SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 2-91000-FW
MIDSOUTH BANCORP, INC.
(Exact name of registrant as specified in its charter)
Louisiana 72-1020809
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
102 Versailles Blvd., Lafayette, LA 70501
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (318) 237-8343
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, $.10 par value American Stock Exchange, Inc.
Preferred Stock, no par value, $14.25 American Stock Exchange, Inc.
stated value
Securities registered pursuant to Section 12(g) of the Act: none
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. _____
As of February 29, 1996, the aggregate market value of the voting stock held
by non-affiliates of the Registrant, calculated by reference to the closing
sale price of MidSouth's common stock on the AMEX was $6,645,377. As of
February 29, 1996 there were outstanding 972,910 shares of MidSouth Bancorp,
Inc. common stock, $.10 par value, which stock is the only class of the
Registrant's common stock.
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement for Annual Meeting of Shareholders to be held May 15, 1996 -
(Part III)
1
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PART I
ITEM 1 - Business.
The Company
MidSouth Bancorp, Inc. ("MidSouth") was incorporated as a
Louisiana corporation on April 17, 1984 for the purpose of
becoming a bank holding company under the Bank Holding
Company Act of 1956. On November 8, 1984, the Company
became a bank holding company when it purchased the shares
of MidSouth National Bank (the "Bank"), its wholly-owned
subsidiary. Substantially all of MidSouth's assets,
earnings and source of funds have been attributable to the
Bank. MidSouth and the Bank are referred to collectively
herein as "the Company."
On July 31, 1995, MidSouth consummated an acquisition of
Sugarland Bancshares, Inc. which resulted in Sugarland Bank
being merged into the Bank and each share of common stock of
Sugarland being converted into one share of MidSouth Series
A Cumulative Convertible Preferred Stock with a stated value
of $14.25 per share. A total of 187,286 shares of
Convertible Preferred Stock were issued. Completion of the
acquisition added $17.2 million to MidSouth's total assets.
The Bank
The Bank received its charter from the Office of the
Comptroller of the Currency (the "OCC") to engage in
business as a national banking association on February 7,
1985 and opened for business on the same date, in Lafayette,
Louisiana. On September 17, 1987 the Bank purchased certain
assets and all of the liabilities of the former Breaux
Bridge Bank & Trust, Breaux Bridge, Louisiana, from the
Federal Deposit Insurance Corporation (the "FDIC"), which
added approximately $27.3 million to the deposit base, and
on May 24, 1989 the purchase and assumption of all of the
assets and liabilities of the former Commerce & Energy Bank
of Lafayette, Louisiana from the FDIC resulted in additional
deposits of approximately $20.7 million. As noted above,
the acquisition of Sugarland Bank occurred on July 31, 1995
and resulted in additional deposits of $13.8 million.
The Bank provides a complete range of commercial and
retail banking services primarily to professional,
commercial and industrial customers in its market area.
These services include, but are not limited to, interest
bearing and non-interest bearing checking accounts,
investment accounts and issuance of cashier's checks, United
States Savings Bonds and travelers checks. The Bank is a
U.S. government depository. Visa and Mastercard credit card
services are offered through an affiliation with First
National Bank of Commerce, New Orleans, Louisiana. The Bank
is also a member of the Electronic Data Services ("EDS")
network through Comerica Bank, Dallas, Texas which provides
its customers with automatic teller machine services through
the GulfNet, Cirrus and Plus networks. Discount brokerage
services are offered in conjunction with Union Planters
Discount Brokerage Services. The Bank serves most types of
lending demands including short term business loans, other
commercial, industrial and financial loans, real estate
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construction and mortgage loans and installment loans. The
Bank operates at the thirteen locations described below
under the heading "Item 2 - Properties."
Employees
As of December 31, 1995, the Bank had in its employ 110
full-time equivalent employees. MidSouth has no employees.
Competition
The Bank faces keen competition in its market area,
Lafayette, Jefferson Davis, St. Martin and Iberia Parishes
in Louisiana, not only with other commercial banks, but also
with savings and loan associations, credit unions, finance
companies, mortgage companies, leasing companies, insurance
companies, money market mutual funds and brokerage houses.
In the Lafayette Parish area there are fourteen state
chartered or national banks and four savings banks. Several
of the banks in Lafayette are subsidiaries of holding
companies or branches of banks having far greater resources
than the Company.
In 1988 the Louisiana Banking Law was amended to permit
Louisiana banks to establish branch offices statewide, and
national banks domiciled in Louisiana have the power to
establish branches to the full extent that Louisiana banks
may establish branches. Effective January 1, 1989,
Louisiana's reciprocal interstate banking law allows bank
holding companies domiciled in any state of the United
States to acquire Louisiana banks and bank holding
companies, if the state in which the bank holding company is
domiciled allows Louisiana banks and bank holding companies
the same opportunities. The effect of the changes in
Louisiana's branch banking laws and interstate banking law
on the Company has been to increase competition in the
state, and such competition is expected to continue to
increase.
In 1994, the Interstate Banking and Branching Efficiency
Act of 1994 (the "Interstate Act") was enacted. Among other
things, the Interstate Act (i) allows bank holding companies
after September, 1995 to acquire a bank located in any
state, subject to certain limitations that may be imposed by
the state, (ii) allows banks after June 1, 1997 (or earlier
if permitted by state law) to merge across state lines
unless the home state has enacted prior to June 1, 1997 a
law opting out of interstate bank mergers, and (iii) permits
banks to establish branches outside their state of domicile
if expressly permitted by the law of the state in which the
branch is to be located. In 1995, the Louisiana legislature
enacted legislation permitting out of state bank holding
companies after June 1, 1997 to convert any banks owned in
Louisiana into branches of out of state banks owned by such
holding companies, subject to certain limitations.
Registrant is unable to predict at this time the effect of
the Interstate Act and recent Louisiana legislature on
competition.
3
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Supervision and Regulation
Bank Holding Companies. As a bank holding company,
MidSouth is subject to the Bank Holding Company Act of 1956
(the "Act") and is supervised by the Board of Governors of
the Federal Reserve System (the "Federal Reserve Board").
The Act requires MidSouth to file periodic reports with the
Federal Reserve Board and subjects MidSouth to examination
by the Federal Reserve Board. The Act also requires
MidSouth to obtain the prior approval of the Federal Reserve
Board for acquisitions of substantially all of the assets of
any bank or bank holding company or more than 5% of the
voting shares of any bank or bank holding company. The Act
prohibits the Federal Reserve Board from approving an
application from a bank holding company to acquire shares of
a bank located outside the state in which the operations of
the holding company's banking subsidiaries are principally
conducted, unless such an acquisition is specifically
authorized by the law of the state in which the bank whose
shares are to be acquired is located. The Act prohibits
MidSouth from engaging in any business other than banking or
bank-related activities specifically allowed by the Federal
Reserve Board and from engaging in certain tie-in
arrangements in connection with any extension of credit or
provision of any property or services.
National Banks. As a national banking association, the
Bank is supervised and regulated by the OCC (its primary
regulatory authority), the Federal Reserve Board and the
FDIC. Under the Federal Reserve Act, the Bank is restricted
in extending credit to or making investments in MidSouth and
other affiliates defined in that act. National banks are
required by the National Bank Act to adhere to branch
banking laws applicable to state banks in the states in
which they are located.
Governmental Policies
The operations of financial institutions may be affected
by legislative changes and by the policies of various
regulatory authorities. In particular, bank holding
companies and their subsidiaries are affected by the credit
policies of the Federal Reserve Board. An important
function of the Federal Reserve Board is to regulate the
national supply of bank credit. Among the instruments of
monetary policy used by the Federal Reserve Board to
implement its objectives are open market operations in
United States Government Securities, changes in the discount
rate on bank borrowings and changes in reserve requirements
on bank deposits. These policies have significant effects
on the overall growth and profitability of the loan,
investment and deposit portfolios. The general effects of
such policies upon future operations cannot be accurately
predicted.
ITEM 2 - Properties.
The Company leases its principal executive and
administrative offices and principal banking facility in
Lafayette, Louisiana under a ten year lease expiring
November 30, 2004. The Bank has four other banking offices
in Lafayette, Louisiana, two in New Iberia and one banking
office in each of Breaux Bridge, Cecilia, Jeanerette and
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Jennings, Louisiana. In addition, MidSouth has a loan
production office in Morgan City, Louisiana. Eight of these
offices are owned and five are leased.
ITEM 3 - Legal Proceedings.
The Bank has been named as a defendant in various legal
actions arising from normal business activities in which
damages of various amounts are claimed. While the amount,
if any, of ultimate liability with respect to such matters
cannot be determined, management believes, after consulting
with legal counsel, that any such liability will not have a
material adverse effect on the Company's consolidated
financial position and results of operation.
ITEM 4 - Submission of Matters to a Vote of Security
Holders.
No matters were submitted to a vote of MidSouth's
security holders in the fourth quarter of 1995.
Executive Officers of the Registrant
C. R. Cloutier, 48 - President, Chief Executive Officer and
Director of the Bank since 1984; Director of MidSouth since
1984 and President and Chief Executive Officer of MidSouth
since 1985.
Karen L. Hail, 42 - Executive Vice President of the Bank and
Secretary and Treasurer of the Bank and MidSouth since 1984;
Director of the Bank and MidSouth since 1988; Chief
Financial Officer of the MidSouth since 1985.
Donald R. Landry, 39 - Senior Vice President and Senior Loan
Officer of the Bank since 1990; prior to his employment at
the Bank, Mr. Landry was a commercial loan officer at
Premier Bank, N.A. for over 12 years with responsibilities
ranging from loan production to managing branch locations.
Jennifer S. Fontenot, 41 - Senior Vice President of the
Bank, responsible for branch administration and marketing,
since 1986.
Teri S. Stelly, 36 - Controller of MidSouth since 1987; Vice
President of MidSouth and the Bank since 1992; Assistant
Vice President of MidSouth and the Bank since 1987.
David L. Majkowski, 46 - Loan review officer of the Bank
hired in 1995; prior to his employment at the Bank, Mr.
Majkowski was Compliance Officer for St. Martin Bank and
Trust, St. Martinville, Louisiana for 15 years.
All executive officers of the Company are appointed for
one year terms expiring at the first meeting of the Board of
Directors after the annual shareholders meeting next
succeeding his or her election and until his or her
successor is elected and qualified.
5
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PART II
ITEM 5 - Market for Registrant's Common Stock and Related
Stockholder Matters.
On April 19, 1993 MidSouth's common stock was accepted
for listing on the American Stock Exchange, Inc./Emerging
Company Marketplace under the symbol MSL.EC. Effective
August 1, 1995, the Company's common stock and its preferred
stock, issued in conjunction with the Sugarland acquisition,
was approved for listing on the regular American Stock
Exchange, Inc. ("AMEX") under the symbols MSL and MSL.pr,
respectively. As of February 29, 1996, there were 383
common shareholders of record and 199 preferred shareholders
of record. The high and low sales prices for the past eight
quarters are provided in the Selected Quarterly Financial
Data tables on pages 49 and 50.
MidSouth's first common stock dividend was paid at a rate
of $.06 per share on October 2, 1995 to shareholders of
record on September 18, 1995. Common stock shareholders of
record on December 17, 1995 received an additional $.06 per
share on January 2, 1996. It is the intention of the Board
of Directors of MidSouth to continue paying quarterly
dividends on the common stock at a rate of $.06 per share.
The Company's ability to pay dividends is described in Item
7 below under the heading "Balance Sheet Analysis -
Dividends" and in Note 13 to the Company's consolidated
financial statements.
On September 15, 1995, MidSouth effected a four for three
stock split by way of a stock dividend to its common
shareholders of record as of September 7, 1995. The stock
split increased the common shares outstanding at the time
from 720,415 to 960,553.
On February 18, 1994, MidSouth paid a 5% common stock
dividend to shareholders of record on February 4, 1994. The
dividend increased MidSouth's common shares outstanding at
the time from 670,638 to 705,327.
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<TABLE>
<CAPTION>
FIVE-YEAR SUMMARY OF SELECTED
CONSOLIDATED FINANCIAL DATA
Year Ended December 31,
______________________________________________________________________________
1995 1994 1993 1992 1991
__________ __________ __________ __________ __________
<S> <C> <C> <C> <C> <C>
Gross interest income $9,727,584 $7,388,478 $6,369,047 $6,678,326 $7,697,768
Interest expense (3,225,326) (1,976,101) (1,803,934) (2,411,228) (3,739,702)
Net interest income 6,502,258 5,412,377 4,565,113 4,267,098 3,958,066
Provision for loan losses (225,000) (210,000) (306,500) (365,000) (518,500)
Other operating income 1,583,026 1,422,894 1,371,124 1,108,138 1,103,859
Other expenses (6,072,129) (4,882,130) (4,653,303) (4,105,639) (4,102,594)
Net income (loss)
before extraordinary item
and cumulative effect of
accounting change 1,788,155 1,743,141 976,434 904,597 440,831
Provision for income taxes (546,545) (601,500) (331,500) (311,500) (151,000)
Extraordinary item - - - 311,500 151,000
Cumulative effect of
accounting change - - 600,000 - -
Net Income (Loss) $1,241,610 $1,141,641 $1,244,934 $904,597 $440,831
Preferred stock dividend
requirement ($38,142) - - - -
Income applicable to
common shareholders $1,203,468 $1,141,641 $1,244,934 $904,597 $440,831
Primary earnings per
share <FN1> $1.24 $1.20 $1.40 $1.10 $0.61
Fully diluted earnings
per share $1.15 $1.20 $1.40 $1.10 $0.61
Total Loans 77,826,707 60,432,275 49,786,123 40,374,221 40,166,914
Total Assets 151,183,241 103,965,960 97,695,512 85,141,634 81,445,937
Total Deposits 139,029,563 96,490,355 90,411,946 80,166,500 77,384,015
Cash Dividends 57,676 - - - -
Long-term Obligation <FN2> 972,617 1,195,917 786,164 953,820 982,897
Selected Ratios:
Loans to Assets 51.48% 58.13% 50.96% 47.42% 49.32%
Loans to Deposits 55.98% 62.63% 55.07% 50.36% 51.91%
Deposits to Assets 91.96% 92.81% 92.54% 94.16% 95.01%
Return on Average
Assets <FN3> 0.98% 1.12% 1.13% 1.10% 0.54%
Return on Average
Equity <FN3> 14.84% 20.98% 22.88% 31.33% 22.35%
</TABLE>
<FN1> Earnings per share have been adjusted to reflect a stock dividend
of 5% paid by the Company on February 18, 1994 to shareholders of
record on February 4, 1994 and a four for three stock split paid
on September 15, 1995 to shareholders of record on September 7, 1995.
