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, 1996
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, American Stock Exchange, Inc.
$14.25 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-KSB or any amendment to
this Form 10-KSB __X___
As of February 28, 1997, 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 $8,374,106. As of
February 28, 1997 there were outstanding 1,367,880 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 14, 1997 -
(Part III)
<PAGE>
PART I
ITEM 1 - Business.
The Company
MidSouth Bancorp, Inc. ("MidSouth") is a Louisiana
corporation registered as a bank holding company under the
Bank Holding Company Act of 1956. Its operations are
conducted through, and its primary asset is, MidSouth
National Bank (the "Bank"), a wholly-owned subsidiary. In
the third quarter of 1996, MidSouth formed Financial
Services of the South, Inc. (the "Finance Company") to
provide quality consumer finance throughout its market area.
MidSouth, the Bank and the Finance Company are referred to
collectively herein as "the Company."
On July 31, 1995, MidSouth consummated the acquisition of
Sugarland Bancshares, Inc. which resulted in Sugarland's
subsidiary and sole asset, Sugarland Bank, being merged into
the Bank. Completion of the acquisition added $17.2 million
to MidSouth's total assets.
The Bank
The Bank is a national banking association domiciled in
Lafayette, Louisiana. 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, credit card services and issuance of
cashier's checks, United States Savings Bonds and travelers
checks. The Bank is a U.S. government depository. 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 agricultural loans, real estate
construction and mortgage loans and installment loans. The
Bank operates at the fifteen locations described below under
"Item 2 - Properties."
Employees
As of December 31, 1996, the Bank employed 128 full-time
equivalent
employees and the Finance Company employed 5 full-time
equivalent employees. MidSouth has no employees who are not
also employees of the Bank. Through the Bank and the
Finance Company, employees receive employee benefits which
include an employee stock ownership plan, a 401-K plan and
life, health and disability insurance plans. MidSouth
considers the relationships of the Bank and the Finance
Company with their employees to be very good.
Competition
The Bank faces keen competition in its market area 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 thirteen 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.
Louisiana state banks may 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. Since 1989,
Louisiana has allowed 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.
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 legislation on
competition.
Supervision and Regulation - Bank Holding Companies
General. 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. Until June 1, 1997, 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.
Capital Adequacy Requirements. The Federal Reserve Board
monitors the capital adequacy of bank holding companies
through the use of a combination of risk-based capital
guidelines and leverage ratios. Risk-based capital
requirements are intended to make regulatory capital more
sensitive to the risk profile of a company's assets.
Certain off-balance sheet items, such as letters of credit
and unused lines of credit, are also assigned risk-weights
and included in the risk-based capital calculations. The
guidelines require a minimum ratio of total qualifying
capital to total risk-weighted assets of 8.0%, of which 4.0%
must be in the form of Tier 1 capital. At December 31,
1996, the Company's ratios of Tier 1 and total capital to
risk-weighted assets were 10.82% and 11.87%, respectively.
MidSouth's leverage ratio (Tier 1 capital to total average
adjusted assets) was 6.30% at December 31, 1996. All three
regulatory capital ratios for the Company exceeded
regulatory minimums at December 31, 1996.
Supervision and Regulation - National Banks
General. As a national banking association, the Bank is
supervised and regulated by the U. S. Comptroller of the
Currency (its primary regulatory authority), the Federal
Reserve Board and the Federal Deposit Insurance Corporation
("FDIC"). Under Section 23A of 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 and are limited
as to powers, locations and other matters of applicable
federal law.
Capital Adequacy Requirements. A national bank is subject
to regulatory capital requirements administered by the
federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory, and possibly
discretionary, actions by regulators that, if undertaken,
could have a direct material effect on a bank's financial
statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, a bank
must meet specific capital guidelines that involve
quantitative measures of the bank's assets, liabilities, and
certain off-balance-sheet items as calculated under
regulatory accounting practices. As of December 31, 1996,
the most recent notification from the FDIC categorized the
Bank as "well capitalized" under the regulatory framework
for prompt corrective action. To be categorized as "well
capitalized," the Bank must maintain a minimum of total
risk-based capital and Tier 1 capital to risk-weighted
assets of 10% and 6%, respectively, and a minimum leverage
ratio of 5%. All three regulatory capital ratios for the
Bank exceeded these minimums at December 31, 1996.
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 Bank 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 five other banking offices
in Lafayette, Louisiana, two in New Iberia and one banking
office in each of Breaux Bridge, Cecilia, Jeanerette,
Opelousas and Jennings, Louisiana. In addition, the Bank
has loan production offices in Lake Charles and Morgan City,
Louisiana. Eight of these offices are owned and seven are
leased. A full service branch facility is currently under
construction in Morgan City and will replace the leased
facility currently used for the loan production office.
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 1996.
Executive Officers of the Registrant
C. R. Cloutier, 49 - President, Chief Executive Officer and
Director of MidSouth and the Bank
Karen L. Hail, 43 - Executive Vice President of the Bank and
Chief Financial Officer, and Secretary and Treasurer of
MidSouth and the Bank
Donald R. Landry, 40 - Senior Vice President and Senior Loan
Officer of the Bank
Jennifer S. Fontenot, 42 - Senior Vice President of the Bank
William R. Snyder, 56 - Senior Vice President of the Bank
since 1996; prior to his employment at the Bank, Mr. Snyder
was Senior Vice President for First National Bank of Ohio
for 1 year and Senior Vice President for Banc One,
Cleveland, Ohio for 5 years.
Teri S. Stelly, 37 - Vice President and Controller of
MidSouth and the Bank since 1992; Assistant Vice President
and Controller of MidSouth and the Bank since 1987.
David L. Majkowski, 47 - Loan review officer of the Bank
since 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.
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. Effective August 1, 1995, the
Company's common stock and its preferred stock has been
listed on the regular American Stock Exchange, Inc. ("AMEX")
under the symbols MSL and MSL.pr, respectively. As of
February 28, 1997, there were 356 common shareholders of
record and 187 preferred shareholders of record. The high
and low sales prices for the past eight quarters are
provided in the Selected Quarterly Financial Data tables
included with this filing.
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. Cash dividends totaling
$115,750 and $280,461 were paid to common stockholders
during 1995 and 1996, respectively. A total of $155,421 in
dividends were paid on MidSouth's Preferred Stock in 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. Cash dividends on the common stock
are subject to payment of dividends on the preferred stock.
The Company's ability to pay dividends is described in Item
7 below under the heading "Balance Sheet Analysis -
Dividends" and in Note 12 to the Company's consolidated
financial statements.
On August 19, 1996, MidSouth effected a four for three stock
split by way of a stock dividend to its common shareholders
of record on July 31, 1996. The stock split increased
common shares outstanding at the time from 994,627 to
1,326,025. Accordingly, the conversion rate on the
preferred stock was adjusted to 1.777 shares of MidSouth
Common Stock for each share of MidSouth Preferred Stock
converted.
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.
<PAGE>
<TABLE>
<CAPTION>
FIVE-YEAR SUMMARY OF SELECTED
CONSOLIDATED FINANCIAL DATA
Year Ended December 31,
________________________________________________________________________________
1996 1995 1994 1993 1992
__________ _________ _________ _________ _________
<S> <C> <C> <C> <C> <C>
Gross interest income $12,572,417 $9,727,584 $7,388,478 $6,369,047 $6,678,326
Interest expense (4,541,727) (3,225,326) (1,976,101) (1,803,934) (2,411,228)
Net interest income 8,030,690 6,502,258 5,412,377 4,565,113 4,267,098
Provision for loan losses (674,500) (225,000) (210,000) (306,500) (365,000)
Other operating income 2,138,285 1,583,026 1,422,894 1,371,124 1,108,138
Other expenses (7,840,691) (6,072,129) (4,882,130) (4,653,303) (4,105,639)
Net income
before extraordinary item
and cumulative effect of
accounting change 1,653,784 1,788,155 1,743,141 976,434 904,597
Provision for income taxes (417,286) (546,545) (601,500) (331,500) (311,500)
Extraordinary item - - - - 311,500
Cumulative effect of
accounting change - - - 600,000 -
Net Income $1,236,498 $1,241,610 $1,141,641 $1,244,934 $904,597
Preferred stock dividend
requirement ($155,421) ($38,142) - - -
Income applicable to
common shareholders $1,081,077 $1,203,468 $1,141,641 $1,244,934 $904,597
Primary earnings per <FN1> $0.82 $0.92 $0.90 $1.05 $0.83
Fully diluted earnings
per share $0.76 $0.86 $0.90 $1.05 $0.83
Total Loans $93,740,719 $77,826,707 $60,432,275 $49,786,123 $40,374,221
Total Assets 185,228,252 151,183,241 103,965,960 97,695,512 85,141,634
Total Deposits 171,616,508 139,029,563 96,490,355 90,411,946 80,166,500
Cash Dividends 280,461 115,750 - - -
Long-term Obligations <FN2> 1,521,435 972,617 1,195,917 786,164 953,820
Selected Ratios:
Loans to Assets 50.61% 51.48% 58.13% 50.96% 47.42%
Loans to Deposits 54.62% 55.98% 62.63% 55.07% 50.36%
Deposits to Assets 92.65% 91.96% 92.81% 92.54% 94.16%
Return on Average Assets <FN3> 0.65% 0.98% 1.12% 1.13% 1.10%
Return on Average Common
Equity <FN3> 13.09% 17.22% 20.98% 22.88% 31.33%
<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, a four for
three stock split paid on September 15, 1995 to shareholders of record on September 7, 1995, and
a four for three stock split paid on August 19, 1996 to shareholders of record on July 31, 1996.
<FN2> Long-term obligations include ESOP borrowing and, in 1994, 1995 and 1996, FHLB borrowings.
In 1995and 1996, 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.
</TABLE>
<PAGE>
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
subsidiaries, MidSouth National Bank (the "Bank")
and Financial Services of the South, Inc. (the
"Finance Company"). 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
consolidated financial statements and the notes
thereto presented herein.
OVERVIEW
MidSouth recorded income available to common
shareholders of $1,081,077 for 1996 as compared to
$1,203,468 for 1995. Net income for 1996 was
$1,236,498 as compared to $1,241,610 reported for
the year ended 1995. Primary earnings per common
share were $.82 for 1996 and $.92 for 1995. Fully
diluted earnings per common share were $.76 for
1996 and $.86 for 1995.
Earnings for 1996 were adversely impacted by
increases in loan loss provisions and other
expenses relating to expansion. In the past
eighteen months, MidSouth has added four new
branch locations, two new loan production offices,
an expanded ATM network and new product offerings.
In addition, MidSouth formed Financial Services of
the South, Inc., a full service finance company,
which opened its Lafayette, Louisiana office in
August of 1996 and a second location in Jennings,
Louisiana in November of 1996. For the five months
of operations in 1996, the Finance Company
recorded a net loss of $54,593. Management
anticipates that the Finance Company will not have
positive earnings until approximately the fourth
quarter of 1997.
MidSouth's consolidated assets increased $34.0
million or 22% from $151.2 million at December 31,
1995 to $185.2 million at December 31, 1996.
Loans grew $15.9 million, from $77.8 million to
$93.7 million, net of reserves, for the same
period. Loan growth was primarily attributed to a
strong economy and quality demand in the
southwestern Louisiana market. Marketing
promotion of a direct leasing program, home equity
loan program, credit card program and an accounts
receivable financing program contributed $3.8
million to loan growth.
MidSouth increased its deposits by $32.6 million
to end the year 1996 with a total of $171.6
million in deposit accounts. Of the $32.6 million
increase, approximately $7.7 million resulted from
an increase in public funds held on deposit. The
remainder of the growth resulted from development
of branch markets.
The Allowance for Loan and Lease Losses ("ALLL")
totaled $1,087,790 or 1.15% of total loans at year
end 1996 compared to $1,051,898 or 1.33% at
December 31, 1995. Provisions for loan losses
totaled $674,500 for 1996 versus $225,000 for
1995. The increase resulted primarily from net
charge-offs of certain loans within a leasing
program. Management is continuing negotiations
with the lease program customers and hopes to
obtain partial recoveries of the $369,155 in net
charge-offs in 1996 related to the program.
On August 19, 1996, MidSouth effected a four for
three stock split by way of a stock dividend to
its common shareholders of record on July 31,
1996. The stock split increased the common shares
outstanding by 331,398 shares and adjusted the
conversion rate on MidSouth's preferred stock to
1.777 shares of common stock for each share of
preferred stock converted.
MidSouth paid $280,461 in cash dividends on common
stock and $155,421 in cash dividends on preferred
stock for the year ended December 31, 1996. The
Board of Directors of MidSouth intends to continue
quarterly payment of dividends on MidSouth's
common stock at a rate of $.06 per share. The
rate on the preferred stock for 1997 will be
6.51%. The dividend rate on the preferred stock
is set based on the closing rate of the one year
treasury bond (as posted in the Wall Street
Journal) on December 31st of each year plus 1.0%.
This rate results in an annual dividend payment of
92.76 cents per share to be paid quarterly in the
amount of 23.19 cents per share.
MidSouth's leverage ratio was 6.30% at December
31, 1996. Return on average equity was 13.09% and
return on average assets was .65% for the year
ended 1996.
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, 1996.
Net interest income increased $1,528,432 for 1996
over 1995 and $1,089,881 for 1995 over 1994. The
increase in net interest income for both 1996 and
1995 resulted primarily from growth in MidSouth's
loan portfolio. Interest income from loans,
including loan fees, increased $1,576,998 from
1995 to 1996 and $1,762,968 from 1994 to 1995. The
increased interest income for both years resulted
from increases in average loan volume of $16.1
million in 1996 and $13.8 million in 1995.
Average yield on loans decreased 12 basis points,
from 10.41% to 10.29%, and slightly lessened the
impact of the volume increase on interest income
in 1996. 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 significant volume increase in securities and
federal funds sold contributed $1,267,835 to the
increase in interest income for 1996. The average
volume of securities and federal funds sold
increased $23 million, from $42.3 in 1995 to $65.3
in 1996, as deposit growth exceeded loan
originations. A slight decrease in the yield on
securities of 6 basis points (from 5.94% in 1995
to 5.88% in 1996) and a decrease of 45 basis
points in the yield on federal funds sold (from
5.73% in 1995 to 5.28% in 1996) had little impact
on the increase in interest income resulting from
the change in volume. A $4.9 million increase in
the volume of securities and federal funds sold
for 1995, combined with an increase in yields of
67 basis points and 179 basis points,
respectively, resulted in increased interest
<PAGE>
<TABLE>
<CAPTION>
TABLE 1 - Average Balance Sheets and Interest Rate Analysis (in thousands)
1996 1995 1994
___________________________ ________________________ ________________________
Average Average Average
Average Yield Average Yield Average Yield
Volume Interest /Rate Volume Interest /Rate Volume Interest /Rate
_______ ________ _______ _______ ________ ______ _______ ________ _______
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest Bearing Deposits $166 $8 4.82% $149 $9 6.04% $99 $4 4.04%
Investment Securities <FN1>
Taxable 45,689 2,728 5.97% 31,798 1,901 5.98% 33,590 1,772 5.28%
Tax Exempt <FN2> 7,575 404 7.70% 2,669 148 7.45% 27 2 7.81%
______ _____ ______ _____ ______ _____
Total Investments 53,430 3,140 5.88% 34,616 2,058 5.94% 33,716 1,778 5.27%
Federal Funds Sold and Securities
Purchased Under
Agreements to Resell 11,902 629 5.28% 7,728 443 5.73% 3,730 147 3.94%
Loans <FN3>
Commercial and Real Estate 56,012 5,876 10.49% 48,535 5,115 10.54% 42,192 4,018 9.52%
Installment 29,505 2,927 9.92% 20,856 2,111 10.12% 13,409 1,445 10.78%
______ _____ ______ _____ ______ _____
Total Loans 85,517 8,803 10.29% 69,391 7,226 10.41% 55,601 5,463 9.82%
______ _____ ______ _____ ______ _____
Total Earning Assets 150,849 12,572 8.33% 111,735 9,727 8.71% 93,047 7,388 7.94%
Allowance for Loan and
Lease Losses (1,015) (948) (836)
Nonearning Assets 16,920 12,503 9,336
______ _____ ______ _____ ______ _____
Total Assets $166,754 $123,290 $101,547
======= ======= =======
LIABILITIES AND
STOCKHOLDERS' EQUITY
NOW, Money Market
and Savings 58,362 1,599 2.74% 40,180 1,046 2.60% 32,030 680 2.12%
Certificates of Deposit 54,944 2,854 5.19% 41,489 2,067 4.98% 34,134 1,200 3.52%
______ _____ ______ _____ ______ _____
Total Interest Bearing Deposits 113,306 4,453 3.93% 81,669 3,113 3.81% 66,164 1,880 2.84%
Federal Funds Purchased and
Securities Sold Under
Agreements to Repurchase 102 4 3.92% 292 13 4.45% 978 39 3.99%
Notes Payable 1,158 84 7.25% 1,239 99 7.99% 630 57 9.05%
______ _____ ______ _____ ______ _____
Total Interest Bearing
Liabilities $114,566 $4,541 3.96% $83,200 $3,225 3.88% $67,772 $1,976 2.92%
Demand Deposits 40,633 31,354 28,000
Other Liabilities 720 628 332
Stockholders' Equity 10,835 8,108 5,443
______ _____ ______ _____ ______ _____
Total Liabilities and
Stockholder's Equity
$166,754 $123,290 $101,547
======= ======= =======
NET INTEREST INCOME
AND NET INTEREST SPREAD $8,031 4.37% $6,502 4.83% $5,412 5.02%
====== ====== ======
NET YIELD ON EARNING ASSETS 5.32% 5.82% 5.81%
<FN1> Securities classified as available-for-sale are included in average
balances and interest income figures reflect interest earned on
such securities.
<FN2> Yields on tax-exempt obligations are shown on a tax equivalent basis
using a 34% tax rate.
<FN3> Interest income includes loan fees of $674,443 for 1996, $596,445 for
1995 and $324,757 for 1994. Nonaccrual loans are included in average
balances and income on such loans is recognized on a cash basis.
</TABLE>
income in 1995.
Average loans as a percentage of average earnings
assets increased from 60% in 1994 to 62% in 1995
before declining to 57% in 1996. Substantial
growth in average deposits in 1996 of $40.9
million resulted in a significant excess of funds
over the volume needed for loan originations. The
excess funds were invested in securities and
federal funds sold, increasing this portfolio to
43% of earning assets at year end 1996 compared to
38% at year end 1995.
The average volume of interest-bearing deposits
increased $31.6 million, from $81.7 million in
1995 to $113.3 million in 1996, resulting in an
increase to interest expense of $1,331,743. A 12
basis point increase in the average rate paid on
interest-bearing liabilities, from 3.81% in 1995
to 3.93% in 1996, contributed to the increase in
interest expense for 1996. Rising interest rates
throughout 1995 resulted in a significant increase
of 97 basis points to an average rate paid on
interest-bearing deposits of 3.81%. A 22.8%
increase in the average volume of interest-bearing
deposits in 1995 combined with the higher rate
resulted in an increase of $1,200,907 in interest
expense for the year.
Over the past three years, MidSouth's deposit mix
shifted to a higher volume of interest-bearing
deposits primarily due to an increase in interest-
bearing public fund deposits. As of December 31,
1996, 26% of average total deposits were non-
interest bearing demand deposits, while 38%
represented NOW, money market and savings
deposits. Certificates of deposit amounted to 36%
of average total deposits at year-end 1996. As of
year-end 1995, the deposit mix consisted of 28%
non-interest bearing demand deposits, 35% NOW,
money market and savings and 37% certificates of
deposit. The deposit mix at year-end 1994
consisted of 30% non-interest bearing demand
deposits, 34% NOW, money market and savings and
36% 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 5.32% in 1996 as
compared to 5.82% for 1995 and 5.81% for 1994.
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 $351,897 in 1996 and $105,291
in 1995 primarily due to an increase in the number
of transaction accounts serviced and the volume of
nonsufficient funds checks processed by MidSouth.
The total number of transaction accounts
(excluding savings accounts) increased from 7,394
in 1994 to 10,141 in 1995 and to 17,139 in 1996.
Of the 2,747 accounts added in 1995, 1,009 were
accounts acquired from MidSouth's acquisition of
Sugarland Bank in July 1995. Non-interest income
resulting from other charges and fees increased
$202,186 in 1996 as compared to $56,019 in 1995.
Increases of $63,597 in fees earned through the
sale of credit life insurance, $35,953 in fee
income from the Finance Company, $29,609 in ATM
fee income, $21,400 in gains on sales of fixed
assets and other increases recorded in check order
fees, safe deposit box rental fees, and lease
income from a third party offering investment
services to customers contributed to the increased
non-interest income for 1996. The 1995 increase
primarily resulted 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.
Securities Transactions. Net gains on sales of
securities totaled $1,176 for 1996 as $2.0 million
in U. S. Treasury securities were liquidated and
reinvested to improve yield. 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 totaled $1,178 for
1994.
Non-Interest Expense
Total non-interest expense increased 29% from 1995
to 1996 and 24% from 1994 to 1995. MidSouth's
expansion over the past twenty-four months
resulted in significant increases in salaries and
employee benefits, occupancy expenses, marketing
expenses, data processing expenses and the cost of
printing and supplies. Throughout the twenty-four
month period, MidSouth opened five full service
Bank branches, two of which were former Sugarland
banking offices, two Bank loan production offices
and two Finance Company offices.
Accordingly, salaries and employee benefits
increased 31% from 1995 to 1996 and 25% from 1994
to 1995. MidSouth hired the full-time equivalent
of 23 employees in 1996 to bring the total
employed from 110 at year-end 1995 to 133 at year-
end 1996. The majority of the new hires staffed
the Super 1 - Lafayette branch, the two loan
production offices and the two Finance Company
locations. In addition, MidSouth hired a retail
branch manager to facilitate growth in the branch
markets. The expansion of MidSouth's branch
system in 1995 required the addition of the full-
time equivalent of 29 employees to a total of 110
as compared to 81 in 1994.
Occupancy expenses increased 33% from 1995 to 1996
and 32% from 1994 to 1995 as a result of increases
in building lease expense, depreciation and
maintenance expenses associated with buildings,
furniture and equipment and ad valorem taxes.
Building lease expense increased $103,717 in 1996
primarily due to a full year of lease expense on
the Super 1 - New Iberia branch, the addition of
Super 1 - Lafayette's lease expense, the Finance
Company's lease expenses and the loan production
offices' lease expenses. The increase in lease
expense for 1995 resulted primarily from 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 addition, 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 thirteen banking
offices and two loan production offices increased
$205,859 in 1996 and $118,500 in 1995. Ad valorem
taxes increased $41,500 in 1996 and $30,500 in
1995. During 1996,
<PAGE>
<TABLE>
<CAPTION>
TABLE 2 - Interest Differentials (in thousands)
1996 OVER 1995 1995 OVER 1994
_________________________________________ ___________________________________________
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 (1) 1 (2) - 5 2 2 1
Investment Securities
Taxable 827 830 (2) (1) 129 (95) 237 (13)
Tax Exempt 256 272 (7) (9) 146 207 (2) (59)
Federal Funds Sold and
Securities Purchased
Under Agreement to
Resell 186 239 (34) (19) 296 158 66 72
Loans, including fees 1,577 1,680 (83) (20) 1,763 1,354 327 82
_____ _____ _____ ______ _____ _____ ______ ______
TOTAL 2,845 3,022 (128) (49) 2,339 1,626 630 83
_____ _____ _____ ______ _____ _____ ______ ______
Interest Bearing Liabilities:
Interest Bearing Deposits 1,340 1,206 97 37 1,233 441 642 150
Federal Funds Purchases
and Securities
Sold Under Agreement
to Repurchase (9) (8) (2) 1 (26) (27) 5 (4)
Notes Payable (15) (7) (9) 1 42 54 (7) (5)
_____ _____ _____ ______ _____ _____ ______ ______
TOTAL 1,316 1,191 86 39 1,249 468 640 141
_____ _____ _____ ______ _____ _____ ______ ______
Net Interest Income Before
Allocation of Volume/Rates 1,529 1,831 (214) (88) 1,090 1,158 (10) 58
Allocation of Volume/Rates - (97) 9 88 - (58) - (58)
_____ _____ _____ ______ _____ _____ ______ ______
CHANGES IN
NET INTEREST INCOME $1,529 $1,734 ($205) - $1,090 $1,100 ($10) -
===== ====== ===== ====== ===== ===== ====== ======
NOTE: 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>
MidSouth invested total
capital of $1,634,490 in the construction of a
full service branch in Opelousas, an in-store
branch in the Super 1 Foods store in Lafayette and
began construction of a full service branch in
Morgan City. Fixed asset additions planned for
the next two years include construction of a full
service branch in Lake Charles and construction of
a branch facility at the Ambassador Caffery
location in Lafayette to replace the movable
buildings currently used.
