-----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, B263AnNZjnTq/yQ6AopSihlcQEdMyOwApGRs6slHJWGhKjQixCb2fBO3yV76AYrm sLa5uOhe64tPlOOAMSn4jQ== 0000948688-99-000019.txt : 19990813 0000948688-99-000019.hdr.sgml : 19990813 ACCESSION NUMBER: 0000948688-99-000019 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990812 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: 10QSB SEC ACT: SEC FILE NUMBER: 001-11826 FILM NUMBER: 99685704 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 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.......... June 30, 1999 ______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 (318) 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 July 31, 1999 Common stock, $.10 par value 2,464,472 Preferred stock, no par value, $14.25 stated value 152,736 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 - June 30, 1999 and December 31, 1998 4 Statements of Income - Three and Six Months Ended June 30, 1999 and 1998 5 Statement of Stockholders' Equity - Six Months Ended June 30, 1999 6 Statements of Cash Flows - Six Months Ended June 30, 1999 and 1998 7 Notes to Financial Statements 8 Item 2. Management's Discussion and Analysis or Plan of Operation 9 PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 17 Item 6. Exhibits and Reports on Form 8-K 18 Signatures 19
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES FINANCIAL HIGHLIGHTS (UNAUDITED) Three Months Ended Six Months Ended June 30 June 30, EARNINGS DATA 1999 1998 1999 1998 _________________________________________________ Net interest income $3,296,977 $2,941,826 $6,319,117 $5,633,548 Provision for loan losses 238,000 238,000 504,950 496,000 Non-interest income 979,195 872,174 1,888,335 1,651,014 Non-interest expense 3,125,265 2,629,198 6,028,358 5,136,454 Provision for income tax 245,050 268,150 409,437 420,948 Net income 667,857 678,652 1,264,707 1,231,160 Preferred dividend requirement 32,903 37,444 66,286 74,964 Income available to common shareholders $634,954 $641,208 $1,198,421 $1,156,196 ====================================================================================== PER COMMON SHARE DATA Basic earnings per share $0.26 $0.27 $0.49 $0.49 Diluted earnings per share $0.23 $0.23 $0.43 $0.42 Book value at end of period $5.69 $5.05 $5.69 $5.05 Market price at end of period $10.88 $14.54 $10.88 $14.54 Market price of preferred stock at $31.00 $44.25 $31.00 $44.25 Weighted average shares outstanding Basic 2,450,164 2,396,051 2,444,740 2,388,821 Diluted 2,967,157 2,949,476 2,968,195 2,943,800 ====================================================================================== AVERAGE BALANCE SHEET DATA Total assets $280,657,061 $230,492,703 $269,966,798 $226,389,477 Earning assets 254,546,089 209,768,889 245,118,332 205,514,205 Loans and leases 158,432,030 139,609,048 156,817,654 135,744,324 Interest-bearing deposits 199,047,941 158,387,576 189,767,500 155,086,933 Total deposits 259,606,028 211,819,511 249,391,744 208,344,912 Common stockholders' equity 14,078,482 11,985,587 13,814,301 11,492,493 Total stockholders' equity 16,293,605 14,264,461 16,036,629 13,764,949 ====================================================================================== SELECTED RATIOS Return on average assets (annualize 0.95% 1.18% 0.94% 1.10% Return on average common equity (an 18.09% 21.46% 17.49% 20.29% Return on average total equity ( an 16.44% 19.08% 15.90% 18.04% Leverage capital ratio 5.70% 6.06% 5.70% 6.06% Tier 1 risk-based capital ratio 9.01% 9.24% 9.01% 9.24% Total risk-based capital ratio 10.08% 10.36% 10.08% 10.36% Allowance for loan losses as a % of total loans 1.17% 1.17% 1.17% 1.17% ======================================================================================= PERIOD ENDING BALANCE SHEET DATA 6/30/99 6/30/98 Net Change % Change Total assets $282,503,279 $235,816,742 $46,686,537 19.80% Earning assets 257,675,940 213,316,617 $44,359,323 20.80% Loans and leases, net 160,787,191 143,521,513 $17,265,678 12.03% Interest-bearing deposits 201,570,300 162,003,496 $39,566,804 24.42% Total deposits 261,272,545 216,994,125 $44,278,420 20.41% Common stockholders' equity 13,991,819 12,130,557 $1,861,262 15.34% Total stockholders' equity 16,185,079 14,393,414 $1,791,665 12.45% =======================================================================================