<FN2> Long-term obligations include ESOP borrowing and, in 1994 and 1995,
FHLB borrowings. In 1995, the ESOP borrowing is eliminated as an
intercompany transaction.
<FN3> Exclusive of extraordinary item and cumulative effect of accounting
change for the year ended December 31, 1993.
7
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ITEM 6 - Management's Discussion and analysis or Plan of
Operation
MidSouth Bancorp, Inc. ("MidSouth") is a one-bank holding
company that conducts substantially all of its business through
its wholly-owned subsidiary, MidSouth National Bank (the "Bank").
Following is management's discussion of factors that management
believes are among those necessary for an understanding of
MidSouth's financial statements. The discussion should be read
in conjunction with MidSouth's financial statements and the notes
thereto presented herein.
OVERVIEW
MidSouth ended the year 1995 with total assets of $151,183,241,
an increase of 45% over the $103,965,960 reported in total assets
at year-end 1994. The completion of the acquisition of Sugarland
State Bank ("Sugarland") of Jeanerette, Louisiana on July 31,
1995 contributed $17,169,959 of the increase in total assets.
The transaction resulted in the issuance of 187,286 shares of
MidSouth Series A Cumulative Convertible Preferred Stock to the
former shareholders of Sugarland.
Net income for 1995 was $1,241,610 as compared to $1,141,641
reported for 1994. Income applicable to common shareholders for
1995 totaled $1,203,468. Primary and fully diluted earnings per
common share for 1995 were $1.24 and $1.15, respectively,
compared to $1.20 primary and fully diluted earnings per common
share for 1994.
Net interest income increased $1,089,881 in 1995. The increase
results primarily from significant loan growth which contributed
to a 20% increase in average earning assets. MidSouth's loans,
net of reserves, increased in 1995 by $18,268,366 to $77,826,707
as compared to $59,558,341 at December 31, 1994. Loans acquired
from Sugarland amounted to $8,601,476 or 47% of the total
increase in loans over the past twelve months. Increased
expenses associated with four branch locations, which included
two former Sugarland banking offices, and a loan production
office added by MidSouth in 1995, offset the increase in net
interest income for 1995. The increases were noted in personnel,
occupancy, telephone and data processing expenses. Additionally,
marketing, printing and postage expenses increased due to the
growth experienced in 1995.
Deposits grew $42.5 million, from $96.5 million at December 31,
1994 to $139.0 million at December 31, 1995. Of the $42.5
million in growth, $13.8 million was attributable to the
Sugarland acquisition and $11.0 million resulted from two public
funds contracts. An additional $10.5 million in deposits
resulted from a deposit promotion held during the fourth quarter
of 1995. The Opelousas branch, opened in April 1995, contributed
$3.2 million to the increase in deposits for the year.
Non-performing assets (net of reserve for possible real estate
write-downs) and loans past due 90 days or more were $836,523 at
December 31, 1995, up $284,420 from $552,103 a year earlier. The
8
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Allowance for Loan and Lease Losses ("ALLL") amounted to
$1,051,898 at December 31, 1995, or 1.33% of total loans and
leases, compared to $873,934, or 1.45% of total loans and leases
at December 31, 1994.
On September 15, 1995, MidSouth effected a four for three stock
split by way of a stock dividend to its common stock shareholders
of record on September 7, 1995. The stock split increased the
common shares outstanding from 720,415 to 960,553 and adjusted
the conversion rate on MidSouth's Preferred Stock to 1.33 shares
of common stock for each share of preferred stock converted.
MidSouth paid its first cash dividend on common stock of $.06 per
share on October 2, 1995 to shareholders of record as of
September 18, 1995. Common stock shareholders also received a
second cash dividend on January 2, 1996 of $.06 per share. The
Board of Directors of MidSouth intends to continue quarterly
payment of dividends on MidSouth's common stock at the rate of
$.06 per share. Cash dividends will be subject to payment of
dividends on the preferred stock issued in the acquisition of
Sugarland, as well as other considerations.
MidSouth's leverage ratio was 6.99% at December 31, 1995. Return
on average equity was 14.84% and return on average assets was
.98% for the year 1995.
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. Tables 1
and 2 analyze the changes in net interest income for the three
years ended December 31, 1995.
Net interest income increased $1,089,881 for 1995 over 1994 and
$847,264 for 1994 over 1993. The increase in net interest income
for both 1995 and 1994 resulted primarily from growth in
MidSouth's loan portfolio. Interest income from loans, including
loan fees, increased $1,762,968 from 1994 to 1995 and $837,508
from 1993 to 1994. The increased interest income for both years
resulted from increases in average loan volume of $13.8 million
in 1995 and $10.5 million in 1994. An increase in the average
yield on loans of 59 basis points, from 9.82% to 10.41%,
contributed to the increase in interest income on loans in 1995.
A decrease in average yield on loans of 43 basis points lessened
the impact of the volume increase in 1994.
A $.9 million increase in the average volume of securities for
1995, combined with a 46 basis point increase in yield, resulted
in increased interest income from MidSouth's securities portfolio
for the year. A $5.1 million increase in the average volume of
securities for 1994 resulted in increased interest income for
1994 despite a 34 basis point decline in the average yield.
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<TABLE>
<CAPTION>
Table 1
Average Balance Sheets and Interest Rate Analysis
(in thousands)
1995 1994 1993
___________________________ ___________________________ ___________________________
Average Average Average Average Average Average
Volume Interest Yield/Rate Volume Interest Yield/Rate Volume Interest Yield/Rate
___________________________ ___________________________ ___________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest Bearing Deposits $149 $9 6.04% $99 $4 4.04% $0 $0 0.00%
Investment Securities <FN1>
Taxable 31,798 1,901 5.98% 33,590 1,772 5.28% 28,577 1,597 5.59%
Tax Exempt <FN2> 2,669 148 7.45% 27 2 7.81% 78 9 12.03%
________ _______ ________ _______ _______ ______
Total Investments 34,616 2,058 5.94% 33,716 1,778 5.27% 28,655 1,606 5.61%
Federal Funds Sold and
Securities Purchased
Under Agreements to Resell 7,728 443 5.73% 3,730 147 3.94% 4,971 139 2.80%
Loans <FN3>
Commercial and Real Estate 48,535 5,115 10.54% 42,192 4,018 9.52% 33,354 3,310 9.92%
Installment 20,856 2,111 10.12% 13,409 1,445 10.78% 11,770 1,316 11.18%
________ _______ ________ _______ _______ ______
Total Loans 69,391 7,226 10.41% 55,601 5,463 9.82% 45,124 4,626 10.25%
________ _______ ________ _______ _______ ______
Total Earning Assets 111,735 9,727 8.71% 93,047 7,388 7.94% 78,750 6,371 8.09%
Allowance for Loan and Lease
Losses (948) (836) (824)
Nonearning Assets 12,503 9,336 8,556
________ ________ _______
Total Assets $123,290 $101,547 $86,482
======== ======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
NOW, Money Market, and
Savings 40,180 1,046 2.60% 32,030 680 2.12% 25,995 600 2.31%
Certificates of Deposits 41,489 2,067 4.98% 34,134 1,200 3.52% 32,355 1,130 3.49%
________ _______ ________ _______ _______ ______
Total Interest Bearing Deposits 81,669 3,113 3.81% 66,164 1,880 2.84% 58,350 1,730 2.96%
Federal Funds Purchased and
Securities Sold Under
Agreements to Repurchase 292 13 4.45% 978 39 3.99% 582 14 2.41%
Notes Payable 1,239 99 7.99% 630 57 9.05% 931 60 6.40%
________ _______ ________ _______ _______ ______
Total Interest Bearing
Liabilities $83,200 $3,225 3.88% $67,772 $1,976 2.92% $59,863 $1,804 3.01%
Demand Deposits 31,354 28,000 22,116
Other Liabilities 628 332 236
Stockholders' Equity 8,108 5,443 4,267
________ ________ _______
Total Liabilites and
Stockholders'
Equity $123,290 $101,547 $86,482
======== ======== =======
NET INTEREST INCOME AND NET
INTEREST SPREAD $6,502 4.83% $5,412 5.02% $4,567 5.08%
======= ======= =======
NET YIELD ON EARNING ASSETS 5.82% 5.81% 5.80%
<FN1> Securities classified as available-for-sale
are included in average balance and interest
income figures reflect interest earned on
such securities.
<FN2> Yields on tax-exempt obligations are shown on
a tax equivalent bases using a 34% tax rate.
<FN3> Interest income includes loan fees of $596,445
for 1995, $324,757 for 1994, and $264,321 for
1993. Nonaccrual loans are included in average
balances and income on such loans is recognized
on a cash basis.
</TABLE>
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Throughout 1993, 1994 and 1995, MidSouth continued to improve the
mix of average earning assets as average loan volume increased
from 57% to 60% to 62% of average earning assets, respectively.
This trend reflects increased quality loan demand and
management's commitment to offer competitive loan products while
maintaining conservative credit criteria.
In 1994, the average rate paid on interest-bearing deposits
decreased 12 basis points to 2.84% from 2.96% in 1993. Rising
interest rates throughout 1995 resulted in a significant increase
of 96 basis points to an average rate paid on interest-bearing
deposits of 3.88%. A 22.8% increase in the average volume of
interest-bearing deposits in 1995 combined with the higher rate
resulted in an increase of $1.2 million in interest expense for
the year. MidSouth's deposit mix shifted slightly during 1995 to
a higher volume of interest-bearing deposits. As of December 31,
1995, 28% of average total deposits were non-interest bearing
demand deposits, while 35% represented NOW, money market and
savings deposits. Certificates of deposit amounted to 37% of
average total deposits at year-end 1995. As of year-end 1994,
the deposit mix consisted of 30% non-interest bearing demand
deposits, 34% NOW, money market and savings, and 36% certificates
of deposit. The deposit mix at year-end 1993 consisted of 28%
non-interest bearing demand deposits, 32% NOW, money market and
savings, and 40% certificates of deposit.
These changes in MidSouth's earning assets and interest-bearing
liabilities combined with changes in interest rates resulted in
net yields on average earning assets of 5.82% for 1995, as
compared to 5.81% for 1994 and 5.80% for 1993.
Non-Interest Income
Excluding Securities Transactions. Service charges and fees on
deposit accounts represent the primary source of non-interest
income for MidSouth. Income from service charges and
nonsufficient funds fees increased $88,103 in 1995 and $134,357
in 1994 primarily due to an increase in the number of transaction
accounts serviced by MidSouth. The total number of transaction
accounts (excluding savings accounts) increased from 6,826 in
1993 to 7,394 in 1994 and to 10,141 in 1995. Of the 2,747
accounts added in 1995, 1,009 were Sugarland accounts. Non-
interest income resulting from other charges and fees increased
$73,207 in 1995 as compared to increases of $126,701 in 1994 and
$26,221 in 1993. The 1995 increase primarily results from
additional income of $38,683 earned through the sale of credit
life insurance, $17,189 in ATM fee income and $12,343 in check
order fees. Increases of $37,510 in fees earned through the sale
of credit life insurance, $31,800 in lease income on the former
Pinhook Branch building, $24,490 in check order fees and $15,000
in lease income from a third party offering investment services
to customers contributed to the increased non-interest income for
1994.
Securities Transactions. No gains or losses were recorded on
sales of securities during 1995. Upon the acquisition of
Sugarland, $2.3 million in securities available-for-sale were
liquidated on the date of merger at the acquired value. Net
gains on sales of securities decreased $209,288 from 1993 to 1994
primarily due to limited sales activity within the securities
11
<PAGE>
<TABLE>
<CAPTION>
TABLE 2
Interest Differentials
(in thousands)
1995 OVER 1994 1994 OVER 1993
__________________________________________________ _____________________________________________
Total Change Change Total Change Change
Increase Attributable to Attributable to Increase Attributable to Attributable to
(Decrease) Volume Rates Volume/Rates (Decrease) Volume Rates Volume/Rates
_________ ______ _____ ____________ _________ ______ _____ ___________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Earning Assets:
Interest Bearing
Deposits 5 2 2 1 4 - - 4
Investment Securities
Taxable 129 (95) 237 (13) 175 280 (89) (16)
Tax Exempt 146 207 (2) (59) (7) (6) (4) 3
Federal Funds Sold and
Securities Purchased
Under Agreement to 296 158 66 72 8 (35) 57 (14)
Loans, including fees 1,763 1,354 327 82 834 1,074 (195) (45)
_________ _________ _________ _________ _________ _________ _________ _________
TOTAL 2,339 1,626 630 83 1,014 1,313 (231) (68)
_________ _________ _________ _________ _________ _________ _________ _________
Interest Bearing Liabilities:
Interest Bearing
Deposits 1,233 441 642 150 150 232 (72) (10)
Federal Funds Purchased
and Securities Sold
Under Agreement to
Repurchase (26) (27) 5 (4) 25 10 9 6
Notes Payable 42 54 (7) (5) (3) (20) 24 (7)
_________ _________ _________ _________ _________ _________ _________ _________
TOTAL 1,249 468 640 141 172 222 (39) (11)
_________ _________ _________ _________ _________ _________ _________ _________
Net Interest Income Before
Allocation of
Rates/Volume 1,090 1,158 (10) (58) 842 1,091 (192) (57)
Allocation of Rates/Volume - (58) - 58 - (65) 8 57
_________ _________ _________ _________ _________ _________ _________ _________
CHANGES IN NET INTEREST
INCOME $1,090 $1,100 ($10) - $842 $1,026 ($184) -
========= ========= ========= ========= ========= ========= ========= =========
NOTE: Changes in interest income are presented on a tax-equivalent basis.
The changes in interest due to both volume and rate have been allocated
proportionally between volume and rate. In addition, nonaccrual loans
and leases are included.
</TABLE>
12
<PAGE>
portfolio. In 1993, MidSouth realized gains on sales of several
fixed rate mortgage-backed securities and on U.S. Treasury notes
with remaining maturities of six months to nine months. Also, in
September of 1993, MidSouth sold a security for $152,350 that had
previously been partially written down to $100,000, resulting in
a recovery of $52,350 on the security.
Non-interest Expense
Total non-interest expense increased 24% from 1994 to 1995 and 5%
from 1993 to 1994. The addition of four branch locations,
including two former Sugarland banking offices, and a loan
production office, in 1995 resulted in significant increases in
salaries and employee benefits, occupancy expenses, marketing
expenses and the cost of printing and supplies. In addition, data
processing expenses increased due to the purchase of new hardware
and software. The increase in 1994 resulted primarily from
increases in salaries and employee benefits, occupancy expenses
and marketing expenses.
