UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10QSB
__X___QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended........September 30, 1997
_____TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ..... to .....
COMMISSION FILE NUMBER 2-91-000FW
MIDSOUTH BANCORP, INC.
Louisiana 72 -1020809
102 Versailles Boulevard, Lafayette, Louisiana
70501
(318) 237-8343
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.YES __X__NO _____
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date.
Outstanding as of October 31, 1997
Common stock, $.10 par value 1,578,943
Preferred stock, no par value, $14.25 stated value 161,456
Transitional Small Business Disclosure Format:
Yes _______ No X
Page 1
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PART 1 - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (Unaudited) Page
Financial Highlights 3
Statements of Condition - September 30, 1997 and
December 31, 1996 4
Statements of Income - Three and Nine Months Ended
September 30, 1997 and 1996 5
Statement of Stockholders' Equity - Nine Months
Ended September 30, 1997 6
Statements of Cash Flows - Nine Months Ended
September 30, 1997 and 1996 7
Notes to Financial Statements 8
Item 2. Management's Discussion and Analysis or
Plan of Operation 9
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
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MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS (UNAUDITED)
______________________________________________________________________________________________________
Three Months Ended Nine Months Ended
September 30, September 30,
EARNINGS DATA 1997 1996 1997 1996
_________________________________________________________
<S> <C> <C> <C> <C>
Net interest income $2,516,952 $2,049,089 $7,185,901 $5,883,202
Provision for loan losses 241,700 224,804 604,300 534,804
Non-interest income 735,354 563,384 2,146,014 1,568,224
Non-interest expense 2,474,093 2,039,381 7,025,825 5,676,193
Provision for income tax 127,220 95,280 428,564 362,761
Net income 409,293 253,008 1,273,226 877,668
Preferred dividend requirement 37,442 39,133 117,195 117,986
Income available to common shareholders $371,851 $213,875 $1,156,031 $759,682
______________________________________________________________________________________________________
PER COMMON SHARE DATA
Primary earnings per share $0.23 $0.14 $0.74 $0.51
Fully diluted earnings per share $0.21 $0.14 $0.67 $0.47
Book value at end of period $6.45 $5.43 $6.45 $5.43
Market price at end of period $16.25 $9.45 $16.25 $9.45
Weighted average shares outstanding
Primary 1,595,916 1,511,138 1,565,926 1,498,436
Fully diluted 1,930,918 1,870,470 1,913,192 1,857,768
______________________________________________________________________________________________________
AVERAGE BALANCE SHEET DATA
Total assets $210,869,856 $170,715,583 $202,954,632 $162,927,970
Earning assets 190,599,040 155,060,362 183,360,010 147,421,704
Loans and leases 118,824,135 87,516,401 107,496,909 83,327,134
Interest-bearing deposits 142,509,715 116,531,168 139,542,546 110,484,955
Total deposits 191,343,608 157,828,297 186,703,236 150,387,753
Common stockholders' equity 9,931,230 8,298,866 9,431,211 8,110,061
Total stockholders' equity 12,340,991 10,860,389 11,866,265 10,690,515
______________________________________________________________________________________________________
SELECTED RATIOS
Return on average assets (annualized) 0.70% 0.50% 0.76% 0.62%
Return on average common equity (annuali 14.85% 10.22% 16.39% 12.48%
Return on average total equity ( annuali 11.95% 7.81% 13.03% 9.47%
Leverage capital ratio 5.78% 6.35% 5.78% 6.35%
Tier 1 risk-based capital ratio 9.36% 11.53% 9.36% 11.53%
Total risk-based capital ratio 10.39% 12.65% 10.39% 12.65%
Allowance for loan losses as a %
of total loans 1.08% 1.19% 1.08% 1.19%
______________________________________________________________________________________________________
PERIOD ENDING BALANCE SHEET DATA 9/30/97 9/30/96 Net Change % Change
Total assets $206,518,858 $171,781,165 $34,737,693 20.22%
Earning assets 185,192,383 155,035,051 $30,157,332 19.45%
Loans and leases 124,386,058 88,164,439 $36,221,619 41.08%
Interest-bearing deposits 134,357,623 119,113,869 $15,243,754 12.80%
Total deposits 181,475,290 159,130,877 $22,344,413 14.04%
Common stockholders' equity 10,153,951 8,164,701 $1,989,250 24.36%
Total stockholders' equity 12,454,699 10,726,224 $1,728,475 16.11%
______________________________________________________________________________________________________
All per share and shares outstanding data have been adjusted to reflect a
12.5% stock dividend payable on August 27, 1997 to common shareholders of
record on August 6, 1997.
