UNITED STATES SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C. 20549
FORM 10QSB
__X___QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended........ June 30, 1998
_____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ..... to .....
COMMISSION FILE NUMBER 2-91-000FW
MIDSOUTH BANCORP, INC.
Louisiana 72 -1020809
102 Versailles Boulevard, Lafayette, Louisiana
70501
(318) 237-8343
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days. YES __X__ NO _____
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.
Outstanding as of July 31, 1998
Common stock, $.10 par value 1,609,361
Preferred stock, no par value, $14.25 stated value 158,797
Transitional Small Business Disclosure Format:
Yes No X
________ ________
Page 1
<PAGE>
Page 2
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) Page
Financial Highlights 3
Statements of Condition - June 30, 1998 and
December 31, 1997 4
Statements of Income - Three and Six Months Ended
June 30, 1998 and 1997 5
Statement of Stockholders' Equity - Six Months
Ended June 30, 1998 6
Statements of Cash Flows - Six Months Ended
June 30, 1998 and 1997 7
Notes to Financial Statements 8
Item 2. Management's Discussion and Analysis or
Plan of Operation 9
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 18
<PAGE>
<TABLE>
<CAPTION>
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS (UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
EARNINGS DATA 1998 1997 1998 1997
____________________________________________________
<S> <C> <C> <C> <C>
Net interest income $2,941,826 $2,430,987 $5,633,548 $4,668,949
Provision for loan losses 238,000 209,332 496,000 362,600
Non-interest income 872,174 814,171 1,651,014 1,410,660
Non-interest expense 2,629,198 2,368,565 5,136,454 4,551,732
Provision for income tax 268,150 184,750 420,948 301,344
Net income 678,652 482,511 1,231,160 863,933
Preferred dividend requirement 37,444 39,946 74,964 79,753
Income available to common shareholders $641,208 $442,565 $1,156,196 $784,180
______________________________________________________________________________________________
PER COMMON SHARE DATA
Basic earnings per share $0.40 $0.28 $0.73 $0.51
Diluted earnings per share $0.35 $0.25 $0.63 $0.46
Book value at end of period $7.57 $6.16 $7.57 $6.16
Market price at end of period $21.81 $12.89 $21.81 $12.89
Market price of preferred stock at end
of period $44.25 $26.00 $44.25 $26.00
Weighted average shares outstanding
Basic 1,597,367 1,559,891 1,592,547 1,551,856
Diluted 1,966,324 1,897,595 1,962,848 1,886,542
______________________________________________________________________________________________
AVERAGE BALANCE SHEET DATA
Total assets $230,492,703 $205,894,127 $226,389,477 $198,940,158
Earning assets 209,768,889 185,878,244 205,514,205 179,680,868
Loans and leases 139,609,048 106,759,581 135,744,324 101,739,790
Interest-bearing deposits 158,387,576 143,677,505 155,086,933 138,034,371
Total deposits 211,819,511 190,730,243 208,344,912 184,349,417
Common stockholders' equity 11,985,587 9,446,536 11,492,493 9,270,020
Total stockholders' equity 14,264,461 11,892,634 13,764,949 11,717,721
______________________________________________________________________________________________
SELECTED RATIOS
Return on average assets (annualized) 1.18% 0.86% 1.10% 0.79%
Return on average common equity
(annualized) 21.46% 18.79% 20.29% 17.06%
Return on average total equity
(annualized) 19.08% 14.93% 18.04% 13.50%
Leverage capital ratio 6.06% 5.79% 6.06% 5.79%
Tier 1 risk-based capital ratio 9.24% 9.85% 9.24% 9.85%
Total risk-based capital ratio 10.36% 10.95% 10.36% 10.95%
Allowance for loan losses as a %
of total loans 1.17% 1.16% 1.17% 1.16%
______________________________________________________________________________________________
PERIOD ENDING BALANCE SHEET DATA 6/30/98 6/30/97 Net Change % Change
Total assets $235,816,742 $212,617,670 $23,199,072 10.91%
Earning assets 213,316,617 189,611,750 $23,704,867 12.50%
Loans and leases, net 143,521,513 113,047,556 $30,473,957 26.96%
Interest-bearing deposits 162,003,496 144,797,535 $17,205,961 11.88%
Total deposits 216,994,125 195,081,301 $21,912,824 11.23%
Common stockholders' equity 12,130,557 9,573,596 $2,556,961 26.71%
Total stockholders' equity 14,393,414 12,019,694 $2,373,720 19.75%
______________________________________________________________________________________________
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
June 30, December 31,
1998 1997 *
ASSETS (unaudited)
___________ ___________
<S> <C> <C>
Cash and due from banks $12,890,224 $15,774,024
Federal funds sold 11,000,000 8,060,000