Salaries and employee benefits increased 25% from 1994 to 1995
and 11% from 1993 to 1994. The expansion of MidSouth's branch
system in 1995 required the addition of 26 employees which
resulted in increased salaries and benefits costs. As of
December 31, 1995, MidSouth employed 110 full-time equivalent
employees. The increase in 1994 resulted primarily from
increases in incentive compensation awarded to officers and
employees of the Bank and from an increase in the number of full-
time equivalent employees from 76 in 1993 to 81 in 1994.
Occupancy expenses increased 29% from 1994 to 1995 and 19% from
1993 to 1994 as a result of increases in building lease expense,
depreciation and maintenance expenses associated with furniture
and equipment, and ad valorem taxes. Building lease expense
increased primarily due to an increase provided for in the lease
agreement on the corporate office location and the addition of
the lease on the Opelousas and Super 1 New Iberia branch
locations. In November of 1994, MidSouth leased additional space
and remodeled the corporate office location to provide for
additional office space and a training facility. As a result of
these additions, building lease expense increased $35,803 in
1995. Costs associated with building and leasehold improvements,
furniture and equipment, maintenance and utilities of MidSouth's
twelve banking offices and one loan production office increased
$118,500 in 1995. Included in the increased costs were the
purchase of a telephone system, the installation of a computer
network (a "Novell" network) at the corporate office and at four
branch offices and renovation of the Breaux Bridge branch
facility.
Fixed assets additions planned for 1996 include construction of a
permanent branch facililty in Opelousas and an additional branch
office to be located in the Super 1 store under construction in
Lafayette.
During the third quarter of 1993, MidSouth contracted with an
accounting and consulting firm to perform an information systems
review. The review resulted in a five year technology plan to
improve information systems and product offerings. As proposed
13
<PAGE>
in the plan, MidSouth purchased in 1994 a "Novell" network
system and in 1995 a new data processing hardware system and
software package that was installed during the third quarter of
1995. Additionally, debit card and telephone banking services
were installed in the fourth quarter of 1995. As a result, data
processing expenses increased $79,167 in 1995. Plans for 1996
include the expansion of the "Novell" network to two additional
branches and the installation of a "loan-by-phone" system.
A decrease in MidSouth's rate for FDIC premiums, retroactive to
June 1, 1995, resulted in a refund of $68,703 received during the
third quarter of 1995. The reduced rate and subsequent refund
significantly lowered MidSouth's FDIC premiums by $103,094 from
1994 to 1995. Based on the current risk classification, MidSouth
is not required to pay FDIC premiums for the first quarter of
1996. Premiums increased slightly from 1993 to 1994 due to an
increase in total deposits, despite a reduction in the premium
rate on July 1, 1993 resulting from an improvement in risk
classification.
Professional fees consist of legal, accounting and regulatory
fees. A 20% increase in 1995 professional fees resulted
primarily from increases in legal fees and in other professional
services. Other professional services include internal audit
services contracted to an accounting firm and an external loan
and compliance review. In 1994, professional fees decreased
$41,986 primarily due to non-recurring costs during the third
quarter of 1993 associated with the listing of MidSouth's common
stock and with registration under the securities laws of the
common stock underlying existing warrants. Net of these non-
recurring costs, minimal increases were reported in professional
fees in 1994.
Marketing expenses increased $121,669 from 1994 to 1995 and
$30,131from 1993 to 1994. Promotions related to new branch
facilities, the Sugarland acquisition and a deposit promotion
held during the fourth quarter of 1995 resulted in the
significant increase in marketing expenses for 1995. The
increase from 1993 to 1994 is due to expenses related to the
quality service program and increased newspaper and billboard
advertisement.
Decreases of $4,051 and $68,349 were reported in net expenses on
Other Real Estate Owned (OREO) for 1995 and 1994, respectively.
Expenses on OREO remained controlled in 1995 due to few additions
and continued improvement in credit quality. The decrease in
1994 resulted from disposal of high maintenance properties during
1993 and a reduction in collection costs on related loans.
Income Taxes
With the exception of the impact of adopting Statement of
Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109") in 1993, MidSouth's tax expense has been
consistent at a rate of approximately 34% for the three years
ended December 31, 1995. Note 1 and Note 10 to MidSouth's
Consolidated Financial Statements provide additional information
regarding the adoption of SFAS 109 and MidSouth's income tax
considerations.
14
<PAGE>
BALANCE SHEET ANALYSIS
Securities
MidSouth's securities available-for-sale portfolio increased
$4.7 million from year-end 1994 to year-end 1995. An improvement
of $1,161,750 in the market value of securities available-for-
sale contributed to the increase in 1995. Unrealized gains in
the securities available-for-sale portfolio, net of unrealized
losses and tax effect, were $98,950 at December 31, 1995,
compared to unrealized losses net of unrealized gains and tax
effect of $1,062,800 at December 31, 1994. These amounts result
from interest rate fluctuations and do not represent permanent
adjustments of value. Moreover, classification of securities
available-for-sale does not necessarily indicate that the
securities will be sold prior to maturity. The Financial
Accounting Standards Board ("FASB") announced in the fourth
quarter of 1995 that banks would have a one-time opportunity to
reclassify securities for 1995 year-end financial statements.
The opportunity to reclassify allows banks to move individual
securities out of the held-to-maturity category, as defined by
SFAS 115, without having to evaluate all securities in that
category. MidSouth management elected to retain the current
classification of its securities.
Approximately 42% of MidSouth's securities available-for-sale
portfolio represents mortgage-backed securities and 13.5%
collaterized mortgage obligations ("CMO's"). An additional 37%
of the portfolio consists of U. S. Treasury and agency
securities, while mutual funds and other securities represent
7.5% of the portfolio. MidSouth held two CMO's with book values
in excess of 10% of stockholders' equity at December 31, 1995: a
Chase Mortgage Finance Corp 1993 H II A-3 with a book value of
$1,783,456 (market value of $1,784,157) and a GE Capital Mortgage
Services Inc. 1993-14 A4 with a book value of $2,007,089 (market
value of $1,991,240). All CMO's held by MidSouth are Aaa rated
and not considered "high-risk" securities under the Federal
Financial Institutions Examination Council ("FFIEC") tests.
MidSouth does not own any "high-risk" securities as defined by
the FFIEC.
MidSouth purchased approximately $10.0 million in securities
available-for-sale during 1995. Of the $10.0 million, $6.0
million were U. S. Treasury securities and $4 million were
mortgage-backed securities, primarily fifteen year fixed rate
mortgage-backed pools. MidSouth monitors the risk due to changes
in interest rates on mortgage-backed pools by monthly review of
prepayment speeds, duration, and purchase yields as compared to
current market yields on each security. In the held-to-maturity
portfolio, MidSouth purchased $4.3 million in non-taxable
municipal securities during 1995. Detailed credit analysis was
performed on each municipal offering prior to purchase by Piper
Capital Management, Inc., an investment advisory firm.
Federal funds sold totaled $15.8 million, and $1.7 million for
the years ended December 31, 1995 and 1994, respectively.
Deposits received through a deposit promotion during the fourth
quarter of 1995, combined with funds deposited with two public
fund contracts and the Sugarland acquisiton, resulted in the
increased volume in federal funds sold for 1995.
15
<PAGE>
Loan Portfolio
MidSouth experienced substantial loan growth for the years ended
December 31, 1994 and 1995. Total loans grew from $49,786,123 at
year-end 1993 to $60,432,275 at year-end 1994 and to $78,878,605
at year-end 1995.
The $18.4 million increase in 1995 represents a 30% increase in
total loans. Loans acquired at the consummation of the
acquisition of Sugarland on July 31, 1995 totaled $8.6 million
and consisted of approximately $2.0 million in commercial loans,
$3.5 million in agricultural loans, $2.1 million in loans secured
by real estate and $1.0 million in installment loans to
individuals. As of December 31, 1995, total agricultural loans
had decreased by $1.3 million to $2.2 million. Additional
changes in MidSouth's loan portfolio consisted of a $6.0 million
increase in installment loans to individuals, a $6.3 million
increase in loans secured by real estate, and a $1.8 million
decrease in commercial loans. The Business Manager portfolio,
described below, grew by $.5 million during 1995.
Favorable economic conditions in MidSouth's market area combined
with increased market awareness of MidSouth as the largest
locally owned bank led to the approximated 14%growth experienced
in 1995, net of the loans acquired from Sugarland. An annual
retail loan promotion held in March contributed to the growth
realized in the installment loan portfolio. Real estate loan
growth consisted of both commercial and consumer credits that
carry ten to fifteen year amortizations with rates fixed for
three to five years. The short fixed rate terms of these credits
allow management greater flexibility in controlling the Bank's
interest rate risk.
MidSouth has maintained its credit policy and underwriting
procedures and has not changed these procedures to stimulate loan
growth. Completed loan applications, credit bureau reports,
financial statements and a committee approval process remain a
part of credit decisions. Documentation of the loan decision
process is required on each credit application, whether approved
or denied, to insure thorough and consistent procedures.
Of the $10.6 million increase in 1994 over 1993, approximately
$6.8 million represented growth in the commercial and real estate
loan portfolios. Commercial loan growth was stimulated by
construction and expansion in the market area. MidSouth utilized
the Small Business Administration ("SBA") 504 program to lessen
the risk of a decline in future real estate values. The SBA 504
program allows the Bank to finance 50% of a project with a first
lien position rather than the usual 80%. The SBA funds a portion
of the project, taking a second lien position. This position
allows for a higher quality commercial real estate portfolio for
the Bank.
Growth in the commercial portfolio during 1994 also included
$784,779 funded through the Business Manager program introduced
in December of 1993. The Business Manager program provides
MidSouth's business customers with an accounts receivable system
through which the Bank purchases the customers' accounts
receivables on a discounted basis and handles all accounting,
16
<PAGE>
billing, and collection of the receivables. The commercial lease
financing portfolio increased $861,041 in 1994 as the quantity
and quality of lease paper presented by the leasing companies
improved.
MidSouth's installment loans to individuals experienced growth of
$3.0 million in 1994. The majority of the growth occurred in the
first six months of 1994 due to strong loan demand and a loan
promotion that targeted MidSouth's consumer market.
Asset Quality
Credit Risk Management. MidSouth manages its credit risk by
diversifying its loan portfolio, determining that borrowers have
adequate cash flows for loan repayment, obtaining and monitoring
collateral and continuously reviewing outstanding loans. The
risk management program requires that each individual loan
officer review his or her portfolio on a quarterly basis and
recommend credit gradings on each loan. The senior loan officer
and loan review officer review the gradings. In addition, the
loan review officer performs an independent evaluation annually
of each commercial loan officer's portfolio and a random sampling
of credits in MidSouth's installment loan portfolio.
In addition to the internal reviews of the loan portfolio, U. S.
Banking Alliance, a bank consulting firm, performs an annual
review of the loan portfolio.
Nonperforming Assets. Table 3 contains information about
MidSouth's nonperforming assets and loans past due 90 days or
more and still accruing.
Nonperforming assets totaled $570,841 at December 31, 1995
compared to $448,043 at December 31, 1994. The increase in
nonperforming assets resulted primarily from the addition of a
few loans on nonaccrual status.
Nonaccrual loans increased $137,760 to $387,453 at December 31,
1995 compared to $249,693 at December 31, 1994. Loans to
commercial borrowers are placed on nonaccrual when principal or
interest is 90 days past due, or sooner if the full
collectability of principal or interest is doubtful, except if
the underlying collateral supports both the principal and accrued
interest and the loan is in the process of collection. Retail
loans that become 120 days past due are routinely charged off.
Loans classified for regulatory purposes but not included in
Table 3 do not represent material credits about which management
has serious doubts as to the ability of the borrower to comply
with the loan repayment terms.
Effective January 1, 1995, MidSouth adopted Statement of
Financial Accounting Standards ("SFAS") No. 114, "Accounting by
Creditors for Impairment of a Loan," which was subsequently
amended by SFAS No. 118, "Accounting by Creditors for Impairment
of a Loan - Income Recognition and Disclosures." For further
discussion of the recorded investment in loans considered to be
impaired under SFAS 114 and the effect of SFAS 118 on interest
17
<PAGE>
<TABLE>
<CAPTION>
TABLE 3
Nonperforming Assets and
Loans Past Due 90 Days
=============================================================
December 31, December 31,
1995 1994
=============================================================
<S> <C> <C>
Nonperforming loans
Nonaccrual loans $386,510 $244,800
Restructured loans 943 4,893
________ ________
Total nonperforming loans 387,453 249,693
Other real estate owned, net 180,270 198,350
Other assets repossessed 3,118 -
________ ________
Total nonperforming assets $570,841 $448,043
======== ========
Loans past due 90 days
or more and still accruing $265,682 $104,060
Nonperforming loans as a
% of total loans 0.49% 0.41%
Nonperforming assets as a
% of total loans, other real
estate owned and other assets
repossessed 0.72% 0.74%
ALLL as a % of nonperforming 271.49% 350.00%
=============================================================
</TABLE>
18
<PAGE>
income reported for the year 1995 refer to Note 5 to MidSouth's
Consolidated Financial Statements.
Allowance for Loan and Lease Losses. Provisions totalling
$225,000, $210,000, and $306,500 for the years 1995, 1994 and
1993, respectively, were necessary to bring the ALLL to a level
considered by management to be sufficient to cover potential
losses in the loan portfolio.
Improved trends in loan loss experience and the volume of past
due and nonaccrual loans have decreased the amount of provisions
necessary to achieve sufficient ALLL levels. Table 4 analyzes
activity in the ALLL for 1994 and 1995. Specific reserves within
the ALLL are allocated to loans on nonaccrual for which the
underlying collateral value is insufficient to cover the
principal remaining on the loan. A portion of the unallocated
reserve is assigned to accruing loans that are classified for
regulatory purposes. The remainder of the ALLL represents a
percentage of all other credits based on gradings assigned in the
loan review process.
Quarterly evaluations of the ALLL are performed in accordance
with Section 217 of the OCC's manual and Banking Circular 201.
Factors considered in determining provisions include estimated
future losses in significant credits; known deterioration in
concentrations of credit; historical loss experience; trends in
nonperforming assets; volume, maturity and composition of the
loan portfolio; off balance sheet credit risk; lending policies
and control systems; national and local economic conditions; the
experience, ability and depth of lending management and the
results of examinations of the loan portfolio by regulatory
agencies and others. The process by which management determines
the appropriate level of the ALLL, and the corresponding
provision for possible credit losses, involves considerable
judgment; therefore, no assurance can be given that future losses
will not vary from current estimates.