A decrease in MidSouth's rate for FDIC premiums,
retroactive to June 1, 1995, resulted in MidSouth
paying nominal premiums of $2,000 for the year
1996, a decrease of $104,414 from the $106,414
recorded for 1995. The retroactive reduction in
rate in 1995 resulted in a refund of $68,703
received during the third quarter of 1995. The
reduced rate and subsequent refund lowered
MidSouth's FDIC premiums by $103,094 from 1994 to
1995.
On September 30, 1996, the Deposit Insurance Act
of 1996 was signed into law for the purpose of
recapitalizing the Savings Association Insurance
Fund ("SAIF") and to assure the payment of the
Financing Corporation's ("FICO") bond obligations.
Under this new act, banks insured under the Bank
Insurance Fund ("BIF") are required to pay a
portion of the interest due on bonds that were
issued by FICO to help the ailing Federal Savings
and Loan Insurance Corporation ("FSLIC") in 1987.
The FICO rates for BIF are determined quarterly.
The annual rate is expected to be 1.3 basis points
per $100 of deposits, or .00013, for 1997.
Professional fees consist of legal, accounting and
regulatory fees. A 33% increase in professional
fees in 1996 resulted primarily from an increase
in legal fees associated with the collection of
lease financing receivables within an indirect
leasing program and accounting fees paid for audit
and tax services. 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.
Marketing expenses increased $82,242 from 1995 to
1996 and $121,669 from 1994 to 1995. In 1996,
expenses related to special loan and deposit
product promotions and related incentives
contributed to the increase in marketing expenses.
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.
Decreases of $7,480 and $4,051 and were reported
in net expenses on Other Real Estate Owned
("OREO") for 1996 and 1995, respectively.
Expenses on OREO remained controlled in 1996 and
1995 due to few additions and continued
improvement in credit quality.
Income Taxes
MidSouth's tax expense decreased in 1996 to
approximately 27% of income primarily due to an
increase in interest income on non-taxable
municipal securities and from an overpayment of
1995 income taxes that effectively reduced 1996
income tax provisions. Interest income on non-
taxable municipal securities also lowered the
effective tax rate for 1995 to approximately 31%.
Note 1 and Note 10 to MidSouth's Consolidated
Financial Statements provide additional
information regarding MidSouth's income tax
considerations.
BALANCE SHEET ANALYSIS
Securities
MidSouth's securities available-for-sale portfolio
increased $11.2 million from year-end 1995 to
year-end 1996. A decline of $329,279 in the
market value of securities available-for-sale is
included in the net change in 1996. Unrealized
losses in the securities available-for-sale
portfolio, net of unrealized gains and tax effect,
were $114,530 at December 31, 1996, compared to
unrealized gains net of unrealized losses and tax
effect of $98,950 at December 31, 1995. These
amounts result from interest rate fluctuations and
do not represent permanent adjustments of value.
Moreover, classification of securities as
available-for-sale does not necessarily indicate
that the securities will be sold prior to
maturity. 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 allowed 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.
At December 31, 1996, approximately 33% of
MidSouth's securities available-for-sale portfolio
represents mortgage-backed securities and 9%
collateralized mortgage obligations ("CMO's").
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.
An additional 52% of the portfolio consisted of U.
S. Treasury and agency securities, while mutual
funds and other securities represented 6% of the
portfolio. MidSouth held two CMO's with book
values in excess of 10% of stockholders' equity at
December 31, 1996: a Chase Mortgage Finance Corp
1993 H II A-3 with a book value of $1,315,955
(market value of $1,309,756) and a GE Capital
Mortgage Services, Inc. 1993-14 A4 with a book
value of $2,001,408 (market value of $1,963,997).
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 $17.2 million in
U. S. Treasury securities and $3.0 million in
mortgage-backed securities designated as available-
for-sale during 1996. In the held-to-maturity
portfolio, MidSouth purchased $5.0 million in non-
taxable municipal securities in the same period.
Detailed credit analysis was performed on each
municipal offering by Piper Capital Management,
Inc., an investment advisory firm, prior to
purchase. In addition, MidSouth limits the amount
of securities of any one municipality purchased
and the amount purchased within specific
geographic regions to reduce the risk of loss
within the non-taxable municipal securities
portfolio.
Federal funds sold totaled $14.1 million, and
$15.8 million as of December 31, 1996 and 1995,
respectively. Significant deposit growth in
branch markets resulted in a high volume of
federal funds sold at December 31, 1996. Due to a
high volume of anticipated loan fundings and the
limited availability of securities fitting
MidSouth's investment portfolio specifications,
MidSouth placed excess cash from the deposit
growth in federal funds sold during 1996.
Deposits received through a deposit promotion
during the fourth quarter of 1995, combined with
funds deposited with two public fund contracts and
the Sugarland acquisition, resulted in the
increased volume in federal funds sold at December
31, 1995.
Loan Portfolio
MidSouth experienced substantial loan growth for
the years ended December 31, 1995 and 1996. Total
loans grew from $60,432,275 at year-end 1994 to
$78,878,605 at year-end 1995 and to $94,828,509 at
year-end 1996.
The $15.9 million increase in 1996 represents a
20% increase in total loans. Of this $15.9
million increase, $8.4 million resulted from an
increase in real estate mortgage loans. This
category of loans is comprised of first mortgage
loans structured on a fifteen year amortization
with three to five year balloon payments to allow
for repricing and second mortgage home equity
financing. A strong economy in MidSouth's markets
increased real estate values during 1996 and
provided opportunities for home equity financing.
MidSouth elected to offer its second mortgage home
equity financing at a more conservative margin of
80% of appraised value as compared to 100% of
appraised value. Installment loans to individuals
increased $5.8 million during 1996 primarily due
to an installment loan promotion held during the
months of March and April 1996 and due to the
focus placed by MidSouth's retail lenders on
growing the banking relationship of each
established customer. In addition, the
introduction and promotion of loan products such
as consumer Primeline and Visa credit cards
contributed to the growth in installment loans to
individuals.
The commercial loan portfolio grew $2.4 million
primarily in term debt financing commercial real
estate and commercial vehicles and equipment.
Decreases were noted in real estate construction
lending and lease financing receivables. Real
estate construction lending decreased due to
tightened credit criteria for interim construction
loans. Lease financing receivables declined while
MidSouth developed its own direct leasing program
and discontinued third party lease financing. In
addition, losses within the third party lease
financing receivables, resulting from the third
party's failure to perform, contributed to the
decrease in lease financing receivables.
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. 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.
Favorable economic conditions in MidSouth's market
area combined with increased market awareness of
MidSouth as the largest locally owned bank led to
the approximately 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 relaxed 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. In
addition, MidSouth plans to utilize a credit
scoring program beginning in 1997 that will
strengthen current underwriting procedures and
enhance consistency in lending decisions.
Documentation of the loan decision process is
required on each credit application, whether
approved or denied, to insure thorough and
consistent procedures.
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, an external 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 $714,140 at December
31, 1996, compared to $570,841 at December 31,
1995. The increase in nonperforming assets
resulted primarily from the addition of a one
large commercial credit placed on nonaccrual in
September 1996. The credit represents a pool of
automobile loans for which the initial servicer
discontinued processing payments on the pool. A
new service provider continued payments on the
pool and, as of December 31, 1996, MidSouth had
experienced no loss in principal payments on the
pool. Nonaccrual loans totaled $523,855 at year-
end 1996 compared to $387,453 at year-end 1995.
Loans past due 90 days and still accruing totaled
$338,294 at December 31, 1996, compared to
$265,682 for the year ended December 31, 1995.
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 are not
placed on nonaccrual but that become 120 days past
due are
<TABLE>
<CAPTION>
TABLE 3
Nonperforming Assets and Loans Past Due 90 Days
December 31,
_____________________
1996 1995
________ ________
<S> <C> <C>
Nonperforming loans
Nonaccrual loans $523,020 $386,510
Restructured loans 835 943
_______ _______
Total nonperforming loans 523,855 387,453
Other real estate owned, net 180,270 180,270
Other assets repossessed 10,015 3,118
_______ _______
Total nonperforming assets $714,140 $570,841
======= =======
Loans past due 90 days
or more and still accruing $338,294 $265,682
Nonperforming loans as a %
of total loans 0.55% 0.49%
Nonperforming assets as a %
of total loans, other real estate
owned and other assets repossessed 0.75% 0.72%
ALLL as a % of nonperforming loans 207.65% 271.49%
</TABLE>
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 income reported for the year 1996
refer to Note 5 to MidSouth's Consolidated
Financial Statements.
Allowance for Loan and Lease Losses. Provisions
totalling $674,500, $225,000 and $210,000, for the
years 1996, 1995 and 1994, respectively, were
necessary to bring the ALLL to a level considered
by management to be sufficient to cover potential
losses in the loan portfolio. Losses within the
lease financing receivables portfolio resulted in
increased provisions for 1996. Table 4 analyzes
activity in the ALLL for 1996 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
<PAGE>
<TABLE>
<CAPTION>
TABLE 4 - Summary of Loan Loss Experience (in thousands)
1996 1995
______ ______
<S> <C> <C>
BALANCE AT BEGINNING OF YEAR $1,052 $874
CHARGE-OFFS
Commercial, Financial and Agricultural 109 118
Real Estate - Construction - -
Real Estate - Mortgage 1 42
Installment Loans to Individuals 269 93
Lease Financing Receivables 517 -
Other - -
______ ______
Total Charge-offs 896 253
______ ______
RECOVERIES
Commercial, Financial and Agricultural 11 36
Real Estate - Construction - -
Real Estate - Mortgage 20 2
Installment Loans to Individuals 78 53
Lease Financing Receivables 148 -
Other - -
______ ______
Total Recoveries 257 91
______ ______
Net Charge-offs 639 162
Additions to allowance charged to
operating expenses 675 225
Addition of Sugarland allowance - 115
______ ______
BALANCE AT END OF YEAR $1,088 $1,052
====== ======
RATIOS
Net charge-offs to average loans 0.75% 0.23%
Balance in allowance at year-end to
outstanding loans at year end 1.15% 1.33%
</TABLE>
Refer to "Balance Sheet Analysis - Asset Quality-Allowance for Loan and Lease
Losses" for a description of the factors which influence
management's judgment in determining the amount of the provisions to the
allowance.
<TABLE>
<CAPTION>
Allowance for % of category % of category
Loan and Lease Losses 1996 to total loans 1995 to total loans
_______________________________ ____________________ _____________________
<S> <C> <C> <C> <C>
Commercial, Financial and
Agricultural 150 29.63% $130 32.64%
Real Estate - Construction - 1.80% - 2.86%
Real Estate - Mortgage 10 38.28% 10 35.37%
Installment Loans to Individuals 13 27.81% - 26.10%
Other - .13% - 2.98%
Lease Financing Receivables - 2.35% - .05%
Unallocated 915 - 912 -
______ _______ ______ _______
$1,088 100.00% $1,052 100.00%
====== ======= ====== =======
</TABLE>
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 increased its deposits in 1996
by $32.6 million, ending the year at $171.6
million compared to $139.0 million at December 31,
1995. Approximately $7.7 million of the $32.6
million increase resulted from in an increase in
public funds held on deposit. The remainder of
the growth resulted from development of branch
markets, which included the promotion of a new
deposit product, "Value Checking." In addition, a
direct mail promotion of MidSouth as a locally
owned bank contributed to the development of each
branch market. As a result, Lafayette Parish
deposits grew $14.5 million, St. Landry Parish
deposits grew $4.6 million, Jeff Davis Parish
deposits grew $2.5 million and the Super 1 Foods
branches grew $2.5 million.
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.
Core deposits, defined as all deposits other than
certificates of deposit ("CD's") of $100,000 or
more, represented 89% of total deposits at
December 31, 1996, compared to 91% at December 31,
1995 and 89% at December 31, 1994. Non-interest
bearing deposits represented 29% of total deposits
for year-end 1996 and year-end 1995, down from 32%
at year-end 1994. CD's of $100,000 or more
totaled $19.1 million at year-end 1996, an
increase of $6.2 million from the $12.9 million
reported at year-end 1995. The majority of these
deposits represent deposits of local customers
with which MidSouth has other relationships and
public funds deposits that are fully secured.
MidSouth's deposit rates are competitive within
its market and 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, 1996, MidSouth
maintained one repurchase agreement totaling
$104,414. Long term borrowings included an
advance against a $2.5 million line of credit
issued by a financial institution with a remaining
principal balance of $784,522 at December 31,
1996. An advance against a $600,000 line of
credit for the Finance Company added $240,000 to
the total of long term borrowings at December 31,
1996. A total of $471,338 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, 1996. 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 MidSouth Bank
or MidSouth. The ESOP note was eliminated from
total loans and long-term debt as an intercompany
transaction in MidSouth's December 31, 1995 and
1996 consolidated financial statements.
Capital. MidSouth and the Bank are required to
maintain certain minimum capital levels. Risk-
based capital requirements are intended to make
regulatory capital more sensitive to the risk
profile of an institution's assets. At December
31, 1996, MidSouth and the Bank were in compliance
with statutory minimum capital requirements.
Minimum capital requirements include a total risk-
based capital ratio of 8.0%, with Tier 1 capital
not less than 4.0%, and a leverage ratio (Tier 1
to total average adjusted assets) of 3% based upon
the regulators latest composite rating of the
institution. As of December 31, 1996, MidSouth's
Tier 1 capital to average adjusted assets (the
"leverage ratio") was 6.30% as compared to 6.74%
at December 31, 1995. Tier 1 capital to risk
weighted assets was 10.82% and 11.73% for 1996 and
1995, respectively. Total capital to risk
weighted assets was 11.87% and 12.98%,
respectively, for the same periods. The Bank's
leverage ratio was 6.52% at December 31, 1996
compared to 6.99% at December 31, 1995. The
capital ratios decreased due to the signficant
growth experienced by the Bank in 1996.
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. The Bank continued to be classified
as "well capitalized" throughout 1994, 1995 and
1996 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," $138,710 in unrealized
losses on securities available-for-sale, net of a
deferred tax asset of $24,180 were recorded as a
reduction to stockholders' equity as of December
31, 1996. In contrast, $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. 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, 1996
and 1995 did, however, effect MidSouth's equity
to assets ratio for financial reporting purposes.
The ratio of equity to assets was 6.13% for year-
end 1996 and 6.85% for year-end 1995.
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.
<PAGE>
<TABLE>
<CAPTION>
TABLE 5 - Interest Rate Sensitivity Table December 31, 1996 (in thousands)
Non-interest
0-3 MOS 4-6 MOS 7-12 MOS 1-5 YRS >5 YRS Bearing Total
_______ _______ ________ _______ ______ ____________ ______
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest Bearing
Deposits $407 $407
Fed Funds Sold 14,100 14,100
Investments
Mutual funds 1,932 1,932
Investment Securities 3,053 5,407 18,786 7,842 35,088
Mortgage-backed
Securities 2,842 2,187 5,257 7,079 2,412 19,777
Loans
Fixed Rate 14,782 9,359 14,082 32,152 1,670 72,045
Variable Rate 22,784 22,784
Other Assets 20,183 20,183
Allowance for
Loan and Lease Losses (1,088) (1,088)
_______ _______ _______ _______ ______ _______ ________
Total Assets $57,968 $11,546 $24,746 $58,017 $13,856 $19,095 $185,228
_______ _______ _______ _______ ______ _______ ________
LIABILITES
Fed Funds Purchased
Repurchase Agreement $104 $104
NOW 3,175 2,871 4,948 17,822 4,497 33,313
MMDA 2,190 1,981 3,415 11,988 3,104 22,678
Savings 954 863 1,488 5,360 1,352 10,017
CDOs 18,108 11,805 12,463 13,290 55,666
Demand Deposits 49,943 49,943
Other Liabilities 240 26 1,255 544 2,065
Stockholder's Equity 11,442 11,442
_______ _______ _______ _______ ______ _______ ________
Total Liabilities $24,531 $17,760 $22,314 $48,486 $10,208 $61,929 $185,228
Gap 33,437 (6,214) 2,432 9,531 3,648 (42,834)
Cumulative Gap 33,437 27,223 29,655 39,186 42,834 -
======= ======= ======= ======= ======= =======
Cumulative Gap/Total
Assets 18.05% 14.70% 16.01% 21.16% 23.13%
_______ _______ _______ _______ ______
</TABLE>
During 1996, MidSouth utilized 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 $29,655,000 which indicates
MidSouth's total earning assets and interest-
bearing liabilities maturing within one year are
mismatched at December 31, 1996. The ratio of the
one year cumulative gap to total assets of 16.01%
is above internal policy guidelines. MidSouth's
internal policy targets a one year cumulative gap
position of a positive or negative 15% of total
assets. The Funds Management Committee approved
the deviation from policy due to MidSouth's high
federal funds sold position at year-end 1996 of
$14,100,000. The Bank has a significant volume in
loans approved for funding and securities approved
for purchase by the board and management 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 quarterly and discussed
at MidSouth's 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
accommodate customers demands for deposit
withdrawals as well as their requests for credit.
Liquidity is deemed adequate when sufficient cash
to meet these needs can be promptly raised at a
reasonable cost to the Bank.
Liquidity is provided primarily by 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 $7.4
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. The
expiration of a public funds contract on July 30,
1997 could necessitate borrowing by the Bank in
August of 1997. The public funds contract
represented $13.6 million in deposits at year-end
1996.
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 in the past several years
have 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 are not expected to be
sufficient to meet debt service obligations
throughout 1997. Dividends from the Bank combined
with sales of MidSouth common stock through a
dividend reinvestment plan to be introduced in the
second quarter of 1997 will provide additional
liquidity for the parent company. As of January
1, 1997, the Bank had the ability to pay dividends
to the parent company of approximately $2,700,000
without prior approval from its primary regulator.
In addition, MidSouth has the ability to borrow
against its $2.5 million line of credit with a
financial institution. The unused portion of the
line totaled $1.7 million at year-end 1996.
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. Cash dividends totaling
$115,750 and $280,461 were paid to common
stockholders during 1995 and 1996, respectively.
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 Cumulative Convertible
Preferred Stock, Series A ("Preferred Stock")
issued in conjunction with the acquisition of
Sugarland Bank, as well as other considerations.
Additional information regarding MidSouth's
Preferred Stock is included in Note 12 to
MidSouth's Consolidated Financial Statements.
On August 19, 1996, MidSouth effected a four for
three stock split by way of a stock dividend to
its common stockholders of record as of July 31,
1996. The stock split increased the common shares
outstanding at the time from 994,627 to 1,326,025.
Accordingly, the conversion rate on the Preferred
Stock was adjusted to 1.777 shares of MidSouth
Common Stock for each share of Preferred Stock
converted.
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 and adjusted the conversion rate on the
Preferred Stock to 1.333 shares of MidSouth Common
Stock for each share of Preferred Stock converted.
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.
A total of $155,421 in dividends were paid on
MidSouth's Preferred Stock in 1996. Assuming no
conversion of preferred stock in 1997, the
aggregate amount of dividends on the preferred
stock in 1997 is expected to be $159,506.