___________ ___________
Total cash and cash equivalents 23,890,224 23,834,024
Interest bearing deposits in banks 53,152 48,928
Securities available-for-sale, at fair value
(cost of $40,018,375 in June 1998 and
$36,750,950 in December 1997) 40,325,095 36,884,465
Securities held-to-maturity (estimated market
value of $17,651,135 in June 1998 and
$17,459,865 in December 1997) 16,731,169 16,732,827
Loans, net of allowance for loan
losses of $1,685,688 in June 1998 and
$1,414,826 in December 1997 143,521,513 129,473,318
Bank premises and equipment, net 8,015,747 6,973,150
Other real estate owned, net 39,100 45,100
Accrued interest receivable 1,646,604 1,638,931
Goodwill, net 224,591 241,902
Other assets 1,369,547 1,239,770
___________ ___________
Total assets $235,816,742 $217,112,415
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing $54,990,629 $58,464,087
Interest bearing 162,003,496 141,603,664
___________ ___________
Total deposits 216,994,125 200,067,751
Securities sold under
repurchase agreements - 69,443
Accrued interest payable 568,422 543,936
Notes payable 3,543,973 3,198,794
Other liabilities 316,808 301,181
___________ ___________
Total liabilities 221,423,328 204,181,105
___________ ___________
Commitments and contingencies - -
Stockholders' Equity:
Preferred Stock, no par value, $14.25
stated value - 5,000,000 shares
authorized, 158,797 and 160,756
issued and outstanding on June 30,
1998 and December 31, 1997,
respectively 2,262,857 2,290,773
Common stock, $.10 par value-
5,000,000 shares authorized, 1,601,759
and 1,581,053 issued and outstanding
on June 30, 1998 and December 31,
1997, respectively 160,176 158,106
Surplus 10,264,907 9,862,700
Unearned ESOP shares (128,349) (137,243)
Unrealized gains/losses on securities
available-for-sale, net of deferred
taxes of $112,445 in June 1998 and
$51,549 in December 1997 194,275 81,966
Retained earnings 1,639,548 675,008
___________ ___________
Total stockholders' equity 14,393,414 12,931,310
___________ ___________
Total liabilities and stockholders' equity $235,816,742 $217,112,415
=========== ===========
</TABLE>
* The consolidated statement of condition at December 31, 1997
is taken from the audited balance sheet on that date.
<PAGE>
<TABLE>
<CAPTION>
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
(unaudited) (unaudited)
___________________________ ___________________________
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans, including fees $3,640,074 $2,756,657 $6,961,806 $5,216,405
Securities
Taxable $601,915 785,491 1,190,426 $1,532,780
Nontaxable 224,177 205,080 444,253 348,812
Federal funds sold 169,700 145,355 349,737 348,270
__________ __________ __________ __________
TOTAL 4,635,866 3,892,583 8,946,222 7,446,267
__________ __________ __________ __________
INTEREST EXPENSE:
Interest on deposits 1,628,696 1,418,057 3,182,996 2,702,252
Interest on note payable 65,344 43,539 129,678 75,066
__________ __________ __________ __________
TOTAL 1,694,040 1,461,596 3,312,674 2,777,318
__________ __________ __________ __________
NET INTEREST INCOME 2,941,826 2,430,987 5,633,548 4,668,949
PROVISION FOR LOAN LOSSES 238,000 209,332 496,000 362,600
__________ __________ __________ __________
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 2,703,826 2,221,655 5,137,548 4,306,349
__________ __________ __________ __________
OTHER OPERATING INCOME:
Service charges on deposits 629,353 522,862 1,214,274 961,076
Gains on securities, net - 85,355 - 85,355
Credit life insurance 40,953 50,660 68,071 101,255
Other charges and fees 201,868 155,294 368,669 262,974
__________ __________ __________ __________
TOTAL OTHER INCOME 872,174 814,171 1,651,014 1,410,660
__________ __________ __________ __________
OTHER EXPENSES:
Salaries and employee benefits 1,283,611 1,126,065 2,533,904 2,154,037
Occupancy expense 565,470 534,910 1,113,608 1,040,434
Other 780,117 707,590 1,488,942 1,357,261
__________ __________ __________ __________
TOTAL OTHER EXPENSES 2,629,198 2,368,565 5,136,454 4,551,732
__________ __________ __________ __________
INCOME BEFORE INCOME TAXES 946,802 667,261 1,652,108 1,165,277
PROVISION FOR INCOME TAXES 268,150 184,750 420,948 301,344
__________ __________ __________ __________
NET INCOME $678,652 $482,511 $1,231,160 $863,933
PREFERRED DIVIDEND REQUIREMENT 37,444 39,946 74,964 79,753
__________ __________ __________ __________
INCOME AVAILABLE TO COMMON
SHAREHOLDERS $641,208 $442,565 $1,156,196 $784,180
========== ========== ========== ==========
BASIC EARNINGS PER COMMON SHARE $0.40 $0.28 $0.73 $0.51
========== ========== ========== ==========