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CONDITION ___________________________________________________________________________________ June 30, December 31, 1999 1998 * ASSETS (unaudited) __________ ___________ Cash and due from banks $11,623,921 $14,003,536 Federal funds sold 10,000,000 6,600,000 Total cash and cash equivalents 21,623,921 20,603,536 Interest bearing deposits in banks 11,208 16,125 Securities available-for-sale, at fair value (cost of $64,205,061 in June 1999 and $43,503,268 in December 1998) 63,635,811 43,938,965 Securities held-to-maturity (estimated market value of $21,465,132 in June 1999 and $20,421,920 in December 1998) 21,338,041 19,246,559 Loans, net of allowance for loan losses of $1,903,689 in June 1999 and $1,860,490 in December 1998 160,787,191 153,616,773 Bank premises and equipment, net 10,363,425 9,054,201 Other real estate owned, net 357,575 48,100 Accrued interest receivable 1,912,167 1,740,514 Goodwill, net 603,853 207,281 Other assets 1,870,087 1,346,214 ___________ ___________ Total assets $282,503,279 $249,818,268 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Non-interest bearing $59,702,245 $60,361,205 Interest bearing 201,570,300 169,563,097 ___________ ___________ Total deposits 261,272,545 229,924,302 Securities sold under repurchase agreements 752,946 - Accrued interest payable 647,152 565,896 Notes payable 3,381,895 3,503,668 Other liabilities 263,662 138,280 ___________ ___________ Total liabilities 266,318,200 234,132,146 ___________ ___________ Commitments and contingencies - - Stockholders' Equity: Preferred Stock, no par value, $14.25 stated value - 5,000,000 shares authorized, 153,913 and 156,927 issued and outstanding on June 30, 1999 and December 31, 1998, respectively 2,193,260 2,236,210 Common stock, $.10 par value- 5,000,000 shares authorized, 2,459,121 and 2,432,016 issued and outstanding on June 30, 1999 and December 31, 1998, respectively 245,912 243,201 Surplus 10,759,356 10,521,020 Unearned ESOP shares (106,923) (119,051) Unrealized gains(losses) on securities available-for-sale, net of deferred taxes(credit) of (181,300) in June 1999 and $159,000 in December 1998 (387,950) 276,700 Retained earnings 3,481,424 2,528,042 ___________ ___________ Total stockholders' equity 16,185,079 15,686,122 ___________ ___________ Total liabilities and stockholders' equity $282,503,279 $249,818,268 =========== =========== * The consolidated statement of condition at December 31, 1998 is taken from the audited balance sheet on that date. ________________________________________________________________________________
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME Three Months Ended Six Months Ended June 30, June 30, 1999 1998 1999 1998 __________________________ ___________________________ INTEREST INCOME: Loans, including fees $4,000,706 $3,640,074 $7,758,244 $6,961,806 Securities Taxable 832,024 601,915 1,517,003 1,190,426 Nontaxable 277,107 224,177 537,789 444,253 Federal funds sold 213,666 169,700 372,299 349,737 _________ _________ __________ _________ TOTAL 5,323,503 4,635,866 10,185,335 8,946,222 _________ _________ __________ _________ INTEREST EXPENSE: Interest on deposits 1,962,089 1,628,696 3,737,355 3,182,996 Interest on note payable 64,437 65,344 128,863 129,678 _________ _________ __________ _________ TOTAL 2,026,526 1,694,040 3,866,218 3,312,674 _________ _________ __________ _________ NET INTEREST INCOME 3,296,977 2,941,826 6,319,117 5,633,548 PROVISION FOR LOAN LOSSES 238,000 238,000 504,950 496,000 _________ _________ __________ _________ NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 3,058,977 2,703,826 5,814,167 5,137,548 _________ _________ __________ _________ OTHER OPERATING INCOME: Service charges on deposits 724,369 629,353 1,430,366 1,214,274 Gains on securities, net - - - - Credit life insurance 25,172 40,953 41,340 68,071 Other charges and fees 229,654 201,868 416,629 368,669 _________ _________ __________ _________ TOTAL OTHER INCOME 979,195 872,174 1,888,335 1,651,014 _________ _________ __________ _________ OTHER EXPENSES: Salaries and employee benefits 1,479,320 1,283,611 2,860,928 2,533,904 Occupancy expense 674,631 565,470 1,325,389 1,113,608 Other 971,314 780,117 1,842,041 1,488,942 _________ _________ __________ _________ TOTAL OTHER EXPENSES 3,125,265 2,629,198 6,028,358 5,136,454 _________ _________ __________ _________ INCOME BEFORE INCOME TAXES 912,907 946,802 1,674,144 1,652,108 PROVISION FOR INCOME TAXES 245,050 268,150 409,437 420,948 _________ _________ __________ _________ NET INCOME $667,857 $678,652 $1,264,707 $1,231,160 PREFERRED DIVIDEND REQUIREMENT 32,903 37,444 66,286 74,964 _________ _________ __________ _________ INCOME AVAILABLE TO COMMON SHAREHOLDERS $634,954 $641,208 $1,198,421 $1,156,196 ========= ========= ========== ========= BASIC EARNINGS PER COMMON SHARE $0.26 $0.27 $0.49 $0.49 ========= ========= ========== ========= DILUTED EARNINGS PER COMMON SHARE $0.23 $0.23 $0.43 $0.42 ========= ========= ========== ========= 5