New Pronouncements. In the opinion of management,
at December 31, 1996, there are no standards
issued by the Financial Accounting Standards Board
and required to be adopted by the Company which
would have a material effect on the financial
condition or results of operations of the Company.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTSOFCONDITION
DECEMBER 31, 1996 AND 1995
1996 1995
<S> <C> <C>
ASSETS
Cash and due from banks $ 11,314,562 $ 10,298,209
Federal funds sold 14,100,000 15,800,000
__________ __________
Total cash and cash equivalents 25,414,562 26,098,209
Interest-bearing deposits in banks 406,798 26,349
Securities available-for-sale at fair value
(cost of $47,387,766 in 1996
and $35,868,018 in 1995) 47,249,059 36,058,587
Securities held-to-maturity (estimated
market value of $9,700,307 in 1996
and $4,735,344 in 1995) 9,547,853 4,545,849
Loans, net of allowance for loan losses
of $1,087,790 in 1996
and $1,051,898 in 1995 93,740,719 77,826,707
Accrued interest receivable 1,386,596 1,107,820
Premises and equipment, net 5,808,952 4,532,610
Other real estate owned, net 180,270 180,270
Goodwill, net 276,523 311,352
Other assets 1,216,920 495,488
__________ __________
$185,228,252 $151,183,241
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 49,943,207 $40,471,206
Interest bearing 121,673,301 98,558,357
__________ __________
Total deposits 171,616,508 139,029,563
Securities sold under repurchase agreements 104,414 175,904
Accrued interest payable 397,259 322,891
Notes payable 1,521,435 972,617
Other liabilities 228,465 326,776
__________ __________
Total liabilities 173,868,081 140,827,751
__________ __________
Commitments and contingencies (Note 9) - -
Stockholders' equity:
Preferred stock, $14.25 par value,
5,000,000 authorized, 171,956 and
187,286 issued and outstanding at
December 31, 1996 and 1995, respectively 2,450,373 2,668,826
Common stock, $.10 par value, 5,000,000
shares authorized, 1,364,903 and
1,299,338 issued and outstanding
at December 31, 1996 and 1995,
respectively 136,491 96,794
Additional paid-in-capital 6,738,943 6,164,443
Unearned ESOP shares (30,836) (54,157)
Unrealized gains (losses) on securities
available-for-sale, net of deferred
taxes of $24,177 in 1996 and $91,619 in 1995 (114,530) 98,950
Retained earnings 2,179,730 1,380,634
__________ __________
Total stockholders' equity 11,360,171 10,355,490
__________ __________
$185,228,252 $151,183,241
=========== ===========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
<S> <C> <C> <C>
INTEREST INCOME:
Loans, including fees $ 8,803,467 $ 7,226,469 $ 5,463,501
Securities 3,140,270 2,058,321 1,782,504
Federal funds sold 628,680 442,794 142,473
__________ _________ _________
Total interest income 12,572,417 9,727,584 7,388,478
__________ _________ _________
INTEREST EXPENSE:
Deposits 4,457,556 3,125,813 1,924,906
Notes payable 84,171 99,513 51,195
__________ _________ _________
Total interest expense 4,541,727 3,225,326 1,976,101
__________ _________ _________
NET INTEREST INCOME 8,030,690 6,502,258 5,412,377
PROVISION FOR LOAN LOSSES 674,500 225,000 210,000
__________ _________ _________
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 7,356,190 6,277,258 5,202,377
__________ _________ _________
NONINTEREST INCOME:
Service charges on deposit accounts 1,489,211 1,137,314 1,032,023
Gain on sale of securities, net 1,176 - 1,178
Other charges and fees 647,898 445,712 389,693
__________ _________ _________
2,138,285 1,583,026 1,422,894
__________ _________ _________
NONINTEREST EXPENSES:
Salaries and employee benefits 3,668,824 2,794,654 2,242,892
Occupancy expense 1,522,974 1,142,405 865,452
Other 2,648,893 2,135,070 1,773,786
__________ _________ _________
7,840,691 6,072,129 4,882,130
__________ _________ _________
INCOME BEFORE INCOME TAXES 1,653,784 1,788,155 1,743,141
PROVISION FOR INCOME TAXES 417,286 546,545 601,500
__________ _________ _________
NET INCOME 1,236,498 1,241,610 1,141,641
PREFERRED DIVIDEND REQUIREMENT 155,421 38,142 -
__________ _________ _________
INCOME AVAILABLE TO COMMON
SHAREHOLDERS $1,081,077 $1,203,468 $1,141,641
========== ========= =========
EARNINGS PER COMMON SHARE:
PRIMARY EARNINGS PER
COMMON SHARE $.82 $.92 $.89
========== ========= =========
FULLY DILUTED EARNINGS
PER COMMON SHARE $.76 $.86 $.89
========== ========= =========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERSO EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
Preferred Stock Common Stock
_____________________ ____________________
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Balance, January 1, 1994 - $ - 670,638 $ 67,064
Issuance of common stock 9,829 983
Issuance of stock dividend 33,521 3,352
Net income
ESOP obligation repayments
Net change in unrealized gain
(loss) on securities
available-for-sale, net of tax
_________ _________ _________ _________
Balance, December 31, 1994 713,988 71,399
Issuance of common stock 9,685 968
Issuance of convertible preferred
stock 187,286 2,668,826
Costs incurred in connection
with issuance of preferred stock
Stock split on common stock effected
in the form of a dividend 240,267 24,027
Dividends paid on common stock-
$.12 per share
Dividends accrued on preferred
stock
Stock options exercised 4,000 400
Net income
ESOP obligation repayments
Net change in unrealized loss
on securities available-for-sale,
net of tax
_________ _________ _________ _________
BALANCE, DECEMBER 31, 1995 187,286 2,668,826 967,940 96,794
Issuance of common stock 13,001 1,300
Dividends paid on common stock-
$.24 per share
Dividends paid on preferred stock
Stock options exercised 28,666 2,867
Preferred stock conversion (15,330) (218,453) 23,898 2,390
Stock split on common stock effected
in the form of a dividend 331,398 33,140
Net income
ESOP obligation repayments
Net change in unrealized gain
on securities available-
for-sale, net of tax
_________ _________ _________ _________
BALANCE, DECEMBER 31, 1996 171,956 $2,450,373 1,364,903 $ 136,491
========= ========= ========= =========
See notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (continued)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
Unrealized
Gains (Losses)
Additional on Securities Retained
Paid-In- ESOP Available Earnings
Capital Obligation for Sale (Deficit) Total
_________ __________ __________ _________ __________
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1994 $5,738,665$ (92,891) $ 293,700 $ (537,872) $ 5,468,666
Issuance of common stock 99,329 100,312
Issuance of stock dividend 306,076 (310,071) (643)
Net income 1,141,641 1,141,641
ESOP obligatio repayments 19,870 19,870
Net changes in unrealized
gain (loss) on
securities available-
for-sale, net of tax (1,356,500) (1,356,500)
_________ ________ _________ _________ __________
BALANCE, DECEMBER 31, 1994 6,144,070 (73,021) (1,062,800) 293,698 5,373,346
Issuance of common stock 123,865 124,833
Issuance of convertible
preferred stock 2,668,826
Costs incurred in connection
with issuance (120,525) (120,525)
Stock split on common stock
effected in the form,
of a dividend (24,027) (782) (782)
Dividends paid on common
stock-$.12 per share (115,750) (115,750)
Dividends accrued on
preferred stock (38,142) (38,142)
Stock options exercised 41,060 41,460
Net income 1,241,610 1,241,610
ESOP obligation repayments 18,864 18,864
Net change in unrealized loss
on securities available-
for-sale, net of tax 1,161,750 1,161,750
_________ ________ _________ _________ __________
BALANCE, DECEMBER 31, 1995 6,164,443 (54,157) 98,950 1,380,634 10,355,490
Issuance of common stock 164,797 166,097
Dividends paid on common
stock-$.24 per share (280,461) (280,461)
Dividends paid on preferred
stock (155,421) (155,421)
Stock options exercised 226,780 229,647
Preferred stock conversion 216,063
Stock split on common stock
effected in the form of
a dividend (33,140) (1,520) (1,520)
Net income 1,236,498 1,236,498
ESOP obligation repayments 23,321 23,321
Net change in unrealized gain
on securities available-
for-sale, net of tax (213,480) (213,480)
_________ ________ _________ _________ __________
BALANCE, DECEMBER 31, 1996 $6,738,943 $ (30,836) $(114,530) $2,179,730 $11,360,171
========= ======== ========= ========= ==========
See notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER31, 1996, 1995 AND 1994
1996 1995 1994
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,236,498 $ 1,241,610 $ 1,141,641
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 650,673 393,418 285,957
Provision for loan losses 674,500 225,000 210,000
Provision for losses on other
real estate owned - 12,400 5,649
Provision for deferred income
taxes (230,442) 82,367 347,500
Premium amortization, net 168,342 123,283 207,798
Gain on sales of securities (1,176) - (1,179)
Gain (loss) on sales of other
real estate owned (163) 735 8,080
Gain on sales of premises
and equipment (21,755) - (455)
Change in accrued interest
receivable (278,776) (185,054) (94,094)
Change in accrued interest
payable 74,368 101,682 44,198
Change in other liabilities 121,111 (423,790) 290,353
Change in other assets (727,211) (82,069) (44,745)
_________ _________ _________
Net cash provided by
operating activities 1,665,969 1,489,582 2,400,703
_________ _________ _________
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease (increase)
in interest-bearing
deposits in banks (380,449) 22,073 (47,389)
Proceeds from sales of
securities available-
for-sale 1,993,633 2,288,617 1,223,182
Proceeds from maturities
and calls of securities
available-for-sale 6,773,366 8,674,925 2,940,591
Proceeds from maturities
and calls of securities
held-to-maturity - 145,946 -
Purchases of securities
available-for-sale (20,429,811) (10,178,931) (3,061,635)
Purchases of securities
held-to-maturity (5,026,109) (4,317,707) (370,946)
Loan originations,
net of repayments (16,615,170) (9,631,750)(10,806,547)
Purchases of premises
and equipment (2,024,561) (1,964,370) (336,703)
Proceeds from sale of
premises and equipment 154,130 - 907
Proceeds from sales of
other real estate owned 3,500 77,945 84,992
Net cash received in
connection with acquisition - 3,388,259 -
_________ _________ _________
Net cash used in investing
activities (35,551,471) (11,494,993)(10,373,548)
_________ _________ _________
(continued)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 32,586,945 27,763,324 6,078,409
Net decrease in repurchase
agreements (71,490) (125,826) (456,945)
Issuance of notes payable 1,369,293 1,000,000 544,916
Repayments of notes payable (820,475) (1,150,279) (115,293)
Proceeds from issuance of common
stock 166,096 124,833 100,312
Payment of common stock dividends (256,641) (57,676) -
Payment of fractional shares
resulting from stock dividend (1,520) (782) (643)
Proceeds from exercise of stock
options and warrants 229,647 28,561 -
Cost incurred in connection
with issuance of preferred stock - (120,524) -
__________ __________ __________
Net cash provided by financing
activities 33,201,855 27,461,631 6,150,756
__________ __________ __________
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS (683,647) 17,456,220 (1,822,089)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 26,098,209 8,641,989 10,464,078
__________ __________ __________
CASH AND CASH EQUIVALENTS AT
END OF YEAR $ 25,414,562 $26,098,209 $ 8,641,989
========== ========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 4,467,359 $ 3,093,801 $ 1,931,905
========== ========== ==========
Income taxes paid $ 500,570 $ 466,723 $ 5,000
========== ========== ==========
See notes to consolidated financial statements.
(concluded)
</TABLE>
<PAGE>
MidSouth Bancorp, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
__________________________________________________
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements of MidSouth
Bancorp, Inc. (the Company) and its wholly owned
subsidiaries MidSouth National Bank (the Bank) and
Financial Services of the South, Inc. (the Finance
Company), 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 Company also provides
consumer loan services to individuals through the
Finance Company.
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, the Bank and the Finance Company.
Significant intercompany transactions and balances
have been eliminated.
Use of Estimates - The preparation of financial
statements in conformity with generally accepted
accounting principles requires 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 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, 1996. 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 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
exists 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 CompanyOs
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 foreclosures
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. Revenues 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. The Bank computes deferred income taxes
based on the difference between the financial
statements and tax basis of assets and liabilities
using enacted tax rates in effect in the years in
which the differences are expected to reverse.
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 - The computation of
primary earnings per share is based on the
weighted average number of outstanding common
shares after giving effect to the stock dividends
paid in 1996 and 1995 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, 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, 1996 were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Primary 1,325,556 1,304,769 1,281,217
Fully diluted 1,630,950 1,447,487 1,281,217
</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 1995 and 1994 amounts to conform
to the classifications adopted for reporting in
1996.
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.
The following unaudited proforma consolidated
results of operations give effect to the
acquisition of Sugarland as though it had occurred
on January 1, 1994:
<TABLE>
<CAPTION>
Year Ended December 31,
_______________________
1995 1994
<S> <C> <C>
Interest income $10,439,686 $ 8,607,394
Interest expense (3,449,290) (2,341,780)
Provision for loan losses (225,000) (210,000)
Net interest income after provision __________ __________
for loan losses $ 6,765,396 $ 6,055,614
Net income $ 1,350,436 $ 1,292,384
Net income available for common shareholders $ 1,129,456 $ 1,071,404
Primary earnings per common share $ .87 $ .83
Fully diluted earnings per common share $ .83 $ .79
</TABLE>
The unaudited proforma information is not
necessarily indicative either of the results of
operations that would have occurred had the
purchases been made as of January 1, 1994 or of
future results of operations of the combined
companies. In connection with the acquisition,
liabilities were assumed as follows:
<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
$3,708,000 and $1,623,000 at December 31, 1996 and
1995, respectively.
4. INVESTMENT SECURITIES
The portfolio of securities consisted of the
following:
<TABLE>
<CAPTION>
December 31, 1996
_______________________________________________
Gross Gross
Amortized Unrealized Unrealized
Available-for Sale Cost Gains Losses Fair Value
___________ __________ _________ ___________
<S> <C> <C> <C> <C>
U.S. Treasury securities $23,733,151 $77,101 $124,391 $23,685,861
U.S. Government agencies 860,178 3,641 5,142 858,677
Obligations of states and
political subdivisions 196,070 4,129 - 200,199
Mortgage-backed securities 15,431,087 126,288 88,480 15,468,895
Collateralized mortgage
obligations 4,345,330 35 64,283 4,281,082
Mutual funds 2,000,000 - 67,605 1,932,395
Other 821,950 - - 821,950
___________ __________ _________ ___________
$47,387,766 $ 211,194 $ 349,901 $47,249,059
=========== ========== ========= ===========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1995
_______________________________________________
Gross Gross
Amortized Unrealized Unrealized
Available-for Sale Cost Gains Losses Fair 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, 1996
_______________________________________________
Gross Gross
Amortized Unrealized Unrealized
Held-to Maturity Cost Gains Losses Fair Value
___________ __________ _________ ___________
<S> <C> <C> <C> <C>
Nontaxable obligations
of states and political
subdivisions $9,547,853 $ 238,774 $ 86,320 $9,700,307
========== ========= ========= ==========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1995
_______________________________________________
Gross Gross
Amortized Unrealized Unrealized
Held-to-Maturity Cost Gains Losses Fair Value
___________ __________ _________ ___________
<S> <C> <C> <C> <C>
Nontaxable obligations
of states and political
subdivision $4,545,849 $ 189,496 $ - $4,735,344
========== ========= ========= ==========
</TABLE>
The amortized cost and fair value of securities at
December 31, 1996, 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>
Available-for-Sale Amortized Fair
Cost Value
__________ __________
<S> <C> <C>
Due in one year or less $7,386,781 $7,318,205
Due after one year
through five years 18,416,122 18,364,069
Due after five years
through ten years 685,027 693,389
Due after ten years 301,469 301,469
Mortgage-backed securities 19,776,417 19,749,977
Other securities 821,950 821,950
__________ __________
$47,387,766 $47,249,059
========== ==========
Held-to-Maturity Amortized Fair
Cost Value
__________ __________
Due in one year or less $ 20,000 $ 20,254
Due after one year through
five years 100,000 102,564
Due after five years through
ten years 2,809,794 2,886,865
Due after ten years 6,618,059 6,690,624
_________ _________
$9,547,853 $9,700,307
========= =========
</TABLE>
Proceeds from sales of securities available-for-
sale during 1996 were $1,993,633. A gross gain of
$1,176 was recognized on those sales. There were
no gross losses realized on sales during 1996.
The related income tax provision on gains on the
sales of investment securities was $400 in 1996.
Proceeds from sales of securities available-for-
sale during 1995 and 1994 were $2,288,617 and
$1,223,182, respectively. No gain or losses were
recognized on sales in 1995. Gross gains of
$1,179 were realized on sales during 1994. There
were no gross losses realized on sales during
1994. The related income tax provisions on gains
on the sales of investment securities was $400 in
1994.
Securities with an aggregate carrying value of
approximately $35,329,518 and $13,151,000 at
December 31, 1996 and 1995 were pledged to secure
public funds on deposit and for other purposes
required or permitted by law.
The Bank has four 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 less than one to four years.
5. LOANS
The loan portfolio consisted of the following:
<TABLE>
<CAPTION>
December 31,
__________________________
1996 1995
<S> <C> <C>
Commercial, financial and
agricultural $28,100,137 $25,748,496
Lease financing receivable 2,231,843 2,349,525
Real estate - mortgage 36,302,817 27,895,794
Real estate - construction 1,705,161 2,257,013
Installment loans to individuals 26,369,119 20,586,821
Other 119,432 40,956
___________ ___________
94,828,509 78,878,605
Less allowance for loan losses (1,087,790) (1,051,898)
___________ ___________
$93,740,719 $77,826,707
=========== ===========
</TABLE>
The Bank generally makes loans in its market areas
of Lafayette, Jefferson Davis, Iberia, St. Landry,
St. Mary, Calcasieu and St. Martin Parishes.
Loans on which the accrual of interest has been
discontinued amounted to $523,855 and $387,453 at
December 31, 1996 and 1995, respectively. If
interest on those loans had been accrued, such
income would have approximated $79,000, $42,000
and $25,000 for the years ended December 31, 1996,
1995 and 1994. Interest income on those loans,
which is recorded only when received, amounted to
$33,660, $16,808 and $8,385 for 1996, 1995 and
1994, respectively.
An analysis of the activity in the allowance for
loan losses is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
____________________________________________
1996 1995 1994
<S> <C> <C> <C>
Balance at beginning of year $ 1,051,898 $ 873,934 $ 824,329
Provision for loan losses 674,500 225,000 210,000
Addition of acquired reserve - 115,093 -
Recoveries 257,051 91,481 165,730
Loans charged off (895,659) (253,610) (326,125)
_________ _________ _________
Balance at end of year $ 1,087,790 $ 1,051,898 $ 873,934
========== ========= =========
</TABLE>
During the years ended December 31, 1996 and 1995,
approximately $3,000 and $18,000 of loans were
transferred to other real estate owned,
respectively.
As of December 31, 1996 and 1995, loans
outstanding to certain directors, officers, and
their affiliates were $422,968 and $512,103,
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.
An analysis of activity with respect to these
related party loans is as follows:
<TABLE>
<CAPTION>
December 31,
___________________________
1996 1995
<S> <C> <C>
Beginning balance $ 512,103 $ 561,011
New loans 522,623 312,328
Repayments (611,758) (361,236)
_________ _________
Ending balance $ 422,968 $ 512,103
========= =========
</TABLE>
At December 31, 1996 and 1995, the recorded
investment in loans that are considered to be
impaired was $418,794 and $406,745, respectively.
The related reserves for these loans were $134,716
and $140,000 at December 31, 1996 and 1995,
respectively. Interest income on those would have
approximated $41,310 and $23,760 for 1996 and
1995, respectively, if interest had been accrued.
Interest income recognized on those loans amounted
to $32,960 and $18,600 for 1996 and 1995,
respectively.
6. BANK PREMISES AND EQUIPMENT
Premises and equipment consisted of the following:
<TABLE>
<CAPTION>
December 31,
_________________________
1996 1995
<S> <C> <C>
Buildings and improvements $ 3,441,573 $ 2,643,069
Furniture, fixtures and equipment 3,884,752 3,215,533
Automobiles 260,008 180,264
Leasehold improvements 633,977 385,521
Construction-in-process 130,757 61,857
8,351,067 6,486,244
__________ __________
Less accumulated depreciation
and amortization (2,542,115) (1,953,634)
__________ __________
$ 5,808,952 $ 4,532,610
========== ==========
</TABLE>
7. DEPOSITS
Deposits consisted of the following:
<TABLE>
<CAPTION>
December 31,
__________________________
1996 1995
<S> <C> <C>
Non-interest bearing $49,943,207 $40,471,206
Savings and money market 32,695,085 27,526,736
NOW accounts 33,312,529 22,100,079
Time deposits under $100,000 36,571,046 36,027,950
Time deposits over $100,000 19,094,641 12,903,592
___________ ___________
$171,616,508 $139,029,563
=========== ===========
</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,
_________________________
1996 1995
<S> <C> <C>
Note payable to financial
institutions $ 1,050,097 $ 463,197
FHLB borrowings 471,338 509,420
__________ __________
$ 1,521,435 $ 972,617
========== ==========
</TABLE>
The note payables to financial institutions
consist of advances against lines of credit
established by the Company and the Finance Company
and an automobile loan payable by the Finance
Company.
The line of credit of the Company of $2,500,000 is
dated August 29, 1996. At anytime prior to April
30, 1997, the Company 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 as quoted by the Wall Street Journal
and are payable in monthly installments based on
an 84 month amortization of the principal amount
of each advance. Advances totaling $784,522 at
December 31, 1996 are due on October 15, 2003 and
bear an interest rate of 8.25%. The Company has
pledged all of the Bank's stock as collateral for
the note and, as additional security, provided a
life insurance policy on the President of the
Company in the amount of $1,000,000.
The line of credit of the Finance Company of
$600,000 is dated August 29, 1996. At anytime
prior to April 30, 1997, the Finance Company may
request advances up to but not exceeding an
aggregate principal amount of $600,000 at any one
time outstanding. Advances under the line of
credit bear interest at a variable rate equal to
the financial institution's prime rate of interest
and are payable on April 30, 1997. Interest on
the line of credit is payable monthly. Advances
totaled $240,000 at December 31,1996 and bore an
interest rate of 8.25%. The Finance Company has
pledged (1) all its promissory notes, credit sales
agreements, installment sales contracts, chattel
paper, negotiable paper or other written evidence
of indebtedness to the Finance Company; (2) all of
its accounts receivable; (3) all of its common
stock; and (4) a life insurance policy on the
President of the Company in the amount of
$300,000.
A note payable on the Finance Company dated June
5, 1996 bears interest at 4.80% and is due on June
5, 2000. This note payable is payable in 48
monthly installments over the term of the loan.
The principal balance remaining on the note at
December 31, 1996 was $25,575.
At December 31, 1996, 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.
Aggregate annual maturities on notes payable are
as follows:
<TABLE>
<CAPTION>
<S> <C>
1997 $ 381,977
1998 148,037
1999 275,459
2000 168,651
2001 300,813
Thereafter 246,498
_________
$1,521,435
=========
</TABLE>
9. COMMITMENTS AND CONTINGENCIES
At December 31, 1996, future annual minimum rental
payments due under noncancellable operating
leases, primarily for land, are as follows:
<TABLE>
<CAPTION>
<S> <C>
1997 $ 384,900
1998 385,950
1999 373,901
2000 371,715
2001 377,238
Thereafter through 2058 5,917,882
_________
$7,811,586
=========
</TABLE>
Minimum rental payments have not been reduced by
minimum sublease rentals of approximately $60,000
due in the future under noncancellable subleases.
Rental expense under operating leases for 1996,
1995 and 1994 was $370,275, $266,558 and $230,756,
respectively. Sublease income amounted to $31,800
in 1996 and $31,800 in 1995.
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.
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
Company's deferred tax assets and liabilities as
of December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
December 31,
__________________________
1996 1995
<S> <C> <C>
Deferred tax assets:
Unrealized loss on securities $ 24,180 $ -
Writedowns of other real estate 60,152 58,971
Allowance for possible loan
losses 166,382 16,113
Other 6,212 12,791
_________ ________
Total deferred tax assets 256,926 87,875
_________ ________
Deferred tax liabilities:
FHLB stock dividends (17,105) -
Depreciation (158,449) (97,118)
Unrealized gain on securities - (91,619)
Other (88,411) (156,251)
_________ ________
Total deferred tax liabilities (263,965) (344,988)
_________ ________
Net deferred tax liability $ (7,039) $ (257,113)
========= ========
</TABLE>
Components of income tax expense are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Current $ 551,561 $ 464,178 $ 254,000
Deferred (134,275) 82,367 347,500
_________ __________ __________
$ 417,286 $ 546,545 $ 601,500
========= ========== ==========
</TABLE>
The provision for federal income taxes differs
from the amount computed by applying the U.S.
Federal income tax statutory rate of 34% on income
as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
_______________________________________
1996 1995 1994
<S> <C> <C> <C>
Taxes calculated at statutory rate $ 562,287 $ 607,973 $ 592,668
Increase (decrease) resulting from:
Tax-exempt interest (124,532) (50,463) -
Other (20,469) (10,965) 8,832
_________ __________ _________
$ 417,286 $ 546,545 $ 601,500
========= ========== =========
</TABLE>
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
is 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
$30,836 at December 31, 1996. 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 $84,000, $78,000 and $60,000 for the
years ended December 31, 1996, 1995 and 1994,
respectively. The ESOP shares as of December 31,
1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Allocated shares 123,936 116,221
Shares released for allocation 3,346 2,405
Unreleased shares 4,087 5,828
_______ _______
Total ESOP shares 131,369 124,454
======= =======
Fair value of unreleased shares at December 31, $44,957 $67,226
======= =======
</TABLE>
During 1996, the Company adopted a deferred
compensation plan for certain officers which
qualifies as a defined contribution plan.
Contributions to the plan are required only if
"excess earnings," as defined, are achieved. The
participants accrue benefits based only on the
contributions made. During 1996, no contributions
were required.
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 1.777 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 on an annual rate,
fixed on December 31 of each year for the ensuing
calendar year and was 6.51% at December 31, 1996.
The dividends are cumulative and payable quarterly
in arrears. Holders of Convertible Preferred
Shares are not entitled to normal voting rights
unless certain conditions exist.
The payment of dividends by the Bank to the
Company is restricted by various regulatory and
statutory limitations. In 1997, the Bank will
have available to pay dividends to the Parent
Company, without regulatory approval approximately
$2,700,000, plus net retained income earned in
1997 prior to the dividend declaration date.
The Company had granted options to certain key
employees to purchase shares of the Company's
common stock at $5.36 per share. As of
December 31, 1995, 4,000 of these options had been
exercised. At December 31, 1996, all options had
been exercised. The Company is applying APB
Opinion No. 25 and related interpretations in
accounting for stock options. All options
exercisable in 1996, 1995 and 1994 were granted
before 1994 and were at or above the estimated
fair market value at the date of grant.
Accordingly, no compensation expense has been
recognized.
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
____________________________
1996 1995
<S> <C> <C>
Financial instruments whose contract
amounts represent credit risk:
Commitments to extend credit $11,694,027 $11,621,000
Standby letters of credit 575,331 704,000
</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 73% of these letters of
credit were secured by marketable securities, cash
on deposits or other assets at December 31, 1996.
14. REGULATORY MATTERS
The Company and the Bank are subject to various
regulatory capital requirements administered by
the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain
mandatory and possibly additional
discretionary actions by regulators that, if
undertaken, could have a direct material effect on
the financial statements. Under capital adequacy
guidelines, the Company and the Bank must meet
specific capital guidelines that involve
quantitative measures of the assets, liabilities
and certain off-balance-sheet items as calculated
under regulatory accounting practices. The
capital amounts and classification are also
subject to qualitative judgments by the regulators
about components, risk weightings and other
factors.
Quantitative measures established by regulation to
ensure capital adequacy require the Company and
the Bank to maintain minimum amounts and ratios
(set forth in the table below) of total and Tier I
capital (as defined in the regulations) to risk-
weighted assets (as defined), and of Tier I
capital (as defined) to average assets (as
defined). Management believes, as of December 31,
1996, that all capital adequacy requirements to
which it is subject have been met.
As of December 31, 1996, the most recent
notification from the Federal Deposit Insurance
Corporation categorized the Bank as well
capitalized under the regulatory framework for
prompt corrective action. To be categorized as
well capitalized the Bank must maintain minimum
total risk-based, Tier I risk-based, Tier I
leverage ratios as set forth in the table. There
are no conditions or events since that
notification that management believes have changed
the institution's category.
The Company's and the Bank's actual capital
amounts and ratios are also presented in the
table.