3
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MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION (UNAUDITED)
________________________________________________________________________________
September 30, December 31,
ASSETS 1997 1996
___________ ___________
<S> <C> <C>
Cash and due from banks $12,164,721 $11,314,562
Federal funds sold 400,000 14,100,000
___________ ___________
Total cash and cash equivalents 12,564,721 14,100,000
Interest bearing deposits in banks 93,046 406,798
Securities available-for-sale, at fair
value (cost of $43,339,142 in September 1997
and $47,387,766 in December 1996) 43,360,187 47,249,059
Securities held-to-maturity (estimated
market value of $17,554,695 in September 1997
and $9,700,307 in December 1996) 16,953,092 93,740,719
123,046,154 9,547,853
Loans, net of allowance for loan and lease
losses of $1,339,904 in September 1997
and $1,087,790 in December 1996 123,046,154 93,740,719
Bank premises and equipment, net 6,835,182 5,808,952
Other real estate owned, net 146,552 180,270
Accrued interest receivable 1,784,837 1,386,596
Goodwill, net 250,558 276,523
Other assets 1,484,529 1,216,920
___________ ___________
Total assets $206,518,858 $185,228,252
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing $47,117,667 $49,943,207
Interest bearing 134,357,623 121,673,301
___________ ___________
Total deposits 181,475,290 171,616,508
Securities sold under repurchase agreements
and federal funds purchased 3,677,516 104,414
Other borrowed funds 5,000,000 -
Accrued interest payable 493,101 397,259
Notes payable 2,981,108 1,521,435
Other liabilities 437,144 228,465
___________ ___________
Total liabilities 194,064,159 173,868,081
___________ ___________
Commitments and contingencies - -
Stockholders' Equity:
Preferred Stock, no par value, $14.25
stated value - 5,000,000 shares authorized,
161,456 and 171,956 issued and outstanding
on September 30, 1997 and December 31, 1996,
respectively 2,300,748 2,450,373
Common stock, $.10 par value-
5,000,000 shares authorized, 1,574,674 and
1,537,649 issued and outstanding on
September 30, 1997 and December 31, 1996,
respectively 157,468 136,491
Surplus 9,803,782 6,738,943
Unearned ESOP shares (141,398) (30,836)
Unrealized gains/losses on securities
available-for-sale, net of deferred
taxes of $12,630 in September 1997
and $24,177 in December 1996 8,415 (114,530)
Retained earnings 325,684 2,179,730
___________ ___________
Total stockholders' equity 12,454,699 11,360,171
___________ ___________
Total liabilities and stockholders' equity $206,518,858 $185,228,252
=========== ===========
4
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MIDSOUTH BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
___________________________________________________________________________________________________
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
___________________________ ___________________________
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans, including fees $3,108,931 $2,266,637 $8,325,336 $6,433,531
Securities 989,118 821,922 2,870,710 2,280,331
Federal funds sold 14,382 145,912 362,652 492,255
_________ _________ __________ _________
TOTAL 4,112,431 3,234,471 11,558,698 9,206,117
_________ _________ __________ _________
INTEREST EXPENSE:
Deposits 1,487,968 1,164,349 4,190,220 3,260,277
Repurchase agreements and
federal funds purchased 28,466 1,070 32,785 3,171
Other borrowed funds 18,968 - 18,968 -
Notes payable 60,077 19,963 130,824 59,467
_________ _________ __________ _________
TOTAL 1,595,479 1,185,382 4,372,797 3,322,915
_________ _________ __________ _________
NET INTEREST INCOME 2,516,952 2,049,089 7,185,901 5,883,202
PROVISION FOR LOAN LOSSES 241,700 224,804 604,300 534,804
_________ _________ __________ _________
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 2,275,252 1,824,285 6,581,601 5,348,398
_________ _________ __________ _________
NON-INTEREST INCOME:
Service charges on deposit accou 553,168 387,599 1,514,244 1,086,610
Gains on sales of securities, ne (176) 1,175 85,179 1,175
Other charges and fees 182,362 174,610 546,591 480,439
_________ _________ __________ _________
TOTAL NON-INTEREST INCOME 735,354 563,384 2,146,014 1,568,224
_________ _________ __________ _________
NON-INTEREST EXPENSE:
Salaries and employee benefits 1,202,047 964,538 3,356,084 2,706,397
Occupancy expense 561,181 413,796 1,601,615 1,228,722
Professional fees 86,942 94,511 235,700 234,113
FDIC assessments 5,702 500 15,397 2,000
Marketing expenses 135,250 106,362 358,501 265,800
General and bond insurance 32,283 56,098 102,162 121,685
Data processing expenses 36,351 39,729 112,201 104,792
Postage 58,060 41,295 164,533 111,464
Director fees 26,666 24,967 77,950 73,972
Education and travel 30,523 34,959 92,832 112,449
Printing and supplies 70,153 60,962 213,521 168,858
Telephone 52,014 45,902 151,779 130,962
Expenses on other real estate ow 7,876 4,606 47,475 6,419
Other 169,045 151,156 496,075 408,560
_________ _________ __________ _________
TOTAL NON-INTEREST EXPENSE 2,474,093 2,039,381 7,025,825 5,676,193
_________ _________ __________ _________
NET INCOME BEFORE INCOME TAXES 536,513 348,288 1,701,790 1,240,429
PROVISION FOR INCOME TAXES 127,220 95,280 428,564 362,761
_________ _________ __________ _________
NET INCOME $409,293 $253,008 $1,273,226 $877,668
_________ _________ __________ _________
PREFERRED DIVIDEND