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED) UNREALIZED (GAINS) LOSSES ON PREFERRED STOCK COMMON STOCK ESOP SECURITIES- RETAINED SHARES AMOUNT SHARES AMOUNT SURPLUS OBLIGATION FOR-SALE EARNINGS TOTAL ___________________ ___________________ ___________ ___________________________________ ___________ BALANCE, DECEMBER 31, 1998 156,927 $2,236,210 2,432,016 $243,201 $10,521,020 ($119,051) $276,700 $2,528,042 $15,686,122 Issuance of common stock 18,073 1,808 196,289 198,097 Dividends paid on common stock (245,039) (245,039) Dividends paid on preferred stock (66,286) (66,286) Preferred stock conversion (3,014) (42,950) 9,032 903 42,047 - Net income 1,264,707 1,264,707 ESOP obligation, net of repayments 12,128 12,128 Net change in unrealized gain/loss on securities available-for-sale, net of tax (664,650) (664,650) _______ __________ _________ ________ ___________ ________ ________ __________ ___________ BALANCE, June 30, 1999 153,913 $2,193,260 2,459,121 $245,912 $10,759,356 ($106,923) ($387,950) $3,481,424 $16,185,079 ======= ========== ========= ======== =========== ======== ======== ========== ===========
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 1999 and 1998 _________________________________________________________________________________________ June 30, 1999 June 30, 1998 _____________ _____________ CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $1,264,707 $1,231,160 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 571,616 462,292 Provision for loan losses 504,950 415,000 Provision for deferred income taxes 12,228 49,330 Discount accretion (premium amortization), net 13,660 (13,235) Gain on sale of premises and equipment (1,925) (750) Loss on sale of other real estate owned - 3,037 Change in accrued interest receivable (171,653) (7,673) Change in accrued interest payable 81,256 24,486 Change in other liabilities 125,382 (67,757) Change in other assets (172,033) (156,618) _____________ _____________ NET CASH PROVIDED BY OPERATING ACTIVITIES 2,228,188 1,939,272 _____________ _____________ CASH FLOWS FROM INVESTING ACTIVITIES: Net decrease (increase) in interest-bearing deposits in banks 4,917 (4,224) Proceeds from maturities and calls of securities available-for-sale 6,313,566 4,988,673 Purchases of securities available-for-sale (27,027,658) (8,241,206) Purchases of securities held-to-maturity (2,092,845) - Loan originations, net of repaymens (5,000,180) (14,468,338) Purchases of premises and equipment (1,851,017) (1,516,789) Proceeds from sales of premises and equipment 24,000 29,961 Proceeds from sales of other real estate owned 58,724 17,000 Purchase of insurance premium financing company (3,503,497) - _____________ _____________ NET CASH USED IN INVESTING ACTIVITIES (33,073,990) (19,194,923) _____________ _____________ CASH FLOWS FROM FINANCING ACTIVITIES: Net increase in deposits 31,348,243 16,926,374 Net (decrease) increase in securities sold under repurchase agreements and federal funds purchased 752,946 (69,443) Issuance of notes payable 75,000 435,000 Repayments of notes payable (196,774) (89,821) Proceeds from issuance of common stock 198,097 376,361 Payment of dividends (311,325) (266,550) Payment of fractional shares resulting from conversion of preferred stock and stock dividends - (70) _____________ _____________ NET CASH PROVIDED BY FINANCING ACTIVITIES 31,866,187 17,311,851 _____________ _____________ NET DECREASE IN CASH & CASH EQUIVALENTS 1,020,385 56,200 CASH & CASH EQUIVALENTS AT BEGINNING OF PERIOD 20,603,536 23,834,024 _____________ _____________ CASH & CASH EQUIVALENTS AT END OF PERIOD $21,623,921 $23,890,224 ============= ============= 7
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES NOTES TO 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 June 30, 1999 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 1998 annual consolidated report and Form 10-KSB. The results of operations for the six month period ended June 30, 1999 are not necessarily indicative of the results to be expected for the entire year. 2. ALLOWANCE FOR LOAN AND LEASE LOSSES An analysis of the activity in the allowance for loan and lease losses is as follows:
Six Months Ended June 30, (in thousands) 1999 1998 __________ ______________ Balance at beginning of period $1,860,490 $1,414,826 Provision for loan losses 504,950 496,000 Recoveries 65,122 83,129 Loans charged off (526,873) (308,267) __________ __________ Balance at end of period $1,903,689 $1,685,688 ========== ==========
3. COMPREHENSIVE INCOME MidSouth adopted Statement of Financial Accounting Standards No. 130 "Reporting Comprehensive Income" ("SFAS 130") effective January 1, 1998. SFAS 130 establishes standards for reporting and display of comprehensive income and its components. 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 six months ended June 30, 1999 and 1998.
1999 1998 __________ __________ Net income $1,264,707 $1,231,160 Other comprehensive income, (losses), net of tax (664,650) 112,309 __________ __________ Total comprehensive income $600,057 $1,343,469 ========== ==========
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 1998 annual consolidated financial statements, the notes thereto and the related Management's Discussion and Analysis. MidSouth's second quarter 1999 earnings reflect a strategic focus on its long term investment in system upgrades, staff development and market penetration. The significant 20% growth in assets over the past twelve months is a direct result of this investment. MidSouth now stands well positioned as a dominant community bank offering big bank services. Net income totaled $667,857 for the second quarter of 1999, compared to net income of $678,652 for the second quarter of 1998. Income available to common shareholders totaled $634,954 for the second quarter of 1999, compared to $641,208 for the second quarter of 1998. Basic earnings per share were $.26 and $.27 for the quarters ended June 30, 1999 and 1998, respectively. Diluted earnings per share were $.23 for both the second quarter of 1999 and the second quarter of 1998. Net income for the six months ended June 30, 1999 totaled $1,264,707 compared to $1,231,160 for the six months ended June 30, 1998. Basic earnings per share were $.49 for both six-month periods ended June 30, 1999 and 1998. Year-to-date diluted earnings per share were $.43 for June 30, 1999 and $.42 for June 30, 1998. In both quarterly and year-to-date comparisons, net interest income increased 12% due to a higher volume of earning assets. Non-interest income increased 12% in quarterly comparison and 14% in year-to-date comparison, primarily due to increases in service charges on deposit accounts and insufficient funds fees. The increased net interest income and non-interest income was substantially offset by increases in non-interest expense for the three and six months periods ended June 30, 1999 as compared to the three and six months periods ended June 30, 1998. Increased expenses were recorded primarily in salaries and benefits and occupancy expenses. These increases reflect MidSouth's investment to strengthen its infrastructure in order to support recent and anticipated growth. In addition, marketing expenses increased due to promotions designed to take advantage of opportunity created by mergers and acquisitions of major banks in MidSouth's market area. During the second quarter of 1999, MidSouth completed testing of systems identified as "mission critical" for year 2000 computer operations, including the internal network system. Core data processing hardware and software testing were completed in the first quarter of 1999. Costs associated with testing and other year 2000 direct expenses totaled approximately $27,000 for the first six months of 1999. 9 MidSouth recorded substantial deposit growth and continued loan growth during the past twelve months. Deposits grew $44.3 million or 20%, from $217.0 million at June 30, 1998 to $261.3 million at June 30, 1999. Of the $44.3 million increase, $39.6 million represented interest-bearing deposits. Most of the growth resulted from a deposit promotion designed to increase MidSouth's market share. The promotion began March 1, 1999 and resulted in additional deposits totaling $27.5 million as of the end of the promotion on May 31, 1999. Total deposits at the end of the second quarter of 1999 included approximately $18.2 million held under a public fund contract that expired June 30, 1999. The majority of these funds were withdrawn within the first week of July 1999. Loans, net of Allowance for Loan Losses ("ALL"), increased $17.3 million or 12%, from $143.5 million at June 30, 1998 to $160.8 million at June 30, 1999. The majority of the loan growth occurred in the commercial and real estate portfolios during the second half of 1998. Moderate growth continued in these portfolios for the first six months of 1999. Additionally, on May 15, 1999, MidSouth's subsidiary, MidSouth National Bank purchased the assets of TMC Financial Services, Inc. which consisted primarily of $3.0 million in insurance premium financing loans. Provisions for loan and lease losses totaled $504,950 for the six months ended June 30, 1999 compared to $496,000 for the six months ended June 30, 1998. Nonperforming loans as a percentage of total loans decreased from .24% in June of 1998 to .10% in June of 1999 primarily due to the transfer of two commercial real estate credits totaling $357,575 to other real estate owned. Accordingly, nonperforming assets increased $179,395 in quarterly comparison, from $341,419 at June 30, 1998 to $565,768 at June 30, 1999. The ALL represented 364% of nonperforming loans and other real estate owned as of June 30, 1999, as compared to 443% as of June 30, 1998. MidSouth's leverage ratio was 5.70% at June 30, 1999. Return on average common equity was 18.09% and return on average assets was .95%. Earnings Analysis Net Interest Income Average earning assets increased 21%, or $44.8 million, from $209.8 million for the three months ended June 30, 1998 to $254.6 million for the three months ended June 30, 1999. The mix of earning assets shifted significantly, from 67% of average earning assets in loans for the second quarter of 1998 down to 62% in the second quarter of 1999. The average yield on loans decreased 33 basis points, from 10.46% to 10.13% at June 30, 1999. Yields on commercial and real estate loans declined 54 basis points, while consumer loan yields rose 55 basis points. 10 Market competition for quality credits, combined with decreased loan fee income caused commercial and real estate loan yields to decline. Consumer loan yields increased primarily due to loans funded by Financial Services of the South, Inc. (the "Finance Company"), credit card loans and insurance premium financing loans acquired with the purchase of TMC Financial Services, Inc. ("TMC"). TMC's portfolio averaged $3.0 million with an average yield of approximately 33%. The Finance Company's portfolio averaged $1.6 million in consumer finance loans yielding an average of 23%. Credit card loans at the Bank averaged $1.2 million and yielded an average of 18%. Investment volume increased significantly by $20.2 million, from $57.7 million at June 30, 1998 to $77.9 million at June 30, 1999. Growth in MidSouth's deposits resulting from the deposit promotion in the second quarter of 1999 far exceeded the moderate loan demand for the same period. Subsequently, excess dollars were invested in investment securities. The average taxable-equivalent yield on investments declined by 10 basis points, from 6.44% at June 30, 1998 to 6.34% at June 30, 1999. The change in the mix of earning assets combined with lower yields decreased the taxable-equivalent yield on quarterly average earning assets 47 basis points, from 9.05% for the second quarter of 1998 to 8.58% for the second quarter of 1999. An average volume increase of $40.7 million in interest- bearing liabilities resulted in increased interest expense for the quarter ended June 30, 1999 compared to the quarter ended June 30, 1998. The percentage of average interest- bearing deposits to average total deposits increased from 75% at June 30, 1998 to 77% at June 30, 1999. The average rate paid on interest-bearing deposits decreased 17 basis points, from 4.12% at June 30, 1998 to 3.95% at June 30, 1999. The net effect of changes in the volume and mix of average earning assets and interest-bearing liabilities increased net interest income $355,151 in quarterly comparison. The net taxable-equivalent yield on average earning assets declined 43 basis points, from 5.82% for the quarter ended June 30, 1998 to 5.39% for the quarter ended June 30, 1999. Review of the changes in the volume and yields of average earning assets and interest-bearing liabilities between the two six month periods ended June 30, 1999 and 1998 reflected results similar to the quarterly comparison. The net taxable-equivalent yield on average earning assets for the six months ended June 30, 1999 decreased 33 basis points from 5.72% at June 30, 1998 to 5.39% at June 30, 1999. However, the volume increase in earning assets resulted in increased net interest income of $685,569 between the two six month periods reviewed. Non-interest Income MidSouth's primary source of non-interest income, service charges on deposit accounts, increased $107,021 for the three months and $237,321 for the six months ended June 30, 1999 as compared to the same periods for 1998. The increases resulted primarily from additional insufficient funds fees and an increase in service charge income due to a higher volume of accounts serviced. 