<TABLE>
<CAPTION>
To Be Well Capitalized
For Capital Under Promput Corrective
Actual Adequacy Purposes Action Provisions
____________________ ___________________ ________________________
Amount Ratio Amount Ratio Amount Ratio
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996:
Total capital to risk
weighted assets:
Company $ 12,300,261 11.87% $ 8,291,529 8.00% $ 10,364,411 N/A
Bank 12,632,795 12.25% 8,247,337 8.00% 10,309,171 10.00%
Tier I capital to risk
weighted assets:
Company 11,212,471 10.82% 4,145,764 4.00% 6,218,647 N/A
Bank 11,558,155 11.21% 4,123,668 4.00% 6,185,503 6.00%
Tier I to average assets:
Company 11,212,471 6.30% 7,458,191 4.00% 8,893,673 N/A
Bank 11,558,155 6.52% 7,432,479 4.00% 8,864,453 5.00%
As of December 31, 1995:
Total capital to risk
weighted assets:
Company 10,976,261 12.98% 6,767,477 8.00% 8,459,347 N/A
Bank 11,322,696 13.38% 6,761,951 8.00% 8,452,487 10.00%
Tier I capital to risk
weighted assets:
Company 9,924,363 11.73% 3,383,739 4.00% 5,075,608 N/A
Bank 10,270,798 12.14% 3,380,975 4.00% 5,071,463 6.00%
Tier I to average assets:
Company 9,924,363 6.74% 3,383,739 4.00% 7,357,306 N/A
Bank 10,270,798 6.99% 3,380,976 4.00% 7,343,618 5.00%
</TABLE>
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, 1996 and 1995 (in thousands):
<TABLE>
<CAPTION>
1996 1995
_________________________ _________________________
Carrying Fair Carrying Fair
Amount Value Amount Value
<S> <C> <C> <C> <C>
Financial assets:
Cash, due from banks
and federal fund sold $ 25,415 $ 25,415 $ 26,098 $ 26,098
Securities available-for-sale 47,249 47,249 36,059 36,059
Securities held-to-maturity 9,548 9,700 4,546 4,735
Loans, net 93,741 92,886 77,827 76,937
Financial liabilities:
Non-interest bearing deposits 49,943 49,943 40,471 40,471
Interest bearing deposits 121,673 121,782 98,558 98,860
Notes payable 1,521 1,522 973 960
</TABLE>
16. SUPPLEMENTAL INFORMATION
The following is selected supplemental expense
information for the years ended December 31, 1996,
1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Professional fees $ 348,543 $ 261,857 $ 218,287
FDIC assessments 2,000 106,414 209,508
Marketing expenses 411,206 328,964 207,295
Data processing 375,299 187,739 108,572
Postage 154,802 130,754 104,365
Education and travel 159,500 103,563 91,896
Printing and supplies 236,681 171,376 113,526
Telephone 177,563 156,969 94,985
</TABLE>
17. SUBSEQUENT EVENT (UNAUDITED)
On February 18, 1997, the Board of Directors
approved a 1997 Stock Incentive Plan for key
employees of the Company (including officers and
directors who are full-time employees).
Incentives may be granted under the Plan in the
form of (1) incentive stock options; (2) non-
qualified stock options; (3) stock appreciation
rights; (4) restricted stock; and (5) performance
shares. The Plan provides that a total of eight
percent of the outstanding common shares are
authorized to be issued under the Plan. The Plan
is subject to approval by the shareholders at
their next meeting. If approved by the
shareholders, the Company intends to apply APB No.
25 in accounting for the Stock Incentive Plan.
18. CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY
Summarized financial information for MidSouth
Bancorp, Inc. (parent company only) follows:
<TABLE>
<CAPTION>
STATEMENTS OF CONDITION
December 31,
________________________
1996 1995
<S> <C> <C>
ASSETS
Cash and interest-bearing deposits in banks $ 52,305 $ 90,235
Other assets 197,315 228,143
Investments in subsidiaries 12,026,362 10,752,502
__________ __________
$12,275,982 $11,070,880
=========== ==========
LIABILITIES & STOCKHOLDERS' EQUITY
Liabilities:
Note payable to a financial institution $ 784,522 $ 463,197
Note payable to Bank 49,395 99,119
Other liabilities 81,894 95,000
__________ __________
Total liabilities 915,811 657,316
__________ __________
Stockholders' Equity:
Preferred stock 2,450,373 2,668,826
Common stock 136,491 96,794
Additional paid-in-capital 6,738,943 6,164,443
ESOP obligation (30,836) (54,157)
Unrealized gains (losses) on securities
available-for-sale, net of deferred
taxes (114,530) 98,950
Retained earnings 2,179,730 1,438,708
__________ __________
Total stockholders' equity 11,360,171 10,413,564
__________ __________
$12,275,982 $11,070,880
========== ==========
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF INCOME
Years Ended December 31,
_________________________________
1996 1995 1994
<S> <C> <C> <C>
Revenue:
Other income $ 1,027 $ 5,080 $ 7,091
Equity in undistributed
income of subsidiaries 1,337,342 1,350,358 1,251,499
Rental income 31,800 31,800 31,800
_________ _________ _________
1,370,169 1,387,238 1,290,390
_________ _________ _________
Expenses:
Interest on notes payable 50,249 55,884 56,906
Professional fees 64,737 68,169 76,951
Other expenses 75,299 89,575 71,591
_________ _________ _________
190,285 213,628 205,448
_________ _________ _________
Income before income taxes and
cumulative effect of
accounting change 1,179,884 1,173,610 1,084,942
Income tax benefit 56,614 68,000 56,699
_________ _________ _________
Net income $1,236,498 $1,241,610 $1,141,641
========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
Years Ended December 31,
__________________________________
1996 1995 1994
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $1,236,498 $1,241,610 $1,141,641
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Equity in undistributed
earnings of subsidiaries (1,337,342) (1,350,358) (1,251,499)
Dividends from Bank 150,000 220,524 -
Tax benefit received
from Bank 58,197 12,899 -
Change in other assets 30,828 (114,411) 135,058
Change in other liabilites (95,000) 95,000 (12,955)
__________ __________ __________
Net cash provided by
operating activities 43,181 105,264 12,245
__________ __________ __________
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in the Finance
Company (300,000) - -
Purchase of investment securities - - (120,946)
Proceeds from maturities of
investment securities - 120,946 98,042
__________ __________ __________
Net cash provided by
(used in) investing
activities (300,000) 120,946 (22,904)
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock 166,097 124,833 100,312
Payment of fractional shares
resulting from stock dividend (1,520) (782) (643)
Exercise of stock warrants 171,450 28,561 -
Payment of stock dividends (412,030) (57,676) -
Issuance of note payable to
Bank, net of repayments - 40,669 -
Repayment of note payable
to Bank (26,403) - -
Issuance of note payable to
other financial institutions,
net of repayments 321,295 - -
Repayments of notes payable
to other financial
institutions - (174,499) (138,190)
Cost incurred in connection
with issuance of preferred
stock - (120,524) -
__________ __________ __________
Net cash (used in) provided
by financing activities 218,889 (159,418) (38,521)
__________ __________ __________
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (37,930) 66,792 (49,180)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 90,235 23,443 72,623
__________ __________ __________
CASH AND CASH EQUIVALENTS
AT END OF YEAR $ 52,305 $ 90,235 $ 23,443
========== ========== ==========
</TABLE>
<PAGE>
Independent Auditor's 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 subsidiaries as of December 31, 1996 and
1995, and the related consolidated statements of
income, stockholders' equity, and cash flows for
each of the three years in the period ended
December 31, 1996. 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 subsidiaries at December 31,
1996 and 1995 and the results of their operations
and their cash flows for each of the three years
in the period ended December 31, 1996 in
conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 7, 1997
<PAGE>
<TABLE>
<CAPTION>
Selected Quarterly Financial Data (unaudited)
1996
____________________________________
(Dollars in
thousands,
except per
share data) IV III II I
_________ _________ _________ _________
<S> <C> <C> <C> <C>
Interest income $3,366 $3,234 $3,061 $2,911
Interest expense 1,218 1,185 1,108 1,030
_________ _________ _________ _________
Net interest income 2,148 2,049 1,953 1,881
Provision for
possible credit
losses 140 225 190 120
_________ _________ _________ _________
Net interest income
after provision
for possible
credit losses 2,008 1,824 1,763 1,761
Noninterest income,
excluding
securities gains 570 562 563 442
Net securities gains - 1 - -
Noninterest expense 2,165 2,039 1,856 1,780
_________ _________ _________ _________
Income before
income tax expense 413 348 470 423
Income tax expense 55 95 134 134
_________ _________ _________ _________
Net income 358 253 336 289
Preferred stock
dividend
requirement (37) (39) (39) (40)
_________ _________ _________ _________
Income applicable
to common
shareholders $321 $214 $297 $249
========= ========= ========= =========
Earnings per common
share <FN1>
Primary $0.24 $0.16 $0.22 $0.20
Fully diluted $0.22 $0.15 $0.21 $0.18
Market price of
common stock
High $11.13 $10.75 $11.63 $11.72
Low $10.50 $10.25 $10.50 $11.25
Close $11.00 $10.63 $10.50 $11.44
Average shares
outstanding
Primary 1,348,967 1,335,231 1,328,799 1,314,881
Fully diluted 1,654,361 1,654,570 1,568,768 1,560,912
<FN1> Earnings per share and other market data have
been adjusted for a 5% stock dividend paid by the
Company on February 18, 1994, a four for three stock
split paid on September 15, 1995, and a four for
three stock split paid on August 19, 1996. 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>
<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 for possible
credit losses 1,763 1,668 1,470 1,377
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 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 $0.21 $0.25 $0.23 $0.23
Fully diluted $0.18 $0.22 $0.23 $0.23
Market price of common stock
High $14.81 $9.75 $6.84 $6.98
Low $9.94 $6.56 $6.20 $6.14
Close $11.54 $9.75 $6.62 $6.14
Average shares outstanding
Primary 1,310,372 1,299,818 1,288,955 1,286,743
Fully diluted 1,559,462 1,469,590 1,288,955 1,286,743
<FN1> Earnings per share and other market data have
been adjusted for a 5% stock dividend paid by the
Company on February 18, 1994, a four for three stock
split paid on September 15, 1995, and a four for
three stock split paid on August 19, 1996. 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>
<PAGE>
<TABLE>
<CAPTION>
MIDSOUTH BANCORP, INC.
SECURITIES PORTFOLIO
MATURITIES AND AVERAGE YIELDS
for the Year Ended December 31, 1996
(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 $5,273 5.65% $18,364 5.78% $607 6.37% $301 7.75% 24,545
Obligations of State and
Political Subdivisions 114 9.77% - 86 5.00% - 200
Mortgage-backed securities
and CMOs 10,259 6.65% 7,079 6.65% 1,957 6.65% 455 6.65% 19,750
Other securities - - - 822 5.00% 822
Mutual funds 1,932 5.81% - - - 1,932
_____________________________________________________________________________________
Total Fair Value $17,578 $25,443 $2,650 $1,578 $47,249
=====================================================================================
HELD TO MATURITY
Obligations of State and
Political Subdividsions 20 5.75% 440 6.45% 7815 7.76% 1,273 7.38% 9,548
____________________________________________________________________________________
Total Amortized Cost $20 $440 $7,815 $1,273 $9,548
====================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MIDSOUTH BANCORP, INC.
LOAN PORTFOLIO
LOAN MATURITIES AND SENSITIVITY TO INTEREST RATES
for the Year Ended December 31, 1996
(in thousands)
Loans at Stated Maturities Amounts Over One Year With
____________________________________________ ___________________________________
1 Year 1 Year - Over PredetermineFloating
or Less 5 Years 5 Years Total Rates Rates Total
____________________________________________ ___________________________________
<S> <C> <C> <C> <C> <C> <C> <C>
Commercial, Financial
Industrial, Real Estate
Mortgage and Real
Estate - Construction $19,394 $35,022 $11,693 $66,109 $24,434 $22,281 $46,715
Installment Loans to
Individuals 4,286 21,251 832 $26,369 21,580 503 $22,083
Lease Financing
Receivables 89 2,143 - $2,232 2,143 - $2,143
Other 119 - - $119 - -
-
____________________________________________ ___________________________________
TOTAL $23,888 $58,416 $12,525 $94,829 $48,157 $22,784 $70,941
============================================= ====================================
</TABLE>
<TABLE>
<CAPTION>
MIDSOUTH BANCORP, INC.
SUMMARY OF
AVERAGE DEPOSITS
(in thousands)
1996 1995
AVERAGE AVERAGE AVERAGE AVERAGE
AMOUNT YIELD AMOUNT YIELD
_______ _______ _______ _______
<S> <C> <C> <C> <C>
Non-interest bearing $40,633 0.00% $31,354 0.00%
Demand Deposits
Interest bearing Deposits
Savings, NOW, MM 58,362 2.74% 40,180 2.60%
Time Deposits 54,944 5.19% 41,489 4.98%
_______ _______
Total $153,939 2.89% $113,023 2.76%
======= =======
</TABLE>
<TABLE>
<CAPTION>
MATURITY SCHEDULE
TIME DEPOSITS OF
$100,000 OR MORE
(in thousands)
1996 1995
_______ _______
<S> <C> <C>
3 months or less $7,238 $4,539
3 months through 6 months 3,292 1,587
7 months through 12 months 4,969 4,231
over 12 months 3,596 2,547
_______ _______
Total $19,095 $12,904
======= =======
SUMMARY OF RETURN
ON EQUITY AND ASSETS
1996 1995
________ ______
Return on Average Assets 0.65% 0.98%
Return on Average Common Equity 13.09% 14.84%
Dividend Payout Ratio
on Common Stock 31.58% 13.95%
Average Equity to
Average Assets 6.50% 6.58%
</TABLE>
<PAGE>
ITEM 8 - Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
Not applicable.
PART III
ITEM 9 - Directors, Executive Officers, Promotors and
Control Persons; Compliance with Section 16(a) of the
Exchange Act
The information contained in Registrant's definitive proxy
statement for its 1997 annual meeting of shareholders, 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 1997 annual meeting of shareholders 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 1997 annual meeting of shareholders 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 1997 annual meeting of shareholders is
incorporated herein by reference in response to this Item.
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 of MidSouth 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,
and is incorporated herein by reference.
4.1 MidSouth agrees to furnish to the Commission
on request a copy of the instruments defining
the rights of the holder of its long-term
debt, which debt does not exceed 10% of the
total consolidated assets of MidSouth.
10.1 MidSouth National Bank Lease Agreement with
Southwest Bank Building Limited Partnership
is included as Exhibit 10.7 to the 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.
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.
10.7 Loan Agreements and Master Notes for lines of
credit established for MidSouth Bancorp, Inc.
and Financial Services of the South, Inc. by
Whitney National Bank are included as Exhibit
10.7 of this filing.
11 Computation of Earnings Per Share
21 Subsidiaries of the Registrant
27 Financial Data Schedule
Reports on Form 8-K
None
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: /s/ C. R. Cloutier
C. R. Cloutier
President and Chief Executive Officer
Dated: March 14, 1997
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 14, 1997
and Director
Chief Financial
Karen L. Hail Officer, Executive March 14, 1997
Vice President,
Secretary/Treasurer
and Director
Teri S. Stelly Controller March 14, 1997
J. B. Hargroder, M.D. Director March 14, 1997
William M. Simmons Director March 14, 1997
Will G. Charbonnet, Sr. Director March 14, 1997
Clayton Paul Hilliard Director March 14, 1997
James R. Davis, Jr. Director March 14, 1997
Milton B. Kidd, III., O.D. Director March 14, 1997
Exhibit "A"
MASTER NOTE
$2,500,000.00 Lafayette, La., August 29, 1996
ON DEMAND I, whether maker, endorser, guarantor,
surety, or other party hereto, for value received
promise to pay to the order of
WHITNEY NATIONAL BANK
at 228 St. Charles Avenue, New Orleans,
Louisiana, or at any one of its branches, TWO MILLION
FIVE HUNDRED THOUSAND AND NO/100 (S2,500.000.00)
Dollars, or the aggregate unpaid principal amount owed
hereon, which ever is less, as evidenced by the
internal records of the National Bank (the "Bank"),
together with interest on the unpaid balance thereof at
the rate or rates specified below from the date of this
Note until this Note is paid in fill.
Variable Interest Rate: The simple interest rate under
this Note at a variable per annum rate at all times
equal to the prime commercial rate of interest (herein
called the "Prime Rate") most recently published in the
Money Rates Section of The Wall Street Journal, as its
Prime Rate; which rate shall change when and as the
Prime Rate shall change, effective on the day of such
change; provided, however, in the event that (1) no
Prime Rate is being announced by The Wall Street
Journal or (2) this Note is in default and legal
proceedings are commenced to enforce collection hereof,
then, in any such event, interest on the unpaid
principal balance of this Note shall form any such date
then bear interest at the fixed rate of eighteen ( 18%)
percent per annum until paid. The Bank will advise the
maker of the current Prime Rate upon the maker's
request.
Each maker, endorser, guarantor, surety or
other party to this note (the "Obligor", whether one or
more) waives
presentment for payment, demand, notice of dishonor,
protest, pleas of discussion and division and is bound
jointly, severally and solidarily for the full and
timely payment of this note in accordance with its
terms.
Each Obligor agrees to the following terms and
conditions:
1. The principal amount shown on the face
of this note evidences the maximum aggregate principal
amount that may be outstanding from time to time on
this note. Borrower may request an advance during the
Bank's regular business hours. Borrower shall make such
request in writing, by facsimile or by telephone. All
proceeds of any requested advance shall be deposited
to borrower's account at the Bank. After an advance,
the Bank will mail to borrower at the most recent
address shown on the Bank's records a credit advice
showing the amount of the advance and the amount
credited into borrower's account. Within ten (10) days
after the date of any such advice, borrower shall
notify the Bank of any inaccuracy in the credit advice
or the lack of authority to request the advance.
Failure by borrower to notify the Bank timely shall
preclude the borrower from asserting against the Bank
the inaccuracy of such advance and/or the lack of
authorization of such advance. The Bank's failure to
mail the credit advice shall not alter any Obligor's
obligation to repay the loan or make the Bank liable to
any Obligor for failure to mail the credit advice. Each
Obligor agrees that the internal records of the Bank
shall constitute for all purposes prima facie evidence
of (i) the amount of principal and interest owing on
this note from time to time, (ii) the amount of each
advance or loan made to any Obligor under this note and
(iii) the amount of each principal and/or interest
payment received by the Bank on this note.
2. Notwithstanding the maximum aggregate
principal amount of this note and anything herein to
the
contrary, the Bank shall have no obligation to make any
loan or advance to any Obligor if, in the Bank's sole
discretion, the credit worthiness of any Obligor at the
time of tie request for an advance or loan is
insufficient to justify such loan. Prior to advancing
loans to my Obligor pursuant to this note or any other
agreement between the Bank and any obligor, the Bank
may require each Obligor to furnish to the Bank
information and documentation (i) to verify the credit
worthiness of each Obligor, (ii) to evidence such loan,
(iii) to verify that each Obligor is not in default on
my obligation to tie Bank, or (iv) for such other
reasons as may be reasonably required by the Bank.
3. If this note is payable on demand or
becomes payable on demand, Bank may, from time to time,
change the interest rate set forth in this note by
giving notice to the maker by U..S. mail, postage
prepaid, at the last address of maker on file with the
Bank, which shall constitute notice to Obligor. The
Obligor shall have the right to reject a change in the
interest rate by paying the note in full, including all
principal and interest due thereon, with interest at
the rate in effect prior to the giving of the notice of
change, within ten (10) days after the date of such
notice. If this note is not paid in till within ten
(10) days after the date of the notice, each Obligor
shall be conclusively presumed to have agreed to each
charge of interest rate from the date specified in the
notice. Interest on the outstanding principal owed on
this note shall be computed and assessed on the basis
Of he actual number of days elapsed over
<PAGE>
a year composed of 360 days. If this note provides for
interest at a rate based on Whitney Prime, the term
Whitney prime shall mean that rate of interest as
recorded by the Bank from time to time as its prime
lending rate with the rate of interest to change when
and as said prime lending rate changes
4. As security for the debt evidenced by
this note, and for all obligations and liabilities of
each Obligor to the Bank, direct or contingent, due or
to become due, now existing or hereafter arising,
including all future advances, with interest,
attorneys' fees, expenses of collection and costs,
including, without limitation, obligations to the Bank
on promissory notes, checks, overdrafts, letters of
credit, letter of credit agreements, endorsements
and continuing guaranties, each Obligor hereby (a)
pledges, pawns and delivers to the Bank, and grants in
favor of the Bank a continuing security interest in, all
property of Obligor of every nature or kind whatsoever
owned by Obligor or in which Obligor has an interest
that is now or hereafter on deposit with, in the
possession of, under the control of or held by the Bank
in definitive form, book entry form or in safekeeping
or custodian accounts, including all deposit accounts,
money, funds on deposit in checking, savings, custodian
and other accounts, instruments, negotiable instruments,
certificates of deposit, commercial paper, stocks,
bonds, treasury bills and other securities, documents,
documents of title and chattel paper, and (b) grants to
the Bank a right of set-off and/or compensation with
respect to such property of each Obligor. If the
proceeds of collateral furnished for the payment of
this note are insufficient to pay this note in full,
each Obligor shall remain fully obligated for any
deficiency. For purposes of executory process, each
Obligor hereby acknowledges the debt created hereby
and confesses judgment in favor of the Bank for the
full amount of the debt evidenced by this note. To
the extent permitted by law, each Obligor hereby
expressly waives (i) the benefit of appraisement
provided in the Louisiana Code of Civil Procedure and
(ii) the demand and three (3) days delay accorded by
Articles 2639 and 2721, Louisiana Code of Civil
Procedure. The terms "deposit accounts, " "instruments,
" "documents" and "chattel paper" shall have the
meaning provided in La. R.S. 10:9-105. Each Obligor
hereby releases the Bank from any obligation to take any
steps to collect any proceeds of or preserve any
of Obligor's rights, including, without limitation,
rights against prior parties, in the collateral in
which the Bank possesses a security interest, and the
Bank's only duty with respect to such collateral
shall be solely to use reasonable care in the
physical preservation of the collateral which is in
the actual possession of the Bank. Notwithstanding
any other provision in this note to the contrary,
IRA, pension, and other tax-deferred accounts at the
Bank shall not be subject to the security interest
created hereby.
5. Each Obligor agrees to furnish the Bank
with such annual and/or quarterly financial statements,
prepared in conformity with generally accepted
accounting principles applied on a basis consistent with
that of the preceding fiscal year, as the Bank may
reasonably request.
6. If any of the following events shall
occur:
(a) the non-payment of any principal
or interest on this note on the
date when due;
(b) the death, interdiction, dissolution,
liquidation or insolvency of any
Obligor;
(c) the filing by or against any Obligor
of a proceeding for bankruptcy,
arrangement, reorganization, or any
other relief afforded debtors or
affecting rights of creditors
generally under the laws of any
state or under the United States
Bankruptcy Code;
(d) the default by any Obligor under
this note, or under any commitment
letter, loan agreement, mortgage,
pledge agreement, security agreement,
or other security instrument
securing the payment of this note or
under any other obligations owed by
any Obligor to the Bank;
(e) any judgment, garnishment, seizure,
tax lien or levy against any assets
of any Obligor;
(f) any material adverse change in the
financial condition of any Obligor,
or any material discrepancy between
the financial statements submitted
by any Obligor and the actual
financial condition of such Obligor;
(g) the expropriation or condemnation,
of all or a part of any property
which is assigned, pledged or
mortgaged to the Bank or in which
the Bank possesses a security
interest;
(h) any statement, warranty, covenant
or representation made by any
Obligor to the Bank proves to be
untrue;
<PAGE>
(i) the assessment of any tax or other assessment
against the loan amount, tie Bank's interest
in the note or in any asset assigned, pledged or
mortgaged to the Bank or in which the Bank
possesses a security interest; or
(j) the existence or future enactment of any law or
ordinance by any federal, state, parish,
municipal or other taxing authority requiring or
permitting Obligor to deduct any amount
whatsoever from any payments to be made on this
note, then at the option of the Bank, the full
amount of this note and all other obligations
and liabilities, direct or contingent, of Obligor
to the Bank shall be immediately due and payable
without notice or demand.
7. If an earlier note of any Obligor is canceled at
the time of execution hereof, then this note constitutes art extension,
but not a novation, of the amount of the continuing indebtedness, and
all security rights held by the Bank under the earlier note shall
continue in full force and effect.
