increase) in interest-bearing deposits in banks 4,507 (163,642) Proceeds from sales of securities available-for-sale 1,296,875 Proceeds from maturities and calls of securities available- for-sale 6,734,014 8,187,235 Purchases of securities available-for-sale (6,769,484) (9,025,679) Loan originations, net of repayments (2,457,922) (9,740,203) Purchases of premises and equipment (176,314) (233,520) Proceeds from sales of premises and equipment 37,610 ______________ ______________ NET CASH USED IN INVESTING ACTIVITIES (2,665,199) (9,641,324) ______________ ______________ CASH FLOWS FROM FINANCING ACTIVITIES: Net increase in deposits 33,137,962 5,792,865 Net (decrease) increase in securities sold under repurchase agreements, federal funds purchased and FHLB advances (12,946,950) 1,401,035 Repayments of notes payable (82,030) Issuance of common stock 84,367 Transfers to ESOP (purchases) of treasury stock, net 21,194 (46,362) Payment of dividends (510,810) (290,114) ______________ ______________ NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 19,785,763 6,775,394 ______________ ______________ NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS 20,275,464 (93,890) CASH & CASH EQUIVALENTS AT BEGINNING OF PERIOD 13,833,857 27,466,035 ______________ ______________ CASH & CASH EQUIVALENTS AT END OF PERIOD $34,109,321 $27,372,145 ============== ============== SUPPLEMENTAL CASH FLOW INFORMATION: Interest paid $1,260,769 $1,477,703 ============== ============== Income taxes paid $287,470 $290,725 ============== ==============
See notes to unaudited consolidated financial statements. 6 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, in accordance with accounting principles generally accepted in the United States of America, the financial position of MidSouth Bancorp, Inc. ("MidSouth") and its subsidiaries as of March 31, 2004 and the results of their operations and their cash flows for the periods presented. These consolidated financial statements should be read in conjunction with the annual consolidated financial statements and the notes thereto included in MidSouth's 2003 annual report and Form 10KSB. The results of operations for the three month period ended March 31, 2004 are not necessarily indicative of the results to be expected for the entire year. MidSouth applies the Accounting Practices Board (APB) Opinion No. 25 and related interpretations in accounting for its stock options. Accordingly, no compensation cost has been recognized. MidSouth has adopted the disclosure-only option under SFAS No. 123. Had compensation costs for MidSouth's stock options been determined based on the fair value at the grant date, consistent with the method under SFAS No. 123, MidSouth's net income and earnings per share would have been as indicated below:
Three Months Ended March 31, 2004 2003 __________ __________ Net earnings available to common stockholders (in thousands): As reported $1,661 $1,310 Deduct total stock based compensation determined under fair value method (13) (14) __________ __________ Pro forma $1,648 $1,296 ========== ========== Basic earnings per share: As reported $0.52 $0.41 Pro forma $0.52 $0.41 Diluted earnings per share: As reported $0.50 $0.40 Pro forma $0.49 $0.40
2. ALLOWANCE FOR LOAN AND LOSSES An analysis of the activity in the allowance for loan losses is as follows: Three Months Ended March 31, 2004 2003 ______ ______ (in thousands) Balance at beginning of period $2,790 $2,891 Provision for loan losses 230 200 Recoveries 59 41 Loans charged off (172) (178) ______ ______ Balance at end of period $2,907 $2,954 ====== ======
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 months ended March 31, 2004 and 2003. Three Months Ended March 31, (in thousands) 2004 2003 ______ ______ Net income $1,661 $1,310 Other comprehensive income Unrealized gains (losses) on securities available-for- sale, net: Unrealized holding gains (losses) arising during the period 469 (75) Less reclassification adjustment for losses included in net income 3 ______ ______ Total other comprehensive gain (loss) 469 (78) ______ ______ Total comprehensive income $2,130 $1,232 ====== ======
7 compared to 8.78% at March 31, 2003. .. Net interest income totaled $5,033,439 for the first quarter of 2004, up 10% from the $4,587,203 reported for the first quarter 2003. Net interest income increased primarily due to an increase in the average volume of earning assets combined with a decrease in interest expense. .. Total loans grew $27.6 million or 12%, from $236.6 million at March 31, 2003 to $264.2 million at March 31, 2004, primarily in commercial and real estate loans. .. Nonperforming assets, including loans 90 days or more past due, as a percentage of total assets decreased slightly from .37% at March 31, 2003 to .35% at March 31, 2004. Net charge-offs to total loans decreased from .06% to .04% for the same periods, respectively. .. Total consolidated assets increased $64.0 million or 16%, from $390.9 million at the end of the first quarter of 2003 to $454.9 million at the end