Sources of Funds
Deposits. MidSouth's deposits grew $42.5 million, from $96.5
million at year-end 1994 to $139.0 million at year-end 1995. A
total of $13.8 million of the $42.5 million represents deposits
acquired from Sugarland. In addition, year-end 1995 deposits
associated with two public funds contracts totaled $11.0 million.
A deposit promotion held during the fourth quarter of 1995 which
offered incentives to employees to attract new deposit dollars
resulted in the addition of $10.5 million in deposits.
MidSouth's Opelousas and Super 1 Foods - New Iberia branches,
both opened in 1995, contributed $3.2 and $1.2 million in deposit
dollars as of December 31, 1995.
With the deposit additions described above, MidSouth experienced
a change in deposit mix during 1995. At year-end 1995, 29% of
total deposits reflected non-interest bearing demand accounts,
while interest-bearing NOW, money market and savings accounts
represented 36% and certificates of deposit 35% of total
deposits. This deposit mix reflects a higher percentage of
interest-bearing deposits as compared to 1994. Non-interest
bearing demand deposits represented 32% of total deposits at
year-end 1994. Interest-bearing deposits consisted of 32% NOW,
money market and savings deposits and 36% certificates of deposit
for the same period.
19
<PAGE>
<TABLE>
<CAPTION>
Table 4
Summary of Loan Loss Experience
(in thousands)
1995 1994
_________ _________
<S> <C> <C>
Balance at Beginning of Year $874 $824
Charge-offs
Commercial, Financial, and Agricultural 118 93
Real Estate - Construction - -
Real Estate - Mortgage 42 -
Installment Loans to Individuals 93 212
Other - -
Lease Financing Receivables - 21
_________ _________
Total Charge-offs 253 326
_________ _________
Recoveries
Commercial, Financial and Agricultural 36 26
Real Estate - Construction - -
Real Estate - Mortgage 2 58
Installment Loans to Individuals 53 82
Other - -
Lease Financing Receivables - -
_________ _________
Total Recoveries 91 166
_________ _________
Net Charge-Offs 162 160
Additions to allowance charged to
operating expense 225 210
Addition of Sugarland allowance 115
_________ _________
Balance at end of year $1,052 $874
========= =========
Ratios
Net charge-offs to average loans 0.23% 0.29%
Balance in allowance at year-end to
outstanding loans at year-end 1.33% 1.45%
Refer to "Balance Sheet Analysis -- Asset Quality -- Allowance for Loan
and Lease Losses" for a description of the factors which influence
management's judgement in determining the amount of the provisions to
the allowance.
</TABLE>
<TABLE>
<CAPTION>
Allowance for % of category % of category
Loan Loss Reserve 1995 to total loans 1994 to total loans
==========================================================================================
<S> <C> <C> <C> <C>
Commercial, Financial, and $130 32.64% $105 36.50%
Agricultural
Real Estate - Construction - 2.86% - 2.10%
Real Estate - Mortgage 10 35.37% - 33.63%
Installment Loans to
Individuals - 26.10% - 23.54%
Other - 0.05% - 0.12%
Lease Financing Receivables - 2.98% - 4.11%
Unallocated 912 769
_______________ _____________
$1,052 100.00% $874 100.00%
====== ====
==========================================================================================
</TABLE>
20
<PAGE>
The percentage of certificates of deposit of $100,000 or more
decreased from year-end 1994 to year-end 1995, from 11% to 9%
of total deposits.
MidSouth's deposits grew $6.1 million, from $90.4 million at
year-end 1993 to $96.5 million at year-end 1994. The increase
resulted primarily from deposits that accompanied new loan
relationships and the continued efforts by management to
reinforce quality customer service through on-going training of
personnel.
MidSouth has no brokered deposits. Although time deposits of
$100,000 can exhibit greater volatility due to changes in
interest rates and other factors than do core deposits,
management believes that any volatility experienced could be
adequately met with current levels of asset liquidity or access
to alternate funding sources. Additional information on
MidSouth's deposits appears in Note 7 to MidSouth's Consolidated
Financial Statements.
Borrowed Funds. As of December 31, 1995, MidSouth maintained two
repurchase agreements totalling $175,904. Long term borrowings
included a note payable to a financial institution with a
remaining principal balance of $463,197 at December 31, 1995.
Included in long term borrowings at December 31, 1994 is a note
payable by the MidSouth Bancorp, Inc. Employee Stock Ownership
Plan (the "ESOP") to an unaffiliated bank, with a principal
balance at December 31, 1994 of $73,021. On May 31, 1995, the
ESOP note with the unaffiliated bank was paid in full with
proceeds funded by MidSouth National Bank. Accordingly, the ESOP
note was eliminated from total loans and long-term debt as an
intercompany transaction in MidSouth's December 31, 1995
consolidated financial statements. A total of $509,420 in funds
borrowed from the Federal Home Loan Bank of Dallas (the "FHLB")
are recorded as long term borrowings for the period ended
December 31, 1995. Additional information regarding the notes
payable is provided in Note 8 to MidSouth's Consolidated
Financial Statements.
The current ESOP note held by the Bank is at a fixed rate of
7.00% payable in monthly installments of $2,200 with payment in
full due on March 10, 1998. The ESOP obligation constitutes a
reduction of MidSouth's stockholders' equity because the primary
source of loan repayment is contributions by the Bank to the
ESOP; however, the loan is not guaranteed by either the Bank or
MidSouth.
During 1994, the Bank used its membership in the FHLB to match
borrowed funds with several mortgage loan fundings. The
borrowings range from five to seven years in maturity and bear
interest at rates between 5.49% and 7.28%.
Capital. Substantial earnings for 1995 combined with capital
received from the acquisition of Sugarland improved capital
ratios for MidSouth and the Bank. As of December 31, 1995, Tier
1 capital to average adjusted assets (the "leverage ratio") was
6.99% as compared to 6.45% at December 31, 1994. Tier 1 capital
to risk weighted assets was 12.11% and 10.95% for 1995 and 1994,
respectively. Total capital to risk weighted assets was 13.36%
and 12.20%, respectively, for the same periods. All ratios were
above the minimums required by federal regulations.
21
<PAGE>
The Federal Deposit Insurance Corporation Improvement Act of 1991
established a capital-based supervisory system for all insured
depository institutions that imposes increasing restrictions on
the institution as its capital deteriorates. In December 1993,
the Bank's classification improved to "well capitalized" as a
result of the termination of a written agreement with the OCC.
The Bank continued to be classified as "well capitalized"
throughout 1994 and 1995 and also improved its supervisory
subgroup rating. No significant restrictions are placed on the
Bank as a result of this classification.
As discussed under the heading "Balance Sheet Analysis -
Securities," $190,569 in unrealized gains on securities
available-for-sale net of a deferred tax liability of $91,619
were recorded as an addition to stockholders' equity as of
December 31, 1995. In contrast, $1,403,000 in unrealized losses
on securities available for sale net of a deferred tax asset of
$477,000 were recorded as a reduction of stockholders' equity as
of December 31, 1994. While the net unrealized gain or loss on
securities available for sale is required to be reported as a
separate component of stockholders' equity, it does not affect
operating results or regulatory capital ratios. The net
unrealized gains and losses reported for December 31, 1995 and
1994 did, however, effect MidSouth's equity to assets ratio for
financial reporting purposes. The ratio of equity to assets was
6.58% for year-end 1995 and 5.36% for year-end 1994.
Interest Rate Sensitivity. Interest rate sensitivity is the
sensitivity of net interest income to changes in market rates of
interest. The initial step in the process of monitoring
MidSouth's interest rate sensitivity involves the preparation of
a basic "gap" analysis of earning assets and interest-bearing
liabilities. The analysis presents differences in the repricing
and maturity characteristics of earning assets and interest-
bearing liabilities for selected time periods.
During 1995, MidSouth continued to use a correspondent bank to
provide the Sendero model of asset and liability management. The
Sendero model uses basic gap data and additional information
regarding rates and prepayment characteristics to construct a gap
analysis that factors in repricing characteristics and cash flows
from payments received on loans and mortgage-backed securities.
The resulting Sendero gap analysis is presented in Table 5.
With the exception of NOW, money market and savings deposits, the
table presents interest-bearing liabilities on a contractual
basis. While NOW, money market and savings deposits are
contractually due on demand, historically, MidSouth has
experienced stability in these deposits despite changes in market
rates. Presentation of these deposits in the table, therefore,
reflects delayed repricing throughout the time horizon.
The resulting cumulative gap at one year is approximately
$23,479,000 which indicates MidSouth's total earning assets and
interest-bearing liabilities maturing within one year are
mismatched at December 31, 1995. The ratio of the one year
cumulative gap to total assets of 15.53% is above internal policy
guidelines by 53 basis points. MidSouth's internal policy
targets a one year cumulative gap position of a positive or
negative 15% of total assets. The Funds Management Committee
22
<PAGE>
<TABLE>
<CAPTION>
Table 5
Interest Rate Sensitivity Table
December 31, 1995
(in thousands)
Non-interest
0-3 MOS 4-6 MOS 7-12 MOS 1 - 5YRS > 5YRS Bearing Total
________ _________ __________ ___________ _________ ______________ _______
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest Bearing Deposits $26 $26
Fed Funds Sold 15,800 15,800
Investments
Mutual Funds 1,921 1,921
Investment Securities 2,941 1,202 2,548 7,790 4,098 18,579
Mortgage-backed Securitie 3,801 3,210 2,625 4,060 6,408 20,104
Loans
Fixed Rate 12,864 6,689 9,974 26,152 1,844 57,523
Variable Rate 21,356 21,356
Other Assets 16,926 16,926
Allowance for
Loan and Lease Losses (1,052) (1,052)
________ _________ ___________ ___________ ___________ _________ ___________
Total Assets $56,788 $11,101 $15,147 $38,002 $14,271 $15,874 $151,183
________ _________ ___________ ___________ ___________ _________ ___________
LIABILITIES
Fed Funds Purchased
Repurchase Agreement $176 $176
NOW 2105 1905 3,283 11,823 2,984 22,100
MMDA 1,436 2,821 4395 10,326 878 19,856
Savings 731 661 1,139 4,104 1,036 7,671
CD'S 16,172 9,009 15,698 8,053 48,932
Demand Deposits 40,471 40,471
Other Liabilities 973 591 1,564
Stockholders' Equity 10,413 10,413
________ _________ ___________ ___________ ___________ _________ ___________
Total Liabilities $20,620 $14,396 $24,515 $34,306 $5,871 $51,475 $151,183
________ _________ ___________ ___________ ___________ _________ ___________
Gap 36,168 (3,295) (9,368) 3,696 8,400 (35,601)
Cumulative Gap 36,168 32,873 23,505 27,201 35,601
Cumulative Gap/
Total Assets 23.92% 21.74% 15.55% 17.99% 23.55%
________ _________ ___________ ___________ ___________ _________ ___________
</TABLE>
23
<PAGE>
approved the deviation from policy due to MidSouth's high federal
funds sold position at year-end 1995 of $15,800,000. The board
and management have approved purchases of securities that should
reduce MidSouth's asset sensitivity at the cumulative one year
position.
The Sendero model also uses the gap analysis data in Table 5 and
additional information regarding rates and payment
characteristics to perform three simulation tests. The tests use
market data to perform rate shock, rate cycle and rate forecast
simulations to measure the impact of changes in interest rates,
the yield curve and interest rate forecasts on MidSouth's net
interest income and market value of portfolio equity. Results of
the simulations are reviewed and discussed at MidSouth's
quarterly Funds Management Committee meetings.
MidSouth does not invest in derivatives and has none in its
securities portfolio.
Liquidity
Bank Liquidity. Liquidity is the availability of funds to meet
contractual obligations as they become due and to fund
operations. The Bank's primary liquidity needs involve its
ability to accomodate 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 two sources: a stable base of
funding sources and an adequate level of assets that can be
readily converted into cash. 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 the primary sources of asset liquidity for the
Bank.
In addition to these primary sources, the Bank has certain other
sources available to meet the demand for funds if necessary.
Approximately $3.8 million in securities maturing within twelve
months provides an additional source of liquidity. These
securities could be liquidated if necessary prior to maturity.
MidSouth also has borrowing capabilities with three correspondent
banks.
Parent Company Liquidity. At the parent company level, cash is
needed primarily to service outstanding debt and pay dividends on
preferred and common stock. The parent company has a note
payable to a financial institution, the terms of which are
described in Note 8 to MidSouth's Consolidated Financial
Statements. Funds to meet payments on the note come primarily
from the sale of MidSouth's common stock to the Directors'
Deferred Compensation Trust and to the ESOP and from funds
received from the Bank under a tax sharing agreement with the
parent company. Funds received from these sources and from the
exercise of stock options described in Note 12 to MidSouth's
Consolidated Financial Statements are expected to be sufficient
to meet debt service obligations throughout 1996. Earnings of
the Bank in 1994 eliminated the Bank's accumulated retained
24
<PAGE>
earnings deficit reported at December 31, 1993. Therefore, as of
January 1, 1995, the Bank had the ability to pay dividends to the
parent company without prior approval from its primary regulator.
The dividends could provide additional liquidity for the parent
company if needed.
Dividends. The primary source of cash dividends on MidSouth's
preferred and common stock is distributions from the Bank. As
stated above under "Parent Company Liquidity", earnings recorded
for 1994 eliminated an accumulated retained earnings deficit,
thereby giving the Bank the ability to declare dividends to the
parent company without prior approval of its primary regulator.
However, the Bank's ability to pay dividends would be prohibited
if the result would cause the Bank's regulatory capital to fall
below minimum requirements.
On May 12, 1995, MidSouth received written consent from its
lender that allows payment of dividends or distributions to its
shareholders. Subsequently, the Bank declared a dividend in the
amount of $100,000.00 on September 21, 1995 to the parent company
for the purpose of paying dividends on MidSouth's common stock.
MidSouth's first common stock cash dividend of $.06 per share was
paid on October 2, 1995 to shareholders of record on September
18, 1995. Common stock shareholders of record on December 17,
1995 received an additional $.06 per share dividend on January 2,
1996. It is the intention of the Board of Directors of MidSouth
to continue to pay quarterly dividends on the common stock at the
rate of $.06 per share. Cash dividends on the common stock are
subject to payment of dividends on the preferred stock issued in
conjunction with the acquisition of Sugarland State Bank, as well
as other considerations.