11 Other non-interest income, net of gains on sales of investment securities, increased $27,786 in quarterly comparison and $47,960 in year-to-date comparison. A new mortgage origination program with a third party processor contributed $14,725 to the increase for the quarter and $22,667 for the six months ended June 30, 1999. VISA merchant and debit card income increased significantly in 1999, however, expenses associated with these programs have also increased, offsetting the income. Income from the sale of credit life insurance decreased $15,781 for the quarter and $26,731 for the six months period ended June 30, 1999 as compared to the same periods ended June 30, 1998. Sales of credit life insurance are expected to increase in the third quarter of 1999 as a result of a retail loan promotion scheduled in that quarter. Non-interest Expense Non-interest expense increased $496,067 for the three months and $891,904 for the six months ended June 30, 1999 compared to the three and six months ended June 30, 1998. Increases were recorded primarily in the categories of salaries and employee benefits, occupancy expenses, marketing expenses, VISA programs and ATM processing fees. These increases reflect MidSouth's long term investment in staff development, system upgrades and market penetration. In addition, MidSouth paid $25,495 in insurance agent commissions associated with TMC insurance premium financing portfolio added during the second quarter of 1999. Salaries and employee benefits increased primarily due to additional staff and an increase in the cost of group health insurance. The number of full-time equivalent ("FTE") employees increased by 19, from 150 in June 1998 to 169 in June 1999. The increase includes nine employees added with the merger of TMC on May 15, 1999. Other positions added over the past twelve months include trainer, internal auditor, retail sales manager and several customer contact positions. Occupancy expense increased in the three and six month periods ended June 30, 1999 compared to the same period of 1998 due to increases in depreciation of building, furniture, and equipment and maintenance expenses incurred on fixed assets. In addition, MidSouth recorded increases in ad valorem taxes and janitorial expense. Balance Sheet Analysis MidSouth ended the second quarter of 1999 with consolidated assets of $282,503,279, an increase of $32.7 million or 13% from the $249,818,268 reported for December 31, 1998. Deposits increased over the six months ended June 30, 1999 by $31.4 million, $27.5 million of which resulted from a deposit promotion held during the months of March, April and May 1999. The majority of the growth occurred in money market deposits and certificates of deposit. At the end of the second quarter of 1999, total deposits included approximately $18.2 million held under a public fund contract that expired June 30, 1999. The majority of these funds were withdrawn within the first week of July. 12 Loans experienced moderate growth of $7.2 million in the first six months of 1999, with the majority of the increase in commercial and real estate loans. Due to an influx of deposits from the deposit promotion in the first six months of 1999, excess funds were used to purchase additional securities and federal funds sold. Securities available-for- sale increased $19.7million, from $43.9 million at December 31, 1998 to $63.6 million at June 30, 1999. The increase reflects purchases of $ 27.0 million and maturities and principal paydowns of $6.3 million. Purchases of securities held-to-maturity totaled $2.1 million for the same period. Unrealized losses in the securities available-for- sale portfolio, net of unrealized gains and tax effect, were $387,950 at June 30, 1999, compared to a net unrealized gain of $ 276,700 at December 31, 1998. 