REQUIREMENT $37,442 $39,133 $117,195 $117,986
_________ _________ __________ _________
INCOME AVAILABLE TO COMMON
SHAREHOLDERS $371,851 $213,875 $1,156,031 $759,682
========= ========= ========== =========
EARNINGS PER COMMON SHARE:
PRIMARY $0.23 $0.14 $0.74 $0.51
========= ========= ========== =========
FULLY DILUTED $0.21 $0.14 $0.67 $0.47
========= ========= ========== =========
See notes to consolidated financial statements. 5
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MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED)
__________________________________________________________________________________________________________________________________
UNREALIZED
(GAINS)
LOSSES ON
SECURITIES
PREFERRED STOCK COMMON STOCK ESOP AVAILABLE RETAINED
SHARES AMOUNT SHARES AMOUNT SURPLUS OBLIGATION FOR-SALE EARNINGS TOTAL
____________________ ____________________ __________ __________________________________ ___________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
DECEMBER 31, 1996 171,956 $2,450,373 1,364,903 $136,491 $6,738,943 ($30,836) ($114,530) $2,179,730 $11,360,171
Issuance of common on
stock 16,617 1,661 186,218 187,879
Dividends paid on common
stock (259,473) (259,473)
Dividends paid on
preferred stock (117,195) (117,195)
Stock dividend on common
stock 174,496 17,450 2,730,862 (2,750,557) (2,245)
Preferred stock
conversion (10,500) (149,625) 18,658 1,866 147,759 (47) (47)
Net income 1,273,226 1,273,226
ESOP obligation, net of
repayments (110,562) (110,562)
Net change in unrealized
gain/loss on securities
available-for-sale, net
of tax 122,945 122,945
________ _________ _________ ________ _________ ________ _________ _________ __________
BALANCE,
SEPTEMBER 30, 1997 161,456 $2,300,748 1,574,574 $157,468 $9,803,782 ($141,398) $8,415 $ 325,684 $12,454,699
======== ========= ========= ======== ========= ======== ========= ========= ==========
6
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MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 and 1996
__________________________________________________________________________________________________
September 30, September 30,
1997 1996
____________ ____________
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $1,273,226 $ 877,668
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 628,701 470,497
Provision for loan losses 604,300 534,804
Provision for deferred taxes 40,116 (157,422)
Premium amortization, net (164,224) 127,065
Net (gain) loss on sales of securities (85,180) (22,129)
Net (gain) loss on sale of other real estate owned - (163)
Write-down of other real estate owned 33,718 -
Change in accrued interest receivable (398,241) (379,284)
Change in accrued interest payable 95,842 77,868
Change in other liabilities 182,326 200,482
Change in other assets (318,179) (767,091)
____________ ____________
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,892,405 962,295
____________ ____________
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease (increase) in interest-bearing deposits in banks 313,752 (177,166)
Proceeds from maturities and calls of securities available-
for-sale 16,932,739 3,814,768
Proceeds from sales of securities available-for-sale 12,990,400 1,992,457
Purchases of securities held-to-maturity (7,577,947) (5,026,109)
Purchases of securities available-for-sale (25,452,403) (20,419,911)
Loan originations, net of repayments (30,020,297) (9,841,416)
Purchases of premises and equipment (1,628,966) (1,234,165)
Proceeds from sale of other real estate owned - 3,500
Proceeds from sales of fixed assets - 149,758
____________ ____________
NET CASH USED IN INVESTING ACTIVITIES (34,442,722) (30,738,284)
____________ ____________
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 9,858,782 20,101,314
Net increase (decrease) in securities sold under repurchase
agreements and federal funds purchased 3,573,102 (72,575)
Net increase in other borrowed funds 5,000,000 -
Issuance of notes payable 3,024,210 354,293
Repayments of notes payable (1,564,537) (125,564)
Proceeds from issuance of common stock 187,879 120,001
Payment of dividends (376,668) (176,479)
Payment of fractional shares resulting from conversion
of preferred stock and stock dividends (2,292) (1,520)
Proceeds from exercise of stock options - 153,837
____________ ____________
NET CASH PROVIDED BY FINANCING ACTIVITIES 19,700,476 20,353,307
____________ ____________
NET DECREASE IN CASH & CASH EQUIVALENTS (12,849,841) (9,422,682)
CASH & CASH EQUIVALENTS AT BEGINNING OF YEAR 25,414,562 26,098,209
____________ ____________
CASH & CASH EQUIVALENTS AT END OF QUARTER 12,564,721 16,675,527
============ ============
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MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. STATEMENT BY MANAGEMENT CONCERNING THE REVIEW OF UNAUDITED
FINANCIAL INFORMATION
The accompanying unaudited consolidated financial statements and
notes thereto contain all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the financial
position of MidSouth Bancorp, Inc. ("MidSouth") and its
subsidiaries as of September 30, 1997 and the results of their
operations and their cash flows for the periods presented. The
consolidated financial statements should be read in conjunction
with the annual consolidated financial statements and the notes
thereto included in MidSouth's 1996 annual report and Form 10-KSB.