DILUTED EARNINGS PER COMMON SHARE $0.35 $0.25 $0.63 $0.46
========== ========== ========== ==========
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
__________________________________________________________________________________________________________________________________
UNREALIZED
(GAINS)
LOSSES ON
SECURITIES
PREFERRED STOCK COMMON STOCK ESOP AVAILABLE- RETAINED
SHARES AMOUNT SHARES AMOUNT SURPLUS OBLIGATION FOR-SALE EARNINGS TOTAL
____________________ ___________________ __________ _________________________________ ___________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
DECEMBER 31, 1997 160,756 $2,290,773 1,581,053 $158,106 $9,862,700 ($137,243) $81,966 $675,008 $12,931,310
Issuance of common
stock 16,795 1,679 374,682 376,361
Dividends paid on
common stock (191,586) (191,586)
Dividends paid on
preferred stock (74,964) (74,964)
Preferred stock
conversion (1,959) (27,916) 3,911 391 27,525 (70) (70)
Net income 1,231,160 1,231,160
ESOP obligation,
net of repayments 8,894 8,894
Net change in
unrealized gain/
loss on securities
available-for-sale,
net of tax 112,309 112,309
_______ __________ _________ ________ ___________ _________ ________ __________ ___________
BALANCE,
JUNE 30, 1998 158,797 $2,262,857 1,601,759 $160,176 $10,264,907 ($128,349) $194,275 $1,639,548 $14,393,414
======= ========== ========= ======== =========== ========= ======== ========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1998 and 1997
June 30, 1998 June 30, 1997
_____________ _____________
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Income $1,231,160 $863,933
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 462,292 408,807
Provision for loan losses 415,000 362,600
Provision for deferred income taxes 49,330 40,116
Provision for losses on other real estate owned - 33,718
Discount accretion (premium amortization), net (13,235) (20,449)
Gain on sale of premises and equipment (750) -
Loss on sale of other real estate owned 3,037 -
Gain on sale of securities - (85,356)
Change in accrued interest receivable (7,673) (273,557)
Change in accrued interest payable 24,486 74,084
Change in other liabilities (67,757) 35,030
Change in other assets (156,618) (182,613)
__________ __________
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,939,272 1,256,313
__________ __________
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease (increase) in interest-bearing
deposits in banks (4,224) 235,562
Proceeds from maturities and calls of securities
available-for-sale 4,988,673 1,343,689
Proceeds from sales of securities available-for-sale - 8,494,338
Purchases of securities held-to-maturity - (8,737,947)
Purchases of securities available-for-sale (8,241,206) (19,321,260)
Loan originations, net of repayments (14,468,338) (19,784,433)
Purchases of premises and equipment (1,516,789) (1,423,762)
Proceeds from sales of premises and equipment 29,961 -
Proceeds from sales of other real estate owned 17,000 -
__________ __________
NET CASH USED IN INVESTING ACTIVITIES (19,194,923) (39,193,813)
__________ __________
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 16,926,374 23,464,793
Net (decrease) increase in securities sold
under repurchase agreements and
federal funds purchased (69,443) 2,192,910
Issuance of notes payable 435,000 2,564,210
Repayments of notes payable (89,821) (1,552,405)
Proceeds from issuance of common stock 376,361 180,001
Payment of dividends (266,550) (244,748)
Payment of fractional shares resulting from
conversion of preferred stock and stock dividends (70) (47)
__________ __________
NET CASH PROVIDED BY FINANCING ACTIVITIES 17,311,851 26,604,714
__________ __________
NET DECREASE IN CASH & CASH EQUIVALENTS 56,200 (11,332,786)
CASH & CASH EQUIVALENTS AT BEGINNING OF PERIOD 23,834,024 25,414,562
__________ __________
CASH & CASH EQUIVALENTS AT END OF PERIOD $23,890,224 $14,081,776
========== ==========
</TABLE>
7
<PAGE>
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. STATEMENT BY MANAGEMENT CONCERNING THE REVIEW OF UNAUDITED
FINANCIAL INFORMATION
The accompanying unaudited consolidated financial statements and notes
thereto contain all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the financial position of
MidSouth Bancorp, Inc. ("MidSouth") and its subsidiary as of
June 30, 1998 and the results of their operations and their cash
flows for the periods presented. The consolidated financial
statements should be read in conjunction with the annual
consolidated financial statements and the notes thereto included
in MidSouth's 1997 annual consolidated report and Form 10-KSB.