On September 15, 1995, MidSouth effected a four for three stock
split by way of a stock dividend to its common stockholders of
record as of September 7, 1995. The stock split increased the
common shares outstanding at the time from 720,415 to 960,553.
On February 18, 1994, MidSouth paid a 5% common stock dividend to
shareholders of record on February 4, 1994. The dividend
increased MidSouth's common stock outstanding at the time from
670,638 shares to 705,327 shares.
No dividends were payable on MidSouth's preferred stock in 1995.
Assuming no conversion of preferred stock in 1996, the aggregate
amount of dividends on the preferred stock in 1996 is expected to
be $163,065.
25
<PAGE>
ITEM 7 - Financial Statements
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors
of MidSouth Bancorp, Inc.
Lafayette, Louisiana
We have audited the accompanying consolidated statements of
condition of MidSouth Bancorp, Inc. and its subsidiary as of
December 31, 1995 and 1994, and the related consolidated
statements of income, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1995.
These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of
MidSouth Bancorp, Inc. and subsidiary at December 31, 1995 and
1994 and the results of their operations and their cash flows
for each of the three years in the period ended December 31,
1995 in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
January 26, 1996
26
<PAGE>
<TABLE>
<CAPTION>
MIDSOUTH BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CONDITION
DECEMBER 31, 1995 AND 1994
==============================================================================================
ASSETS 1995 1994
<S> <C> <C>
Cash and due from banks $ 10,298,209 $ 6,941,989
Federal funds sold 15,800,000 1,700,000
___________ ___________
Total cash and cash equivalents 26,098,209 8,641,989
Interest-bearing deposits in banks 26,349 48,422
Securities available-for-sale, at fair value
(cost of $35,868,018 in 1995 and $32,909,276
in 1994) 36,058,587 31,369,476
Securities held-to-maturity (estimated market
value of $4,735,344 in 1995 and $372,274
in 1994) 4,545,849 370,946
Loans, net of allowance for loan losses
of $1,051,898 in 1995 and $873,934 in 1994 77,826,707 59,558,341
Premises and equipment, net 4,532,610 2,117,512
Other real estate owned, net 180,270 198,350
Accrued interest receivable 1,107,820 695,604
Goodwill, net 311,352 191,691
Other assets 495,488 773,629
___________ ___________
Total assets $151,183,241 $103,965,960
=========== ===========
LIABILITIES AND STOCKHOLERS' EQUITY
Deposits:
Non-interest bearing $ 40,471,206 $ 31,035,865
Interest bearing 98,558,357 64,454,490
___________ ___________
Total deposits 139,029,563 96,490,355
Securities sold under repurchase agreements 175,904 301,730
Accrued interest payable 322,891 191,366
Notes payable 972,617 1,195,917
Other liabilities 268,702 413,246
___________ ___________
Total liabilities 140,769,677 98,592,614
___________ ___________
Commitments and Contingencies - -
Stockholders' equity:
Preferred stock, $14.25 stated value, 5,000,000
authorized, 187,286 issued and outstanding at
December 31, 1995 2,668,826 -
Common stock, $.10 par value, 5,000,000 shares
authorized; 967,940 and 713,988 issued and
outstanding at December 31, 1995 and 1994,
respectively 96,794 71,399
Surplus 6,164,443 6,144,070
Unearned ESOP shares (54,157) (73,021)
Unrealized gains (losses) on securities
available-for-sales, net of deferred taxes
of $91,619 in 1995 and $477,000 in 1994 98,950 (1,062,800)
Retained earnings 1,438,708 293,698
___________ ___________
Total stockholders' equity 10,413,564 5,373,346
___________ ___________
Total liabilities and stockholders' equity $151,183,241 $103,965,960
=========== ===========
See notes to consolidated financial statements.
</TABLE>
27
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
MIDSOUTH BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
===========================================================================================
1995 1994 1993
<S> <C> <C> <C>
INTEREST INCOME:
Loans, including fees $7,226,469 $5,463,501 $4,625,993
Securities 2,058,321 1,782,504 1,603,668
Federal funds sold 442,794 142,473 139,386
_________ _________ _________
Total interest income 9,727,584 7,388,478 6,369,047
_________ _________ _________
INTEREST EXPENSE:
Deposits 3,125,813 1,924,906 1,744,394
Notes payable 99,513 51,195 59,540
_________ _________ _________
Total interest expense 3,225,326 1,976,101 1,803,934
_________ _________ _________
NET INTEREST INCOME 6,502,258 5,412,377 4,565,113
PROVISION FOR LOAN LOSSES 225,000 210,000 306,500
_________ _________ _________
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 6,277,258 5,202,377 4,258,613
_________ _________ _________
NONINTEREST INCOME:
Service charges on deposit accounts 1,103,632 1,015,529 881,172
Gains on investment securities, net - 1,178 210,466
Other charges and fees 479,394 406,187 279,486
_________ _________ _________
1,583,026 1,422,894 1,371,124
NONINTEREST EXPENSES:
Salaries and employee benefits 2,794,654 2,242,892 2,024,335
Occupancy expense 1,057,953 822,615 688,661
Professional fees 261,857 218,287 260,273
FDIC assessments 106,414 209,508 208,656
Marketing expenses 328,964 207,295 177,164
General and bond insurance 111,319 109,674 121,529
Data processing 187,739 108,572 104,077
Postage 130,754 104,365 93,922
Director fees 96,660 95,509 79,960
Education and travel 103,563 91,896 93,644
Printing and supplies 171,376 113,526 91,824
Telephone 156,969 94,985 86,385
Expenses on other real estate owned, net 18,449 22,500 90,849
Other 545,458 440,506 532,024
_________ _________ _________
6,072,129 4,882,130 4,653,303
_________ _________ _________
INCOME BEFORE INCOME TAXES
AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGE 1,788,155 1,743,141 976,434
PROVISION FOR INCOME TAXES 546,545 601,500 331,500
_________ _________ _________
(Continued)
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
MIDSOUTH BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
=======================================================================================
1995 1994 1993
<S> <C> <C> <C>
INCOME BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE 1,241,610 1,141,641 644,934
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE FOR INCOME TAXES - - 600,000
_________ _________ _________
NET INCOME 1,241,610 1,141,641 1,244,934
PREFERRED DIVIDEND REQUIREMENT 38,142 - -
_________ _________ _________
INCOME AVAILABLE TO COMMON
SHAREHOLDERS $1,203,468 $1,141,641 $1,244,934
========= ========= =========
EARNINGS PER COMMON SHARE:
PRIMARY
Before cumulative effect of accounting chan $1.24 $1.20 $0.73
Cumulative effect of accounting change - - .67
_____ _____ _____
Primary earnings per common share $1.24 $1.20 $1.40
===== ===== =====
FULLY DILUTED
Before cumulative effect of accounting chan $1.15 $1.20 $0.73
Cumulative effect of accounting change - - .67
_____ _____ _____
Fully diluted earnings per common share $1.15 $1.20 $1.40
===== ===== =====
See notes to consolidated financial statements.
(Concluded)
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
MIDSOUTH BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Unrealized
Gains (Losses)
on Securities Retained
Preferred Stock Common Stock ESOP Available Earnings
__________________ ________________ Surplus Obligation for Sale (Deficit) Total
Shares Amount Shares Amount
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1993 - $ - 597,439 $5,314,454 $ - $(107,984) $ -$(1,782,806) $3,423,664
Change in par value (5,254,710) 5,254,710
Issuance of common stock 13,530 1,353 110,199 111,552
Exercise of warrants 59,669 5,967 373,756 379,723
Net income 1,244,934 1,244,934
ESOP obligation repayments 15,093 15,093
Increase in unrealized
gain on securities
available-for-sale, net
of tax 293,700 293,700
_______ _______ _______ _________ _________ ________ ________ _________ _________
BALANCE, DECEMBER 31, 1993 - - 670,638 67,064 5,738,665 (92,891) 293,700 (537,872) 5,468,666
Issuance of common stock 9,829 983 99,329 100,312
Issuance of stock dividend 33,521 3,352 306,076 (310,071) (643)
Net income 1,141,641 1,141,641
ESOP obligation repayments 19,870 19,870
Net change in unrealized
gain (loss) on securities
available-for-sale, net
of tax (1,356,500) (1,356,500)
_______ _______ _______ _________ _________ ________ ________ _________ _________
BALANCE, DECEMBER 31, 1994 - - 713,988 71,399 6,144,070 (73,021)(1,062,800) 293,698 5,373,346
Issuance of common stock 9,685 968 123,865 124,833
Issuance of convertible
preferred stock 187,286 2,668,826 2,668,826
Costs incurred in
connection with
issuance of preferred
stock (120,525) (120,525)
Stock split on common
stock effected in the
form of a dividend 240,267 24,027 (24,027) (782) (782)
Dividends paid on
common stock (57,676) (57,676)
Dividends accrued on
preferred stock (38,142) (38,142)
Stock options exercised 4,000 400 41,060 41,460
Net income 1,241,610 1,241,610
ESOP obligation repayments 18,864 18,864
Net change in unrealized
gain (loss) on securities
available-for-sale,
net of tax 1,161,750 1,161,750
_______ _________ _______ _________ _________ ________ ________ _________ __________
BALANCE, DECEMBER 31, 1995 187,286 $2,668,826 967,940 $ 96,794 $6,164,443 $ (54,157) $ 98,950 $1,438,708 $10,413,564
======= ========= ======= ========= ========= ======== ======== ========= ==========
See notes to consolidated financial statements.
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
MIDSOUTH BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
================================================================================
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $1,241,610 $1,141,641 $1,244,934
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 393,418 285,957 247,690
Provision for loan losses 225,000 210,000 306,500
Provision for losses on other
real estate owned 12,400 5,649 42,520
Provision for deferred income
taxes 82,367 347,500 321,500
Premium amortization, net 123,283 207,798 257,860
Gain on sales of securities - (1,179) (210,466)
Loss on sales of other real
estate owned 735 8,080 4,784
Gain on sales of premises and
equipment - (455) (4,325)
Change in accrued interest
receivable (185,054) (94,094) (28,033)
Change in accrued interest
payable 101,682 44,198 (20,212)
Change in other liabilities (423,790) 290,353 187,104
Change in other assets (82,069) (44,745) (78,361)
Increase in deferred tax asset - - (600,000)
_________ _________ _________
Net cash provided by
operating activities 1,489,582 2,400,703 1,671,495
_________ _________ _________
CASH FLOWS FROM INVESTING
ACTIVITIES:
Net decrease (increase) in interest-
bearing deposits in banks 22,073 (47,389) 4,492
Proceeds from sales of securities
available-for-sale 2,288,617 1,223,182 6,774,117
Proceeds from maturities and calls
of securities available-for-sale 8,674,925 2,940,591 8,105,502
Proceeds from maturities and calls
of securities held-to-maturity 145,946 - -
Purchases of securities available-
for-sale (10,178,931) (3,061,635) (18,566,265)
Purchases of securities held-to-
maturity (4,317,707) (370,946) -
Loan originations, net of repayments (9,631,750) (10,806,547) (9,804,366)
Purchases of premises and equipment (1,964,370) (336,703) (614,860)
Proceeds from sale of premises and
equipment - 907 8,513
Proceeds from sales of other real
estate owned 77,945 84,992 36,503
Net cash received in connection with
acquisition 3,388,259 - -
_________ _________ _________
Net cash used in investing
activities (11,494,993) (10,373,548) (14,056,364)
__________ __________ __________
(Continued)
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
MIDSOUTH BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
========================================================================================
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net increase in deposits 27,763,324 6,078,409 10,245,446
Net (decrease) increase in repurchase
agreements (125,826) (456,945) 415,494
Issuance of notes payable 1,000,000 544,916 -
Repayments of notes payable (1,150,279) (115,293) (152,563)
Proceeds from issuance of common stock 124,833 100,312 111,552
Payment of common stock dividends (57,676) - -
Payment of fractional shares resulting
from stock dividend (782) (643) -
Proceeds from exercise of stock options
and warrants 28,561 - 379,723
Costs incurred in connection with
issuance of preferred stock (120,524) - -
___________ __________ ___________
Net cash provided by financing
activities 27,461,631 6,150,756 10,999,652
___________ __________ ___________
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 17,456,220 (1,822,089) (1,385,217)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 8,641,989 10,464,078 11,849,295
___________ __________ ___________
CASH AND CASH EQUIVALENTS AT
END OF YEAR $ 26,098,209 $ 8,641,989 $ 10,464,078
=========== ========== ===========
SUPPLEMENTAL CASH FLOW
INFORMATION:
Interest paid $ 3,093,801 $ 1,931,905 $ 1,824,146
=========== ========== ===========
Income taxes paid $ 466,723 $ 5,000 $ 12,280
=========== ========== ===========
See notes to consolidated financial statements.
(Concluded)
</TABLE>
32
<PAGE>
MIDSOUTH BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
_____________________________________________________________________
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements of MidSouth Bancorp, Inc.
(the Company) and its wholly owned subsidiary MidSouth National
Bank (the Bank), have been prepared in accordance with generally
accepted accounting principles and conform with general
practices within the banking industry. A summary of significant
accounting policies follows:
Description of Business - The Company is a bank holding company
headquartered in Lafayette, Louisiana, providing banking
services to commercial and retail customers through its wholly
owned subsidiary, the Bank.
The Bank is community oriented and focuses primarily on offering
competitive commercial and consumer loan and deposit services to
individuals and small to middle market business.
Consolidation - The consolidated financial statements of the
Company include the accounts of the Company and the Bank.
Significant intercompany transactions and balances have been
eliminated.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles require
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, and disclosures of
contingent assets and liabilities at the date of the financial
statement and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
Securities - Securities are being accounted for in accordance
with Statement of Financial Accounting Standards (SFAS) No. 115
"Accounting for Certain Investments in Debt and Equity
Securities." SFAS No. 115, which was adopted effective December
31, 1993, requires the classification of securities into one of
three categories: trading, available-for-sale, or held-to-
maturity.
Management determines the appropriate classification of debt
securities at the time of purchase and re-evaluates this
classification periodically. Trading account securities are
held for resale in anticipation of short-term market movements.
Debt securities are classified as held-to-maturity when the
Company has the positive intent and ability to hold the
securities to maturity. Securities not classified as held-to-
maturity or trading are classified as available-for-sale. The
Company had no trading account securities during the three years
ended December 31, 1995. Held-to-maturity securities are stated
at amortized cost. Available-for-sale securities are stated at
market value, with unrealized gains and losses, net of income
taxes, reported as a separate component of stockholders' equity
until realized.