of the first quarter of 2004. .. Total deposits increased $58.2 million or 17%, from $349.3 million at March 31, 2003 to $407.5 million at March 31, 2004. The increase resulted primarily from approximately $30 million in deposits associated with a public fund contract added in July of 2003 and approximately $10 million in deposits resulting from a deposit incentive campaign introduced in March 2004. Earnings Analysis Net Interest Income The primary source of earnings for MidSouth is net interest income, which is the difference between interest earned on loans and investments and interest paid on deposits and other liabilities. Changes in the volume and mix of earning assets and interest-bearing liabilities combined with changes in market rates of interest greatly affect net interest income. The tables provided below analyze the changes in taxable-equivalent net interest income for the two quarters ended March 31, 2003 and 2004. Average earning assets increased 18%, or $61.8 million from $346.4 million for the three months ended March 31, 2003 to $408.2 million for the three months ended March 31, 2004. The average yield on earning assets decreased 84 basis points, from 7.08% in the first quarter of 2003 to 6.24% in the first quarter of 2004. The mix of average earning assets changed slightly, as loans represented 64% of average earning assets in the first quarter of 2004 compared to 67% in the first quarter of 2003. The change in mix resulted primarily from investing the majority of funds received from a public fund contract in the third quarter of 2003 into investments instead of loans. Approximately $30 million in contracted funds were deposited on July 1, 2003 and will be under contract for two years. Average loans increased $29.3 million, from $231.3 million in the first quarter of 2003 to $260.6 million in the first quarter of 2004. The average yield on loans decreased 69 basis points in quarterly comparison, from 8.30% to 7.61% at March 31, 2004. Loan yields declined primarily due to lower rates offered on new fundings combined with rate adjustments on other credits with scheduled repricing dates. The impact of the decline in yield was offset by the $29.3 million average volume increase in the loan portfolio, resulting in a $210,127 increase in interest income on loans. 9 >
Consolidated Average Balances, Interest and Rates Taxable-equivalent basis (in thousands) Three Months Ended Three Months Ended March 31, 2004 March 31, 2003 ____________________________________________________________ Average Average Average Average Volume Interest Yield/Rate Volume Interest Yield/Rate ____________________________________________________________ ASSETS Investment Securiti Taxable $79,845 $627 3.15% $66,134 $640 3.94% Tax Exempt 58,414 761 5.22% 45,246 667 5.98% _________________ _________________ Total Investments 138,259 1,388 4.03% 111,380 1,307 4.76% Federal Funds Sold and Securities Purchased Under Agreements to Resell 9,365 20 0.87% 3,797 11 1.13% Loans Commercial and Real Estate 218,258 3,933 7.23% 186,660 3,663 7.87% Installment 42,306 1,011 9.59% 44,603 1,071 9.63% _________________ _________________ Total Loans 260,564 4,944 7.61% 231,263 4,734 8.30% Total Earning Assets 408,188 6,352 6.24% 346,440 6,052 7.08% Allowance for Loan Losses (2,768) (2,850) Nonearning Assets 31,214 34,984 ________ ________ Total Assets $436,634 $378,574 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY NOW, Money Market, and Savings $191,801 $381 0.80% $141,713 $335 0.96% Certificates of Deposits 102,296 514 2.02% 108,601 738 2.76% _________________ _________________ Total Interest Bearing Deposits 294,097 895 1.22% 250,314 1,073 1.74% Federal Funds Purchased, Securities Sold Under Agreements to Repurchase and Federal Home Loan Bank Advances 10,530 29 1.09% 4,127 12 1.22% Notes Payable 530 1 0.77% Junior Subordinated Debenture 7,000 173 10.20% 7,000 180 10.20% _________________ _________________ Total Interest Bearing Liabilities 311,627 1,097 1.41% 261,971 1,266 1.96% Demand Deposits 90,572 87,139 Other Liabilities 1,117 1,157 Stockholders' Equity 33,318 28,307 Total Liabilites and Stockholders' Equity $436,634 $378,574 ======== ======== NET TAXABLE-EQUIVALENT INTEREST INCOME AND SPREAD $5,255 4.83% $4,786 5.12% ====== ====== NET TAXABLE-EQUIVALENT YIELD ON EARNING ASSETS 5.16% 5.60%
Securities classified as available-for-sale are included in average balances and interest income figures reflect interest earned on such securities. Interest income of $222,000 for 2004 and $169,000 for 2003 is added to interest earned on tax-exempt obligations to reflect tax equivalent yields using a 34% tax rate. Interest income includes loan fees of $452,000 for 2004 and $416,000 for 2003. Nonaccrual loans are included in average balances and income on such loans is recognized on a cash basis. 10