The results of operations for the three and six month periods ended
June 30, 1998 are not necessarily indicative of the results to be
expected for the entire year.
2. ALLOWANCE FOR LOAN AND LEASE LOSSES
An analysis of the activity in the allowance for loan and lease
losses is as follows:
<TABLE>
<CAPTION>
Six Months Ended
June 30,
(in thousands) 1998 1997
______ ______
<S> <C> <C>
Balance at beginning of year $1,415 $1,087
Provision for loan losses 496 363
Recoveries 83 163
Loans charged off (308) (281)
______ ______
Balance at end of quarter $1,686 $1,332
====== ======
</TABLE>
3. NEW ACCOUNTING STANDARD
MidSouth adopted Statement of Financial Accounting Standards
No. 130 "Reporting Comprehensive Income" ("SAFS 130")
effective January 1, 1998. SFAS 130 establishes standards
for reporting and display of comprehensive income and its
components. Comprehensive income includes net income and
other comprehensive income which, in the case of MidSouth,
only includes unrealized gains and losses on securities
available-for-sale.
Following is a summary of MidSouth's comprehensive income
for the six months ended June 30, 1998 and 1997.
<TABLE>
<CAPTION>
1998 1997
__________ ________
<S> <C> <C>
Net income $1,231,160 $863,933
Other comprehensive income,
net of tax 112,309 (24,620)
__________ ________
Total comprehensive income $1,343,469 $839,313
========== ========
</TABLE>
4. SUBSEQUENT EVENT
On June 17, 1998, MidSouth announced a three-for-two (50%)
stock split on its common stock to holders of record as of
July 31, 1998 payable August 31, 1998. This split will be
effected by way of a dividend of one share of common stock
for each two shares of common stock outstanding on the
record date. Earnings per share information as adjusted
for the split is presented below:
<TABLE>
<CAPTION>
2nd Qtr 98 2nd Qtr 97 YTD 6/98 YTD 6/97
__________ ___________ _________ _________
<S> <C> <C> <C> <C>
Basic EPS $0.27 $0.19 $0.49 $0.34
Diluted EPS $0.23 $0.17 $0.42 $0.31
Weighted average
shares
Basic 2,396,051 2,339,837 2,388,821 2,327,784
Diluted 2,949,486 2,846,393 2,944,272 2,829,813
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
This review should be read in conjunction with the MidSouth Bancorp, Inc.
("MidSouth") consolidated financial statements and accompanying notes
contained herein, as well as with MidSouth's 1997 annual consolidated
financial statements, the notes thereto and the related Management's
Discussion and Analysis.
MidSouth completed a second strong quarter for 1998, with continued
growth in loans, deposits and net income. Net income totaled $678,652
for the quarter, an increase of 41% over net income of $482,511
reported for the second quarter of 1997. Income available to
common shareholders totaled $641,208 for the quarter, compared
to $442,565 for the second quarter of 1997. Basic earnings per
share were $.40 and $.28 for the quarters ended June 30, 1998 and 1997,
respectively. Diluted earnings per share were $.35 for the second quarter
of 1998 compared to $.25 for the second quarter of 1997.
Net income for the six months ended June 30, 1998 totaled $1,231,160
compared to $863,933 for the first six months of 1997. Income available
to common shareholders totaled $1,156,196 for the six months ended June
30, 1998 compared to $784,180 for the six months ended June 30, 1997.
Basic earnings per share were $.73 and $.51 for the six month periods
ended June 30, 1998 and 1997, respectively. Diluted earnings per share
were $.63 for the first six months of 1998 compared to $.46 for the first six
months of 1997.
The increase in earnings resulted primarily from increased net interest
income due to increased loan volume. Net interest income increased
$510,839, or 20%, in quarterly comparison and $964,599, or 25%, in year-
to-date comparison. Non-interest income, exclusive of net gains on sales
of investment securities, increased $143,358 in quarterly comparison and
$325,709 in annual comparison. Increases in service charges and fees on
deposit accounts contributed most of the increase to non-interest income.
Loans, net of Allowance for Loan Losses ("ALL"), increased $30.5
million or 27%, from $113.0 million in the second quarter of 1997 to
$143.5 million in the second quarter of 1998. Deposits grew $21.9 million
or 11%, from $195.1 million at June 30, 1997 to $217.0 million at June
30, 1998. Of the $21.9 million increase, $17.2 million represented interest
bearing deposits.