The amortized cost of debt securities classified as held-to-
maturity or available-for-sale is adjusted for amortization of
premiums and accretion of discounts to maturity or, in the case
of mortgage-backed securities, over the estimated life of the
security. Amortization, accretion and accrued interest are
included in interest income on securities. Realized gains and
losses, and declines in value judged to be other than temporary,
are included in net securities gains. Gains and losses on the
sale of securities available-for-sale are determined using the
specific-identification method.
Loans -Loan origination fees and certain direct origination
costs are capitalized and recognized as an adjustment of the
yield on the related loan. Interest on commercial and real
33
<PAGE>
estate mortgage loans is recorded as income based upon the
principal amount outstanding. Unearned income on installment
loans is credited to operations based on a method which
approximates the interest method. Where doubt exists as to
collectibility of a loan, the accrual of interest is
discontinued and payments received are applied first to
principal. Upon such discontinuances all unpaid accrued
interest is reversed. Interest income is recorded after
principal has been satisfied and as payments are received.
The Company considers a loan to be impaired when, based upon
current information and events, it believes it is probable that
the Company will be unable to collect all amounts due according
to the contractual terms of the loan agreement. The Company's
impaired loans include troubled debt restructurings, and
performing and non-performing major loans in which full payment
of principal or interest is not expected. The Company
calculates a reserve required for impaired loans based on the
present value of expected future cash flows discounted at the
loan's effective interest rate, or at the loan's observable
market price or the fair value of its collateral.
Generally, loans of all types which become 90 days delinquent
are in the process of collection through repossession,
foreclosure or have been deemed currently uncollectible. Loans
deemed currently uncollectible are charged-off against the
reserve account. As a matter of policy, loans are placed on a
non-accrual status where doubt exist as to collectibility.
Reserve for Loan Losses - The reserve for loan losses is a
valuation account available to absorb probable losses on loans.
All losses are charged to the reserve for loan losses when the
loss actually occurs or when a determination is made that a loss
is likely to occur; recoveries are credited to the reserve for
loan losses at the time of recovery. Periodically during the
year management estimates the likely level of future losses to
determine whether the reserve is adequate to absorb reasonable
anticipated losses in the existing portfolio based on the
Company's past loan loss experience, known inherent risks in the
portfolio, adverse situations that may affect the borrowers
ability to repay, the estimated value of any underlying
collateral and current economic conditions. Based on these
estimates, the reserve for loan losses is increased by charges
to income and decreased by charge-offs (net of recoveries).
Premises and Equipment - Premises and equipment are stated at
cost less accumulated depreciation and amortization.
Depreciation and amortization are computed using the straight-
line method over the estimated useful lives of the assets which
generally range from 3 to 30 years. Leasehold improvements are
amortized over the estimated useful lives of the improvements or
the term of the lease, whichever is shorter.
Other Real Estate Owned - Real estate properties acquired
through, or in lieu of, loan foreclosure are to be sold and are
initially recorded at fair value at the date of foreclosure
establishing a new cost basis. After foreclosure, valuations
are periodically performed by management and the real estate is
carried at the lower of carrying amount or fair value less cost
to sell. Revenue and expenses from operations and changes in
the valuation allowance are included in loss on foreclosed real
estate.
Income Taxes - Deferred income taxes are provided for timing
differences between items of income or expense reported in the
consolidated financial statements and those reported for income
tax purposes.
In the first quarter of the year ending December 31, 1993, the
Company adopted the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes"
(SFAS No. 109). This Statement requires, among other things,
recognition of future tax benefits, measured by enacted tax
rates, attributable to deductible temporary differences between
financial statement and income tax basis of assets and
liabilities and to tax net operating loss carryforwards, to the
extent that realization of such benefits is more likely than
not.
34
<PAGE>
Goodwill - Goodwill represents the excess of the cost over the
fair value of net assets purchased and is being amortized over
15 years.
Earnings Per Common Share - In 1995, the computation of primary
earnings per share is based on the weighted average number of
outstanding common shares and additional shares assuming the
exercise of stock options. The computation of fully diluted
earnings per share further assumes the conversion of the
convertible preferred stock. In 1994 and 1993, both primary and
fully diluted earnings per common share were based on the
weighted average number of outstanding common shares since the
outstanding common stock equivalents did not have a material
dilutive effect in those years. The shares used in the
computations for the three years ended December 31, 1995 were as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Primary 969,971 949,819 888,680
Fully diluted 1,077,003 949,819 888,680
</TABLE>
Statement of Cash Flows - For purposes of reporting cash flows,
cash and cash equivalents include cash on hand, amounts due from
banks, and federal funds sold. Generally, federal funds are
purchased or sold for one-day periods.
Reclassifications - Certain reclassifications have been made to
the 1994 and 1993 amounts to conform to the classifications
adopted for reporting in 1995.
2. ACQUISITION
On July 31, 1995, the Company completed the merger and
acquisition of Sugarland Bancshares, Inc. The Company issued
187,286 shares of its cumulative convertible preferred stock to
former shareholders of Sugarland Bancshares, Inc. The
transaction was accounted for as a purchase.
<TABLE>
<CAPTION>
<S> <C>
Fair value of assets, excluding cash $13,781,700
Cash acquired 3,388,259
__________
Liabilities assumed $17,169,959
==========
</TABLE>
3. CASH AND DUE FROM BANKS
The Bank is required to maintain average reserve balances with
the Federal Reserve Bank. "Cash and due from banks" in the
consolidated statements of condition included amounts so
restricted of $1,623,000 and $908,000 at December 31, 1995 and
1994, respectively.
35
<PAGE>
4. SECURITIES
The portfolio of securities consisted of the following:
<TABLE>
<CAPTION>
December 31, 1995
_________________________________________________
Gross Gross
Amortized Unrealized Unrealized Fair
Available-for-Sale Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury securities $11,958,890 $146,197 $ 35,650 $12,069,437
U.S. Government agencies 1,140,551 7,895 4,656 1,143,790
Obligations of states and
political subdivisions 212,271 10,577 - 222,848
Mortgage-backed securities 15,006,892 187,141 21,624 15,172,409
Collateralized mortgage
obligations 4,826,975 728 21,950 4,805,753
Mutual funds 2,000,000 - 78,900 1,921,100
Other 722,439 811 - 723,250
__________ _______ _______ __________
$35,868,018 $353,349 $162,780 $36,058,587
========== ======= ======= ==========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994
_________________________________________________
Gross Gross
Amortized Unrealized Unrealized Fair
Available-for-Sale Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 9,853,194 $ 5,924 $ 288,415 $ 9,570,703
U.s. Government agencies 2,430,718 4,474 9,500 2,425,692
Obligations of states and
political subdivisions 212,271 16,890 - 229,161
Mortgage-backed securities 12,710,062 4,213 652,182 12,062,093
Collateralized mortgage
obligations 5,149,781 - 484,085 4,665,696
Mutual funds 2,000,000 - 136,800 1,863,200
Other 553,250 - 319 552,931
___________ ________ __________ ___________
$32,909,276 $ 31,501 $1,571,301 $31,369,476
=========== ======== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1995
_______________________________________________________
Gross Gross
Amortized Unrealized Unrealized Fair
Held-to-Maturity Cost Gains Losses Value
<S> <S> <C> <C> <C>
Nontaxable obligations
of states and
political subdivisions $4,545,849 $ 189,495 $ - $4,735,344
========== ========= =========== ==========
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
December 31, 1994
__________________________________________
Gross Gross
Amortized Unrealized Unrealized Fair
Held-to-Maturity Cost Gains Losses Value
<S> <C> <C> <C> <C>
U. S. Treasury securities $120,946 $ - $ - $120,946
Nontaxable obligations of states and
political subdivisions 250,000 1,687 359 251,328
_______ _______ ______ _______
$370,946 $ 1,687 $ 359 $372,274
======= ======= ====== =======
</TABLE>
The amortized cost and fair value of securities at December 31,
1995, by contractual maturity, are shown below. Expected
maturities may differ from contractual maturities because
borrowers may have the right to call or prepay obligations with
or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Fair
Available-for-Sale Cost Value
<S> <C> <C>
Due in one year or less $ 5,732,652 $ 5,669,605
Due after one year through five years 7,689,894 7,747,165
Due after five years through ten years 1,677,947 1,730,000
Due after ten years 311,110 311,110
Mortgage-backed securities 19,833,976 19,978,269
Other securities 622,439 622,438
__________ __________
$35,868,018 $36,058,587
========== ==========
</TABLE>
<TABLE>
<CAPTION>
Amortized Fair
Held-to-Maturity Cost Value
<S> <C> <C>
Due in one year or less $ 20,000 $ 20,316
Due after one year through five years 185,000 193,623
Due after five years through ten years 383,043 394,176
Due after ten years 3,957,806 4,127,229
_________ _________
$4,545,849 $4,735,344
========= =========
</TABLE>
Proceeds from sales of securities available-for-sale during 1995
were $2,288,617. No gains or losses were recognized of those
sales. Proceeds from sales of securities available-for-sale
during 1994 and 1993 were $1,223,182 and $6,774,117,
respectively. Gross gains of $1,179 and $210,667 were realized
on those sales, respectively. There were no gross losses
realized on sales during 1994. Gross losses realized on sales
during 1993 were $201. The related income tax provisions on
gains on the sales of investment securities was $400 in 1994,
and $71,500 in 1993.
Securities with an aggregate carrying value of approximately
$13,151,000 and $6,200,000 at December 31, 1995 and 1994 were
pledged to secure public funds on deposit and for other purposes
required or permitted by law.
37
<PAGE>
The Bank has three Aaa rated whole-loan collateralized mortgage
obligations (CMO's) classified as available-for-sale which have
sequential pay structures and have estimated average lives of
two to six years.
5. LOANS
The loan portfolio consisted of the following:
<TABLE>
<CAPTION>
December 31,
__________________________
1995 1994
<S> <C> <C>
Commercial, financial and agricultural $25,748,496 $22,057,790
Lease financing receivable 2,349,525 2,485,512
Real estate - mortgage 27,895,794 20,318,642
Real estate - construction 2,257,013 1,268,712
Installment loans to individuals 20,586,821 14,231,699
Other 40,956 69,920
__________ __________
78,878,605 60,432,275
Less allowance for loan losses (1,051,898) (873,934)
__________ __________
$77,826,707 $59,558,341
========== ==========
</TABLE>
The Bank generally makes loans in its market areas of Lafayette,
Jefferson Davis, Iberia, St. Landry and St. Martin Parishes.
Loans on which the accrual of interest has been discontinued
amounted to $387,453 and $249,693 at December 31, 1995 and 1994,
respectively. If interest on those loans had been accrued, such
income would have approximated $42,000, $25,000 and $39,000 for
the years ended December 31, 1995, 1994 and 1993. Interest
income on those loans, which is recorded only when received,
amounted to $16,808, $8,385 and $18,470 for 1995, 1994 and 1993,
respectively.
An analysis of the activity in the allowance for loan losses is
as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
_______________________________________
1995 1994 1993
<S> <C> <C> <C>
Balance at beginning of year $ 873,934 $ 824,329 $ 837,203
Provision for loan losses 225,000 210,000 306,500
Addition of acquired reserve 115,093 - -
Recoveries 91,481 165,730 208,689
Loans charged off (253,610) (326,125) (528,063)
________ ________ ________
Balance at end of year $ 1,051,898 $ 873,934 $ 824,329
========= ======== ========
</TABLE>
During the year ended December 31, 1995, approximately $18,000
of loans were transferred to other real estate owned. There
were no transfers of loans to other real estate owned in 1994.
As of December 31, 1995 and 1994, loans outstanding to certain
directors, officers, and their affiliates were $512,103 and
$561,011, respectively. In the opinion of management, all
transactions entered into between the Bank and such related
parties have been and are made in the ordinary course of
business, on the same terms and conditions, including interest
rates and collateralization, as similar transactions with
unaffiliated persons and do not involve more than the normal
risk of collection.
38
<PAGE>
An analysis of activity with respect to these related party
loans is as follows:
<TABLE>
<CAPTION>
December 31,
_____________________
1995 1994
<S> <C> <C>
Beginning balance $ 561,011 $ 700,660
New loans 312,328 241,593
Repayments (361,236) (381,242)
________ ________
Ending balance $ 512,103 $ 561,011
======== ========
</TABLE>
At December 31, 1995, the recorded investment in loans that are
considered to be impaired was $406,745. Included in this amount
is $267,610 of impaired loans for which the related allowance
for credit losses is $140,000 and $139,135 of impaired loans
that do not have an allowance for credit losses. Two credits
were removed and one added to total loans considered impaired
during 1995. Interest income recognized on these loans amounted
to approximately $18,600 for the year ended December 31, 1995.
6. BANK PREMISES AND EQUIPMENT
Premises and equipment consisted of the following:
<TABLE>
<CAPTION>
December 31,
_______________________
1995 1994
<S> <C> <C>
Buildings and improvements $ 2,643,069 $ 1,570,923
Furniture, fixtures, and equipment 3,215,533 1,897,887
Automobiles 180,264 114,776
Leasehold improvements 385,521 130,246
Construction-in-process 61,857 _
__________ __________
6,486,244 3,713,832
Less accumulated depreciation and amortization (1,953,634) (1,596,320)
__________ __________
$ 4,532,610 $ 2,117,512
========== ==========
</TABLE>
39
<PAGE>
7. DEPOSITS
Deposits consisted of the following:
<TABLE>
<CAPTION>
December 31,
_________________________
1995 1994
<S> <C> <C>
Non-interest bearing $ 40,471,206 $ 31,035,865
Savings and money market 27,526,736 21,355,647
NOW accounts 22,100,079 9,998,596
Time deposits under $100,000 36,027,950 23,837,982
Time deposits over $100,000 12,903,592 10,262,265
___________ ___________
$139,029,563 $ 96,490,355
=========== ===========
</TABLE>
The bank has no brokered deposits and there are no major
concentrations of deposits.
8. NOTES PAYABLE
Notes payable consisted of the following:
<TABLE>
<CAPTION>
December 31,
_____________________
1995 1994
<S> <C> <C>
Note payable to a financial institution $463,197 $ 577,980
FHLB borrowings 509,420 544,916
ESOP note payable to a financial institution - 73,021
_______ _________
$972,617 $1,195,917
======= =========
</TABLE>
The note payable to a financial institution bears interest at
prime plus 1%, is dated July 18, 1989, and is due on July 20,
1999. This note is payable in 120 monthly installments at
increasing amounts over the term of the loan. In addition, the
payments may be changed under the terms of the note when the
interest rate is adjusted. At December 31, 1995, this note bore
an interest rate of 9.5%. The Company has pledged all of the
Bank's stock as collateral for the note. A portion of the loan
is guaranteed by a group of eleven individuals, some of whom are
Directors of the Company, in the amount of $30,000 each. The
Company's ability to meet its debt requirements will depend upon
its ability to receive sufficient dividends from the Bank.