The results of operations for the nine month period ended September
30, 1997 are not necessarily indicative of the results to be expected
for the entire year.
2. ALLOWANCE FOR LOAN AND LEASE LOSSES
An analysis of the activity in the Allowance for Loan and Lease
Losses ("ALLL") is as follows:
Nine Months Ended
September 30,
(in thousands)
1997 1996
_____ _____
Balance at beginning of year $1,087 $1,052
Provision for loan losses 604 535
Recoveries 190 148
Loans charged off (541) (683)
_____ _____
Balance at end of quarter $1,340 $1,052
===== =====
3. NEW ACCOUNTING STANDARD
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 128,
" Earnings per Share." This new standard requires dual presentation
of basic and diluted earnings per share (EPS) on the face of the
earnings statement and requires a reconciliation of the numerators
and denominators of the basic and diluted EPS calculations. This
statement will be effective for financial statements issued for
periods ending after December 15, 1997. Basic and diluted earnings
per share, as computed under SFAS No. 128, would have been $.24 and
and $.21 , respectively, for the three months ended September 30, 1997.
For the nine months ended September 30, 1997, basic earnings per share
would have been $.74 and diluted earnings per share would have been
$.67.
4. STOCK DIVIDEND
On July 16, 1997, the Board of Directors declared a 12.5% stock dividend
payable on August 27, 1997 to shareholders of record on August 6, 1997.
All per share and weighted average share data have been restated to
reflect this stock dividend.
8
MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
This review should be read in conjunction with MidSouth Bancorp
Inc.'s ("MidSouth") consolidated financial statements and
accompanying notes contained herein, as well as with MidSouth's
1996 annual consolidated financial statements, the notes thereto
and the related Management's Discussion and Analysis.
All per share data has been adjusted for a 12.5% common stock
dividend payable on August 27, 1997 to common shareholders of
record on August 6, 1997.
MidSouth reported net income for the third quarter of 1997 of
$409,293 , representing a 62 % increase over net income for the
third quarter of 1996 of $253,008. Income available to common
shareholders was $371,851 for the third quarter of 1997 compared
to $213,875 for the third quarter of 1996. Primary earnings per
share were $.23 and $.14 for the quarters ending September 30,
1997 and 1996, respectively. Fully diluted earnings per share
were $.21 for the third quarter of 1997 compared to $.14 for the
third quarter of 1996. Year-to-date earnings totaled $1,273,226
at September 30, 1997 compared to $877,668 at September 30, 1996.
Income available to common shareholders for the nine months
ending September 30, 1997 was $1,156,031 compared to $759,682 for
the same period in 1996. Primary earnings per common share were
$.74 and $.51 for the nine month periods ending September 30,
1997 and 1996, respectively. Fully diluted year-to-date earnings
per share were $.67 and $.47 for the nine month periods ending
September 30, 1997 and 1996, respectively.
Return on average common equity was 14.85% for the third quarter
of 1997 compared to 10.22% for the third quarter of 1996. Return
on average assets was .70% and .50% for the same periods,
respectively. For the first nine months of 1997, returns on
average common equity and average assets were 16.39% and .76%,
respectively. For the first nine months of 1996, return on
average common equity was 12.48% and return on average assets was
.62%. Total assets were $206.5 million at September 30, 1997, up
20% from $171.8 million at September 30, 1996.
Quarterly earnings improved primarily due to a 23% increase in
the average volume of earning assets from $155.1 million at
September 30, 1996 to $190.6 million at September 30, 1997. The
mix of average earning assets shifted to 62.4% in loans and 37.6%
in investment securities and federal funds sold for the quarter
ended September 30, 1997 compared to 56.4% in loans and 43.6% in
investment securities and federal funds sold for the quarter
ended September 30, 1996.
The increased volume and shift in the mix of earning assets
resulted in increased net interest income of $467,863 in
quarterly comparison and $1,302,699 in year-to-date comparison.
Non-interest income, excluding securities transactions, increased
31% in quarterly comparison and 32% in year-to-date comparison
primarily due to an increase in insufficient funds fees ("NSF"
fees) and service charges on deposit accounts. This increase
resulted from a greater number of accounts serviced and a slight
change in the assessment of NSF fees. In addition, fees earned
9
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through increased usage of ATM's, cash machines and VISA debit
cards, and lease income from a third party brokerage firm
contributed to the increase in non-interest income.