Provisions for loan and lease losses increased $133,400, from $362,600 in
June 1997 to $496,000 in June 1998, primarily due to loan growth. Non-
performing loans as a percentage of total loans decreased from .45% in
June of 1997 to .24% in June of 1998. The ALL represents 494% of non-
performing loans as of June 30, 1998.
MidSouth's leverage ratio was 6.06% at June 30, 1998. Second quarter
1998 return on average common equity was 21.46% and return on average
assets was 1.18%.
9
<PAGE>
Earnings Analysis
Net Interest Income
Average earning assets increased 13%, or $23.9 million, from $185.9
million for the three months ended June 30, 1997 to $209.8 million for the
three months ended June 30, 1998. A change in the mix of earning assets
increased net interest income as higher-yielding loans represented 66.6%
of average earning assets in the second quarter of 1998 compared to 57.4%
in the second quarter of 1997. The average yield on loans increased 10
basis points, from 10.36% to 10.46% at June 30, 1998. Yields on
commercial and real estate loans declined 19 basis points, while consumer
loan yields rose 89 basis points. Consumer loan yields increased primarily
due to loans funded by MidSouth's consumer finance subsidiary, Financial
Services of the South, Inc. (the "Finance Company"), and credit card loans.
The Finance Company's portfolio averaged $1.4 million in consumer finance
loans yielding an average of 24%. Credit card loans at the Bank averaged
$1.0 million and yielded an average of 17%. Investment volume decreased
$11.2 million, from $68.9 million at June 30, 1997 to $57.7 million at
June 30, 1998 due to increased loan funding. The average taxable-equivalent
yield on investments improved by 14 basis points for the same period,
from 6.30% to 6.44%. The change in mix and increase in the volume of
earning assets boosted the taxable-equivalent yield on quarterly average
earning assets 45 basis points, from 8.60% for the second quarter of 1997
to 9.05% for the second quarter of 1998.
An average volume increase of $14.7 million and a 17 basis point rate
increase on interest-bearing liabilities resulted in increased interest
expense for the quarter ended June 30, 1998 compared to the quarter ended
June 30, 1997. The percentage of average interest-bearing deposits to
average total deposits remained constant at 75% in quarterly comparison.
The average rate paid on interest-bearing deposits increased 17 basis
points, from 3.95% at June 30, 1997 to 4.12% at June 30, 1998, primarily
due to higher yielding public fund deposits. In addition, in February 1998,
MidSouth introduced a new money market account indexed to the 90-day
Treasury bill less 50 basis points. The average rate paid on the indexed
account was 4.56% for the second quarter of 1998. The average volume of
notes payable increased $2.0 million in quarterly comparison as MidSouth
and the Finance Company increased borrowings against their lines of
credit during 1997 and the second quarter of 1998.
The net effect of changes in the volume and mix of average earning assets
and interest-bearing liabilities increased net interest income $510,839 in
quarterly comparison. The net taxable-equivalent yield on average earning
assets increased 38 basis points, from 5.44% for the quarter ended June 30,
1997 to 5.82% for the quarter ended June 30, 1998. Review of the
changes in the volume and yields of average earning assets and interest-
bearing liabilities between the two six month periods ended June 30, 1998
and 1997 reflected results similar to the quarterly comparison. The net
taxable-equivalent yield on average earning assets for the six months
ended June 30, 1998 increased 31 basis points to 5.72% at June 30, 1998
as compared to 5.41% at June 30, 1997.
10
<PAGE>
Non-interest Income
MidSouth's primary source of non-interest income, service charges on
deposit accounts, increased $106,491 for the three months and $253,198
for the six months ended June 30, 1998 as compared to the same periods in
1997. The increases resulted primarily from additional insufficient funds
fees and a change in January 1998 in the monthly service charge balance
calculation method from average collected balance to minimum balance.
This change in method calculation resulted in additional non-interest
income despite the elimination of per check charges and lowering of tiered
fees on most consumer deposit accounts.
Other non-interest income, net of gains on sales of investment securities,
increased $46,574 in quarterly comparison and $105,695 in year-to-date
comparison, with significant increases recorded in lease income from a
third party investment company and in VISA merchant and debit card
income. Although increases have been recorded in VISA merchant and
debit card income, expenses associated with these programs have also
increased, offsetting the income. Decreases were realized in
income from the sale of credit life insurance of $9,707 for the quarter and
$33,184 for the six months period ended June 30, 1998 as compared to the
same periods ended June 30, 1997. Sales of credit life insurance were
higher in the first six months of 1997 due to a retail loan promotion held
during the first quarter.
