UNITED STATES SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C. 20549
FORM 10QSB
__X___QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended........ September 30, 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 September 30, 1998
Common stock, $.10 par value 2,424,258
Preferred stock, no par value, $14.25 stated value 156,927
Transitional Small Business Disclosure Format:
Yes _______ No ____X____
Page 1
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Page 2
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) Page
Financial Highlights 3
Statements of Condition - September 30, 1998 and
December 31, 1997 4
Statements of Income - Three and Nine Months Ended
September 30, 1998 and 1997 5
Statement of Stockholders' Equity - Nine Months
Ended September 30, 1998 6
Statements of Cash Flows - Nine Months Ended
September 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 6. Exhibits and Reports on Form 8-K 16
Signatures 17
<PAGE>
<TABLE>
<CAPTION>
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS (UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
EARNINGS DATA 1998 1997 1998 1997
_________________________________________________
<S> <C> <C> <C> <C>
Net interest income $3,107,465 $2,516,952 $8,741,013 $7,185,901
Provision for loan losses 260,450 241,700 756,450 604,300
Non-interest income 907,162 735,354 2,558,176 2,146,014
Non-interest expense 2,888,022 2,474,093 8,024,476 7,025,825
Provision for income tax 242,050 127,220 662,998 428,564
Net income 624,105 409,293 1,855,265 1,273,226
Preferred dividend requirement 37,003 37,442 111,967 117,195
Income available to common
shareholder $587,102 $371,851 $1,743,298 $1,156,031
======================================================================================
PER COMMON SHARE DATA
Basic earnings per share $0.24 $0.16 $0.72 $0.49
Diluted earnings per share $0.21 $0.14 $0.62 $0.44
Book value at end of period $5.41 $4.30 $5.41 $4.30
Market price at end of period $13.25 $10.83 $13.25 $10.83
Market price of preferred stock at $40.00 $33.00 $40.00 $33.00
Weighted average shares outstanding
Basic 2,417,457 2,378,288 2,404,799 2,364,621
Diluted 2,963,618 2,912,740 2,979,619 2,882,481
======================================================================================
AVERAGE BALANCE SHEET DATA
Total assets $240,301,904 $210,869,856 $230,966,203 $202,954,632
Earning assets 219,123,358 190,599,040 210,198,283 183,360,010
Loans and leases 150,018,325 118,824,135 140,539,477 107,496,909
Interest-bearing deposits 166,025,394 142,509,715 158,773,155 139,542,546
Total deposits 220,753,040 191,343,608 212,517,851 186,703,236
Common stockholders' equity 12,638,818 9,931,230 11,744,457 9,431,211
Total stockholders' equity 14,889,712 12,340,991 14,009,428 11,866,265
======================================================================================
SELECTED RATIOS
Return on average assets (annualize 1.03% 0.70% 1.07% 0.76%
Return on average common equity (an 18.43% 14.85% 19.85% 16.39%
Return on average total equity ( an 16.63% 11.95% 17.71% 13.03%
Leverage capital ratio 6.10% 5.78% 6.10% 5.78%
Tier 1 risk-based capital ratio 8.90% 9.36% 8.90% 9.36%
Total risk-based capital ratio 9.98% 10.39% 9.98% 10.39%
Allowance for loan losses as a %
of total loans 1.14% 1.08% 1.14% 1.08%
======================================================================================
PERIOD ENDING BALANCE SHEET DATA 9/30/98 9/30/97 Net Change % Change
Total assets $250,386,189 $206,518,858 $43,867,331 21.24%
Earning assets 227,224,601 185,192,383 $42,032,218 22.70%
Loans and leases, net 154,320,174 124,386,058 $29,934,116 24.07%
Interest-bearing deposits 173,626,200 134,357,623 $39,268,577 29.23%
Total deposits 230,445,040 181,475,290 $48,969,750 26.98%
Common stockholders' equity 13,108,743 10,153,951 $2,954,792 29.10%
Total stockholders' equity 15,341,476 12,454,699 $2,886,777 23.18%
======================================================================================
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
________________________________________________________________________________
September 30, December 31,
1998 1997 *
ASSETS (unaudited)
____________ ____________
<S> <C> <C>
Cash and due from banks $12,618,694 $15,774,024
Federal funds sold 7,400,000 8,060,000
____________ ____________
Total cash and cash equivalents 20,018,694 23,834,024
Interest bearing deposits in banks 1,727 48,928
Securities available-for-sale, at fair value
(cost of $45,373,450 in September 1998 and
$36,750,950 in December 1997) 46,093,450 36,884,465
Securities held-to-maturity (estimated market