At December 31, 1995, the Bank had four FHLB borrowings
outstanding. These borrowings bear interest at rates between
5.49% and 7.28%, and have maturities from February 1999 to June
2001. Monthly principal and interest payments ranges from
approximately $350 on the smallest borrowing to approximately
$4,710 on the largest borrowing, with balloon payments due at
maturity. The borrowings are secured by a blanket floating lien
on approximately $21,600,000 of the Bank's mortgage loans.
Prior to 1995 the ESOP note payable to a financial institution
was included in the Company's notes payable, with a
corresponding reduction of stockholders' equity because the
primary source of loan repayments is contributions by the
Company to the ESOP. During 1995, the ESOP note payable was
paid in full to the financial institution with proceeds received
from a loan from the Bank. Therefore, the note payable and the
related loan were eliminated in the consolidation.
40
<PAGE>
Aggregate annual maturities on notes payable are as follows:
<TABLE>
<CAPTION>
<S> <C>
1996 $165,928
1997 181,516
1998 198,456
1999 202,646
2000 48,106
Thereafter 175,965
_______
$972,617
=======
</TABLE>
9. COMMITMENTS AND CONTINGENCIES
At December 31, 1995, future annual minimum rental payments due
under noncancellable operating leases, primarily for land, are
as follows:
<TABLE>
<CAPTION>
<S> <C>
1996 $ 339,290
1997 350,780
1998 337,060
1999 324,243
2000 331,459
Thereafter through 2058 6,033,808
_________
$7,716,640
=========
</TABLE>
Minimum rental payments have not been reduced by minimum
sublease rentals of approximately $91,000 due in the future
under noncancellable subleases.
Rental expense under operating leases for 1995, 1994 and 1993
was $266,558, $230,756, and $164,658, respectively. Sublease
income amounted to $31,800 in 1995 and 1994.
The Company and its subsidiaries are parties to various legal
precedings arising in the ordinary course of business. In the
opinion of management, the ultimate resolution of these legal
proceedings will not have a material adverse effect on the
Company's financial position or results of operations.
41
<PAGE>
10.INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes. Significant components of the
Bank's deferred tax assets and liabilities as of December 31,
1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Deferred tax assets:
Unrealized loss on securities $ - $477,000
Writedowns of other real estate 58,971 23,134
Allowance for possible loan losses 16,113 -
Other 12,791 18,814
_________ ________
Total deferred tax assets 87,875 518,948
_________ ________
Deferred tax liabilities:
Allowance for possible loan losses - (36,572)
Depreciation (97,118) (58,208)
Unrealized gain on securities (91,619) -
Other (156,251) (30,295)
_________ ________
Total deferred tax liabilities (344,988) (125,075)
_________ ________
Net deferred tax (liability)/asset $(257,113) $393,873
========= ========
</TABLE>
Components of income tax expense are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <S> <S> <S>
Current $464,178 $254,000 $ 10,000
Deferred 82,367 347,500 321,500
________ ________ ________
$546,545 $601,500 $331,500
======== ======== ========
</TABLE>
The actual tax expense does not materially differ from the
"expected" tax expense, computed by applying the U.S. federal
corporation tax rate of 34% to earnings before income taxes in
1995, 1994 and 1993.
42
<PAGE>
11.EMPLOYEE BENEFITS
The Company sponsors a leveraged employee stock ownership plan
(ESOP) that covers all employees who meet minimum age and
service requirements. The Company makes annual contributions to
the ESOP in amounts as determined by the Board of Directors.
These contributions are used to pay debt service and purchase
additional shares. The ESOP shares initially were pledged as
collateral for its debt. As the debt is repaid, shares are
released from collateral and allocated to active employees,
based on the proportion of debt service paid in the year. Prior
to 1995, the ESOP note payable was to a financial institution.
Because the source of the loan payments are contributions
received by the ESOP from the Company, such debt was included in
the Company's notes payable, with a corresponding reduction of
stockholders' equity. During 1995, the ESOP note payable to the
financial institution was paid in full with proceeds received
from a loan from the Bank. The balance of the ESOP note payable
to the Bank was $54,157 at December 31, 1995. In accordance
with Statement of Position 93-6 (SOP), shares purchased
subsequent to December 31, 1992 are based on the current market
price of the shares. The Company has elected not to apply the
provisions of the SOP to shares purchased on or before December
31, 1992. ESOP compensation expense was $78,000 for the year
ended December 31, 1995. ESOP compensation expense was $60,000
in each of the years ended December 31, 1994 and 1993. The ESOP
shares as of December 31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Allocated shares 87,115 58,968
Shares released for allocation 1,804 1,927
Unreleased shares 4,371 6,175
______ ______
Total ESOP shares 93,290 67,070
====== ======
Fair value of unreleased shares at
December 31, $67,226 $71,012
====== ======
</TABLE>
12.STOCKHOLDERS' EQUITY
On July 31, 1995, the Company issued 187,286 shares of Series A
Cumulative Convertible Preferred Shares with a stated value of
$14.25. The Convertible Preferred Shares are convertible at any
time at the option of the holder into common stock, at the rate
of 1.333 shares of Common Stock for each Convertible Preferred
Share. On or after July 31, 2000, the Convertible Preferred
Shares are redeemable, in whole or in part, at the option of the
Company at the stated value of $14.25. The liquidation value of
the Convertible Preferred Stock is $14.25 plus accrued
dividends. Dividends on the Convertible Preferred Shares are
determined each year based on an annual rate, fixed on December
31 of each year for the ensuing calendar year and was 6.11% at
December 31, 1995. The dividends are cumulative and payable
quarterly in arrears. Holders of Convertible Preferred Shares
are not entitled to normal voting rights unless certain
conditions exists.
The payment of dividends by the Bank to the Company is
restricted by various regulatory and statutory limitations. In
1996, the Bank will have available to pay dividends to the
Parent Company, without regulatory approval approximately
$2,365,000, plus net retained income earned in 1996 prior to the
dividend declaration date.
43
<PAGE>
The Company has granted options to certain key employees to
purchase shares of the Company's common stock at $7.14 per
share. These options expire on December 31, 1996. As of
December 31, 1995, 4,000 of these options have been exercised.
At December 31, 1995 and 1994, 24,000 and 21,000 options,
respectively, remained unexercised.
13.FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Bank is a party to various financial instruments with off-
balance sheet risk in the normal course of business to meet the
financing needs of its customers and to reduce its own exposure
to fluctuations in interest rates. These financial instruments
include commitments to extend credit and standby letters of
credit. Those instruments involve, to varying degrees, elements
of credit and interest rate risk in excess of the amounts
recognized in the statements of financial condition. The
contract or notional amounts of those instruments reflect the
extent of the involvement the Bank has in particular classes of
financial instruments.
The Bank's exposure to loan loss in the event of nonperformance
by the other party to the financial instrument for commitments
to extend credit, standby letters of credit and financial
guarantees is represented by the contractual amount of those
instruments. The Bank uses the same credit policies, including
considerations of collateral requirements, in making these
commitments and conditional obligations as it does for on-
balance sheet instruments.
<TABLE>
<CAPTION>
Contract or Notional
Amount
________________________
1995 1994
<S> <C> <C>
Financial instruments whose contract
amounts represent credit risk:
Commitments to extend credit $11,621,000 $6,859,000
Standby letters of credit 704,000 670,000
</TABLE>
Commitments to extend credit are agreements to lend to a
customer as long as there is no violation of any condition
established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require
payment of a fee. Since many of the commitments are expected to
expire without being fully drawn upon, the total commitment
amounts disclosed above do not necessarily represent future cash
requirements.
Standby letters of credit and financial guarantees are
conditional commitments issued by the Bank to guarantee the
performance of a customer to a third party. The credit risk
involved in issuing letters of credit is essentially the same as
that involved in extending loan facilities to its customers.
Approximately 63% of these letters of credit were secured by
marketable securities, cash on deposits or other assets at
December 31, 1995.
14.REGULATORY MATTERS
The Bank is required to maintain certain minimum capital levels.
At December 31, 1995, the Bank was in compliance with statutory
minimum capital requirements. Following is a summary of the
actual capital levels at December 31, 1995:
<TABLE>
<CAPTION>
Actual
<S> <C>
Core Capital vs. Risk Assets (Tier 1) 12.11%
Qualifying Capital vs. Risk Assets (Tier 2) 13.36%
Core Capital vs. Total Assets (Leveraged) 6.99%
</TABLE>
44
Risk-based capital requirements are intended to make regulatory
capital more sensitive to risk elements of the Bank. Currently,
the Bank is required to maintain a minimum risk-based capital
ratio of 8.0%, with not less than 4.0% in Tier 1 capital. In
addition, the Bank must maintain a minimum Tier 1 leverage ratio
(Tier 1 capital to total assets) of at least 3.0% based upon the
regulators latest composite rating of the institutions.
The Federal Deposit Insurance Corporation Improvement Act of
1991 ("FDICIA") required that each federal banking agency
implement prompt corrective actions for institutions that it
regulates. The rules provide that an institution is "well
capitalized" if its total risk-based capital ratio is 10% or
greater, its Tier 1 risked-based capital ratio is 6% or greater,
its leverage is 5% or greater and the institution is not subject
to a capital directive. Under this regulation, the Bank is
deemed to be "well capitalized" as of December 31, 1995 based
upon the most recent notification from their regulators. There
are no conditions or events since those notifications that
management believes would change their classifications.
15.DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the
fair value of each class of financial instruments for which it
is practicable to estimate that value:
Cash, Due From Banks and Federal Funds Sold - For those short-
term instruments, the carrying amount is a reasonable estimate
of fair value.
Securities - For securities, fair value equals quoted market
price, if available. If a quoted market price is not available,
fair value is estimated using quoted market prices for similar
securities.
Loans - The fair value of loans is estimated by discounting the
future cash flows using the current rates at which similar loans
would be made to borrowers with similar credit ratings and for
the same remaining maturities.
Deposits - The fair value of demand deposits, savings accounts,
and certain money market deposits is the amount payable on
demand at the reporting date. The fair value of fixed-maturity
certificates of deposit is estimated using the rates currently
offered for deposits of similar remaining maturities.
Long-Term Bonds and Notes - Rates currently available to the
Company for debt with similar terms and remaining maturities are
used to estimate fair value of existing debt.
Commitments - The fair value of commitments to extend credit was
not significant.
The estimated fair values of the Company's financial instruments
are as follows at December 31, 1995 (in thousands):
<TABLE>
<CAPTION>
1995
___________________
Carrying Fair
Amount Value
<S> <C> <C>
Financial Assets:
Cash, due from banks and federal fund sold $26,098 $26,098
Securities available-for-sale 36,059 36,059
Securities held-to-maturity 4,546 4,735
Loans, net 77,827 76,937
Financial liabilities:
Non-interest bearing deposits $40,471 $40,471
Interest bearing deposits 98,558 98,860
Notes payable 973 960
</TABLE>
45
<PAGE>
16.CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY
Summarized financial information for MidSouth Bancorp, Inc.
(parent company only) follows:
<TABLE>
<CAPTION>
STATEMENTS OF CONDITION
December 31,
_______________________
1995 1994
ASSETS
<S> <C> <C>
Cash and interest-bearing deposits in banks $ 90,235 $ 23,443
Investment securities - 120,946
Other assets 228,143 113,732
Investment in subsidiary 10,752,502 5,835,618
__________ _________
$11,070,880 $6,093,739
========== =========
LIABILITIES & STOCKHOLDERS' EQUITY
Liabilities:
Note payable to a financial institution $ 463,197 $ 651,001
Note payable to Bank 99,119 69,392
Other liabilities 95,000 -
__________ _________
Total liabilities 657,316 720,393
__________ _________
Stockholders' Equity:
Preferred stock 2,668,826 -
Common stock 96,794 71,399
Surplus 6,164,443 6,144,070
ESOP obligation (54,157) (73,021)
Unrealized gains (losses) on securities
available-for-sale, net of deferred taxes 98,950 (1,062,800)
Retained earnings 1,438,708 293,698
__________ _________
Total stockholders' equity 10,413,564 5,373,346
__________ _________
$11,070,880 $6,093,739
========== =========
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF INCOME
Years Ended December 31,
___________________________________
1995 1994 1993
<S> <C> <C> <C>
Revenue:
Interest income $ 5,080 $ 7,091 $ 5,300
Equity in undistributed income
of subsidiary 1,350,358 1,251,499 1,269,489
Rental income 31,800 31,800 -
_________ _________ _________
1,387,238 1,290,390 1,274,789
_________ _________ _________
Expenses:
Interest on notes payable 55,884 56,906 59,540
Professional fees 68,169 76,951 64,942
Other expense 89,575 71,591 60,976
_________ _________ _________
213,628 205,448 185,458
_________ _________ _________
Income before income taxes and
cumulative effect of accounting change 1,173,610 1,084,942 1,089,331
Income tax benefit 68,000 56,699 61,603
_________ _________ _________
Income before cumulative effect
of accounting change 1,241,610 1,141,641 1,150,934
Cumulative effect of accounting change
for income taxes - - 94,000
_________ _________ _________
Net income $1,241,610 $1,141,641 $1,244,934
========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
Years Ended December 31,
____________________________________
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $ 1,241,610 $ 1,141,641 $ 1,244,934
Adjustments to reconcile net
income to net cash used in
operating activities:
Equity in undistributed
income of Bank (1,350,358) (1,251,499) (1,269,491)
Dividends from Bank 220,524 - -
Tax benefit received from Bank 12,899 - -
Change in other assets (114,411) 135,058 (248,790)
Change in other liabilities 95,000 (12,955) 799
__________ _________ __________
Net cash provided by (used in)
operating activities 105,264 12,245 (272,548)
__________ _________ __________
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
Years Ended December 31,
________________________________
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of investment securities - (120,946) (98,042)
Proceeds from maturities of investment
securities 120,946 98,042 -
________ ________ ________
Net cash provided by (used in) investing 120,946 (22,904) (98,042)
________ ________ ________
CASH FLOWS FROM FINANCING
ACTIVITIES:
Sale of common stock 124,833 100,312 111,552
Payment of fractional shares resulting from
stock dividend (782) (643) -
Exercise of stock options and warrants 28,561 - 379,723
Payment of common stock dividends (57,676) - -
Issuance of note payable to Bank,
net of repayments 40,669 - 92,292
Repayments of notes payable to
other financial institutions (174,499) (138,190) (152,563)
Cost incurred in connection with issuance
of preferred stock (120,524) - -
________ ________ ________
Net cash (used in) provided by financing (159,418) (38,521) 431,004
________ ________ ________
NET INCREASE (DECREASE)
IN CASH AND CASH EQUIVALENTS 66,792 (49,180) 60,414
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 23,443 72,623 12,209
________ ________ ________
CASH AND CASH EQUIVALENTS
AT END OF YEAR 90,235 23,443 72,623
======== ======== ========
*********
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
Selected Quarterly Financial Data
(unaudited)
1995
_________________________________________________________
(Dollars in thousands, except
per share data) IV III II I
______ ______ ______ ______
<S> <C> <C> <C> <C>
Interest income $2,849 $2,636 $2,213 $2,030
Interest Expense 1,011 908 708 598
______ ______ ______ ______
Net interest income 1,838 1,728 1,505 1,432
Provision for possible credit losses 75 60 35 55
______ ______ ______ ______
Net interest income after provision 1,763 1,668 1,470 1,377
for possible credit losses
Noninterest income,
excluding securities gains 423 413 389 358
Net securities gains - - - -
Noninterest expense 1,778 1,601 1,418 1,276
______ ______ ______ ______
Income before income tax expense,
extraordinary item and cumulative
effect of accounting change 408 480 441 459
Income tax expense 90 154 142 161
______ ______ ______ ______
Net income 318 326 299 298
Preferred stock dividend requirement (38) - - -
______ ______ ______ ______
Income applicable to common
shareholders $280 $326 $299 $298
====== ====== ====== ======
Earnings per common share <FN1>
Primary $0.29 $0.34 $0.31 $0.30
Fully diluted $0.26 $0.28 $0.31 $0.30
Market price
High $19.75 $13.00 $9.12 $9.30
Low $13.25 $8.74 $8.27 $8.18
Close $15.38 $13.00 $8.83 $8.18
Average shares outstanding
Primary 978,974 968,420 957,557 955,345
Fully diluted 1,228,064 1,138,192 957,557 955,345
<FN1> Earnings per share and other market data have been adjusted for
a 5% stock dividend paid by the Company on February 18, 1994 and
a four for three stock split paid on September 15, 1995.