Non-interest Expense
Non-interest expense increased $260,633 for the three months and
$584,722 for the six months ended June 30, 1998 compared to the three
and six months ended June 30, 1997. Increases were recorded primarily
in the categories of salaries and employee benefits, occupancy expenses,
VISA programs, ATM processing fees, and accounting and professional
fees.
Salaries and employee benefits increased primarily due to additional staff.
The number of full-time equivalent ("FTE") employees increased by 17,
from 133 in June 1997 to 150 in June 1998. Six of the seventeen FTE
employees were added in administrative positions, five in retail staffing
positions and four were added for the Lake Charles office that began
offering full service banking in June 1998.
Occupancy expense increased in the three and six month periods ended
June 30, 1998 compared to the same period of 1997 due to increases in
building lease expense, depreciation and maintenance expenses associated
with furniture and equipment and fuel and maintenance of bank autos.
The increase in depreciation expense resulted primarily from the addition
of the Morgan City Office in March 1997, expansion of MidSouth's
ATM cash machine network and upgrading of computer equipment
throughout 1997 to bring additional MidSouth offices into an existing
computer network. Management expects depreciation expense to continue
to increase as additional fixed assets are added with the completion of the
Lake Charles and Ambassador Caffery offices.
11
<PAGE>
Balance Sheet Analysis
MidSouth ended the second quarter of 1998 with consolidated assets of
$235,816,742, an increase of $18.7 million or 9% from the $217,112,415
reported for December 31, 1997. Deposits increased over the six months
ended June 30, 1998 by $16.9 million. Of the $16.9 million increase, $5.0
million was in public fund deposits, $4.2 million in commercial deposits
and $7.7 million in retail deposits. The introduction of a money market
account indexed to the 90 day Treasury bill resulted in an increase in
interest-bearing retail deposits of $1.8 million in the first quarter of 1998
and $3.4 million in the second quarter of 1998.
Loans grew $14.3 million in the first six months of 1998, with the
majority of the increase in real estate and construction loans recorded
during the second quarter. Due to a decrease in loan fundings in the first
three months of 1998, excess funds were used to purchase additional
securities and federal funds sold. Securities available-for-sale increased
$3.4 million, from $36.9 million at December 31, 1997 to $40.3 million at
June 30, 1998. The increase reflects purchases of $8.2 million and
maturities and principal paydowns of $5.0 million. Unrealized gains in the
securities available-for-sale portfolio, net of unrealized losses and tax
effect, were $194,275 at June 30, 1998, compared to a net unrealized gain
of $81,966 at December 31, 1997. These amounts result from interest rate
fluctuations and do not necessarily represent permanent increase of value.
Moreover, classification of securities as available-for-sale does not
necessarily indicate that the securities will be sold prior to maturity.
Capital
As of June 30, 1998, MidSouth's leverage ratio was 6.06% as compared to
6.00% at December 31, 1997. Tier 1 capital to risk-weighted assets was
9.24% and total capital to risk-weighted assets was 10.36% at the end of
the second quarter of 1998. At year-end 1997, Tier 1 capital to risk-
weighted assets was 9.19% and total capital to risk-weighted assets was
10.22%.
The introduction of a dividend reinvestment and direct stock purchase plan
late in the fourth quarter of 1997 yielded common stock purchases of
$301,353 in the first six months of 1998.
The Year 2000 Issue
On May 16, 1997, the Office of the Comptroller of the Currency ("OCC")
issued an advisory letter addressing Year 2000 issues and its
examination approach. To maintain safe and sound banking practices,
institutions are required to take appropriate measures to insure efficient
12
<PAGE>
operations of computer systems beyond the year 2000. Institutions should
commence testing for critical systems by September 1, 1998 and should be
substantially completed by December 31, 1998.
MidSouth's Board of Directors established a Year 2000 compliance
committee in June of 1997. The committee has inventoried MidSouth's
hardware and software programs and has forwarded letters to the providers
regarding Year 2000 compliance. Testing and updating has been performed on
approximately 90% of MidSouth's computer hardware and approximately 10% of
computer software, with the exception of the primary data processing
hardware and software. Testing on the primary processing system is
scheduled for the third quarter of 1998. In addition, the OCC has already
performed a review of MidSouth's primary processing software vendor, Jack
Henry and Associates ("JHA") and have found JHA's year 2000 project
management effort "satisfactory". Furthermore, MidSouth has received a
warranty from JHA as to completion of internal testing and readiness.
To further reduce the risks associated with the year 2000, MidSouth held
seminars for commercial customers and community businesses during the
first week of May 1998. MidSouth provided seminar participants with
software designed to help them identify year 2000 issues within their
organizations. The software guides the user through the vendor
identification and tracking process and provides assistance in other
year 2000 issues such as contingency planning. As part of its own
contingency plan, MidSouth has agreements with two vendors to provide
short-term and long-term processing capabilities.