8. Without releasing or affecting any of the
obligations of any Obligor, the Bank may, one or more times,
in its sole discretion, without notice to or consent of any Obligor,
(a) release or modify the obligations of any other Obligor, (b)
release, exchange or modify the Bank's rights with respect to
collateral held as security for this note, (c) extend the maturity of
this note for periods that may exceed the original term, (d) retain
the proceeds, increases and profits, including money, derived from
the collateral furnished by any Obligor as additional security for
any and all obligations and liabilities of Obligor to the Bank,
including the debt evidenced by this note, without applying said
proceeds, increases and profits toward payment of the obligations, or
(e) impute or apply payments received from any Obligor, or the
proceeds, increases and profits of collateral furnished by any
Obligor, in whole or in part to this note, or to any other
obligations of such Obligor.
9. Each Obligor agrees to pay the fees of any attorney-
at-law employed by the Bank to recover sums owed
or to protect the Bank's interests with regard to this note. Such
attorneys' fees are fixed at ten (10%) percent of the amount of
principal and interest due on this note and are secured by collateral
furnished for the payment hereof. Obligor further agrees to pay any
and all charges, fees, costs and/or taxes levied or assessed against
the Bank in connection with this note, any obligation owed by any
Obligor to the Bank and/or any collateral, asset or other property
which is pledged, mortgaged, hypothecated or assigned to the Bank or
in which the Bank possesses a security interest, as security for this
note or any other obligation owed by any Obligor to the Bank.
10. The provisions of this note may not be waived or
modified except in writing, signed by the Bank. No
failure or delay of the Bank in exercising its rights shall be
construed as a waiver.
11. The Bank and each Obligor agree that the internal
laws of the State of Louisiana shall govern this note,
without giving effect to the conflict of laws provisions of Louisiana
law.
12. The terms and conditions in a Commitment
Letter/Loan Agreement dated August 29,1996 from
Lender to Borrower, as the same maybe amended, extended or replaced
from time to time, shall be considered a part hereof to the same
extent as if written herein.
MIDSOUTH BANCORP, INC.
BY:__________________________
CLIVE R. CLOUTIER, President
__________________________
In consideration of the making at the request of the
undersigned of the loan evidenced by the note, the undersigned has
taken notice of the conditions and promises made herein and binds
himself jointly, severally, and solidarity with each and all of them,
as therein stated.
________________________________ ________________________________
________________________________ ________________________________
6622.0
<PAGE>
Exhibit "A"
LOAN AGREEMENT
This Loan Agreement (the "Loan Agreement") is entered into on August 29,
1996 between MIDSOUTH BANCORP, INC. (the "Company"), a Louisiana
Corporation, domiciled in and doing business through Post Office Box
3745, Lafayette, Louisiana 70502, herein represented by and appearing
through CLIVE R. CLOUTIER its duly authorized President, and WHITNEY
NATIONAL BANK (the "Bank"), a national banking association, organized
under and Act of Congress, domiciled in and doing business through Post
office Drawer 2090, Morgan City, Louisiana 70381, herein represented by
and appearing through JAMES S. CORBETT, its duly authorized Vice-
President, under the following terms and conditions:
In consideration of a loan to be made by the Bank to the Company,
the following recitals and
other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and the Bank hereby agree as
follows, intending to be legally bound:
SECTION 1. RECITALS. Concurrently with the execution and delivery of
this Loan Agreement, the Company has requested that the Bank loan to it
$2,500,000.00 (the "Loan") for the purpose of facilitating mergers
and/or acquisitions of a compatible Bank franchise or other corporate
uses as approved by the Bank.
SECTION 2. DEFINITIONS. When used in this Agreement, the following terms
have the following meanings:
Average Assets means the quarterly average of the assets of
MidSouth as shown on MidSouth's consolidated reports of condition and
income required by its Regulatory Authorities.
Capital means the capital stock, certified surplus, undivided
profits and reserve for loan losses of MidSouth, together with any
subordinated debentures or other securities of MidSouth which have been
determined by its Regulatory Authorities to be includable as capital,
all as reported to its Regulatory Authorities quarterly.
MidSouth means MidSouth National Bank, Lafayette, Louisiana.
Loan Documents shall mean this Loan Agreement, the Note, the Pledge
Agreement, the Guarantees, the Certificate of Corporate Resolutions of
the Board of Directors of the Company, and the other documents executed
in connection therewith or contemplated thereby.
Note means the Company's promissory note to be executed and
delivered to the Bank pursuant to Section 3.1 of this Agreement in the
amount of $2,500,000.00, and all renewals, rearrangements and extensions
thereof, a copy of which is attached hereto as Exhibit "A".
Person means a natural person or an organization, including a
corporation, partnership, association, cooperative, estate, trust,
government unit, or any other legal entity.
<PAGE>
Security Agreement means the Company's security agreement to be
executed and delivered to the Bank pursuant to Section 3.2 of this
Agreement in which the Company pledges and/or grants a security interest
in the Stock now owned or hereafter acquired, together with the other
property and assets described therein to secure payment of the Note, the
Loan and any other obligations of the Company to the Bank, a copy of which
is attached hereto as Exhibit "B" .
Regulatory Authorities means, as applicable, the Louisiana State Office
of Financial Institutions, the Federal Deposit Insurance Corporation, the
Board of Governors of the Federal Reserve System and the Comptroller of the
Currency.
Stock means all of the issued and outstanding Capital stock of
MidSouth.
SECTION 3. CERTAIN PROVISIONS RELATING TO THE LOAN. The Company agrees with
the Bank as follows:
3.1 The $2.500.000.00 Line of Credit. Subject to, and upon the terms,
conditions, covenants and agreements contained herein, the Bank agrees to
loan to the Company at anytime and from time to time prior to the April 30,
1997, unless earlier terminated in accordance with the terms hereof, such
amounts as the Company may request up to but not exceeding an aggregate
principal amount of TWO MILLION FIVE HUNDRED THOUSAND AND NO/100
($2,500,000.00) DOLLARS at any one time outstanding (the "Line of Credit").
Within such limits and prior to the April 30, 1997, the Company may borrow,
repay and re-borrow hereunder so long as the outstanding principal amount
owing to the Bank at any one time outstanding does not exceed TWO MILLION
FIVE HUNDRED THOUSAND AND NO/100 ($2,500,000.00) DOLLARS,
Requests for loans or advances may be made by the Company in person or
in writing to the Bank and such requests shall be fully authorized by the
Company if made by any one of the persons designated hereinafter. Each of
the following persons is hereby irrevocably authorized by the Company to
make personal or written requests of Bank for loans or advances under the
Line of Credit, namely:
NAME AND ADDRESS TITLE TELEPHONE NUMBER
Clive R. Cloutier President [3 18] 237-8343
Post Office Box 3745
Lafayette, Louisiana 70502
Karen L. Hail Secretary [3 18] 237-8343
Post Office Box 3745
Lafayette, Louisiana 70502
<PAGE>
The authority of each of the above named individuals
to request loans or advances and the right of the Bank to
rely upon said authority shall continue in full force and
effect until such time as written notice to the contrary is
duly delivered to the Bank and receipted for in writing by
the President or any Executive or First Vice President of
the Bank; but such notice shall not affect or diminish the
liability of the Company to the Bank as to any indebtedness
and/or obligations of the Company then existing and covered
by and subject to this Agreement.
All loans and advances made by the Bank to the
Borrower under the Line of Credit shall bear interest at a
variable per annum rate at all times equal to the prime
commercial rate of interest (herein called the "Prime
Rate") most recently published in the Money Rates Section
of The Wall Street Journal, as its Prime Rate; which rate
shall change when and as the Prime Rate shall change,
effective on the day of such change; provided, however, in
the event that (1) no Prime Rate is being announced by The
Wall Street Journal or (2) this Note is in default and
legal proceedings are commenced to enforce collection
hereof, then, in any such event, interest on the unpaid
principal balance of this Note shall from any such date
then bear interest at the fixed rate of eighteen (18.0%)
percent per annum until paid. The Bank will advise the
maker of the current Prime Rate upon the maker's request.
The amount so advanced or loaned by the Bank to the Company
shall be due and payable as to principal and interest ON
DEMAND and, if no demand, then (1) the accrued and unpaid
interest on the amount so loaned or advanced by the Bank
shall be payable monthly on 15th day of each month
commencing the day of September, 1996 and (2) the
outstanding principal of each advance or loan made on the
Line of Credit shall be payable in monthly installments due
and payable on the15th day of each month commencing the 15
day of September, 1996, the amount of the monthly
installment of principal due shall be computed based upon
an eighty-four 84 month amortization of the principal
amount of each advance or loan;
As evidence for the advances or loans made or to be
made in the future on the Line of Credit herein
established, the Company has contemporaneously herewith
made, executed and delivered to the Bank a master
promissory note (the "Note"), in the form attached hereto
as Exhibit "A", dated this date and payable to the order of
the Bank in the principal sum of TWO MILLION FIVE HUNDRED
THOUSAND AND NO/100 ($2,500,000.00) DOLLARS, together with
interest On the unpaid balance thereof at a variable per
annum rate variable per annum rate at all times equal to
the prime commercial rate of interest (herein called the
"Prime Rate") most recently published in the Money Rates
Section of The Wall Street Journal, as its Prime Rate;
which rate shall change when and as the Prime Rate shall
change, effective on the day of such change; provided,
however, in the event that (1) no Prime Rate is being
announced by The Wall Street Journal or (2) this Note is in
default and legal proceedings are commenced to enforce
collection hereof, then, in any such event, interest on the
unpaid principal balance of this Note shall from any such
date then bear interest at the fixed rate of eighteen
(18.0%) percent per annum until paid; the Note being
payable as to principal and interest ON DEMAND. When each
advance or loan is made by the Bank to the Company under
the Line of Credit, the Company shall be
<PAGE>
deemed to have renewed and re-issued the Note for the amount
of such advance plus the amounts due by the Company to the
Bank, in principal and interest, for loans or advances
previously made by the Bank to the Company hereunder. The
aggregate outstanding amount of principal and interest due
by the Company at any given time under this Agreement for
loans or advances made shall be and constitute the
indebtedness of the Company to Bank on the Note.
The Bank is hereby irrevocably authorized to evidence
actual advances, loans or repayments which may now or
hereafter be made under the Line of Credit by maintaining a
schedule of advances or repayments. The principal and
interest amount outstanding as so evidenced shall, for all
purposes, be prima facie evidence of the amount owed to the
Bank by the Company under the Line of Credit and the Note.
The Bank agrees to furnish the Company a monthly
statement which shall show all cash advances made under the
Line of Credit, the interest charges as computed in
accordance with this Agreement and the Note, the payments
made to the Line of Credit and the balance outstanding of
all cash advances made.
All renewals, extensions, modifications and
rearrangements of the Note, if any, shall be deemed to be
made pursuant to this Agreement, and, accordingly, shall be
subject to the terms and provisions hereof, and the Company
shall be deemed to have ratified as of such renewal,
extension, modification or rearrangement date, all the
representations, covenants and agreements herein set forth.
3.2 Security. The Company shall secure payment of the
Note by a pledge and/or granting of a security interest to
the Bank of all of the Stock described in the Security
Agreement. The percentage of such stock pledged to the Bank
shall never be less than 100 percent of the issued and
outstanding Stock. As additional security for the Note, the
Company shall cause to be furnished to the Bank an
acceptable life insurance policy on Clive R. Cloutier in the
amount of $1,000,000.00.
SECTION 4. AFFIRMATIVE COVENANTS. Until the Note and the
Loan and all other obligations hereunder have been fully and
finally paid and performed, unless compliance with the
provisions of the following sections has been waived in
writing by the Bank, the Company agrees as follows:
4.1 Reports to Regulatory Authorities. The
Company will cause MidSouth to furnish to the Bank,
within ten (1 O) days after filing the same with its
Regulatory Authorities, a copy of (a) MidSouth's
annual reports of condition and income and quarterly
reports of condition and income; (b) all
applications to any of the Regulatory Authorities of
MidSouth and requests for waiver of compliance of
any requirements of any of the Regulatory
Authorities; and (c) any correspondence or other
writing relating to the compliance or non-compliance
by MidSouth of its commitments to or other
agreements with any of the Regulatory Authorities.
In addition, within ten ( 10) days after receipt of
same, the Company shall cause MidSouth to furnish to
the Bank a copy of MidSouth's Uniform Bank
Performance Reports.
<PAGE>
4.2 Other Information. At the reasonable request of
the Bank from time to time, the Company shall furnish and
shall cause MidSouth to furnish promptly to the Bank any
annual or special report and/or financial information
furnished to shareholders or directors of the Company or
MidSouth as well as such other information concerning the
Company and MidSouth and their business affairs and
financial conditions as the Bank may reasonably request.
4.3 Further Assurances. The Company will, and will
cause MidSouth to, at any time and from time to time,
execute and deliver, and cause to be executed and delivered
by all necessary persons, firms and entities, such further
instruments and take such further action as may reasonably
be requested by the Bank, in order to cure any defects in
the execution and delivery of, or to comply with or
accomplish the covenants and agreements contained in, the
Loan Documents.
4.4 Notice of Change in Circumstances. The Company
will, and will cause MidSouth to, promptly notify the Bank
of (a) any litigation, or any claim or controversy that
might become the subject of litigation, against the Company
or MidSouth affecting any of the Company's or MidSouth's
property, if such litigation or potential litigation might,
in the event of an unfavorable outcome, have a material
adverse affect on the Company's or MidSouth's financial
condition or might cause an Event of Default hereunder (b)
any material adverse change in the financial condition or
business of the Company or MidSouth; (c) any cease and
desist order, memorandum of understanding, letter agreements
or any regular reporting basis required by or entered into
by or with any of the Regulatory Authorities; (d) any other
matter that, in the opinion of the Company or MidSouth,
might materially adversely affect the financial condition of
the Company or MidSouth; and (e) the occurrence of any Event
of Default hereunder.
4.5 Expenses. The Company agrees to pay all out-of-
pocket costs and expenses (including reasonable legal fees
and expenses) of the Bank in connection with the
preparation, operation, administration, collection and
enforcement of the Loan Documents and the transactions
contemplated thereby.
4.6 Financial Statements. The Company will furnish to
the Bank and will cause MidSouth to furnish to the Bank:
(a) Annual Financial Statements: As soon as
available, but in any event not later than ninety (90) days
after the close of each fiscal year of the Company and
MidSouth, a copy of the annual Audited Financial Statements
for such year for the Company and MidSouth and related
statements of income and retained earnings for such fiscal
year, setting forth in each case in comparative form the
corresponding figures for the preceding fiscal period, all
in reasonable detail, prepared in accordance with generally
accepted accounting principles applied on a basis
consistently maintained throughout the period involved and
with prior periods; such audited financial statements being
prepared by independent certified public accountants of
recognized standing selected by the Company and acceptable
to the Bank.
(b) Quarterly Financial Statement: As soon
as available, but in any event not
<PAGE>
later than forty-five (45) days after the end of each
fiscal quarter, individual, combined and combining
financial statements and balance sheets of the Company
and MidSouth as of the end of such quarter and the
year to date, combined and combining statements of
income and retained earnings of the Company and
MidSouth as of the end of each such quarter and
the year to date, setting forth in comparative form
the corresponding figures for the preceding fiscal
period, all in reasonable detail, prepared in
accordance with generally accepted accounting
principles applied on a basis consistently maintained
throughout the period involved and with prior periods,
such financial statements to be certified by the
Chief Financial Officer of the Company and MidSouth.
(c) Other Financial Information: Promptly,
such additional financial and other information as
the Bank may from time to time reasonably request with
respect to the Company or MidSouth.
4.7 Obligations of Bank. Any reports,
documents, notices, information and inspections
required and permitted to be furnished to the Bank
by the Loan Agreement are solely for the Bank's purpose
and not mandatory and impose no obligation or
responsibility upon the Bank.
SECTION 5. NEGATIVE COVENANTS. The Company agrees that
during the term hereof and as long as the Note and the
Loan and all other obligations hereunder and under
the other loan documents are outstanding, unless the
Bank otherwise shall give its prior written consent:
5.1 Dividends. Without prior written consent
of the Bank, the Company will not, and will not permit
MidSouth to, (a) declare or pay any dividend on any
shares of it/their capital stock or make any other
distribution to it/their stockholders except for
dividends and distributions to provide funds for (i)
payment of the Note and Loan, (ii) payment of
taxes becoming owing by the Company and (iii) if the
Company is current on the payments due on the Note
and Loan, payment of up to $25,000.00 annually in
dividends from MidSouth to meet operational expenses
of the Company; or (b) purchase, redeem or otherwise
acquire for value any of it/their capital stock.
SECTION 6. WARRANTIES AND REPRESENTATIONS.
The Company represents and warrants that:
6.1 Corporate Authority.The execution,
delivery and performance of this Loan Agreement by
the Company, the borrowings hereunder and the
execution and delivery of the Note, the Security
Agreement and the several agreements and instruments
contemplated thereby (i) have been duly authorized by
proper corporate proceedings of the Company and
(ii) will not contravene, or constitute a default
under, any provision of applicable law or
regulation or the Articles of Incorporation as
amended or Bylaws of the Company, or of any
mortgage, indenture, contract, agreement or other
instrument, or any judgment, order or decree,
binding upon the Company. All consents of the
Company's shareholders or any holder of any
indebtedness of the Company required as a
condition to the validity of this Loan Agreement,
the Note, the Security Agreement and the
several agreements and instruments contemplated
hereby have been obtained. This Loan Agreement,
<PAGE>
the Note, the Security Agreement and the several agreements
and instruments contemplated thereby, when duly executed and
delivered in accordance with this Loan Agreement will
constitute the legal, valid and binding obligations of the
Company in accordance with their respective terms.
6.2 Corporate Status of the Company.The Company is a
corporation duly incorporated, validly existing and in good
standing under the laws of the State of Louisiana and is
duly licensed, qualified to do business and in good standing
in each jurisdiction in which the ownership of its property
or the conduct of its business requires such licensing and
qualification and has all powers and all permits, consents
and authorizations necessary to own and operate its
properties and to carry on its business as presently
conducted.
6.3 Corporate Status of MidSouth. MidSouth
is a national banking association duly
incorporated under an Act of Congress, validly
existing and in good standing under the laws of
the State of Louisiana and is duly licensed,
qualified to do business and in good standing in
each jurisdiction in which the ownership of its
property or the conduct of its business requires
such licensing and qualification and has all
powers and all permits, consents and
authorizations necessary to own and operate its
properties and to carry on its business as
presently conducted.
6.4 Governmental Approval. No approval of or by any
governmental authority having jurisdiction over the
Company or MidSouth is necessary to permit the Company to
enter into this Loan Agreement, to borrow hereunder or
to execute and deliver the loan documents.
6.5 Stock of MidSouth. All the issued and outstanding
shares of Stock of MidSouth had been duly authorized and
validly issued (free of any pre-emptive rights of
stockholders) and are filly paid and non-assessable, with no
personal liability attaching to the ownership thereof. No
shares of stock of MidSouth are held in the treasury of
MidSouth. There are no rights, subscriptions, warrants,
options, conversion rights or agreements of any kind
outstanding to purchase or otherwise acquire from MidSouth
any shares of its stock or securities or obligations of any
kind of MidSouth convertible into or exchangeable for any
shares of stock of MidSouth.
6.6 Subsidiaries. The Company has no subsidiaries or
indirect beneficial interests by stock ownership or
otherwise in any firm, corporation, association or business
enterprise except MidSouth and Louisiana Liquidators, Inc.
6.7 Financial Statements. Prior to the date hereof
the Company has delivered to the Bank a true, correct
and complete copy of ( 1 ) the balance sheets of the
Company and MidSouth (including all consolidated balance
sheets) as of December 31, 1995 together, in each case
with related statements of income for the respective
years and periods then ended, the notes thereto and, as
to the year-end statements, the reports of the
independent certified public accountants of the Company
and MidSouth with respect thereto; (2) the unaudited
balance sheets of the Company and MidSouth as of March
31, 1996 together with the related statements of income
for the periods then ended, (3) the annual report of
condition and income of MidSouth for the period ending
December 31, 1995; and (4) the quarterly report of
condition and income of MidSouth for the period ending
June 30, 1996
<PAGE>
(such reports and statements being collectively herein
called the "Company Financial Statements"); the Company
Financial Statements (i) are in accordance with the books
and records of the Company and MidSouth, (ii) have been
prepared in accordance with generally accepted accounting
principles, with no material differences between such
statements and the financial records maintained and the
accounting methods applied by the Company and MidSouth for
tax purposes, and (iii) present fairly the financial
condition of the Company and MidSouth as of the respective
dates thereof and the results of their operations for the
periods then ending. As of June 30, 1996, the Company and
MidSouth did not have any material liabilities, commitments
or obligations of any nature, whether absolute or
conditional, contingent or otherwise, not shown and
adequately provided for in the Company financial
Statements.
6.8 Taxes. The Company and MidSouth have filed or
cause to be filed all tax returns which are required to be
filed and have paid all taxes shown to be due and payable
on said returns or on any assessments made against them
(other than those being contested in good faith by
appropriate proceedings for which adequate reserves have
been provided on the books of each of the Company and
MidSouth), and no tax liens have been filed and, to the
best of their knowledge, no claims are being asserted with
respect to any taxes.
6.9 Absence of Adverse Changes. Since June 30, 1996,
(i) the businesses of the Company and MidSouth have been
conducted only in ordinary course; (ii) there have been no
changes in the condition (financial or otherwise), assets,
liabilities, business, operations or affairs of the Company
or MidSouth, other than changes in ordinary course of
business, none of which either singularly or in the
aggregate have been materially adverse; (iii) there has
been no damage, destruction or loss or other occurrence or
development (whether or not insured against) which either
singularly or in the aggregate materially and adversely
affect, and the Company does not have any knowledge of any
threatened occurrence or development which would materially
and adversely affect, the condition (financially or
otherwise), assets, liabilities, business, operations or
affairs of the Company or MidSouth.
6.10 Absence of Other Changes. Since June 30,
1996, neither the Company nor MidSouth have (i) created or
incurred any liability (absolute, conditional, contingent
or otherwise) except unsecured current liabilities incurred
in the ordinary course of business; (ii) mortgaged pledged
or subjected to any lien or otherwise encumbered any of its
assets, tangible or intangible; (iii) waived any rights of
substantial value; (iv) sold or otherwise disposed of any
of its assets, tangible or intangible, other than in the
ordinary course of its business; (v) issued or sold any
shares of its Capital stock or other securities or rights
of any kind to purchase or otherwise acquire any such
shares; or (vi) become bound by or entered into any
contract, commitment, or transaction other than in the
ordinary course of business.
6.11 Litigation: Compliance with Laws. No
litigation or administrative proceedings of or before any
court, tribunal or governmental body is presently pending
or threatened against the Company or MidSouth or any of its
or their properties, which, if adversely determined, would
have a material and adverse affect on the business, assets
or financial condition of the Company or
<PAGE>
MidSouth. Neither the Company nor MidSouth has been charged
with, nor received notice of, or is threatened with or under
investigation with respect to, any violation of any
provision of any federal, state or local law, regulation,
ordinance, or administrative ruling.
SECTION 7. DEFAULT.