Loan demand remained strong in the third quarter of 1997 bringing
total loans to $124.4 million at September 30, 1997, up $29.6
million from $94.8 million at December 31, 1996 and up $36.2
million from $88.2 million at September 30, 1996. The
commercial, agricultural and real estate portfolios have
continued to increase as a result of loan demand stimulated by a
healthy, growing economy. The Lake Charles loan production
office which opened in November of 1996 contributed $9.3 million
to the growth in total loans. Due to the loan growth, provisions
for loan and lease losses increased $16,896 for the quarter and
$69,496 for the nine month period ended September 30, 1997 as
compared to the same periods of 1996.
Credit quality remained strong. Nonperforming assets totaled
$528,973 at September 30, 1997 compared to $714,140 at December
31, 1996 and $876,075 at September 30, 1996. Nonperforming loans
as a percentage of total loans were .29% at September 30, 1997,
down from .55% at December 31, 1996 and down from .79% at
September 30, 1996.
Deposits increased over the twelve month period ended September
30, 1997 by $22.3 million, or 14%, despite the withdrawal of
approximately $28 million in public funds deposits, $13 million
of which was deposited within the same twelve month period. A
new public funds contract initiated on July 1, 1997 added
approximately $11 million to total deposits. Increases totaling
$13.1 million were recorded in commercial demand and money market
deposits and certificates of deposit due to favorable economic
conditions and increased business activity. Individual
certificates of deposit increased $7.2 million due to branch
market promotions and concern among consumers over the
possibility of a stock market correction. The new Morgan City
office, opened in March of 1997, contributed $4.3 million to the
increase in deposits.
Earnings Analysis
Net Interest Income
Average earning assets increased 23%, or $35.7 million, from
$155.0 million for the three months ending September 30, 1996 to
$190.6 million for the three months ending September 30, 1997. A
change in the mix of earning assets contributed to earnings as
higher-yielding loans represented 62.3% of average earning assets
in the third quarter of 1997 compared to 56.5% in the third
quarter of 1996. The average yield on loans improved 10 basis
points, from 10.39% at September 30, 1996 to 10.49% at September
30, 1997, primarily due to finance company loans and credit card
loans added to the loan portfolio within the past year. The
increased volume of earning assets and the increase in loan
yields boosted the yield on average earning assets 27 basis
points, from 8.38% for the third quarter of 1996 to 8.65% for the
third quarter of 1997. These changes in the earning asset mix
resulted in increased interest income of $877,960 in quarterly
comparison and $2,352,581 in nine month comparison.
10
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Volume increases in interest-bearing deposits and an increase in
borrowed funds resulted in a $410,097 quarterly increase and
$1,049,882 year-to-date increase in interest expense.
Additionally, the percentage of average interest-bearing deposits
to average total deposits and the average rate paid on interest-
bearing liabilities increased in quarterly comparison, reflective
of a high volume of interest-bearing public fund deposits. For
the quarter ending September 30, 1997, 74.5% of total average
deposits were interest-bearing compared to 73.8% for the quarter
ending September 30, 1996. The average rate paid on interest-
bearing deposits increased 18 basis points, from 4.01% to 4.19%
for the same period. The increase in borrowed funds resulted
from the purchase of $3,500,000 in federal funds and a $5,000,000
short-term borrowing from the Federal Home Loan Bank of Dallas.
These borrowing provided liquidity for MidSouth National Bank
(the "Bank") to cover the withdrawal of approximately $28 million
in deposits associated with a public funds contract. In
addition, MidSouth and its subsidiary, Financial Services of the
South, Inc. (the "Finance Company"), increased borrowings against
their lines of credit by $1,459,673 during the nine month period
ending September 30, 1997.
The net effect of changes in the volume and mix of earning assets
and interest bearing liabilities increased net interest income
of $467,863 in quarterly comparison and $1,302,699 in year-to-
date comparison. The net yield on average earning assets fell 1
basis point, from 5.31% for the quarter ending September 30,
1996, to 5.30% for the quarter ending September 30, 1997.
Non-interest Income
MidSouth's primary source of non-interest income, service charges
on deposit accounts, increased $165,569 for the quarter and
$427,634 for the nine months ending September 30, 1997 as
compared to the same periods in 1996. The increases resulted
primarily from additional insufficient funds fees and fees
earned on deposit accounts added in the past twelve months.
Other non-interest income increased $7,752 and $66,152 in
quarterly and year-to-date comparisons, respectively. Increases
were recorded in the third quarter of 1997 in lease income from a
third party investment company and VISA debit card income. The
increase in year-to-date comparisons resulted primarily from a
$32,575 increase in income earned through the sale of credit life
and other credit-related insurance at the Finance Company.
Non-interest Expense
Non-interest expense increased 21% for the three months and 24%
for the nine months ended September 30, 1997 as compared to the
same periods ended September 30, 1996. The increase resulted
primarily from start up and operational costs associated with new
office facilities and promotions to expand MidSouth's market
presence. Specifically, increases were recorded in salaries and
employee benefits, occupancy expenses, marketing expenses,
postage, and printing and supplies.