value of $18,707,155 in September 1998 and
$17,459,865 in December 1997) 17,622,120 16,732,827
Loans, net of allowance for loan losses of
$1,787,130 in September 1998 and $1,414,826
in December 1997 154,320,174 129,473,318
Bank premises and equipment, net 8,653,754 6,973,150
Other real estate owned, net 39,100 45,100
Accrued interest receivable 1,923,217 1,638,931
Goodwill, net 215,936 241,902
Other assets 1,498,017 1,239,770
____________ ____________
Total assets $250,386,189 $217,112,415
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing $56,818,840 $58,464,087
Interest bearing 173,626,200 141,603,664
____________ ____________
Total deposits 230,445,040 200,067,751
Securities sold under
repurchase agreements - 69,443
Accrued interest payable 544,839 543,936
Notes payable 3,532,919 3,198,794
Other liabilities 521,915 301,181
____________ ____________
Total liabilities 235,044,713 204,181,105
____________ ____________
Commitments and contingencies - -
Stockholders' Equity:
Preferred Stock, no par value, $14.25
stated value - 5,000,000 shares
authorized, 156,927 and 160,756
issued and outstanding on
September 30, 1998 and December 31,
1997, respectively 2,236,210 2,290,773
Common stock, $.10 par value-
5,000,000 shares authorized, 2,424,258
and 1,581,053 issued and outstanding
on September 30, 1998 and
December 31, 1997, respectively 242,426 158,106
Surplus 10,424,462 9,862,700
Unearned ESOP shares (123,726) (137,243)
Unrealized gains/losses on securities
available-for-sale, net of deferred
taxes of $254,000 in September 1998
and $51,549 in December 1997 466,000 81,966
Retained earnings 2,096,104 675,008
____________ ____________
Total stockholders' equity 15,341,476 12,931,310
____________ ____________
Total liabilities and stockholders' equity $250,386,189 $217,112,415
============ ============
* The consolidated statement of condition at December 31, 1997 is taken
from the audited balance sheet on that date.
________________________________________________________________________________
</TALBE>
4
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</TABLE>
<TABLE>
<CAPTION>
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
(unaudited) (unaudited)
____________________________ ____________________________
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans, including fees $3,927,708 $3,108,931 $10,889,514 $8,325,336
Securities
Taxable 646,521 766,074 1,836,947 2,298,854
Nontaxable 236,571 223,044 680,824 571,856
Federal funds sold 91,567 14,382 441,304 362,652
___________ ____________ ___________ ___________
TOTAL 4,902,367 4,112,431 13,848,589 11,558,698
___________ ____________ ___________ ___________
INTEREST EXPENSE:
Interest on deposits 1,727,004 1,535,402 4,910,000 4,241,973
Interest on note payable 67,898 60,077 197,576 130,824
___________ ____________ ___________ ___________
TOTAL 1,794,902 1,595,479 5,107,576 4,372,797
___________ ____________ ___________ ___________
NET INTEREST INCOME 3,107,465 2,516,952 8,741,013 7,185,901
PROVISION FOR LOAN LOSSES 260,450 241,700 756,450 604,300
___________ ____________ ___________ ___________
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 2,847,015 2,275,252 7,984,563 6,581,601
___________ ____________ ___________ ___________
OTHER OPERATING INCOME:
Service charges on deposits 637,266 553,168 1,887,540 1,514,244
Gains on securities, net - (176) - 85,179
Credit life insurance 30,417 56,295 98,488 157,550
Other charges and fees 203,479 126,067 572,148 389,041
___________ ____________ ___________ ___________
TOTAL OTHER INCOME 907,162 735,354 2,558,176 2,146,014
___________ ____________ ___________ ___________
OTHER EXPENSES:
Salaries and employee benefits 1,396,623 1,202,047 3,930,527 3,356,084
Occupancy expense 612,721 561,181 1,726,329 1,601,615
Other 878,678 710,865 2,367,620 2,068,126
___________ ____________ ___________ ___________
TOTAL OTHER EXPENSES 2,888,022 2,474,093 8,024,476 7,025,825
___________ ____________ ___________ ___________
INCOME BEFORE INCOME TAXES 866,155 536,513 2,518,263 1,701,790
PROVISION FOR INCOME TAXES 242,050 127,220 662,998 428,564
___________ ____________ ___________ ___________
NET INCOME $624,105 $409,293 $1,855,265 $1,273,226
PREFERRED DIVIDEND REQUIREMENT 37,003 37,442 111,967 117,195
___________ ____________ ___________ ___________
INCOME AVAILABLE TO COMMON
SHAREHOLDERS $587,102 $371,851 $1,743,298 $1,156,031
=========== ============ =========== ===========
BASIC EARNINGS PER COMMON SHARE $0.24 $0.16 $0.72 $0.49
=========== ============ =========== ===========
DILUTED EARNINGS PER COMMON SHARE $0.21 $0.14 $0.62 $0.44
=========== ============ =========== ===========