7.1 Events of Default. The occurrence of any of the
following events shall constitute an event of default (any
of which are referred to herein as an "Event of Default "):
(a) failure of the Company to pay any installment
of principal or interest due under the Note or the Loan when
due or declared due; or
(b) the failure to perform or the breach of any
other covenant or any other provision or condition of the
Loan Documents and such failure or breach shall have
continued for a period of ten (1 O) days after notice from
the Bank to the Company; or
(c) any representation, warranty, statement,
report or other information made or furnished to the Bank by
or on behalf of the Company or MidSouth shall have been
false or misleading when made, or shall have failed to
include any material fact; or
(d) a change in control (as such or similar terms
are used in the Financial Institutions Regulatory and
Interest Rate Control Act) shall occur, or action to change
such control shall be commenced, without the prior written
consent of the Bank (which consent may be given or withheld
in the Bank's sole discretion); or
(e) any default shall occur under the Note or
under the Security Agreement or under any of the Guarantees;
or
(f) (i) the Company or MidSouth shall (a)
commence any case, proceeding or other action under any
existing or future law of any jurisdiction relating to
bankruptcy, insolvency, reorganization or relief of debtors,
seeking to have an order for relief entered with respect to
it, or seeking to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment,
liquidation, dissolution, composition or other relief with
respect to it or its debts, or (b) seek an appointment of a
receiver, trustee, liquidator, custodian or other similar
official for it or for all or any substantial part of
its/their property or (c) shall make a general assignment
for the benefit of creditors; or (ii) there shall be
commenced against the Company or MidSouth any case,
proceeding or other action of a nature referred to in clause
(i) above or seeking issuance of a warrant of attachment,
execution, distraint or similar process against all or any
substantial part of its/their property, which case,
proceeding or other action results in the entry of an order
for relief or remains undismissed, undischarged or unbounded
for a period of thirty (30) days; or (iii) the Company or
MidSouth shall take any action indicating its consent to,
approval of, or acquiescence in, or in furtherance of, any
of the acts set forth in clause (i) or (ii) above; or (iv)
the Company or MidSouth shall generally not, or shall be
unable to, pay its/their debts as they
<PAGE>
become due or shall admit in writing its/their inability to
pay its/their debts; or
(g) either the Company or MidSouth fail to (a)
continue to engage in the businesses presently being
operated, (b) maintain its/their corporate existence in good
standing in each jurisdiction in which it/they are required
to be qualified or (c) keep and maintain all franchises,
licenses and properties useful and necessary in the conduct
of its/their business in good order and condition; provided,
however the Bank gives the Company notice of such Event of
Default and the Company fails to cure such Event of Default
within ten (10) days after such notice; or
(h) the failure of the Company to comply with or
the failure of the Company to cause MidSouth to comply with
all applicable federal and state laws, rules and
regulations, the violation of which would have a material
and adverse affect on the Company or MidSouth, or their
businesses and financial condition, or would constitute a
violation for which criminal penalties would be applicable
and provided that the failure of the Company to meet
regulatory capital requirements of the Federal Reserve Board
shall not be considered an Event of Default as long as
MidSouth is in compliance with the Office of the Comptroller
of the Currency's (the "Comptroller") regulatory capital
requirements or with a capital plan approved by the
Comptroller, unless the Federal Reserve Board has instituted
regulatory sanctions against the Company; provided, however
the Bank gives the Company notice of such Event of Default
and the Company fails to cure such Event of Default within
ten (10) days after such notice; or
(i) should the Company create, incur,
assume or suffer to exist or should the Company permit
MidSouth to create, incur, assume or suffer to exist
any indebtedness in excess of $250,000.00, except (a)
the indebtedness incurred under the Loan Agreement and
any other indebtedness to the Bank; (b) indebtedness
(other than for borrowed money) on open account or
under trade acceptances in the ordinary course of
business in connection with normal trade obligations;
and (c) in the case of MidSouth, deposits, debt
instruments and other similar agreements entered into
in the ordinary course of its banking business; or
(should the Company create, assume or suffer to exist
or permit MidSouth to create, assume or suffer to
exist any mortgage, lien, pledge, charge, assignment,
security interest or encumbrance of any kind upon any
of its properties or assets, whether owned or
hereafter acquired, except (a) liens created by the
Security Agreement; (b) liens for taxes, assessments
and other governmental charges not yet payable, or the
validity of which are being contested in good faith by
appropriate proceedings and as to which adequate
reserves have been set aside on the books of the
Company or MidSouth; (c) deposits or pledges to secure
the payment of workmen's compensation, unemployment
insurance or other social security benefits, public or
statutory obligations, surety or appeal bonds or other
obligations of like general nature incurred in the
ordinary course of business; (d) mechanics',
landlord's, materialmen's, vendors' or other like
liens arising by operation of law in the ordinary
course of business securing obligations which are not
overdue for a period longer than thirty (30) days, or
which are being contested in good faith by appropriate
proceedings and against which the Company or MidSouth
have provided
<PAGE>
adequate reserves in accordance with generally accepted
accounting principles; and (e) zoning restrictions,
easements, licenses, restrictions on the use of real
property or minor irregularities in title thereto which do
not materially impair the use of such property in the
operation of the business of the Company or MidSouth or the
value of such property; provided, however the Bank gives the
Company notice of such Event of Default and the Company
fails to cure such Event of Default within ten (10) days
after such notice; or
(k) should the Company become or remain liable
directly or indirectly, for or in connection with or permit
MidSouth to become or remain liable, directly or indirectly,
for or in connection with the obligations, stock or
dividends of any other person, whether by guaranty,
endorsement, agreement to purchase or repurchase, agreement
to lease, agreement to supply or advance funds (including,
without limitation, agreements to maintain working capital,
solvency or other balance sheet conditions or agreements to
purchase stock or make Capital contributions), or otherwise,
except endorsements of instruments for collection in the
ordinary course of business and except to the extent the
Company and MidSouth are liable to make contributions to the
ESOP to permit the ESOP to make payments on a loan from a
financial institution in the principal amount of up to
$141,000.00, which loan is secured by 44,317 shares of the
Company's Common stock and except in the case of MidSouth,
letters of credit or guarantees entered into the ordinary
course of its banking business and except the guaranty
and/or endorsement that certain loan of Financial Services
of the South, Inc. from the Bank in the principal amount of
up to $600,000.00, which loan is secured by the pledge of
ail of the Company's Common stock in Financial Services of
the South, Inc ; or
(1) should the Company, without the prior written
consent of the Bank (which consent may be given or withheld
in the Bank's sole discretion) (a) form or acquire any new
subsidiary or permit MidSouth to form or acquire any new
subsidiary involving an expenditure by the Company or
MidSouth in excess of $50,000.00; (b) enter into any merger
or consolidation, or liquidate or dissolve itself (or suffer
any liquidation or dissolution); (c) convey, sell, lease,
charter or otherwise dispose of all or any substantial part
of its property, assets or business; (d) permit MidSouth to,
or should MidSouth issue any additional capital or other
form of stock or shares or any options, rights or
entitlements thereto; or (e) enter into any arrangement
directly or indirectly whereby the Company or MidSouth would
sell or transfer any properties either now owned or
hereafter acquired, and then or thereafter lease as lessee
such properties or any part thereof or any other property to
be used for substantially the same purpose, unless any of
the foregoing is required by the Regulatory Authorities in
order to dispose of assets, the ownership of which is
improper for bank holding companies or banks; or
(m) should the Company, without the prior written
consent of the Bank (which consent may be given or withheld
in the Bank's sole discretion) expend or enter into a
commitment or permit MidSouth to expend or enter into a
commitment to expend an amount in the aggregate for the
acquisition or lease of tangible, fixed or capital assets,
including repairs, replacements and improvements, which
are capitalized under proper accounting practice, which
exceeds $250,000.00 in the aggregate during any fiscal year
throughout the term hereof.
<PAGE>
7.2 Remedies. Upon the occurrence of any of such
Events of Default, any obligation of theBank to advance
funds shall immediately cease and the Note and Loan shall,
at the Bank's option, be immediately due and payable without
presentment, acceleration, demand, protest, notice of
protest, notice of acceleration or any other notice of any
kind to the Company, all of which are hereby expressly
waived.
SECTION 8. CONDITIONS TO LOAN. The obligation of the Bank to
make the Loan evidenced by the Note and to advance any funds
thereunder is subject to the performance by the Company of
all of its obligations under this Agreement and to the
satisfaction of the following further conditions:
8.1 Accuracy of Representations. The fact that:
(a) The borrowing will not contravene any
provision of law or regulations applicable to the Company or
MidSouth;
(b) At the completion of the borrowing, no Event
of Default specified in Section 7 of this Agreement and no
condition or event which, with the giving of notice or lapse
of time or both, would become such an Event of Default,
shall have occurred and be continuing; and
(c) The representations and warranties contained
in this Agreement and the Loan Documents are true and
correct in all material respects on and as of the applicable
date of borrowing.
A borrowing by the Company will be deemed to be a
representation and warranty by the Company on the date of
such borrowing as to the matters specified in (a) (b) and
(c) above.
8.2 Delivery-v of Documents. Receipt by the Bank of
all of the Loan Documents and the other documents and
certificates required or contemplated hereunder from the
appropriate parties and properly executed.
8.3 Legal Opinion. Receipt by the Bank, in form and
substance satisfactory to counsel for the Bank, of an
opinion of counsel for the Company and MidSouth covering
matters reasonably requested by the Bank or its counsel.
8.4 Certificates and Documents. Receipt by the Bank,
in form and substance satisfactory to the Bank, of:
(a) A certificate of the President of the Company
to the affect set forth in Section 8.1 of this Agreement and
to the further affect that the Company has performed or
complied with all of its covenants and agreements required
by this Agreement and the Loan Documents to have been
performed or complied with,
(b) All documents the Bank may reasonably request relating
to the existence and
<PAGE>
good standing of the Company and MidSouth and to the
authorization, execution and delivery of this Agreement, the
Loan Documents and other matters relevant hereto, and
(c) Evidence satisfactory to the Bank of the
professional liability coverage
maintained by counsel for the Bank.
SECTION 9. MISCELLANEOUS.
9.1 No Balance Requirement.
Neither the Company nor MidSouth will be required to
maintain any deposits or to purchase any certificates of
deposits as a condition for the borrowings
hereunder.
9.2 Governing Law. The Loan Documents shall be governed
by and construed in accordance with the laws of the State of
Louisiana and the United States of America.
9.3 Binding Effect and Benefit. The Loan Documents
shall be binding upon and inure to the benefit of the Company
and the Bank and their respective successors and assigns;
provided, however, that the Company may not, without the
prior written consent of the B@ assign any rights, powers,
duties or obligations hereunder.
9.4 Severability. The unenforceability of any
provision of the Loan Documents shall not
affect the enforceability or validity of any other provision
thereof.
9.5 Notices. All notices, requests and demands to or
upon the respective parties hereto shall
be deemed to have been given or made when deposited in the
mail, postage prepaid, addressed as set forth below or to
such other address as may be hereinafter designated in
writing by the respective parties hereto:
The Company: MidSouth Bancorp, Inc.
Post Office Box 3745
Lafayette, Louisiana 70502
Attn: C. R. Cloutier
Whitney National Bank
Post Office Drawer 2090
Morgan City, Louisiana 70381
Attn: James S. Corbett
9.6 Modification. The Loan Documents cannot be amended
except by written agreement signed by the parties hereto.
9.7 Survival. Representations, warranties, covenants and
agreements of the Company contained in this Loan Agreement or
in any document, certificate or instrument delivered pursuant
<PAGE>
to or in connection with this Loan Agreement, shall survive
the making of this Loan Agreement until the Note and the
obligation created thereby of the Company to the Bank has
been satisfied and extinguished in full.
IN WITNESS WHEREOF, the parties hereto have caused this
Loan Agreement to be duly executed as of the date first
above mentioned at Lafayette, Lafayette Parish, State of
Louisiana, each in the presence of the undersigned two
competent witnesses and me, Notary, after due reading of the whole.
MIDSOUTH BANCORP, INC.
BY:
CLIVE R. CLOUTIER, PRESIDENT
WHITNEY NATIONAL BANK
BY:
JAMES S. CORBETT, VICE-PRESIDENT
NOTARY PUBLIC
LAFAYETTE PARISH, LOUISIANA
<PAGE>
Exhibit "B"
Master Note
$600,000.00 Lafayette,La., August 29, 1996
ON DEMAND after date, I, whether maker, endorser, guarantor,
surety, or other party hereto, for value received promise
to pay to the order of
WHITNEY NATIONAL BANK
at 228 St. Charles Avenue, New Orleans,
Louisiana, or at any one of its branches,
SIX HUNDRED THOUSAND AND NO/100 ($600,000.00) Dollars, or
the aggregate unpaid principal amount
owed hereon, which ever is less, as evidenced by the
internal records of the Whitney National Bank (the "Bank")
with interest at the rate of Whitney Prime percent per
annum payable monthly from date until paid.
Each maker, endorser, guarantor, surety or
other party to this note (the "Obligor", whether one or
more) waives presentment for payment, demand, notice of
dishonor, protest, pleas of discussion and division and is
bound jointly, severally and solidarily for the full and
timely payment of this note in accordance with its terms.
Each Obligor agrees to the following terms and conditions:
1. The principal amount shown on the face of
this note evidences the maximum aggregate principal amount
that may be outstanding from time to time on this note.
Borrower may request an advance during the Bank's regular
business hours. Borrower shall make such request in
writing, by facsimile or by telephone. All proceeds of
any requested advance shall be deposited to borrower's
account at the Bank. After an advance, the Bank will mail
to borrower at the most recent address shown on the Bank's
records a credit advice showing the amount of the advance
and the amount credited into borrower's account. Within
ten (10) days after the date of any such advice, borrower
shall notify the Bank of any inaccuracy in the credit
advice or the lack of authority to request the advance.
Failure by borrower to notify the Bank timely shall
preclude the borrower from asserting against the Bank the
inaccuracy of such advices and/or the lack of
authorization of such advance. The Bank's failure to mail
the credit advice shall not alter any Obligor's obligation
to repay the loan or make the Bank liable to any Obligor
for failure to mail the credit advice. Each Obligor agrees
that the internal records of the Bank shall constitute for
all purposes prima facie evidence of (I) the amount of
principal and interest owing on this note form time to
time (ii) the amount of each advance or loan made to any
Obligor under this note and (iii) the amount of each
principal and/or interest payment received by the Bank on
this note.
2. Notwithstanding the maximum aggregate
principal amount of this note and anything herein to the
contrary, the Bank shall have no obligation to make any
loan or advance to any Obligor if, in the Bank's sole
discretion, the credit worthiness of any Obligor at the
time of the request for an advance or loan is insufficient
to justify such loan. Prior to advancing loans to any
Obligor pursuant to this note or any other agreement
between the Bank and any Obligor, the Bank may require
each Obligor to furnish to the Bank information and
documentation (i) to verify the credit worthiness of each
Obligor, (ii) to evidence such loan, (iii) to verify that
each Obligor is not in default on any obligation to the
Bank, or (iv) for such other reasons as may be reasonably
required by the Bank.
3. If this note is payable on demand or
becomes payable on demand, Bank may, from time to time,
change the interest rate set forth in this note by giving
notice to the maker by U.S. mail, postage prepaid, at the
last address of maker on file with the Bank, which shall
constitute notice to Obligor. The Obligor shall have the
right to reject a change in the interest rate by paying
the note in full, including all principal and interest due
thereon, with interest at the rate in effect prior to the
giving of the notice of change, within ten (10) days after
the date of such notice. If this note is not paid in full
within ten (10) days after the date of the notice, each
Obligor shall be conclusively presumed to have agreed to
each change of interest rate from the date specified in
the notice. Interest on the outstanding principal owed on
this note shall be computed and assessed on the basis of
the actual number of days elapsed over a year composed of
360 days. If this note provides for interest at a rate
based on Whitney Prime,the term Whitney Prime shall mean
that rate of interest as recorded by the Bank from time to
time as its prime lending rate with the rate of interest
to change when and as said prime lending rate changes.
4. As security for the debt evidenced by this
note, and for all obligations and liabilities of each
Obligor to the Bank, direct or contingent, due or to
become due, now existing or hereafter arising, including
all future advances, with interest, attorneys' fees,
expenses of collection and costs, including, without
limitation, obligations to the Bank on promissory notes,
checks, overdrafts, letters of credit, letter of credit
agreements, endorsements and continuing guaranties, each
Obligor hereby (a) pledges, pawns
<PAGE>
and delivers to the Bank, and grants in favor of tie Bank
a continuing Security interest in, all property of Obligor
of every nature or kind whatsoever owned by Obligor or in
which Obligor has an interest that is now or hereafier on
deposit with, in the possession of, under the control of
or held by the Bank in definitive form, book entry form or
in safekeeping or custodian accounts, including all
deposit accounts, money, funds on deposit in checking,
savings, custodian and other accounts,instruments,
negotiable instruments, certificates of deposit,
commercial paper, stocks, bonds, treasury bills and other
securities, documents, documents of title and chattel
paper, and (b) grants to the Bank a right of set-off
and/or compensation with respect to such property of each
Obligor. If the proceeds of collateral furnished for the
payment of this note are insufficient to pay this note in
full, each Obligor shall remain fully obligated for any
deficiency. For purposes of executory process, each
Obligor hereby acknowledges the debt created hereby and
confesses judgment in favor of the Bank for the full
amount of the debt evidenced by this note. To the extent
permitted by law, each Obligor hereby expressly waives (i)
the benefit of appraisement provided in the Louisiana Code
of Civil Procedure and (ii) the demand and three (3) days
delay accorded by Articles 2639 and 2721, Louisiana Code
of Civil Procedure. The terms "deposit accounts, "
"instruments," "documents" and "chattel paper" shall have
the meaning provided in La. R.S. 10:9-105. Each Obligor
hereby releases the Bank from any obligation to take any
steps to collect any proceeds of or preserve any of
Obligor's rights, including, without limitation, rights
against prior parties, in the collateral in which the Bank
possesses a security interest, and the Bank's only duty
with respect to such collateral shall be solely to use
reasonable care in the physical preservation of the
collateral which is in the actual possession of the Bank.
Notwithstanding any other provision in this note to the
contrary, IRA, pension, and other tax-deferred accounts at
the Bank shall not be subject to the security interest
created hereby.
5. Each Obligor agrees to furnish the Bank
with such annual and/or quarterly financial statements,
prepared
in conformity with generally accepted accounting
principles applied on a basis consistent with that of the
preceding fiscal year, as the Bank may reasonably request.
6. If any of the follwing events shall occur:
(a) the non-payment of any principal or
interest on this note on the date when
due;
(b) the death, interdiction, dissolution,
liquidation or insolvency of any Obligor;
(c) the filing by or against any Obligor
of a proceeding for bankruptcy, arrangement,
reorganization, or any other relief
afforded debtors or affecting rights of
creditors generally under the laws of any
state or under the United States Bankruptcy
Code;
(d) the default by any Obligor under this note,
or under any commitment letter, loan
agreement, mortgage, pledge agreement,
security agreement, or other security
instrument securing the payment of this
note or under any other obligations owed
by any Obligor to the Bank;
(e) any judgment, garnishment, seizure, tax lien
or levy against any ssets of any Obligor;
(f) any material adverse change in the financial
condition of any Obligor, or any material
discrepancy between the financial statements
submitted by any Obligor and the actual
financial condition of such Obligor;
(g) the expropriation or condemnation, of all
or a part of any property which is assigned,
pledged or mortgaged to the Bank or in
which the Bank possesses a security interest;
(h) any statement, warranty, covenant or
representation made by any Obligor to the
Bank proves to be untrue;
(i) the assessment of any tax or other assessment
against the loan amount, the Bank's interest
in the note or in any asset assigned, pledged
or mortgaged to the Bank or in which the Bank
possesses a security interest; or
(j) the existence or future enactment of any law
or ordinance by any federal, state, parish,
municipal or other taxing authority
requiring or permitting Obligor to deduct any
amount whatsoever from any payments to be made
on this note,
<PAGE>
then at the option of the Bank, the full amount of this
note and all otter obligations and liabilities, direct or
contingent, of Obligor to the Bank shall be immediately
due and payable without notice or demand.
7. If an earlier note of any Obligor is
cancelled at the time of execution hereof, then this note
constitutes
an extension, but not a novation, of the amount of the
continuing indebtedness, and all security rights held by
the Bank under the earlier note shall continue in full
force and effect.
8. Without releasing or affecting any of the
obligations of any Obligor, the Bank may, one or more
times, in its sole discretion, without notice to or consent
of any Obligor,(a) release or modify the obligations of any
other Obligor, (b) release, exchange or modify the Bank's
rights with respect to collateral held as security for
this note, (c) extend the maturity of this note for
periods `that may exceed the original term, (d) retain the
proceeds, increases and profits, including money, derived
from the collateral furnished by any Obligor as additional
security for any and all obligations and liabilities of
Obligor to the Bank, including the debt evidenced by this
note, without applying said proceeds, increases and
profits toward payment of the obligations, or (e) impute
or apply payments received from any Obligor, or the
proceeds, increases and profits of collateral furnished by
any Obligor, in whole or in part to this note, or to any
other obligations of such Obligor.
9. Each Obligor agrees to pay the fees of any
attorney-at-law employed by the Bank to recover sums owed
or to protect the Bank's interests with regard to this
note. Such attorneys' fees are fixed at ten (10%) percent
of the amount of principal and interest due on this note
and are secured by collateral furnished for the payment
hereof. Obligor further agrees to pay any and all charges,
fees, costs and/or taxes levied or assessed against the
Bank in connection with this note, any obligation owed by
any Obligor to the Bank and/or any collateral, asset or
other property which is pledged, mortgaged, hypothecated
or assigned to the Bank or in which the Bank possesses a
security interest, as security for this note or any other
obligation owed by any Obligor to the Bank.
10. The provisions of this note may not be
waived or modified except in writing, signed by the Bank.
No failure or delay of the Bank in exercising its rights
shall be construed as a waiver.
11. The Bank and each Obligor agree that the
internal laws of the State of Louisiana shall govern this
note, without giving effect to the conflict of laws
provisions of Louisiana law.
12. The terms and conditions in a Commitment
Letter/Loan Agreement dated August 29, 1996 from
Lender to Borrower, as the same maybe amended, extended or
replaced from time to time, shall be considered a part
hereof to the same extent as if written herein.
FINANCIAL SERVICES OF THE SOUTH, INC.
By: ________________________________
BEN P. HUVAL, President
In consideration of the making at the request
of the undersigned of the loan evidenced by the note, the
undersigned has taken notice of the conditions and
promises made herein and binds himself jointly, severally,
and solidarity with each and all of them, as therein
stated.
MIDSOUTH BANCORP, INC.
By: ________________________________
CLIVE R. CLOUTIER, President
6622.01
"Ne Varietur" for identification with an act of Loan
Agreement executed before me, this 29h day of August, 1996.
______________________
NOTARY PUBLIC
<PAGE>
Exhibit "A"
ACT OF LOAN AGREEMENT
STATE OF LOUISIANA
PARISH OF LAFAYETTE
BEFORE ME, Notary Public duly commissioned and
qualified within and for the Parish of Lafayette, State of
Louisiana, therein residing, and in the presence of the
witnesses hereinafter named, personally came and appeared:
FINANCIAL SERVICES OF THE SOUTH, INC. (the "Company"),
a Louisiana corporation, domiciled in and doing business
trough 102 Versailles Boulevard, Lafayette, Lafayette
Parish, Louisiana 70502, herein represented by and
appearing through Ben P. Huval, its duly authorized
President; MIDSOUTH BANCORP, INC. (the "Company"), a
Louisiana Corporation, domiciled in and doing business
through Post Office BOX 3745, Lafayette, Louisiana
70502, herein represented by and appearing through CLIVE
R. CLOUTIER, its duly authorized President, hereinafter
sometimes called the "Guarantor"; and WHITNEY NATIONAL
BANK (the "Bank"), a national banking association
organized under an Act of Congress, domiciled in and
doing business through Post Office Drawer 2090, Morgan
City, St. Mary Parish, Louisiana 70381, herein represented
by and appearing through James S. Corbett, its duly
authorized VicePresident; who declared and acknowledged
that they do hereby covenant, represent and agree as follows:
SECTION 1. DEFINITIONS AND GENERAL RULES. The following
definitions and general rules will apply hereto:
1.1 General Rules. For the purposes of this Agreement:
(a) The terms defined in this Section 1, unless the
context otherwise requires, will have the meanings applied
to them in Section 1 and will include the plural as well as
the singular. Additional definitions may be found
throughout this Agreement.
(b) All accounting terms not otherwise defined herein
will have the meanings assigned to them in accordance with
generally accepted accounting principles consistently
applied.
(c) The words "herein", "hereof", "hereunder" and
words of similar import refer to this Agreement as a whole
and not to a particular section, paragraph or other
subdivision.
1.2 Definitions. As used in this Agreement, the following
terms will have the
following meanings unless the context requires otherwise:
Agreement means this Loan Agreement as originally executed
or hereafter amended.
Business Day means a day on which banks in Morgan City,
Louisiana are opened for
<PAGE>
business.
Collateral means the properties and assets described in
Section 3.6 hereof.
Default means any event specified in Section 7 of this
Agreement, whether or not any requirement for the giving of
notice or lapse of time or any other condition has been satisfied.
Event of Default means any event specified in Section 7
of this Agreement, provided that any requirement in connection
with such event for the giving of notice or lapse of time or any
other condition has been satisfied.
Guaranty means a continuing guaranty agreement in the
form attached hereto as Exhibit "A" to be executed by the Guarantor.