11
<PAGE>
Salaries and employee benefits increased due to the addition of
the Morgan City Office and Lake Charles Office staffs and an
increase in incentive compensation. The number of full-time
equivalent ("FTE") employees increased by 17 from 122 in
September 1996 to 139 in September 1997.
Occupancy expense increased in the three and nine month periods
ending September 30, 1997 as compared to the same periods of 1996
due to increases in building lease expense, depreciation and
maintenance expenses associated with furniture and equipment,
fuel and maintenance of bank autos and ad valorem taxes. These
increases result primarily from the Super 1 Lafayette and Morgan
City offices added in 1996 and early 1997 and the loan production
office opened in Lake Charles in the fourth quarter of 1996.
Marketing and promotional expenses increased due to the
introduction of MidSouth to these new markets and to quality
service programs and special loan and deposit promotions.
Balance Sheet Analysis
MidSouth ended the third quarter of 1997 with consolidated assets
of $206,518,858 an increase of 11% over the $185,228,252 reported
for December 31, 1996. Deposits increased over the nine months
ended September 30, 1997 by $9.9 million despite the withdrawal
of approximately $28 million in funds on deposit under a public
funds contract that expired on July 31, 1997. In order to fund
the withdrawal, MidSouth purchased $3,500,000 in federal funds
from two correspondent banks and borrowed $5,000,000 in short-
term funds from the Federal Home Loan Bank of Dallas. In
addition, approximately $11 million was deposited under a new
public funds contract. The $3,500,000 in federal funds purchased
was paid out in early October and the $5,000,000 short-term
borrowing from the Federal Home Loan Bank of Dallas was paid out
upon maturity at November 4, 1997. In addition to the public
funds deposit activity, increases were recorded in commercial
demand and money market deposits and certificates of deposit due
to favorable economic conditions and increased business activity
throughout MidSouth's market.
Loan growth experienced in the first nine months of 1997 was
primarily in the commercial, agricultural and real estate
portfolios. The Bank's new Morgan City Office and Lake Charles
Loan Production Office contributed $5.6 million and $9.3 million,
respectively, to the $29.6 million growth in loans during this
period.
Securities available-for-sale decreased $3.8 million, from $47.2
million at December 31, 1996 to $43.4 million at September 30,
1997. The net decrease reflects purchases of $25.5 million,
sales of $13.0 million, and maturities and principal paydowns of
$16.9 million. Tax-free municipal securities totaling $7.6
million were purchased for the held-to-maturity portfolio during
the first nine months of 1997. Unrealized gains in the
securities available-for-sale portfolio, net of unrealized losses
and tax effect, were $8,415 at September 30, 1997, compared to a
net unrealized loss of $114,530 at December 31, 1996. These
amounts result from interest rate fluctuations and do not
represent permanent impairment of value. Moreover,
classification of securities as available-for-sale does not
necessarily indicate that the securities will be sold prior to
maturity.
12
<PAGE>
Notes payable to financial institutions increased $1.5 million
from December 31, 1996 to September 30, 1997. On June 23, 1997,
MidSouth refinanced its $2.5 million line of credit with another
financial institution, paying out existing borrowings of $833,355
and receiving advances of $1,385,024 under the new line of
credit. An additional $500,000 advanced under the line was
injected into the capital of the Bank. In August 1997, MidSouth
borrowed an additional $200,000 for operational expenses. At any
time prior to June 30, 2007, MidSouth may request advances up to
but not exceeding an aggregate principal amount of $2,500,000 at
any one time outstanding. Advances under the line of credit bear
interest at a variable rate equal to the prime commercial rate of
interest quoted in the "Money Rates" section of the Wall Street
Journal minus fifty basis points (0.50%). The current rate is
8.00%. Interest under the note is due and payable quarterly in
arrears on the last day of each quarter beginning September 30,
1997. Beginning June 30, 1999, principal payments in the amount
of 11.11% of the amount of the loan balance on June 30 ,1999 are
due and payable in eight consecutive annual installments on June
30 of each succeeding calendar year. The entire outstanding
balance of the loan is due and payable in a ninth and final
installment on June 30, 2007.
The Finance Company paid out borrowings of $600,000 against its
line of credit on June 23, 1997 with $675,000 in advances against
a new $1,200,000 line of credit. Advances under the line of
credit bear interest at a variable rate equal to the commercial
prime rate as quoted in the "Money Rates" section of the Wall
Street Journal plus 25 basis points (0.25%). The current rate is
8.75%. Interest on the line is payable monthly, with principal
due at maturity on May 1, 1998. Advances totaling $260,000 were
funded under the line during the third quarter of 1997.
Capital Ratios
As of September 30, 1997, MidSouth's leverage ratio was 5.78% as
compared to 6.30% at December 31, 1996. Tier 1 capital to risk-
weighted assets was 9.36% and total capital to risk-weighted
assets was 10.39% at the end of the third quarter of 1997. At
year-end 1996, Tier 1 capital to risk-weighted assets was 10.82%
and total capital to risk-weighted assets was 11.87%.