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 June 30, 1999, MidSouth's leverage ratio was 5.70% as compared to 6.06% at December 31, 1998. Tier 1 capital to risk-weighted assets was 9.01% and total capital to risk- weighted assets was 10.08% at the end of the second quarter of 1999. At year-end 1998, Tier 1 capital to risk- weighted assets was 9.24% and total capital to risk- weighted assets was 10.36%. The Year 2000 Issue The Year 2000 issue arises from the storage of data within computer systems using a two digit field rather than a four digit field to define the year. Consequently, computer programs may recognize a date using "00" as the year 1900 instead of 2000. To maintain safe and sound banking practices, financial institutions are required to take appropriate measures to insure efficient operations of computer systems beyond the year 2000. MidSouth's Board of Directors established a Year 2000 compliance committee in June 1997. The committee inventoried MidSouth's hardware and software programs, identified mission critical systems and forwarded letters to the providers regarding Year 2000 compliance. As of June 30, 1999, testing and updating has been performed on 100% of MidSouth's mission critical systems, including the core data processing hardware and software. In addition, MidSouth has received a warranty from the software provider as to the completion of internal testing and readiness of their programs. To further reduce the risks associated with the Year 2000, MidSouth continues to work with commercial customers and community businesses in preparation for the Year 2000. In May 1998, MidSouth provided Year 2000 seminar participants with software designed to help them identify issues within their organizations. The software guides the user through the vendor identification and tracking process and provides assistance in other issues such as contingency planning. As part of its own contingency planning, MidSouth has agreements with and has tested the capabilities of two vendors to provide short- term and long-term processing. 13 In compliance with Year 2000 disclosure requirements, the committee has analyzed the impact that compliance with the Year 2000 may have on earnings. Costs totaling approximately $93,500 have been identified for testing and other expenses. MidSouth directly expensed approximately $27,000 of these costs during the first six months of 1999. Additional costs are expected, but it is management's opinion that the costs will not be material to MidSouth's earnings. 14 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 ================================================================ June December June 30, 31, 30, 1999 1998 1998 ================================================================= Nonperforming loans Nonaccrual loans $165,630 $ 533,107 $341,419 Restructured loans - - - _____________________________________ Total nonperforming loans 165,630 533,107 341,419 Other real estate owned, net 357,575 48,100 39,100 Other assets repossessed 42,563 26,533 5,854 _____________________________________ Total nonperforming assets $565,768 $607,740 $386,373 ===================================== Loans past due 90 days Or more and still accruing $550,516 $329,116 $322,080 Nonperforming loans as a % of total loans .10% 0.34% 0.24% Nonperforming assets as a % of total loans, other real Estate owned and other assets Repossessed 0.35% 0.39% 0.27% ALL as a % of nonperforming loans and other real estate owned 363.85% 320.11% 443.00%
15 Nonperforming assets were $565,768 as of June 30, 1999, a decrease of $41,972 from the $607,740 reported for December 31, 1998 and an increase of $179,395 from the $386,373 reported for June 30, 1998. Two related commercial credits totaling $357,575 were moved from nonaccrual loans into other real estate owned in June 1999. Loans past due 90 days or more increased from $322,080 in June 1998 to $329,116 in December 1998 and to $550,516 as of June 30, 1999. Of the $550,516 in loans past due 90 days or more, $77,602 were funded by the Finance Company and $49,188 represent past due insurance premium financing loans at TMC. 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 $1,903,689 in the reserve as of June 30, 1999 is sufficient to cover potential losses in nonperforming assets and in the loan and lease portfolios. 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. 16 Page 17 Item 4. Submission of Matters to a Vote of Security Holders At the annual meeting of shareholders of MidSouth Bancorp, Inc. held May 12, 1999 at 2:00 p.m., the Class III Directors were elected.