In compliance with Year 2000 disclosure requirements, the committee has
analyzed the impact that compliance with the Year 2000 may have on earnings.
Costs totaling approximately $60,000 have been identified for testing and
other expenses associated with the Year 2000. Additional costs are expected,
but it is management's opinion that the costs will not be material to
MidSouth's earnings.
13
<PAGE>
Nonperforming Assets and Past Due Loans
Table 1 summarizes MidSouth's nonaccrual, past due and restructured
loans and nonperforming assets.
<TABLE>
<CAPTION>
TABLE 1
Nonperforming Assets and
Loans Past Due 90 Days
=============================================================
June December June
30, 31, 30,
1998 1997 1997
=============================================================
<S> <C> <C> <C>
Nonperforming loans
Nonaccrual loans $341,419 $260,875 $518,672
Restructured loans - - -
__________________________________
Total nonperforming loans 341,419 260,875 518,672
Other real estate owned,
net 39,100 45,100 146,552
Other assets repossessed 5,845 13,234 26,040
__________________________________
Total nonperforming assets $386,364 $319,209 $691,264
==================================
Loans past due 90 days
or more and still accruing $322,080 $245,232 $59,675
Nonperforming loans as a
% of total loans .24% 0.20% 0.45%
Nonperforming assets as a
% of total loans, other
real estate owned and
other assets repossessed 0.27% 0.24% 0.60%
ALL as a % of
nonperforming loans 493.73% 542.30% 256.80%
</TABLE>
14
<PAGE>
Nonperforming assets were $386,364 as of June 30, 1998, an increase of
$67,155 from the $319,209 reported for December 31, 1997 and a
decrease of $304,900 from the $691,264 reported for June 30, 1998. Loans
past due 90 days or more increased from $59,675 in June 1997 to
$245,232 in December 1997 and to $322,080 as of June 30, 1998. Of the
$322,080 in loans past due 90 days or more, $116,490 were funded by the
Finance Company.
Specific reserves have been established in the ALL to cover potential
losses on nonperforming assets. The ALL is analyzed quarterly and
additional reserves, if needed, are allocated at that time. Management
believes the $1,685,688 in the reserve as of June 30, 1998 is sufficient to
cover potential losses in nonperforming assets and in the loan and lease
portfolios. Loans classified for regulatory purposes but not included in
Table 1 do not represent material credits about which management has
serious doubts as to the ability of the borrower to comply with loan
repayment terms.
15
<PAGE>
Page 16
Item 4. Submission of Matters to a Vote of Security Holders
At the annual meeting of shareholders of MidSouth Bancorp, Inc. held
May 13, 1998 two Class II Directors were elected.
The following provides information as to the votes:
<TABLE>
<CAPTION>
Election of Directors For Withheld Abstentions Broker Non-Votes
<S> <C> <C> <C> <C>
Will G. Charbonnet, Sr. 1,351,771 2,089 0 0
Clayton Paul Hilliard 1,351,771 2,089 0 0
</TABLE>
<PAGE>
Item 6. Exhibits and Reports on Form 8-K Page 17
(a) Exhibits
Exihibit Number Document Description
3.1 Amended and Restated Articles of Incorporation of
MidSouth Bancorp, Inc. is included as Exhibit 3.1
to the MidSouth's Report on Form 10-K for
the year ended December 31, 1993, and is
incorporated herein by reference.
3.2 Articles of Amendment to Amended and Restated
Articles of Incorporation dated July 19, 1995
are included as Exhibit 4.2 to MidSouth's
Registration Statement on Form S-8 filed
September 20, 1995 and is incorporated herein
by reference.
3.3 Amended and Restated By-laws adopted by the
Board of Directors on April 12, 1995 are
included as Exhibit 3.2 to Amendment No. 1 to
MidSouth's Registration Statement on Form S-4
(Reg. No. 33-58499) filed on June 1, 1995,
and are incorporated herein by reference.
10.1 MidSouth National Bank Lease Agreement with
Southwest Bank Building Limited Partnership is
included as Exhibit 10.7 to the Company's annual
report on Form 10-K for the Year Ended December
31, 1992, and is incorporated herein by reference.
10.2 First Amendment to Lease between MBL Life
Assurance Corporation, successor in interest to
Southwest Bank Building Limited Partnership in
Commendam, and MidSouth National Bank is included
as Exhibit 10.1 to Report on the Company's annual
report on Form 10-KSB for the year ended
December 31, 1994, and is incorporated herein
by reference.