13
<PAGE>
Nonperforming Assets and Past Due Loans
Table 1 summarizes MidSouth's nonaccrual, past due and
restructured loans and nonperforming assets.
<TABLE>
<CAPTION>
TABLE 1
Nonperforming Assets and
Loans Past Due 90 Days
_________________________________________________________________________
September December September
30, 31, 30,
1997 1996 1996
_________________________________________________________________________
<S> <C> <C> <C>
Nonperforming loans
Nonaccrual loans $365,595 $523,020 $691,711
Restructured loans - 835 498
______________________________________
Total nonperforming 365,595 523,855 692,209
loans
Other real estate 146,552 180,270 180,270
owned, net
Other assets 16,826 10,015 3,596
repossessed
______________________________________
Total nonperforming $528,973 $714,140 $876,075
assets
======================================
Loans past due 90 days
or more and still $133,755 $338,294 $318,604
accruing
Nonperforming loans as
a % of total loans .29% 0.55% 0.79%
Nonperforming assets as
a % of total loans, other
real estate owned and
other assets repossessed 0.42% 0.75% 0.99%
ALLL as a % of 366.50% 207.65% 151.95%
nonperforming loans
</TABLE>
14
<PAGE>
Nonperforming assets were $528,973 as of September 30, 1997, a
decrease of $185,167 from the $714,140 reported for December 31,
1996 and a decrease of $347,102 from the $876,075 reported for
September 30, 1996. The decrease from year-end 1996 results
primarily from the charge-off of $115,000 on a commercial credit
that represents a pool of automobile loans.
Loans past due 90 days or more increased from $318,604 in
September 1996 to $338,294 in December 1996 and decreased to
$133,755 as of September 30, 1997.
Specific reserves have been established in the ALLL to cover
potential losses on nonperforming assets. The ALLL is analyzed
quarterly and additional reserves, if needed, are allocated at
that time. Management believes the $1,339,904 in the reserve as
of September 30, 1997 is sufficient to cover potential losses in
nonperforming assets and in the loan and lease portfolios. Loans
classified for regulatory purposes but not included in Table 1 do
not represent material credits about which management has serious
doubts as to the ability of the borrower to comply with loan
repayment terms.
The Year 2000 Issue
On May 16, 1997, the Office of the Comptroller of the Currency
("OCC") issued an advisory letter addressing Year 2000 issues and
their examination approach. To maintain safe and sound banking
practices, institutions are required to take appropriate measures
to insure efficient operations of computer systems beyond the
year 2000. Programming changes for critical systems and testing
of vendors and service providers should be completed by December
31, 1998. MidSouth's Board of Directors established a Year 2000
compliance committee in June of 1997. The committee will assess
the size and complexity of the Year 2000 issues, recommend
changes to hardware and software and conduct testing of all areas
to insure efficient computer operations. The committee is
currently analyzing the the impact that compliance with the Year
2000 issues may have on earnings.
15
<PAGE>
Item 6. Exhibits and Reports on Form 8-K Page 16
(a) Exhibits
Exihibit Number Document Description
3.1 Amended and Restated Articles of Incorporation of
MidSouth Bancorp, Inc. is included as Exhibit 3.1
to the MidSouth's Report on Form 10-K forthe year
ended December 31, 1993, and is incorporated herein
byreference.
3.2 Articles of Amendment to Amended and Restated
Articles of Incorporation dated July 19, 1995 are
included as Exhibit 4.2 to MidSouth's Registration
Statement on Form S-8 filed September 20, 1995
and is incorporated herein by reference.
3.3 Amended and Restated By-laws adopted by the Board
of Directors on April 12, 1995 are included as
Exhibit 3.2 to Amendment No. 1 to MidSouth's
Registration Statement on Form S-4 (Reg.
No. 33-58499) filed on June 1, 1995.
10.1 MidSouth National Bank Lease Agreement with
Southwest Bank Building
Limited Partnership is included as Exhibit 10.7 to
the Company's annual report on Form 10-K for the
Year Ended December 31, 1992, and is incorporated
herein by reference.
10.2 First Amendment to Lease between MBL Life
Assurance Corporation, successor in interest to
Southwest Bank Building Limited Partnership in
Commendam, and MidSouth National Bank is included
as Exhibit 10.1 to Report on the Company's annual
report on Form 10-KSB for the yearended
December 31, 1994, and is incorporated herein by
reference.
10.3 Amended and Restated Deferred Compensation Plan
and Trust is included as Exhibit 10.3 to the
Company's annual report on Form 10-K for the year
ended December 31, 1992 and is incorporated herein
by reference.
10.4 Employment Agreements with C. R. Cloutier and
Karen L. Hail are included as Exhibit 5(c) to
MidSouth's Form 1-A and are incorporated
herein by reference.