Guarantor means MIDSOUTH BANCORP, INC.
Note means the promissory note described in Section 3.1
hereof as the same may be renewed, extended or rearranged at anytime.
Obligations means the outstanding balance of the Note
and any and all other indebtedness, liabilities and obligations
whatsoever of the Company and the Guarantor to the Bank hereunder
or under the Note or Security Instruments, or otherwise,
whether direct or indirect, absolute or contingent, due or to
become due, and whether now existing or hereafter arising, and
howsoever evidenced or acquired, whether joint or several or in
solido, and whether evidenced by note, draft, acceptance,
guaranty, open account, letter of credit, endorsement,
overdraft, surety agreement or otherwise; it being
contemplated by the parties hereto that the Company and the
Guarantor, or any of them, may become indebted to the Bank
for further sum or sums.
Person means any corporation, partnership, trust,
estate, individual, unincorporated
business entity or governmental department, administrative
agency or instrumentality, or any other form of entity
whatsoever.
Security Agreement means a Act of Security Agreement in
the form attached hereto as
Exhibit "B" to be executed by the Company.
Regulation U means Regulation U of the Board of
Governors of the Federal Reserve
System, 12 C. F. R., Part 221.
Regulation X means Regulation X of the Board of
Governors of the Federal Reserve System, 12 C. F. R., Part 224.
Security Instruments means the Guaranty and the
Security Agreement, together with allother documents
necessary for recordation of same or perfection of the
pledges, assignments, liens and security interest granted
thereby.
Subsidiary means any corporation of which more than
fifty (50%) percent of the issued
<PAGE>
and outstanding securities having ordinary voting power for
the election of directors is owned or controlled, directly
or indirectly, by the Company.
SECTION 2. REPRESENTATIONS AND WARRANTIES. The Company and
the Guarantor jointly, severally and in solido represent and
warrant to the Bank that:
2.1 Corporate Authority. The Company is a
corporation duly incorporated, validly existing
and in good standing under the laws of the State
of Louisiana and is duly licensed and qualified to do
business and in good standing in each jurisdiction in which
the ownership of its property or the conduct of its
business requires such licensing and qualification and has
all powers and all permits, licenses, consents and
authorizations necessary to own and operate its properties
and to carry on its business as presently conducted. The
execution, delivery and performance of this Agreement by
the Company and the borrowings hereunder and the execution
and delivery of the Note, the Security Instruments and the
several agreements and instruments contemplated thereby (i)
have been duly authorized by proper corporate proceedings
and (ii) will not contravene, or constitute a default
under, any provision of applicable law or regulation or the
Articles of Incorporation or Bylaws of the Company or of
any mortgage, indenture, contract, agreement or other
instrument or any judgment, order or decree binding upon
the Company. All consents of the shareholders of the
Company or any holder of any indebtedness of the Company
required as a condition to the validity of this Agreement
have been obtained. This Agreement, the Note, the Security
Instruments and the several agreements and instruments
contemplated thereby, when duly executed and delivered in
accordance with this Agreement will constitute, as to the
applicable party, legal, valid and binding obligations of
the Company and each of the Guarantors in accordance with
their respective terms.
2.2 Duly Licensed. The Company is duly licensed and
qualified to engage in the business of providing financing
and credit and shall at all material times remain
so licensed and qualified. The
Company is a corporation that is regularly engaged in the
business of making or purchasing loans and notes, whether
made on a secured or unsecured basis, as a consumer or
commercial finance company.
2.3 Financial Statements. The unaudited balance
sheets of the Company at December 31, 1995 and June 30,
1996 and the related statements of income and retained
earnings and changes in financial position for the
periods then ended, copies of which have been delivered to
the Bank, fairly present the financial position of the
Company as of the dates thereof and the results of its
operations and the changes in its financial position for
the periods then ended in conformity with generally
accepted accounting principles applied on a basis
consistent with the preceding year. No material adverse
change has occurred since the dates of such financial
statements in the financial position or in the results of
operations of the Company or in its
business, taken as a whole.
2.4 Governmental Approvals No approval of or by any
governmental authority having jurisdiction over the Company
is necessary to permit the Company to enter into this
Agreement or to borrow hereunder or to permit the Company
to grant security as provided herein.
2.5 Litigation. There is no action, suit or
proceeding pending or, to the knowledge
<PAGE>
of the Company or the Guarantor, threatened against the
company or the Guarantor before any court, governmental
department, administrative agency or instrumentality which,
if such action, suit or proceeding were adversely
determined (i) would subject the company or the Guarantor
to any liability not fully covered by insurance less any
deductibles and (ii) would adversely affect the financial
position or the results of operations of the Company or the
Guarantor or their businesses or the ability of the Company
or the Guarantor to perform their respective obligations
under this Agreement, the Note or the Security Instruments.
2.6 No Event of default. No Event of Default
specified in Section 7 and no event which, with the giving
of notice or lapse of time or both, would become such an
Event of Default has occurred and is continuing.
2.7 Use of Proceeds. The proceeds of the loans made
hereunder will be used by the Company to provide working
capital for general corporate operating purposes or
to repay existing indebtedness incurred for such purposes.
The proceeds of the loans made hereunder will be used for
commercial and/or business purposes and not for personal,
family, household or agricultural purposes.
2.8 Collateral. The Company has and will have good
and indefeasible title free and clear of all pledges,
liens, assignments, mortgages, security interest and
encumbrances to the Collateral.
2.9 Investment company Act of 1940. The Company is
not an investment company within the meaning of the
Investment Company Act of 1940.
2.10 Tax Returns. The Company and the Guarantor
have filed all United States tax returns and all state and
foreign tax returns required to be filed by each of them
and have paid, or made provisions for the payment of,
all taxes which have become due pursuant to said
returns or pursuant to any assessment received by any of
the Company and the Guarantor except for such taxes, if
any, as are being contested in good faith and as to
which adequate reserves have been provided in
accordance with generally accepted accounting principles,
and such returns properly reflect the United States income,
foreign tax and/or state taxes of the Company and the
Guarantor for the periods covered thereby.
2.11 Liens and Security Interest. The security
interest, pledges, assignment and liens attached to and to
be attached to the Collateral will at all times constitute
valid, perfected and enforceable first priority pledges,
assignments, security interest and liens in favor of the
Bank, subject to no prior or superior pledge, assignment,
lien, security interest or encumbrance.
Subject to the foregoing, before any funding under the
Note, the Company will have taken, or will have
participated with the Bank in taking, all action and make
all necessary filings to provide the Bank with a perfected
first priority pledge, assignment, security interest and
lien on the Collateral under the laws of all applicable
jurisdictions.
.
2.12 Availability of Records. The Company will permit
any authorized representative, account or attorney of the
Bank to visit and inspect any of the properties of the
Company, to
<PAGE>
examine the books and financial records of the Company, to
verify the due investment and application of the proceeds in
accordance with Section 2.7 hereof and to discuss the
affairs, finances and accounts of the Company with its
officers and accountants, all at such reasonable times and
during reasonable business hours, and as often as the Bank
may desire.
2.13 Regulations U and X. No part of the proceeds
received by the Company hereunder will be used, directly or
indirectly, for the purpose of purchasing or carrying, or
for payment in full or in part of indebtedness which was
incurred for the purpose of purchasing or carrying any
"margin stock" as such term is defined in Regulation U. No
part of the proceeds received by the Company from the loans
made hereunder will be used for any purpose which violates
Regulations X.
2.14 Subsidiaries. The Company does not have any
subsidiary as of the date hereof.
SECTION 3. THE LOAN.
3.1 The $600,000.00 Line of Credit. Subject to, and
upon the terms, conditions, covenants and agreements
contained herein, the Bank agrees to loan to the Company at
any time and from time to time prior to April 30, 1997,
unless earlier terminated in accordance with the terms
hereof, such amounts as the Company may request up to but
not exceeding an aggregate principal amount of SIX HUNDRED
THOUSAND AND NO/100 ($600,000.00) dollars at any one time
outstanding (the "Line of Credit"). Within such limits and
prior to April 30, 1997, the Company may borrow, repay and
re-borrow hereunder so long as the outstanding principal
amount owing to the Bank at any one time outstanding does
not exceed SIX HUNDRED THOUSAND AND NO/100 ($600,000.00)
DOLLARS.
Requests for loans or advances may be made by the
Company in person or in writing to the Bank and such
requests shall be fully authorized by the Company if made by
any one of the persons designated hereinafter. Each of the
Following persons is hereby irrevocably authorized by the
Company to make personal or written requests of Bank for
loans or advances under the Line of Credit, namely:
NAME AND ADDRESS TITLE TELEPHONE
NUMBER
Ben P. Huval President (318) 237-8343
102 Versailles Boulevard
Lafayette, Louisiana 70502
Donald R. Landry Vice-President (318) 237-8343
102 Versailles Boulevard
Lafayette, Louisiana 70502
The authority of each of the above names individuals to
request loans or advances and the right of the Bank to rely
upon said authority shall continue in full force and effect
until such time as written notice to the contrary is duly
delivered to the Bank and receipted for in writing by the
<PAGE>
President or any Executive or First Vice President of the
Bank; but such notice shall not affect or
diminish the liability of the Company to the Bank as to any
indebtedness and/or obligations of the Company then existing
and covered by and subject to this Agreement.
All loans and advances made by the Bank to the Borrower
under the Line of Credit shall bear interest at a variable
per annum rate (the "Basic Rate") at all times equal to the
Prime Rate of interest (herein called the "Prime Rate") most
recently amounted by the Bank as its Prime Rate, with the
understanding that the Prime Rate may be one of several base
rates and serves as a basis upon which effective rates of
interest are from time to time calculated for loans making
reference thereto and may not be the lowest of the Bank's
base rates, which Basic Rate shall change when and as the
Prime Rate shall change, effective on the day of such
change. The amount so advanced or loaned by the Bank to the
Company shall be due and payable as to principal and
interest ON DEMAND and, if no demand, then (1) the accrued
and unpaid interest on the amount so loaned or advanced by
the Bank shall be payable monthly on the 15th day of each
month commencing the 15th day of September , 1996 and (2)
the outstanding principal and all accrued interest shall be
due and payable on April 30, 1997. Notwithstanding the
above, in no event shall seventy-five (75 %) percent of the
aggregate outstanding principal balance of Eligible
Promissory Notes (as hereinafter defined) pledged to the
Bank be less than the outstanding principal balance owed by
the Company to the Bank on the Line of Credit and the
Company agrees to pay to the Bank on the 15th day of each
month such amount as is required to reduce the outstanding
principal balance due by the Company to the Bank under the
Line of Credit to a sum equal to or less than seventy-five
(75 %) percent of the aggregate outstanding principal
balance of Eligible Promissory Notes (as hereinafter
defined) pledged to the Bank (the "Mandatory Prepayment").
As evidence for the advances or loans made or to be
made in the future on the Line of Credit herein established,
the Company has contemporaneously herewith made, executed
and delivered to the Bank a master promissory note (the
"Note"), in the form attached hereto as Exhibit "C", dated
this date and payable to the order of the Bank in the
principal sum of SIX HUNDRED THOUSAND AND NO/100
($600,000.00) DOLLARS, together with interest on the unpaid
balance thereof at a variable per annum rate (herein called
the "Basic Rate") at all times equal to the Prime Rate of
interest (the "Prime Rate") most recently announced by the
Bank as its Prime Rate, with the understanding that the
Prime Rate may be one of several base rates and serves as a
basis upon which effective rates of interest are from time
to time calculated for loans making reference thereto and
may not be the lowest of the Bank's base rates, which Basic
Rate shall change when as the Prime Rate shall change,
effective on the day of such change; provided, however, in
the event that (i) no Prime Rate is being announced by the
Bank or (ii) the Note is in default and legal proceedings
are commenced to enforce collection thereof, then, in any
such event, interest on the unpaid principal balance of the
Note shall from any such date then bear interest at the
fixed rate of eighteen (18.0%) percent per annum until paid;
the Note being payable as to principal and interest ON
DEMAND. When each advance or loan is made by the Bank to the
Company under the Line of Credit, the Company shall be
deemed to have renewed and reissued the Note for the amount
of such advance plus the amounts due by the Company to the
Bank, in principal and interest, for loans or advances
previously made by the Bank to the Company hereunder. The
aggregate outstanding amount of principal and interest due
by the Company at any given time under this Agreement for
loans or advances made shall be and constitute the
indebtedness of the Company to Bank on the Note. The
aforesaid Note after having been paraphed
<PAGE>
"Ne Varietur" by the undersigned Notary for Lafayette
Parish for identification herewith has been delivered to the
Bank, who acknowledges receipt thereof.
The Bank is hereby irrevocably authorized to evidence
actual advances, loans or which may now or hereafter be made
under the Line of Credit by maintaining a advances or
repayments. The principal and interest amount outstanding
as so evidenced shall, for all purposes, be prima facie
evidence of the amount owed to the Bank by the Company under
the Line of Credit and the Note.
The Bank agrees to furnish the Company a monthly
statement which shall show all cash advances made under the
Line of Credit, the interest charges as computed in
accordance with this Agreement and the Note, the payments
made to the Line of Credit and the balance outstanding of
all cash advances made.
All renewals, extensions, modifications and
rearrangements of the Note, if any, shall be
deemed to be made pursuant to this Agreement, and,
accordingly, shall be subject to the terms and provisions
hereof, and the Company shall be deemed to have ratified as
of such renewal, extension, modification or rearrangement
date, all the representations, covenants and agreements
herein set forth.
3.2 Obligations to Make Loans. The sum of the
aggregate principal amount at anytime remaining unpaid on
the Line of Credit will not be in excess of the lesser
of (i) $600,000.00 or (ii) seventy- five (75%) percent
of the aggregate outstanding principal
balance of Eligible Promissory Notes (as hereinafter
defined) pledged to the Bank. Eligible Promissory Notes are
hereby defined as and shall be limited to negotiable
instruments that meet each of the following conditions:
1. Is either a promissory note, credit
sales agreement or installment sales contract that is payable
to the order of the Company;
2. Each such negotiable instrument has been
properly completed and executed in every respect;
3. Each such negotiable instrument
evidences funds actually loaned or advanced by the Company
as a consumer or commercial finance company; and
4. Each such negotiable instrument is less
than ninety (90) days due and there has been no default
thereunder by the Borrower.
The Bank shall have the exclusive right, in its sole
discretion, to accept or reject any negotiable or other
instrument as an Eligible Promissory Note as well as to
eliminate any negotiable or other instrument previously
accepted by the Bank as an Eligible Promissory Note.
Any requests for an advance or loan by the Company
pursuant to the Line of Credit shall constitute a
representation and warranty by the Company that each of
the negotiable instruments for which a loan or
request is made is an Eligible Promissory Note.
<PAGE>
The Bank shall be under no obligation to honor any
requests for an advance or loan under the Line of Credit if
the amount of such requests plus the aggregate principal
amount remaining unpaid on loans and advances previously
made pursuant to the Line of Credit will be in excess of the
lesser of (i) $600,000.00 or (ii) seventy-five (75%) percent
of the aggregate outstanding balance of all Eligible
Promissory Notes previously pledged to the Bank plus the
aggregate outstanding balance of the Eligible Promissory
Notes for which the advance or loan is requested.
3.3 Optional Prepayments. The Company may,
without premium or penalty, prepay the Note in full or in
part from time to time, upon payment of accrued interest to
the date of prepayment. Partial prepayments shall be
applied to the accrued and unpaid interest due on the Note.
3.4 Payments. (a) All payments of principal of
and interest on the Note and Line of Credit shall be made to
the Bank at its offices at 1100 Brashear Avenue, Morgan
City, Louisiana 70380 or at such other offices of the Bank
as the Bank from time to time may direct.
(b) Whenever any payment of principal of or
interest on the Note shall be due on a day which is not a
Business Day, the date for payment thereof shall be extended
to the next succeeding Business Day and interest shall be
payable for such extended time at the rate of interest with
respect thereto in effect at the due date.
3.5 Computation of Interest. Interest on the
outstanding principal owed on the Note shall be computed and
assessed on the basis of the actual number of days elapsed
over a year composed of 360 days.
3.6 Security. The full and punctual payment of
the Note, the Obligations and all advances under the Line of
Credit and performance of the obligations of the Company
hereunder shall be secured, directly or indirectly, by a
first priority pledge, assignment and continuing security
interest, as the case may be, of/in the following described
property (the "Collateral"):
(i) All of Company's rights, title and interest
in and to any and all promissory notes, credit sales
agreement, installment sales contracts, chattel paper,
negotiable paper or other written evidence of indebtedness
owing or to be owed to the Company in connection with all or
any part of the finance business of the Company, whether now
existing as well as any and all that may hereafter arise or
be acquired by the Company or be owing to or become owing to
the Company as well as all additions thereto and
substitutions therefor and all the proceeds and products
thereof, including without limitation, all payments,
interest, fees, security, collateral, cash or other benefits
or rights arising therefrom and which pledge, assignment and
security interest will be evidenced by the Security
Agreement;
(ii) Any and all of Debtor's present and future
accounts, accounts receivable, other receivable, contract
rights, chattel paper, instruments, documents, notes, and
all other obligations and indebtedness that may now and in
the future be owed to Debtor from whatever source arising,
and all monies and proceeds that are payable thereunder, and
all of Debtor's rights and remedies to collect and enforce
payment and performance thereof, as well as to enforce any
guaranties of the foregoing and security therefor, and all
of Debtor's present and future rights, title
<PAGE>
and interest in and with respect to the goods, services, or
other property that may give rise to or that may secure any
of the foregoing, and Debtor's insurance rights with regard
thereto, and all present and future general intangibles of
Debtor in any way related or pertaining to the foregoing,
including without limitation, Debtor's account ledgers,
books, records, files, computer discs and software, and all
rights that Debtor may have with regard thereto;
(iii) a pledge of and/or security interest in
favor of the Bank MIDS0UTH BANCORP, INC. of all of the
common captital stock of the Company as described in the Act
of Security Agreement attached as Exhibit "D". The
percentage of such stock pledged to the Bank shall never be
less than 100 percent of the issued and outstanding Stock;
and
(iv) Life Insurance on the life of CLIVE R.
CLOUTIER in the amount of $300,000.00, which pledge,
assignment and security interest will be evidenced by such
assignment form as the Bank may require. The Company agrees
that with respect to any life insurance assigned or which
may be required to be assigned or pledged as Collateral that
it will at all times properly pay or cause to be paid any
and all premiums or charges due or payable upon or on
account of any such policy or policies so assigned or
pledged and will at all times maintain and continue to
maintain said policy or policies in full force and effect
and will take any and all action necessary or required by
the Bank or the company or companies issuing any such policy
or policies to complete, perfect and preserve the rights of
the insured or beneficiary to the end that any such policy
or policies will not lapse or be subject to any claim
whatsoever. In the event the Company fails to pay any such
premiums, when due, the Bank may advance the amount
necessary to pay such premiums and add the amount so
advanced to the principal indebtedness owing on account of
the Line of Credit and Note.
Payment and performance of the Obligations of the
Company to the Bank, including the Note, the Line of Credit
and the obligations of the Company hereunder, will be
guaranteed by the Guarantor and which such guaranty shall be
evidenced by a Guaranty.
The Company and the Guarantor agree to execute,
acknowledge and deliver to the Bank such instruments,
pledges, security agreements, guaranty agreements,
statements, assignments and financing statements, in a form
acceptable to the Bank, as may in the good faith and
discretion of counsel for the Bank be necessary to enforce,
to grant to the Bank and to perfect in the United States the
pledges, assignments and security interest upon the
Collateral. The Company, the Guarantor and the Bank agree
that all Collateral now or hereafter securing any of the
Obligations hereunder shall also secure any and all other
indebtedness and liabilities now or hereafter owing by the
Company to the Bank.
3.7 No Default. The Bank may but shall not be
required to make or continue any loan hereunder or renew the
Note if an event has occurred and is continuing which
constitutes an Event of Default or breach of a covenant
under this or any other agreement between the Company or the
Guarantors and the Bank.
SECTION 4. CONDITIONS TO LOANS. Any obligation of the Bank
to make loans hereunder is subject to the performance by the
Company and the Guarantor of all their obligations under
this Agreement and to the satisfaction of the following
further conditions:
<PAGE>
4.1 Conditions of Initial Loan. The borrowing pursuant
to section 3 hereof shall be subject to the Moment of the
following conditions precedent:
(a) Corporate Proceedings . The
Company shall have furnished to the Bank
in form and substance satisfactory to the Bank a COPY of the
resolutions of the Board of Directors and Stockholders of
the Company, certified by an appropriate officer of the
Company on the date of the loan, authorizing the borrowing
herein provided for and the execution, delivery and
performance of this Agreement, the Note and the Security
Instruments and all other agreements
contemplated by this Agreement.
(b) Representations and Warranties: No Default.
The representations and warranties contained in Section 2
hereof shall be true and correct on the date of the loan and
no Default or Event of Default or event which with the
passage of time or the given of notice or both would
constitute a Default or Event of Default shall have occurred
and be continuing.
(c) Legal Matters. All other instruments and
legal and corporate proceedings in connection with the
transactions contemplated by this Agreement shall be
satisfactory in form and substance to the Bank and its
counsel and counsel to the Bank shall have received copies
of all documents which it may have reasonably requested in
connection therewith. There shall be furnished to the Bank
in form and substance satisfactory to the Bank and its
counsel and properly executed prior to the date of the loan:
(i) the Note, (ii) the Security Agreement; and (iii) all the
documents required or contemplated hereunder from the
appropriate parties.
(d) Guarantv. There shall have been delivered to
the Bank the Guaranty of the Guarantor properly executed on
or prior to the date of the loan, all in form and substance
satisfactory to the Bank; the Guarantor shall be liable "in
solido" for the full amount of the finding of the loans
contemplated by this Agreement.
(e) Life Insurance. There shall have been
delivered to the Bank an assignment of the life insurance
policies required by this Agreement.
(f) Certificates and Documents. There shall have
been delivered to the Bank in form and substance
satisfactory to the Bank (i) all documents the Bank may
reasonably request relating to the existence and good
standing of the Company and to the authorization, execution
and delivery of this Agreement, the Note and the Security
Instruments by the Company and the Guarantors and other
matters relevant hereto; and (ii) a list and summary of all
pending or threatened litigation against the Company and the
Guarantor, or any of them, certified by a responsible
officer of the Company.
4.2 Condition to Advances Against Line of Credit.
In addition to the other conditions set forth in this
Agreement or the Security Instruments, any obligation of the
Bank to advance any funds under or pursuant to the Line of
Credit shall be conditioned upon the following:
(a) At the time of each request for an advance
under the Line of Credit, the Company shall furnish to the
Bank in form and substance satisfactory to the Bank a
Borrowing Certificate in the form attached hereto as Exhibit
" E";
<PAGE>
(b) At the time of each request for an advance
under the Line of Credit, the Company shall furnish to the
Bank the originals of each negotiable instrument for which a
request for an advance or loan is being made and the Company
shall affix or otherwise stamp a notice on the face or
reverse side of each negotiable instrument to the effect
that such negotiable instrument is being pledged to the
Bank, such notice to be in the following form:
"This promissory note and all amounts due hereunder
have been specifically pledged to and a continuing
security interest therein has been granted to Whitney
National Bank, 228 St. Charles Avenue, New Orleans,
Louisiana pursuant to a Security Agreement dated the
day of , 1996.
FINANCIAL SERVICES OF THE SOUTH, INC.
By:
BEN P. HUVAL,President
(c) Each negotiable instrument for which a
request for an advance or loan is being made shall be
endorsed in such form as the Bank may require.
The Bank shall have no obligation to advance any funds
pursuant to this Agreement or the Line of Credit unless on
the date of each advance or request for advance or loan
under this Agreement: (1) the Company and the Guarantor
shall have complied with and be in compliance with all of
the terms, covenants and conditions hereof which are binding
upon them; (2) there shall exist no Default or Event of
Default or event which with the passage of time or the
giving of notice of both would constitute a Default or Event
of Default; and (3) the representations and warranties
contained in this Agreement and the Security Instruments
shall be true and correct with the same effect as though
said representations and warranties have been made at the
time of each such advance or request for advance or loan.