Changes in Taxable-Equivalent Net Interest Income (in thousands) March 31, 2004 compared to March 31, 2003 _______________________________________ Total Change Increase Attributable to (Decrease) Volume Rates _________________________________ Taxable-equivalent interest earned on: Investment Securities Taxable $(13) $120 $(133) Tax Exempt 94 156 (62) Federal Funds Sold and Securities Purchased Under Agreement to Resell 9 11 (2) Loans, including fees 210 490 (280) _______ _____________ TOTAL 300 777 (477) _______ _____________ Interest Paid On: Interest Bearing Deposits (178) 278 (456) Federal Funds Purchased and Securities Sold Under Agreement to Repurchase and FHBL Advances 17 18 (1) Notes Payable (1) (1) Junior Subordinated Debenture (7) (7) _______ _____________ TOTAL (169) 295 (464) _______ _____________ Taxable-equivalent net interest $469 $482 ($13) ======= =============
NOTE: Changes due to both volume and rate has generally been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts to the changes in each. 11 Average investments increased $26.9 million, from $111.4 million at March 31, 2003 to $138.3 million at March 31, 2004 primarily due to funds deposited under the public fund contract mentioned above. The average taxable- equivalent yield on investments decreased 73 basis points, from 4.76% in the first quarter of 2003 to 4.03% in the first quarter of 2004, primarily due to the low rate environment. Additionally, federal funds sold volume increased $5.6 million and yields declined 26 basis points, from 1.13% to ..87%. The volume increases in investments and federal funds sold offset the impact of declining yields and added $90,665 to taxable-equivalent interest income in quarterly comparison. A 52 basis point decrease in the average rate paid on interest-bearing deposits, mostly offset by an average volume increase of $43.8 million, resulted in a $177,750 decrease in interest expense for the quarter ended March 31, 2004 compared to the quarter ended March 31, 2003. The average rate paid on interest-bearing deposits decreased from 1.74% at March 31, 2003 to 1.22% at March 31, 2004. The percentage of average noninterest- bearing deposits to average total deposits decreased slightly from 26% to 24% in quarterly comparison due primarily to the high volume of interest-bearing deposits added under a public fund contract in the third quarter of 2003. The impact of these changes in the yields and volume of earning assets and interest-bearing liabilities contributed $469,699 to the quarterly increase in taxable-equivalent net interest income. The net taxable-equivalent yield on average earning assets decreased 44 basis points, from 5.60% for the quarter ended March 31, 2003 to 5.16% for the quarter ended March 31, 2004. Non-interest Income MidSouth's primary source of non-interest income, service charges on deposit accounts, increased $195,433 or 16% for the three months ended March 31, 2004 as compared to the same period in 2003. The increase resulted primarily from an increase in insufficient funds ("NSF") fees due to an increase in the number of checking accounts from 29,862 at March 31, 2003 to 32,568 at March 31, 2004. The service charge structure and the NSF per item processing fee did not change over the past twelve months and are on the lower end of fees charged by competitors in MidSouth's markets. Other non-interest income categories recorded decreases in quarterly comparison. Income from the sale of credit life insurance decreased $31,000 in quarterly comparison. Income from MidSouth's VISA merchant program decreased $64,000 in quarterly comparison, but was partially offset by a $32,000 increase in debit card interchange income and a $12,000 increase in income from a third party investment advisory service. In 2003, MidSouth made the decision to outsource its VISA merchant program. Although income from the program decreased $64,000 in the first quarter of 2003, expenses associated with the program also decreased $58,000, resulting a net decrease in income from the program of only $6,000 for the quarter. 12 Non-interest Expense Non-interest expense increased $85,706 or 2% for the three months ended March 31, 2004 compared to the three months ended March 31, 2003. Increases of $74,000 in salaries and employee benefits and $74,000 in occupancy expenses were partially offset by the $58,000 decrease in VISA merchant program expenses. Salaries increased $123,000 in quarterly comparison, however the increase was partially offset by a significant decrease in expenses associated with group health insurance of $83,000. The cost of other benefits, including workers compensation premiums and taxes, increased $34,000. The number of full-time equivalent ("FTE") employees increased by 4 from 217 in March 2003 to 221 in March 2004. Occupancy expenses increased $74,000 primarily due to increased depreciation, maintenance and lease expenses on buildings, equipment and land ($28,000) and increases in depreciation of data processing hardware and the cost of communication lines ($17,000), ad valorem taxes ($15,000) and bank auto expenses ($13,000). Analysis of Statement of Condition MidSouth ended the first quarter of 2004 with consolidated assets of $454.9 million, an increase of $22.2 million from the $432.7 million reported at December 31, 2003. Deposits increased $33.1 million, from $374.4 million at December 31, 2003 to $407.5 million at March 31, 2004. The increase in deposits resulted primarily from a deposit incentive campaign introduced in March 2004 and from additional public funds deposits. Total loans increased $2.3 million, from $261.9 million at December 31, 2003 to $264.2 million at March 31, 2004. Loan demand dropped off in the first quarter of 2004, following a strong fourth quarter of 2003 with loan growth of $15 million. The soft loan demand combined with a lack of attractive investment alternatives resulted in a high volume of federal funds sold as of March 31, 2004. Securities available-for-sale and held-to-maturity showed little change in the first quarter of 2004 as purchases of $6.8 million in securities available-for-sale were offset by maturities and calls totaling $6.7 million. Unrealized gains in the securities available-for-sale portfolio, net of unrealized losses and tax effect, were $1,240,905 at March 31, 2004, compared to a net unrealized gain of $891,374 at December 31, 2003. These amounts result from interest rate fluctuations and do not represent permanent adjustments of value. Moreover, classification of securities as available-for-sale does not necessarily indicate that the securities will be sold prior to maturity. Liquidity Liquidity is the availability of funds to meet contractual obligations as they become due and to fund operations. The Banks's primary liquidity needs involve its ability to accommodate customers' demands for deposit withdrawals as well as their requests for credit. Liquidity is deemed adequate when sufficient cash to meet these needs can be promptly raised at a reasonable cost to the Bank. Liquidity is provided primarily by three sources: a stable base of funding sources, an adequate level of assets that can be readily converted into cash, and borrowiing lines with correspondent banks. MidSouth's core deposits are its most stable and important source of funding. Further, the low variability of the core deposit base lessens the need for liquidity. Cash deposits at other banks, federal funds sold and principal payments received on loans and mortgage- backed securities provide additional primary sources of asset liquidity for the Bank. Cash flows from other investment securities provide an additional source of liquidity. MidSouth also has significant borrowing capacity with the FHLB of Dallas, Texas and borrowing lines with other correspondent banks. At the parent company level, cash is needed primarily to meet interest payments on the junior subordinated debentures and pay dividends on common stock. The parent company issued $7,000,000 in junior subordinated debentures in February 2001. Interest-bearing balances remaining from the proceeds from the issuance of the debentures and dividends from the Bank provide liquidity for the parent company. As a publicly traded company, MidSouth also has the ability to issue additional trust preferred and other securities instruments to provide funds as needed for operations and future growth of the company. Capital MidSouth's leverage ratio was 8.96% at March 31, 2004 compared to 8.85% at December 31, 2003. Tier 1 capital to risk-weighted assets was 12.96% and total capital to risk- weighted assets was 13.93% at the end of the first quarter of 2004. At year-end 2003, Tier 1 capital to risk-weighted 13 assets was 12.82% and total capital to risk-weighted assets was 13.78%. MidSouth's capital ratios are well above regulatory requirements and management is not aware of any recommendations by any regulatory authority, which, if implemented, would have a material impact on capital. In November of 2002, MidSouth announced a repurchase program in which the Board of Directors approved the repurchase of up to 5% of the outstanding shares of MidSouth's common stock. No shares were repurchased during the first quarter of 2004. Asset Quality Credit Risk Management MidSouth manages its credit risk by observing written, board approved policies which govern all underwriting activities. The risk management program requires that each individual loan officer review his or her portfolio on a quarterly basis and assign recommended credit ratings on each loan. These efforts are supplemented by independent reviews performed by the loan review officer and other validations performed by the internal audit department. Bank concentrations are monitored and reported to the Board of Directors quarterly whereby individual customer and aggregate industry leverage, profitability, risk rating distributions, and liquidity are evaluated for each major standard industry classification segment. At March 31, 2004, MidSouth had no industry segment concentrations that aggregates more than 10% of the loan portfolio. Nonperforming Assets The following table summarizes MidSouth's nonperforming assets for the two quarters ending March 31, 2004 and 2003 and for the year ended December 31, 2003.