10.5 Description of the Incentive Compensation Plan for
Officers of MidSouth National Bank is included as
Exhibit 10.5 to the Company's annual report
on Form 10-K for the year ended December 31, 1993,
and is incorporated herein by reference.
<PAGE>
Page 17
10.6 MidSouth Bancorp, Inc.'s 1997 Stock Incentive Plan
is included as Exhibit 4.5 to MidSouth's
definitive Proxy Statement filed April 11, 1997,
and is incorporated herein by reference.
10.7 Loan documents detailing notes payable were filed
as Exhibit 10.7 of MidSouth's Form 10-QSB for the
quarter ending June 30, 1997 and is incorporated
herein by reference.
11 Computation of earnings per share
(b) Reports Filed on Form 8-K
(none)
Signatures
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MidSouth Bancorp, Inc.
(Registrant)
Date: November 14, 1997
/s/ C. R. Cloutier
C.R. Cloutier, President & CEO
/s/ Karen L. Hail
Karen L. Hail, Executive Vice
President & CFO
/s/ Teri S. Stelly
Teri S. Stelly, Senior Vice President
& Controller
<PAGE>
<TABLE>
<CAPTION>
MIDSOUTH BANCORP, INC. AND SUBSIDIARY EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE (Unaudited) Page 18
For the Three and Nine Months Periods Ended September 30, 1997 and 1996
Third Quarter Third Quarter Year to Date Year to Date
September 30, September 30, September 30, September 30,
PRIMARY 1997 1996 1997 1996
_____________ _____________ _____________ _____________
<S> <C> <C> <C> <C>
Earnings:
Income applicable to common
stock $371,851 $213,875 $1,156,031 $759,682
============= ============= ============= =============
Shares:
Weighted average number of
common shares outstanding 1,572,470 1,504,532 1,558,803 1,492,277
============= ============= ============= =============
Earnings per common share:
Income applicable to common
stock $0.24 $0.14 $0.74 $0.51
============= ============= ============= =============
Weighted average number of
common shares outstanding 1,572,470 1,504,532 1,558,803 1,492,277
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 23,446 6,606 7,123 6,159
_____________ _____________ _____________ _____________
Weighted average number of
common shares outstanding,
as adjusted 1,595,916 1,511,138 1,565,926 1,498,436
============= ============= ============= =============
Primary earnings per common share $0.23 $0.14 $0.74 $0.51
============= ============= ============= =============
FULLY DILUTED
Earnings:
Net income $409,293 $253,008 $1,273,226 $877,668
============= ============= ============= =============
Weighted average number of
common shares outstanding 1,572,470 1,504,532 1,558,803 1,492,277
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
period end price 35,697 6,606 18,045 6,159
Assuming conversion of
outstanding shares of
preferred stock at a
conversion rate of
1 to 1.999 shares 322,751 359,332 336,344 359,332
_____________ _____________ _____________ _____________
Weighted average number of
common shares outstanding,
as adjusted 1,930,918 1,870,470 1,913,192 1,857,768
============= ============= ============= =============
Fully diluted earnings per common
share $0.21 $0.14 $0.67 $0.47
============= ============= ============= =============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1997
<CASH> 12,164,721
<INT-BEARING-DEPOSITS> 93,046
<FED-FUNDS-SOLD> 400,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 43,360,187
<INVESTMENTS-CARRYING> 16,953,092
<INVESTMENTS-MARKET> 17,554,695
<LOANS> 124,386,058
<ALLOWANCE> 1,339,904
<TOTAL-ASSETS> 206,518,858
<DEPOSITS> 181,475,290
<SHORT-TERM> 3,677,516
<LIABILITIES-OTHER> 5,930,245
<LONG-TERM> 2,981,108
0
2,300,748
<COMMON> 157,468
<OTHER-SE> 9,996,483
<TOTAL-LIABILITIES-AND-EQUITY> 206,518,858
<INTEREST-LOAN> 3,108,931
<INTEREST-INVEST> 989,118
<INTEREST-OTHER> 14,382
<INTEREST-TOTAL> 4,112,431
<INTEREST-DEPOSIT> 1,487,968
<INTEREST-EXPENSE> 1,595,479
<INTEREST-INCOME-NET> 2,516,952
<LOAN-LOSSES> 241,700
<SECURITIES-GAINS> (176)
<EXPENSE-OTHER> 2,474,093
<INCOME-PRETAX> 536,513
<INCOME-PRE-EXTRAORDINARY> 536,513
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 409,293
<EPS-PRIMARY> .23
<EPS-DILUTED> .21
<YIELD-ACTUAL> 5.39
<LOANS-NON> 365,595
<LOANS-PAST> 133,755
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,087,000
<CHARGE-OFFS> 541,000
<RECOVERIES> 190,000
<ALLOWANCE-CLOSE> 1,340,000
<ALLOWANCE-DOMESTIC> 82,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,258,000
</TABLE>