<FN2> No effect has been given to outstanding common stock equivalents
in the first and second quarters of 1995 as no material dilutive
effect would result from the exercise of these items.
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
Selected Quarterly Financial Data
(unaudited)
1994
_________________________________________________________
(Dollars in thousands, except
per share data) IV III II I
______ ______ ______ ______
<S> <C> <C> <C> <C>
Interest income $1,976 $1,878 $1,837 $1,697
Interest Expense 521 507 483 465
______ ______ ______ ______
Net interest income 1,455 1,371 1,354 1,232
Provision for possible credit losses 45 25 60 80
______ ______ ______ ______
Net interest income after provision 1,410 1,346 1,294 1,152
for possible credit losses
Noninterest income,
excluding securities gains 336 359 367 359
Net securities gains - 1 - -
Noninterest expense 1,275 1,214 1,219 1,173
______ ______ ______ ______
Income before income tax expense,
extraordinary item and cumulative
effect of accounting change 471 492 442 338
Income tax expense 165 171 150 115
______ ______ ______ ______
Net income $306 $321 $292 $223
====== ====== ====== ======
Per common share <FN1> <FN2>
Income before extraordinary item
and cumulative effect of
accounting change $0.32 $0.34 $0.31 $0.23
Net income $0.32 $0.34 $0.31 $0.23
Market price
High $9.38 $8.91 $8.44 $7.04
Low $8.44 $7.50 $6.56 $6.66
Close $8.63 $8.35 $7.69 $6.66
Average shares outstanding
Primary 958,517 951,126 948,835 945,854
Fully Diluted 958,517 951,126 948,835 945,854
<FN1> Earnings per share and other market data have been adjusted for
a 5% stock dividend paid by the Company on February 18, 1994 and
a four for three stock split paid on September 15, 1995.
<FN2> No effect has been given to outstanding common stock equivalents
as no material dilutive effect would result from the exercise of
these items.
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
MIDSOUTH BANCORP, INC.
LOAN PORTFOLIO
LOAN MATURITIES AND SENSITIVITY TO INTEREST RATES
for the Year Ended December 31, 1995
(in thousands)
Loans at Stated Maturities Amounts Over One Year With
_______________________________________________ ____________________________________
1 Year 1 Year - Over Predetermined Floating
or Less 5 Years 5 Years Total Rates Rates Total
_______________________________________________ ____________________________________
<S> <C> <C> <C> <C> <C> <C> <C>
Commercial, Financial
and Industrial $12,582 $8,179 $4,987 $25,748 $924 $12,242 $13,166
Real Estate - Construction
and Mortgage 3,284 23,841 3,028 $30,153 25,697 1,172 26,869
Installment Loans to
Individuals 4,429 14,332 1,826 $20,587 15,584 574 16,158
Lease Financing
Receivables 140 2,210 - $2,350 2,210 - 2,210
Other 41 - - $41 - - -
_______________________________________________ ____________________________________
TOTAL $20,476 $48,562 $9,841 $78,879 $44,415 $13,988 $58,403
=============================================== ====================================
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
MIDSOUTH BANCORP, INC.
SUMMARY OF
AVERAGE DEPOSITS
(in thousands)
1995 1994
AVERAGE AVERAGE AVERAGE AVERAGE
AMOUNT YIELD AMOUNT YIELD
_______ _______ _______ _______
<S> <C> <C> <C> <C>
Non-interest bearing $31,354 0.00% $31,036 0.00%
Demand Deposits
Interest bearing Deposits
Savings, NOW, MM 40,180 2.60% 31,354 2.14%
Time Deposits 41,489 4.97% 34,100 3.50%
_______ _______
Total $113,023 2.76% $96,490 2.01%
======= =======
</TABLE>
<TABLE>
<CAPTION>
MATURITY SCHEDULE
TIME DEPOSITS OF
$100,000 OR MORE
(in thousands)
1995 1994
_______ _______
<S> <C> <C>
3 months or less $4,539 $3,942
3 months through 6 months 1,587 2,635
7 months through 12 months 4,231 2,171
over 12 months 2,547 1,514
_______ _______
Total $12,904 $10,262
======= =======
SUMMARY OF RETURN
ON EQUITY AND ASSETS
1995 1994
Return on Average Assets 0.98% 1.12%
Return on Average Equity 14.84% 20.98%
Dividend Payout Ratio
on Common Stock 4.80% N/A
Average Equity to
Average Assets (1) 6.58% 5.36%
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
MIDSOUTH BANCORP, INC.
SECURITIES PORTFOLIO
MATURITIES AND AVERAGE YIELDS
for the Year Ended December 31, 1995
(in thousands)
After 1 but After 5 but
Within 1 Year Within 5 Years Within 10 Years After 10 Years
SECURITIES AVAILABLE FOR SALE Amount Yield Amount Yield Amount Yield Amount Yield Total
____________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and U.S.
Government Agency securities $3,545 6.20% $7,628 5.65% $1,730 6.20% $311 7.75% 13,214
Obligations of State and
Political Subdivisions 103 9.00% 120 9.80% - - 223
Mortgage-backed securities
and CMOs 1,831 7.09% 9,914 6.25% 6,829 6.85% 1,404 6.88% 19,978
Other securities 101 8.00% - - 622 5.00% 723
Mutual funds 1,921 5.55% - - - 1,921
____________________________________________________________________________________________
Total Fair Value $7,501 $17,662 $8,559 $2,337 $36,059
============================================================================================
After 1 but After 5 but
Within 1 Year Within 5 Years Within 10 Years After 10 Years
HELD TO MATURITY Amount Yield Amount Yield Amount Yield Amount Yield Total
____________________________________________________________________________________________
U.S. Treasury and U.S.
Government Agency securities - - - - -
Obligations of State and
Political Subdivisions 20 5.75% 185 5.75% 383 7.35% 3,958 7.39% 4,546
____________________________________________________________________________________________
Total Amortized Cost $20 $185 $383 $3,958 $4,546
============================================================================================
</TABLE>
53
ITEM 8 - Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
Not applicable.
PART III
ITEM 9 - Directors, Executive Officers, Promotors and
Contact Persons; Compliance with Section 16(a) of the
Exchange Act
The information contained in Registrant's definitive proxy
statement for its 1996 annual meeting of shareholders with
respect to directors of the Registrant, is incorporated
herein by reference in response to this Item. Information
concerning executive officers is provided following Item 4.
ITEM 10 - Executive Compensation
The information contained in Registrant's definitive proxy
statement for its 1996 annual meeting of shareholders with
respect to executive compensation, is incorporated herein by
reference in response to this Item.
ITEM 11 - Security Ownership of Certain Beneficial Owners
and Management
The information contained in Registrant's definitive proxy
statement for its 1996 annual meeting of shareholders with
respect to security ownership of certain beneficial owners
and management, is incorporated herein by reference in
response to this Item.
ITEM 12 - Certain Relationships and Related Transactions
The information contained in Registrant's definitive proxy
statement for its 1995 annual meeting of shareholders with
respect to related party transactions is incorporated herein
by reference in response to this Item.
54
<PAGE>
ITEM 13 - Exhibits and Reports on Form 8-K.
Exhibits
Exhibit No. Description
___________ ___________
3.1 Amended and Restated Articles of
Incorporation of MidSouth Bancorp, Inc. are
included as Exhibit 3.1 to MidSouth's Annual
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.
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
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
Rport 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
MidSouth's Annual Report on Form 10-K for the
year ended December 31, 1992 and is
incorporated herein by reference.
10.5 Employment Agreementswith 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.
55
<PAGE>
10.6 Agreement and Plan of Merger between MidSouth
Bancorp, Inc. and MidSouth National Bank and
Sugarland Bancshares, Inc. and Sugarland
State Bank is included as Exhibit 10.5 to the
Company's annual report on Form 10-KSB for
the year ended December 31, 1994, and is
incorporated herein by reference.
11 Computation of Earnings Per Share
21 Subsidiaries of the Registrant
27 Financial Data Schedule
Reports on Form 8-K
Form 8-K/A filed October 13, 1995
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MIDSOUTH BANCORP, INC.
By:
C. R. Cloutier
President and Chief Executive Officer
Dated: March 13, 1996
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
Signatures Title Date
_________________ President, Chief
C. R. Cloutier Executive Officer March 13, 1996
and Director
56
<PAGE>
_________________ Chief Financial
Karen L. Hail Officer, Executive March 13, 1996
Vice President,
Secretary/Treasurer
and Director
_________________
Teri S. Stelly Controller March 13, 1996
_________________
J. B. Hargroder, Director March 13, 1996
M.D.
__________________
William M. Simmons Director March 13, 1996
_________________
Will G. Director March 13, 1996
Charbonnet, Sr.
__________________
Clayton Paul Director March 13, 1996
Hilliard
__________________
James R. Davis, Jr. Director March 13, 1996
_________________
Milton B. Kidd, Director March 13, 1996
Jr., O.D.
57
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
MidSouth National Bank
<TABLE>
<CAPTION>
MIDSOUTH BANCORP, INC. AND SUBSIDIARY EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE (Unaudited)
FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 1995 AND 1994
Fourth Quarter Fourth Quarter Year-to-Date Year-to-Date
December 31, December 31, December 31, December 31,
PRIMARY 1995 1994 1995 1994
______________ ______________ ____________ ____________
<S> <C> <C> <C> <C>
Earnings:
Income applicable to common
stock $280,104 $305,840 $1,203,468 $1,141,641
============== ============== ============ =============
Shares:
Weighted average number of
common shares outstanding 965,624 953,365 959,735 949,819
============== ============== ============ =============
Earnings per common share:
Income applicable to common
stock $0.29 $0.32 $1.25 $1.20
============== ============== ============ =============
Weighted average number of
common shares outstanding 965,624 953,365 959,735 949,819
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 13,350 5,152 10,236 -
______________ ______________ ____________ ____________
Weighted average number of
common shares outstanding,
as adjusted 978,974 958,517 969,971 949,819
============== ============== ============ =============
Primary earnings per common share $0.29 $0.32 $1.24 $1.20
============== ============== ============ =============
FULLY DILUTED
Earnings:
Net income $318,246 $305,840 $1,241,610 $1,141,641
============== ============== ============ =============
Weighted average number of
common shares outstanding 965,624 953,365 959,735 949,819
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 higher
of the average issue price
or per 13,350 5,152 12,855 4,834
Assuming conversion of
preferred stock at a
conversion rate of 1 to 1 249,090 - 104,413 -
______________ ______________ ____________ ____________
Weighted average number of
common shares outstanding,
as adjusted 1,228,064 958,517 1,077,003 954,653
============== ============== ============ =============
Fully diluted earnings per common
share $0.26 $0.32 $1.15 $1.20
============== ============== ============ =============
58
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 10,298,209
<INT-BEARING-DEPOSITS> 26,349
<FED-FUNDS-SOLD> 15,800,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 36,058,587
<INVESTMENTS-CARRYING> 4,545,849
<INVESTMENTS-MARKET> 4,735,344
<LOANS> 78,878,605
<ALLOWANCE> 1,051,898
<TOTAL-ASSETS> 151,183,241
<DEPOSITS> 139,029,563
<SHORT-TERM> 175,904
<LIABILITIES-OTHER> 591,593
<LONG-TERM> 972,617
<COMMON> 96,794
0
2,668,826
<OTHER-SE> 7,647,944
<TOTAL-LIABILITIES-AND-EQUITY> 151,183,241
<INTEREST-LOAN> 2,043,258
<INTEREST-INVEST> 629,638
<INTEREST-OTHER> 176,174
<INTEREST-TOTAL> 2,849,070
<INTEREST-DEPOSIT> 1,001,263
<INTEREST-EXPENSE> 1,011,496
<INTEREST-INCOME-NET> 1,837,574
<LOAN-LOSSES> 75,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,777,547
<INCOME-PRETAX> 407,952
<INCOME-PRE-EXTRAORDINARY> 407,952
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 318,246
<EPS-PRIMARY> .29
<EPS-DILUTED> .26
<YIELD-ACTUAL> 5.21
<LOANS-NON> 386,510
<LOANS-PAST> 265,682
<LOANS-TROUBLED> 943
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 873,934
<CHARGE-OFFS> 253,610
<RECOVERIES> 91,481
<ALLOWANCE-CLOSE> 1,051,898
<ALLOWANCE-DOMESTIC> 140,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 912,000
</TABLE>