SECTION 5. AFFIRMATIVE COVENANTS. The Company and the
Guarantor agree that during the term of this Agreement and
until the Note and Obligations have been fully and finally
paid, unless compliance with the provisions of the following
sections have been waived in writing by the Bank:
5.1 Financial and Other statements. The Company
and/or Guarantor will furnish and the Guarantor shall cause
the Company to furnish to the Bank:
(i) Within ninety (90) days after the end of each
fiscal year of the Company and Guarantor, a copy of the
annual audited financial statements (consisting of at least
a balance sheet and related statements of income, retained
earnings and changes in financial condition) of the Company
and Guarantor, prepared in conformity with generally
accepted accounting principles applied on a basis consistent
with that of the preceding fiscal year, and certified by a
proper financial officer of the Company and Guarantor,
respectively;
(ii) Within fifteen (15) days of the end of each
quarter of each fiscal year
<PAGE>
during the term hereof, unaudited interim financial
statements of the Company and Guarantor, prepared and
certified by a proper financial officer of the Company and
Guarantor, prepared similarly to the annual statements
referred to in clause (i) above (subject to normal year-end
audit adjustments) and consisting of at least a balance sheet
as at the close of such period and profit and loss statement
for the quarter then ended and for the period from the
beginning of such fiscal year to the close of such period;
(iii) Within fifteen (15) days after the end of each
month during the term hereof a report in form and substance
satisfactory to the Bank showing in detail each and every
outstanding negotiable instrument, the amounts due thereunder
and the payments made thereon during such month, certified by
a proper financial officer of the Company;
(iv) Concurrently with the delivery of the financial
statements referred to in clause (ii) above, a certificate of
a proper financial officer of the Company stating that a
review of the activities of the Company, during the period
covered by such financial statements has been made under his
supervision with a view of determining whether the Company
has kept, observed, performed and fulfilled all of its
respective obligations under this Agreement, the Note, and
the Security Instruments and that, to the best of his
knowledge, the Company, during such period has kept,
observed, performed and fulfilled each and every covenant and
condition in this Agreement, the Note, and the Security
Instruments, applicable to the Company and is not at that
time in Default under any of the same, or if the Company
shall have been or shall be in Default, specifying the same;
(v) Within thirty (30) days after filing the same with
the Internal Revenue Service, a copy of the federal income
tax return of the Company and Guarantor, certified by a
proper financial officer of the Company;
(vi) Within thirty (30) days after the end of each
calendar year during the term hereof, the Company shall
provide the Bank with a copy of the current Robert Morse &
Associates Consumer Credit Questionnaire; and
(vii) Such other financial information concerning the
Company or each Guarantor as the Bank shall reasonably
request from time to time.
5.2 Payment of Obligations. The Company will pay and
discharge, when due or in a manner consistent with normal
business practices, including normal terms and conditions for
payment for companies engaged in similar operations and
similar jurisdictions, all of its indebtedness and all of its
obligations, except those being contested in good faith and
the Company will maintain, in accordance with generally
accepted accounting principles, adequate reserves for the
payment of the same.
5.3 Notice of Default; Litigation. The Company will
promptly give written notice to the Bank of (i) the
occurrence of any Default or Event of Default; (ii) any
legal, judicial or
<PAGE>
regulatory proceedings affecting the Company or the
Guarantor or any of their properties or assets in which the
amount involved is material and is not covered (subject to
normal deductibles) by insurance and that is likely to have
an adverse effect on the business or the financial condition
of the Company or the Guarantor; (iii) any dispute between
either the Company or the Guarantor and any governmental
regulatory body or other person that is likely to interfere
with the normal business operations of the Company; (iv)
loss of any part of the Collateral, specifying the nature
and extent of loss; (v) any other action, event or condition
of any nature of which it has knowledge which may have, or
lead to, or result in, any material adverse effect upon the
business, assets or financial condition of the Company, or
the Guarantor, all taken as a whole.
5.4 Maintenance of Corporate Existence and Properties.
Except as maybe permitted by Section 6.4 hereof, the Company
will (i) continue to engage in the businesses presently
being operated by the Company, (ii) maintain its corporate
existence and good standing in each jurisdiction in which it
is required to be qualified, (iii) keep and maintain all
franchises, licenses and properties useful and necessary in
the conduct of its business in good order and condition, and
(iv) duly observe and conform to all material requirements
of any governmental authorities relative to the conduct of
its business or the operation of its properties or assets.
5.5 Insurance. The Company will maintain, with
financially sound and responsible companies, insurance in
such form, in such amounts and against such risks (including
without limitation, public liability and property damage
insurance) as is customarily carried by companies engaged in
the same or similar businesses and operating like properties
and similarly situated. The Company will have the right to
place any such insurance with any insurance carrier admitted
in and authorized and qualified to do business in the State
of Louisiana and having a Best rating of at least B+. Upon
consummation of this Agreement, the Company will furnish the
Bank a summary of the insurance coverage of the Company.
5.6 Payment of Taxes. The Company will pay when due
all taxes, assessments and other liabilities, except those
being contested in good faith and against which the Company
has set up adequate reserves in accordance with generally
accepted accounting principles.
5.7 Accounts Receivable and Payable. The Company will
pay its accounts payable and will maintain its respective
accounts receivable in a manner consistent with normal
business practices, including normal terms and conditions
for payment, for companies engaged in similar operations in
similar jurisdictions.
5.8 Further Assurances. The Company and the Guarantor
will, at anytime and from time to time, execute and deliver
such further instruments and take such further action as may
reasonably be requested by the Bank, in order to cure any
defects in the execution and delivery of, or to comply with
or accomplish the covenants and agreements contained in,
this Agreement, the Note or the Security Instruments.
5.9 Inspection. The Company will permit the Bank (and
any person appointed by the Bank) to examine its corporate
and financial books and records and other records, books and
properties and to discuss its affairs, finances, and
accounts with the officers of the Company and
<PAGE>
any accountant for the Company at all reasonable times and
as often as may be reasonably required.
5.10 Right to Additional Collateral. Provide
within forty -eight (48) hours of demand by the Bank, such
additional collateral or make such payment as a credit on
the Note and Line of Credit as shall be satisfactory to the
Bank, it being acknowledged that the Bank has the right to
request additional collateral and/or additional principal
payments on the subject loans if at anytime the Collateral
held by the Bank as security for the subject loan becomes
unsatisfactory to the Bank for whatever reason. Without
limitation on the rights of the Bank hereunder, the parties
recognize the intent of the parties to, at the least, allow
the Bank at all times to maintain the same ratio of fair
market value of the Collateral to loan balance in the
aggregate as same exists on the date of the original funding
of the subject loan.
SECTION 6. NEGATIVE COVENANTS. The Company agrees that
during the term hereof and as long as the Note may be
outstanding or any of the Obligations remain unsatisfied,
unless the Bank otherwise shall give its prior written
consent:
6.1 Limitations on Borrowings. The Company will not
borrow any finds on or with respect to any of the Collateral
except for indebtedness incurred under this Agreement to the
Bank.
6.2 Limitations on Liens. The Company will not
create, assume or suffer to exist any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind
upon any of its properties or assets, whether now owned or
hereafter acquired, which would in any way impair the
security interest, liens and privileges of the Bank as
created by the Security Instruments or this Agreement.
6.3 Limitations on Continent Liabilities. The Company
will not become or remain liable, directly or indirectly,
for or in connection with the obligations, stock or
dividends of any other Person, whether by guaranty,
endorsement, agreement to purchase or repurchase, agreement
to lease, agreement to supply or advance funds (including,
without limitation, agreements to maintain working capital,
solvency or contributions), or otherwise except (a)
endorsements of instruments for collection in the ordinary
course of business and (b) those not to exceed in the
aggregate the sum of $50,000.
6.4 Limitations on Fundamental Changes: Disposition of
Assets. The Company will not form any new subsidiary, enter
into any transaction of merger or consolidation, or
liquidate or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, lease or otherwise dispose of
all or any substantial part of its property, assets or
business, directly or indirectly, including any transaction
whereby the Company would sell or transfer any properties
either now owned or thereafter acquired, and then or
thereafter lease as lessee such properties or any part
thereof or any other property to be used for substantially
the same purpose. The Company will not sell or otherwise
dispose of any shares of stock of any of its Subsidiaries or
permit any Subsidiary to issue or dispose of its stock
except to Company or another Subsidiary.
6.5 Dividends. The Company will not declare or pay
any dividends on any shares of
<PAGE>
its capital stock or make any other distribution to its
stockholders. The Company will not purchase, redeem or
otherwise acquire for value any of its capital stock.
6.6 Issuance of Shares of Capital Stock. The Company
will not issue any additional shares of capital stock of any
class.
SECTION 7. DEFAULT.
7.1 Events of Default. The occurrence of any of the
following events shall constitute an Event of Default:
(a) Failure of the Company to pay when due any
interest on or any principal or installment of principal or
interest of the Note or other instrument representing or
securing the Line of Credit;
(b) Failure of the Company to pay when due any sums
due pursuant to the terms and provisions of this Agreement
or any of the Security Instruments to the Bank;
(c) The occurrence of any event which under the terms
of any evidence of indebtedness, note(s), loan agreement,
security agreement or similar instrument permits the
acceleration of maturity of any indebtedness of the Company
to Bank, or to others than Bank;
(d) Any representation or warranty made by the Company
herein or made in any statement or certificate furnished to
Bank by the Company pursuant hereto or in connection
herewith proves incorrect in any material respect as of the
date of the making or issuance thereof
(e) Default occurs in the observance or performance by
the Company of any provision of this Agreement or any
Security Instrument or any provision of the Note or other
instrument under or pursuant hereto;
(f) The Company shall make an assignment for the
benefit of creditors or suspend business, or a trustee or
receiver shall be appointed for the Company or for any of
the Company's assets or property, or the Company shall be
adjudicated a bankrupt, or any proceeding shall be commenced
by or against the Company under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of
debt, receivership or liquidation law or statute of the
federal or any state government;
(g) The Guarantor of any indebtedness of the Company
to the Bank, including that represented by the Note or for
advances under the Line of Credit, shall make an assignment
for the benefit of creditors or suspend business, or a
trustee or receiver shall be appointed for any such
Guarantor or for any such Guarantor's assets or property, or
any such Guarantor shall be adjudicated a
<PAGE>
bankrupt or any proceedings shall be commenced by or against
any such Guarantor under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, receivership
or liquidation law or statute of the federal or any state
government;
(h) Any Guaranty by the Guarantor of the indebtedness
of the Company to the Bank, including that represented by
the Note or for any advances made pursuant to the Line of
Credit, shall be terminated, cancelled or shall cease to be
in full force and effect;
(i) An Event of Default shall occur under any of the
Security Instruments; or
(i) Final judgment for the payment of money in excess
of $25,000.00 shall be rendered against the Company and the
same shall remain undischarged for a period of thirty (30)
days during which execution shall not be effectively stayed.
7.2 Optional Acceleration. Upon the occurrence of any
Event of Default set forth in Sections 7.1 (a), (b), (c),
(d), (e), (h), (i) or @ hereof, the obligation of the Bank
to extend credit to the Company pursuant hereto shall
immediately terminate and the Bank may, at its option,
without notice to the Company or the Guarantor, declare the
principal of and interest accrued on the Note and the
Obligations to be forthwith due and payable without
presentment, acceleration, demand, protest, notice of
acceleration, notice of protest or notice of any kind, all
of which are hereby waived.
7.3 Automatic Acceleration. Upon the occurrence of any
Event of Default set forth in Sections 7.1 (f) or (g)
hereof, the obligation of the Bank to extend credit to the
Company pursuant hereto shall immediately terminate and the
principal of and interest accrued on the Note and the
Obligations shall be immediately and automatically forthwith
due and payable without notice or demand of any kind, and
the same shall be due and payable immediately without any
presentment, acceleration, demand, protest, notice of
acceleration, notice of protest or notice of any kind, all
of which are hereby waived.
SECTION 8. INDEMNITY. The Company and the Guarantor
hereby agree jointly, severally and in solido to defend,
indemnity and hold Bank and its directors, officers, agents,
employees, parent and subsidiary corporations and affiliated
companies (the "Indemnified Parties "), totally harmless
from and against any and all claims, demands, causes of
action, losses, liabilities, damages, penalties, punitive
damages, fines and expenses of any nature whatsoever arising
directly or indirectly as a result of the Bank doing
business with the Company or as a result of the Bank having
a pledge, assignment or security interest in the Collateral,
including, without limitation (a) any violations of any
Consumer Protection Laws, Truth in Lending Laws or any
similar laws with respect to the Collateral; (b) any act of
commission or omission of the Company in its dealings with
any debtor or any Person obligated on any item of
Collateral; (c) violation of any usury laws; or (d)
violation of any laws dealing with the collection of debts
or collection practices.
The above indemnity, defense and hold harmless agreement
shall apply notwithstanding
<PAGE>
any negligence and/or fault or other contributory conduct by
or on the part of any of the Indemnified Parties. Further,
it is expressly understood and agreed that the above
indemnity, defense and hold harmless agreement shall survive
the expiration or sooner termination of this Agreement.
SECTION 9. MISCELLANEOUS.
9.1 No Waiver: Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of the
Bank, any right, power or privilege hereunder, shall operate
as a waiver thereof nor shall any single or partial exercise
of any right, power or privilege hereunder preclude any
other further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein
provided are cumulative and not exclusive of any rights or
remedies provided by law or in any other agreement.
9.2 Survival of Agreements. All agreements,
representations and warranties made herein shall survive the
execution and delivery of this Agreement, the Note, the
Security instruments and the making and renewal thereof and
shall continue in full force and effect until all
Obligations of the Company and the Guarantor to the Bank
have been paid in full.
9.3 Successors. This Agreement shall be binding
upon the Company, the Guarantor and their respective
successors, heirs and assigns, except that the Company may
not transfer or assign any of its rights or interest
hereunder without the prior written consent of the Bank.
This Agreement shall inure to the benefit of the Bank and
its successors and assigns.
9.4 Counterparts. This Agreement may be executed in
any number of counterparts and all of said counterparts
taken together shall be deemed to constitute one and the
same instrument.
9.5 Severability. In case any one or more of the
provisions contained in this Agreement or the Note, the
Security Instruments or any other documents executed in
connection therewith or herewith should be invalid, illegal
or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein
and therein shall not in any way be affected thereby.
9.6 No Waiver: Amendments. No modification or waiver
of any provision of this Agreement or the Note or the
Security Instruments nor consent to any departure by the
Company or the Guarantor from the provisions hereof or
thereof, shall be effective unless the same shall be in
writing from the Bank and then such waiver or consent shall
be effective only in the specific instance and for the
purpose for which it is given. No notice to the Company or
the Guarantor shall entitle the Company or the Guarantor to
any other or further notice in other or similar
circumstances unless expressly provided for herein. No
course of dealing between the Company, the Guarantor and the
Bank shall operate as a waiver of any of the rights of the
Bank under this Agreement, the Note or the Security
Instruments.
9.7 Right of Setoff. In addition to any rights or
remedies of the Bank provided by law, upon the occurrence of
any Event of Default, the Bank is hereby authorized without
notice to the
<PAGE>
Company or the Guarantor to setoff and appropriate and apply
all deposits, including certificates of deposit, and other
indebtedness at anytime held or owing by the Bank to or for
the credit or the account of the Borrower or the Guarantor,
against and on account of all Obligations and/or liabilities
of any nature of the Company or the Guarantor to the Bank,
arising under this Agreement, the Note or the Security
Instruments and in such amount as the Bank may elect,
although such obligations, liabilities and claims may be
contingent or unmatured, direct or
indirect.
9.8 Reference to Subsidiaries. If the Company has no
subsidiaries, then the provisions of this Agreement relating
to subsidiaries shall be deemed surplusage without affecting
the applicability of the provisions of this Agreement to
the Company amd the Guarantor.
9.9 Exhibits. Any and all exhibits to this Agreement
shall constitute an integral part of this Agreement.
9.10 Construction. Except as otherwise provided
herein or in any document or instrument executed and
delivered hereunder, this Agreement, the Note, the Security
Instruments and the rights and obligations of the parties
hereunder and thereunder shall be governed by and construed
and interpreted in accordance with the laws of the State of
Louisiana.
9.11 Joinder of Guarantor. The Guarantor is
joining in the execution of this Agreement for the purpose
of acknowledging his respective obligations, warranties and
covenants set out herein; further, the Guarantor
acknowledges that the Company and the Bank may amend and
modify this Agreement in any regard without the joinder of
the Guarantor and without thereby releasing, to any extent,
the Guarantor from the obligations, warranties and covenants
made by the Guarantor hereunder and without releasing, to
any extent, the Guarantor from the obligations undertaken in
the Guaranty signed by the Guarantor.
9.12 Whole Agreement. This Agreement, the Note
and the Security Instruments constitute the whole agreements
and understanding among the parties relative to the loans
which are the subject matter of this Agreement and
supersedes and replaces, without exception, any prior
agreements (including, without limitation, commitment
letters) between the parties relative to the subject loan.
No statement or representation (oral or otherwise) has been
made to the Company or the Guarantor by the Bank or any
officer, director, employee or other representative of the
Bank to induce the Company or the Guarantor to execute this
Agreement or any document or instrument to be executed by
the Company or the Guarantor hereunder which is not
contained herein or in a written instrument to be executed
and delivered pursuant to this Agreement.
9.13 Expenses: Documentary Taxes. The Company and
the Guarantor will pay (i) all out-of-pocket expenses of the
Bank (including reasonable fees and disbursements of counsel
for the Bank) in connection with the preparation,
enforcement, operation and administration of this Agreement,
the Note, and the Security Instruments or any waiver or
amendment of any provision thereof and (ii) if an Event of
Default occurs, all court costs and costs of collection,
including, without limitation, reasonable fees and
disbursements of counsel employed in connection with any and
all collection efforts. The Company and the Guarantor agree
to indemnify the Bank from and hold it harmless against any
documentary taxes, assessments or charges made by any
governmental
<PAGE>
authority by reason of the execution and delivery by the
company or the Guarantor of this Agreement, the Note, the
Security Instruments and any documents executed in
connection therewith.
9.14 Notices. All notices, requests and demands shall
be given to or made upon the respective parties hereto as
follows:
If to the Company, to: FINANCIAL SERVICES OF THE SOUTH, INC.
Post Office Box 3745
Lafayette, Louisiana 70502
If to the Guarantor, to: MIDSOUTH BANCORP, INC.
Post Office Box 3745
Lafayette, Louisiana 70502
If to the Bank, to: Whitney National Bank
Post Office Drawer 2090
Morgan City, Louisiana 70381
Attn: James S. Corbett, Vice-President
All notices and other communications given to any party
hereto in accordance with the provisions of this Agreement
shall be deemed to have been given to any party when sent by
registered or certified mail, if by mail, or when delivered
to the telegraph company, charges prepaid, if by telegram,
in each case addressed to such party as provided herein or
to such other address as may be hereafter designated in
writing by the respective parties hereto.
9.15 Participations. The Company and the Guarantor
expressly recognize and agree that the Bank may sell to
other financial institutions participations in the loans
incurred by the Company pursuant hereto ("Participants "),
and therefore, as security for the due payment and
performance of all indebtedness and other liabilities and
Obligations of the Company and the Guarantor to the Bank
under this Agreement, the Note, the Security Instruments and
any other obligation of the Company and the Guarantor to the
Bank, whether now existing or hereafter arising, and to the
Participants by reason of such participation, the Company
and the Guarantor hereby grant to the Bank and to the
Participants, a lien on and security interest in any and all
deposits or other sums at anytime credited by or due from
the Bank and the Participants or either or any of them to
the Company or the Guarantor, whether in regular or special
depository accounts or otherwise, and any and all money,
securities and other property of the Company or the
Guarantor and the proceeds thereof now or hereafter held or
received by or in transit to the Bank and the Participants
or either or any of them, from or for the Company or the
Guarantor whether for safekeeping, custody, pledge,
transmission, collection or otherwise and any such deposits,
sums, money, securities and other property may at anytime be
setoff, appropriated and applied by the Bank and by the
Participants, or either or any of them, against any
indebtedness, liabilities or other obligations, whether now
existing or hereafter arising of the Company or the
Guarantor to the Bank and to the Participants, or either or
any of them, under this Agreement, the Note, the
<PAGE>
Security Instruments or otherwise, whether or not such
indebtedness, liabilities or other obligations are then due
or secured by any collateral or if such is so secured
whether or not such collateral held by the Bank or the
Participants is considered to be adequate.
9.16 Descriptive Headings. The descriptive headings of
the several paragraphs of this Agreement are inserted for
convenience only and shall not be deemed in any reamer to
modify, explain, enlarge or restrict any of the provisions
of this Agreement.
THUS DONE, PASSED AND SIGNED at Lafayette, Lafayette
Parish, Louisiana in multiple original counterparts on this
25th day of August, 1996 in the presence of the undersigned
competent witnesses who hereunto sign their names with the
said appearers and me, Notary after due reading of the
whole.
WITNESSES: FINANCIAL SERVICES OF THE SOUTH, INC.
By:
BEN P. HUVAL, President
MIDSOUTH BANCORP, INC.
By:
CLIBE R. CLOUTIER, President
WHITNEY NATIONAL BANK
By:
JAMES S. CORBETT, VICE-PRESIDENT
NOTARY PUBLIC
LAFAYETTE PARISH, LOUISIANA
MY COMMISSION EXPIRES AT DEATH
<TABLE>
<CAPTION>
MIDSOUTH BANCORP, INC. AND SUBSIDIARY EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE (Unaudited)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
Year-to-Date Year-to-Date Year-to-Date
December 31, December 31, December 31,
PRIMARY 1996 1995 1994
____________ ____________ ____________
<S> <C> <C> <C>
Earnings:
Income applicable to common
stock $1,081,077 $1,203,468 $1,141,641
============ ============ ============
Shares:
Weighted average number of
common shares outstanding 1,325,556 1,291,133 1,281,217
============ ============ ============
Earnings per common share:
Income applicable to common
stock $0.82 $0.93 $0.89
============ ============ ============
Weighted average number of
common shares outstanding 1,325,556 1,291,133 1,281,217
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 - 13,636 -
____________ ____________ ____________
Weighted average number of
common shares outstanding,
as adjusted 1,325,556 1,304,769 1,281,217
============ ============ ============
Primary earnings per common share $0.82 $0.92 $0.89
============ ============ ============
FULLY DILUTED
Earnings:
Net income $1,236,498 $1,241,610 $1,141,641
============ ============ ============
Weighted average number of
common shares outstanding 1,325,556 1,291,133 1,281,217
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 - 17,137 6,405
____________ ____________ ____________
Assuming conversion of
preferred stock at a
conversion rate of 1 to 1 305,394 139,217 -
Weighted average number of
common shares outstanding,
as adjusted 1,630,950 1,447,487 1,287,622
============ ============ ============
Fully diluted earnings per common
share $0.76 $0.86 $0.89
============ ============ ============
</TABLE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
MidSouth National Bank
Financial Services of the South, Inc.
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 11,314
<INT-BEARING-DEPOSITS> 407
<FED-FUNDS-SOLD> 14,100
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 47,249
<INVESTMENTS-CARRYING> 9,548
<INVESTMENTS-MARKET> 9,700
<LOANS> 94,829
<ALLOWANCE> 1,088
<TOTAL-ASSETS> 185,228
<DEPOSITS> 171,617
<SHORT-TERM> 104
<LIABILITIES-OTHER> 626
<LONG-TERM> 1,521
<COMMON> 136
0
2,450
<OTHER-SE> 8,774
<TOTAL-LIABILITIES-AND-EQUITY> 185,228
<INTEREST-LOAN> 8,803
<INTEREST-INVEST> 3,140
<INTEREST-OTHER> 629
<INTEREST-TOTAL> 12,572
<INTEREST-DEPOSIT> 4,458
<INTEREST-EXPENSE> 4,542
<INTEREST-INCOME-NET> 8,031
<LOAN-LOSSES> 675
<SECURITIES-GAINS> 1
<EXPENSE-OTHER> 7,841
<INCOME-PRETAX> 1,654
<INCOME-PRE-EXTRAORDINARY> 1,236
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,236
<EPS-PRIMARY> .82
<EPS-DILUTED> .76
<YIELD-ACTUAL> 5.32
<LOANS-NON> 523
<LOANS-PAST> 338
<LOANS-TROUBLED> 1
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,052
<CHARGE-OFFS> 896
<RECOVERIES> 257
<ALLOWANCE-CLOSE> 1,088
<ALLOWANCE-DOMESTIC> 173
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 915
</TABLE>