Period Asset Quality Data Period Ended % Ended Mar. 31, Chg Dec. 31, 2004 2003 2003 ____________________________________ Nonaccrual loans $860 $711 21.0% $829 Loans past due 90 days and over 487 534 -8.8% 503 Total nonperforming loans 1,347 1,245 8.2% 1,332 Other real estate owned 247 212 16.5% 218 _______________ _________ Total nonperforming assets $1,594 $1,457 9.4% $1,550 =============== ========= Nonperforming assets to total assets 0.35% 0.37% -6.0% 0.36% Nonperforming assets to total loans + OREO + other foreclosed assets 0.60% 0.62% -2.1% 0.59% ALL to nonperforming assets 182.37% 202.75% -10.0% 180.00% ALL to nonperforming loans 215.81% 237.27% -9.0% 209.46% ALL to total loans 1.10% 1.25% -11.9% 1.07% Year-to-date charge-offs $172 $178 -3.4% $904 Year-to-date recoveries 59 41 43.9% 253 Year-to-date net charge-offs 113 137 -17.5% 651 ________________ _________ Net charge-offs to average total loans 0.18%* 0.23%* -21.74% 0.27% ================ ========= * annualized
14 Nonperforming assets, including loans past due 90 days and over, totaled $1,594,000 as of March 31, 2004, an increase of $137,000 from the $1,457,00 reported for March 31, 2003 and an increase of $44,000 from the $1,550,000 reported for December 31, 2003. Specific reserves have been established in the ALL to cover probable losses on nonperforming assets. The ALL is analyzed quarterly and additional reserves, if needed, are allocated at that time. Management believes the $2,906,598 in the allowance as of March 31, 2004 is sufficient to cover probable losses in nonperforming assets and in the loan portfolio. Loans classified for regulatory purposes but not included in the table above do not represent material credits about which management has serious doubts as to the ability of the borrower to comply with loan repayment terms. Impact of Inflation and Changing Prices The consolidated financial statements of MidSouth and notes thereto, presented herein, have been prepared in accordance with Generally Accepted Accounting Principles, which require the measurement of financial position and operating results in terms of historical dollars without considering the change in the relative purchasing power of money over time and due to inflation. The impact of inflation is reflected in the increased cost of MidSouth's operations. Unlike most industrial companies, nearly all the assets and liabilities of MidSouth are financial. As a result, interest rates have a greater impact on MidSouth's performance than do the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services. Critical Accounting Policies Certain critical accounting policies affect the more significant judgments and estimates used in the preparation of the consolidated financial statements. MidSouth's single most critical accounting policy relates to its allowance for loan losses, which reflects the estimated losses resulting from the inability of its borrowers to make loan payments. If the financial condition of its borrowers were to deteriorate, resulting in an impairment of their ability to make payments, its estimates would be updated and additional provisions for loan losses may be required. 15 Part I. Item 3. Qualitative and Quantitative Disclosures About Market Risk In the normal course of conducting business, MidSouth is exposed to market risk, principally interest rate risk, through operation of its subsidiaries. Interest rate risk arises from market fluctuations in interest rates that affect cash flows, income, expense and values of financial instruments. The Asset/Liability Management Committee ("ALCO") is responsible for managing MidSouth's interest rate risk position in compliance with policy approved by the Board of Directors. Part I. Item 4. Controls and Procedures MidSouth's Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the disclosure controls and procedures (as such term is defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, MidSouth's disclosure controls and procedures are effective. Since the Evaluation Date, there have not been any significant changes in MidSouth's internal controls or in other factors that could significantly affect such controls. 16 Part II. Other Information Item 1. Legal Proceedings None of a material nature. Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities None. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Other Information None. Part II. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 17 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/A (Reg. No. 33-58499) filed on June 1, 1995. 