The following provides information as to the votes: Election of Directors For Withheld Abstentions Broker Non-Votes James R. Davis, Jr. 2,129,728 26,113 Karen L. Hail 2,127,855 27,986 Milton B. Kidd, III 2,128,783 27,058
Proposal to approve the Amendment to the Articles to increase the authorized Common Stock was approved by a vote of 1,985,897 shares voted for, 156,644 shares voted against, 13,358 shares abstained from voting and 58 broker non-votes. Item 6. Exhibits and Reports on Form 8-K Page 18 (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 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 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 19 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 this filing. 11 Computation of earnings per share 27 Financial Data Schedule (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: August 13, 1999 _______________ /s/ C. R. Cloutie 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 EX-10.9 2 MODIFICATION AGREEMENT State of Georgia Loan Number 4013321-101 June 30, 1999 This agreement between MidSouth Bancorp, Inc., a Louisiana corporation (the "Borrower"), and The Bankers Bank, a banking corporation, of Atlanta, Georgia, (the "Lender"). WITNESSETH, that WHEREAS, Borrower has requested Lender to modify certain provisions and conditions pertaining to the aforesaid loan; and WHEREAS, Lender has agreed, subject to the terms of this agreement to consent to the Borrower's request. NOW THEREFORE, in consideration of the premises and other good and valuable consideration, Borrower agrees with Lender as follows, to-wit: Page 2, Paragraph 2 of the Grid Promissory Note dated June 23, 1997 is hereby deleted and the following inserted in lieu thereof: 1. Commencing June 30, 2000, and continuing on June 30 of each succeeding calendar year, the indebtedness evidenced by this Note shall be due and payable in seven (7) consecutive annual installments of principal, each in the amount of 12.5% of the amount of the Loan on June 30, 2000, plus all accrued and unpaid interest as hereinabove provided. The entire outstanding balance of the indebtedness evidenced by this Note, together with all accrued and unpaid interest, shall be due and payable in a eighth (8th) and final installment on June 30, 2007. 2. Borrower hereby authorizes and directs Lender to take any action necessary to conform the original Note, security instruments and other collateral doucments to the terms as herein modified, and by these presents accepts and confirms their liability under said Note, security instruments and other collateral documents, with the terms as herein modified. Borrower further agrees that the foregoing Modification shall in no way affect or otherwise release any collateral held by Lender as security to said Note, but acknowledges and agrees that all collateral held by Lender as security to said Note shall continue to secure the note to the same extent and in the same manner as if the foregoing Modification had not been affected. 3. Borrower hereby warrants that there are no subordinate liens on the collateral securing the original note and that Lender shall maintain its priority and position on collateral, both real and personal, as appropriate. 4. Ratification; No Set-off: Expect as modified herein, the Note shall remain unchanged in full force and effect, and is hereby ratified and confirmed. Borrower acknowledges there are no set- offs or defenses as to the Note, nor shall this modification be construed a novation, discharge, or release, of any person, entity, or agreement whatsoever. Each and every term, covenant, and condition of the Note is hereby incorporated herein such that the Note and this Modification shall be read and construed as one instrument. MODIFICATION AGREEMENT Loan Number: 4013321-101 IN WITNESS WHEREOF, the parties have executed this instrument this 30th day of June, 1999. MIDSOUTH BANCORP, INC. THE BANKERS BANK Borrower Lender By: /s/ C. R. Cloutier By: /s/ Jack Gardner C. R. Cloutier Jack Gardner Title: President Senior Vice President Attest: /s/ Karen L. Hail Karen L. Hail Title: Secretary [CORPORATE SEAL] EX-11 3
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES EXHIBIT 11 COMPUTATION OF EARNINGS PER SHARE (Unaudited) FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998 Second Quarter Second Quarter Year-to-Date Year-to-Date June 30, June 30, June 30, June 30, BASIC 1999 1998 1999 1998 ______________ ______________ ____________ ____________ Earnings: Income applicable to common stock $634,954 $641,208 $1,198,421 $1,156,196 ============ =========== ============ ============ Shares: Weighted average number of common shares outstanding 2,450,164 2,396,051 2,444,740 2,388,821 ============ =========== ============ ============ Earnings per common share: Income applicable to common stock $0.26 $0.27 $0.49 $0.49 ============ =========== ============ ============ DILUTED Earnings: Net income $667,857 $678,652 $1,264,707 $1,231,160 ============ =========== ============ ============ Weighted average number of common shares outstanding 2,450,164 2,396,051 2,444,740 2,388,821 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 56,160 77,022 56,750 76,729 Assuming conversion of preferred stock at a conversion rate of 1 to 2.998 shares 461,431 476,403 466,705 478,250 ____________ ___________ ____________ ____________ Weighted average number of common shares outstanding, as adjusted 2,967,755 2,949,476 2,968,195 2,943,800 ============ =========== ============ ============ Fully diluted earnings per common share $0.23 $0.23 $0.43 $0.42 ============ =========== ============ ============
EX-27 4
9 6-MOS DEC-31-1999 JUN-30-1999 11,623,921 11,208 10,000,000 0 63,635,811 21,338,041 21,465,132 162,690,880 1,903,689 282,503,279 261,272,545 752,946 910,814 3,381,895 0 2,193,260 245,912 13,745,907 282,503,279 7,758,244 2,054,792 372,299 10,185,335 3,737,355 3,866,218 6,319,117 504,950 0 6,028,358 1,674,144 1,264,707 0 0 1,264,707 .49 .43 4.95 165,630 550,516 0 0 1,860,490 526,873 65,122 1,903,689 40,000 0 1,863,689
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