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 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 28,382 2,837 594,841 597,678
Stock split on
common stock
effected in
the form of
a 50% dividend 806,306 80,631 (72,945) (9,374) (1,688)
Dividends paid
on common stock (312,758) (312,758)
Dividends paid on
preferred stock (111,967) (111,967)
Preferred stock
conversion (3,829) (54,563) 8,517 852 53,711 (70) (70)
Registration and
related costs
associated with
dividend
reinvestment plan (13,845) (13,845)
Net income 1,855,265 1,855,265
ESOP obligation,
net of repayments 13,517 13,517
Net change in
unrealized gain/
loss on securities
available-for-sale,
net of tax 384,034 384,034
_________ __________ _________ ________ ___________ _________ ________ __________ ___________
BALANCE,
SEPTEMBER 30, 1998 156,927 $2,236,210 2,424,258 $242,426 $10,424,462 ($123,726) $466,000 $2,096,104 $15,341,476
========= ========== ========= ======== =========== ========= ======== ========== ===========
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 and 1997
_____________________________________________________________________________________________
September 30, 1998 September 30, 1997
__________________ __________________
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $1,855,265 $1,273,226
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 710,730 628,701
Provision for loan losses 756,450 604,300
Provision for deferred income taxes 49,330 40,116
Provision for losses on other real estate owned - 33,718
Discount accretion (premium amortization), net (22,678) (164,224)
Gain on sale of premises and equipment (750) -
Loss on sale of other real estate owned 3,037 -
Gain on sale of securities - (85,180)
Change in accrued interest receivable (284,286) (398,241)
Change in accrued interest payable 903 95,842
Change in other liabilities (4,205) 182,326
Change in other assets (285,089) (318,179)
__________________ __________________
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,778,707 1,892,405
__________________ __________________
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease (increase) in interest-bearing deposits 47,201 313,752
Proceeds from maturities and calls of securities ava 8,480,926 16,932,739
Proceeds from sales of securities available-for-sale - 12,990,400
Purchases of securities held-to-maturity (300,000) (7,577,947)
Purchases of securities available-for-sale (17,670,041) (25,452,403)
Loan originations, net of repayments (25,603,826) (30,020,297)
Purchases of premises and equipment (2,394,579) (1,628,966)
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 (37,393,358) (34,442,722)
__________________ __________________
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 30,377,289 9,858,782
Net (decrease) increase in securities sold under repurchase
agreements and federal funds purchased (69,443) 3,573,102
Net increase in other borrowed funds - 5,000,000
Issuance of notes payable 435,000 3,024,210
Repayments of notes payable (100,875) (1,564,537)
Proceeds from issuance of common stock 597,678 187,879
Payment of dividends (424,725) (376,668)
Cost of capital through dividend reinvestment plan (13,845) -
Payment of fractional shares resulting from conversion
of preferred stock and stock dividends (1,758) (2,292)
__________________ __________________
NET CASH PROVIDED BY FINANCING ACTIVITIES 30,799,321 19,700,476
__________________ __________________
NET DECREASE IN CASH & CASH EQUIVALENTS (3,815,330) (12,849,841)
CASH & CASH EQUIVALENTS AT BEGINNING OF PERIOD 23,834,024 25,414,562
__________________ __________________
CASH & CASH EQUIVALENTS AT END OF PERIOD $20,018,694 $12,564,721
================== ==================
</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 September 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 nine month periods
ended September 30, 1998 are not necessarily indicative of the
results to be expected for the entire year.
2. ALLOWANCE FOR LOAN LOSSES
An analysis of the activity in the allowance for loan losses
is as follows:
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
(in thousands)
1998 1997
______ ______
<S> <C> <C>
Balance at beginning of year $1,415 $1,087
Provision for loan losses 756 604
Recoveries 122 190
Loans charged off (506) (541)
______ ______
Balance at end of quarter $1,787 $1,340
====== ======
</TABLE>
3. NEW ACCOUNTING STANDARD
MidSouth adopted Statement of Financial Accounting Standards
No. 130 "Reporting Comprehensive Income" ("SFAS 130") effective
January 1, 1998. SFAS 130 establishes standards for reporting
and display of comprehensive income and its components.