4.1 MidSouth agrees to furnish to the Commission on request a copy of the instruments defining the rights of the holder of its long-term debt, which debt does not exceed 10% of the total consolidated assets of MidSouth. 10.1 MidSouth National Bank Lease Agreement with Southwest Bank Building Limited Partnership is included as Exhibit 10.7 to the MidSouth's annual report on Form 10-K for the Year Ended December 31, 1992, and is incorporated herein by 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 MidSouth's annual report on Form 10-KSB for the year ended December 31, 1994, and is incorporated herein by reference. 10.2.1 Seventh Amendment to Lease between S & A Properties II, Inc., successor in interest to Southwest Bank Building Limited Partnership in Commendam, and MidSouth Bank, N.A. effective July 1, 2002 is included as Exhibit 10.2.1 to MidSouth's Annual Report on Form 10-KSB for the year ended December 31, 2002 and is incorporated herein by reference. 10.3 Amended and Restated Deferred Compensation Plan and Trust effective October 9, 2002 is included as Exhibit 10.3.1 to MidSouth's Annual Report on Form 10-KSB for the year ended December 31, 2002 and is incorporated herein by reference. 10.5 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. 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. 11 Computation of earnings per share 31.1 Certification pursuant to Exchange Act Rules 13(a) - 14(a) 31.2 Certification pursuant to Exchange Act Rules 13(a) - 14(a) 32.1 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (b) Reports Filed on Form 8-K A press release regarding MidSouth's earnings for the quarter ended December 31, 2003 was attached as Exhibit 99.1 to the Form 8-K filed on January 26, 2004. 18 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: May 14, 2004 ____________ _______________________ C. R. Cloutier, President / CEO _______________________ Karen L. Hail, Senior Executive Vice President / CFO _______________________ Teri S. Stelly, Senior Vice President & Controller 19 EX-11 2 ex11.txt MIDSOUTH BANCORP, INC.
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES EXHIBIT 11 COMPUTATION OF EARNINGS PER SHARE (Unaudited) FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003 AND FOR THE YEAR ENDED DECEMBER 2003 First Quarter First Quarter March 31, March 31, BASIC 2004 2003 _____________ _____________ Earnings: Income applicable to common stock $1,660,948 $1,309,552 ============ ============ Shares: Weighted average number of common shares outstanding 3,184,337 3,178,879 ============ ============ Earnings per common share: Income applicable to common stock $0.52 $0.41 ============ ============ DILUTED Earnings: Net income $1,660,948 $1,309,552 ============ ============ Weighted average number of common shares outstanding 3,184,337 3,178,879 Assuming exercise of options, reduced by the number of shares which could have been purchased with the proceeds from exercise of such options at the average issue price 149,816 90,063 ____________ ____________ Weighted average number of common shares outstanding, as adjusted 3,334,153 3,268,942 ============ ============ Fully diluted earnings per common share $0.50 $0.40 ============ ============
EX-31 3 ex311.txt MIDSOUTH BANCORP, INC. Exhibit 31.1 CERTIFICATION I, C. R. Cloutier, President and CEO, certify that: 1. I have reviewed this quarterly report on Form 10-Q of MidSouth Bancorp, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 14, 2004 /s/C. R. Cloutier _________________ Chief Executive Officer EX-31 4 ex312.txt MIDSOUTH BANCORP, INC. Exhibit 31.2 CERTIFICATION I, Karen L. Hail, Senior Executive Vice President & CFO, certify that: 1. I have reviewed this quarterly report on Form 10-Q of MidSouth Bancorp, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 14, 2004 /s/ Karen L. Hail _________________ Chief Financial Officer EX-32 5 ex321.txt MIDSOUTH BANCORP, INC. Exhibit 32.1 CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of MidSouth Bancorp, Inc. (the "Company") on Form 10-Q for the period ending March 31, 2004(the "Report"), I, C.R. Cloutier, Chief Executive Officer of the Company, certify that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ C. R. Cloutier ________________________ C.R. Cloutier Chief Executive Officer May 14, 2004 EX-32 6 ex322.txt MIDSOUTH BANCORP, INC. Exhibit 32.2 CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of MidSouth Bancorp, Inc. (the "Company") on Form 10-Q for the period ending March 31, 2004 (the "Report"), I, Karen L. Hail, Chief Financial Officer of the Company, certify that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ Karen L. Hail ________________________ Karen L. Hail Chief Financial Officer May 14, 2004 -----END PRIVACY-ENHANCED MESSAGE-----