10.3 Amended and Restated Deferred Compensation Plan
and Trust is included as Exhibit 10.3 to the
Company's annual report on Form 10-K for the year
ended December 31, 1992 and is incorporated herein
by reference.
10.4 Employment Agreements with C. R. Cloutier and
Karen L. Hail are included as Exhibit 5(c) to
MidSouth's Form 1-A and are incorporated herein
by reference.
10.6 MidSouth Bancorp, Inc.'s 1997 Stock Incentive Plan
is included as Exhibit 4.5 to MidSouth's definitive
Proxy Statement filed April 11, 1997, and is
incorporated herein by reference.
Page 18
10.7 The MidSouth Bancorp, Inc. Dividend Reinvestment
and Stock Purchase Plan is included as Exhibit 4.6
to MidSouth Bancorp, Inc.'s Form S-3D filed on
July 25, 1997 and is incorporated herein by
reference.
10.8 Loan Agreements and Master Notes for lines of
credit established for MidSouth Bancorp, Inc. and
Financial Services of the South, Inc. are included
as Exhibit 10.7 of MidSouth's Form 10-QSB filed on
August 14, 1997 and is incorporated herein by
reference.
11 Computation of earnings per share
27 Financial Data Schedule
(b) Reports Filed on Form 8-K
(none)
Signatures
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
MidSouth Bancorp, Inc.
(Registrant)
Date: August 14, 1998
_______________
_______________________________
C. R. Cloutier, President & CEO
_______________________________________
Karen L. Hail, Executive Vice President
& CFO
_______________________________________
Teri S. Stelly, Senior Vice President &
Controller
<PAGE>
<TABLE>
<CAPTION>
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE (Unaudited)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
Second Quarter Second Quarter Year-to-Date Year-to-Date
June 30, June 30, June 30, June 30,
BASIC 1998 1997 1998 1997
______________ ______________ ____________ ____________
<S> <C> <C> <C> <C>
Earnings:
Income applicable to common
stock $641,208 $442,565 $1,156,196 $784,180
========== ========== =========== ==========
Shares:
Weighted average number of
common shares outstanding 1,597,367 1,559,891 1,592,547 1,551,856
========== ========== =========== ==========
16593080
Basic earnings per common share:
Income applicable to common
stock $0.40 $0.28 $0.73 $0.51
========== ========== =========== ==========
DILUTED
Earnings:
Net income $678,652 $482,511 $1,231,160 $863,933
========== ========== =========== ==========
Weighted average number of
common shares outstanding 1,597,367 1,559,891 1,592,547 1,551,856
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 51,304 - 51,415 -
Assuming conversion of
preferred stock at a
conversion rate of 1 to
1.999 shares 317,653 337,704 318,886 334,686
__________ __________ ___________ __________
Weighted average number of
common shares outstanding,
as adjusted 1,966,324 1,897,595 1,962,848 1,886,542
========== ========== =========== ==========
Diluted earnings per common
share $0.35 $0.25 $0.63 $0.46
========== ========== =========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1998
<CASH> 12,890,224
<INT-BEARING-DEPOSITS> 53,152
<FED-FUNDS-SOLD> 11,000,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 40,325,095
<INVESTMENTS-CARRYING> 16,731,169
<INVESTMENTS-MARKET> 17,651,135
<LOANS> 145,207,201
<ALLOWANCE> 1,685,688
<TOTAL-ASSETS> 235,816,742
<DEPOSITS> 216,994,125
<SHORT-TERM> 0
<LIABILITIES-OTHER> 885,230
<LONG-TERM> 3,543,973
0
2,262,857
<COMMON> 160,176
<OTHER-SE> 11,970,381
<TOTAL-LIABILITIES-AND-EQUITY> 235,816,742
<INTEREST-LOAN> 6,961,806
<INTEREST-INVEST> 1,634,679
<INTEREST-OTHER> 349,737
<INTEREST-TOTAL> 8,946,222
<INTEREST-DEPOSIT> 3,182,996
<INTEREST-EXPENSE> 3,312,674
<INTEREST-INCOME-NET> 5,633,548
<LOAN-LOSSES> 496,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 5,136,454
<INCOME-PRETAX> 1,652,108
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,231,160
<EPS-PRIMARY> .73
<EPS-DILUTED> .63
<YIELD-ACTUAL> 5.57
<LOANS-NON> 341,419
<LOANS-PAST> 322,080
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,414,826
<CHARGE-OFFS> 308,267
<RECOVERIES> 83,129
<ALLOWANCE-CLOSE> 1,685,688
<ALLOWANCE-DOMESTIC> 80,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,605,688
</TABLE>