Comprehensive income includes net income and other comprehensive
income 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 nine months ended September 30, 1998 and 1997.
<TABLE>
<CAPTION>
1998 1997
__________ __________
<S> <C> <C>
Net income $1,855,265 $1,273,226
Other comprehensive income,
net of tax 384,034 122,945
__________ __________
Total comprehensive income $2,239,299 $1,396,171
========== ==========
</TABLE>
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
This review should be read in conjunction with MidSouth
Bancorp Inc.'s ("MidSouth") consolidated financial
statements and accompanying notes contained herein, as
well as with MidSouth's 1997 annual consolidated
financial statements, the notes thereto and the related
Management's Discussion and Analysis.
Continuing to build on second quarter momentum,
MidSouth reported strong earnings and loan growth for the
third quarter of 1998. Net income totaled $624,105 for the
third quarter of 1998, an increase of 52% over net income
of $409,293 reported for the third quarter of 1997. Income
available to common shareholders totaled $587,102 for the
third quarter of 1998, compared to $371,851 for the third
quarter of 1997. Basic earnings per common share were
$.24 and $.16 for the quarters ended September 30, 1998
and 1997, respectively. Diluted earnings per common
share were $.21 for the third quarter of 1998 compared to
$.14 for the third quarter of 1997.
Net income totaled $1,855,265 for the nine month period
ended September 30, 1998 compared to $1,273,226 for the
first nine months of 1997. Income available to common
shareholders totaled $1,743,298 and $1,156,031 for the
nine month periods ended September 30, 1998 and 1997,
respectively. Basic earnings per common share were $.72
for the nine months ended September 30, 1998 compared to
$.49 for the nine months ended September 30, 1997.
Diluted earnings per common share were $.62 and $.44 for
the nine months ended September 30, 1998 and 1997,
respectively.
The increase in earnings resulted primarily from growth in
loans between the three and nine months periods ended
September 30, 1998 and 1997. As a result, net interest
income increased 23% or $590,513 in quarterly comparison
and 22% or $1,555,112 in year-to-date comparison. Non-
interest income, exclusive of net gains on sales of
investment securities, increased $171,632 in quarterly
comparison and $497,341 in year-to-date comparison.
Increases in service charges and fees on deposit accounts
contributed most of the increase in non-interest income.
Loans, net of Allowance for Loan Losses ("ALL"),
increased $29.9 million or 24%, from $124.4 million in the
third quarter of 1997 to $154.3 million in the third quarter
of 1998. Provisions for loan losses increased $152,150,
from $604,300 in September 1997 to $756,450 in
September 1998 primarily due to loan growth.
Nonperforming loans as a percentage of total loans
increased from .29% in September 1997 to .39% in
September 1998 due to the addition of one commercial loan
totaling $331,336. The ALL represented 293% of
nonperforming loans as of September 30, 1998.
Total deposits increased $49.0 million or 27%, from $181.5
million in September 1997 to $230.5 million in September
1998. Of the $49.0 million growth in deposits, $39.3
million was interest-bearing and $9.7 million was
noninterest-bearing deposits.
9
<PAGE>
MidSouth's third quarter 1998 annalized return on average
common equity was 18.43% and annalized return on average
assets was 1.03%. The leverage capital ratio was 6.10% at
September 30, 1998.
Earnings Analysis
Net Interest Income
Average earning assets increased 15%, or $28.5 million,
from $190.6 million for the three months ended September
30, 1997 to $219.1 million for the three months ended
September 30, 1998. A change in the mix of earning assets
increased net interest income as higher-yielding loans
represented 68.5% of average earning assets in the third
quarter of 1998 compared to 62.3% in the third quarter of
1997. The average yield on loans remained relatively
unchanged at 10.39% and 10.38% for the two third quarter
periods ending September 30, 1998 and 1997, respectively.
Within the loan portfolio, however, yields on commercial
and real estate loans declined 18 basis points, while
consumer loan yields rose 69 basis points. Consumer loan
yields increased primarily due to loans funded by Financial
Services of the South, Inc. (the "Finance Company") and
credit card loans made by MidSouth National Bank (the
"Bank"). The Finance Company's portfolio averaged $1.7
million in consumer finance loans for the third quarter of
1998, yielding an average of 26%. Credit card loans at the
Bank averaged $1.0 million and yielded an average of 17%.
Average investment volume decreased $8.2 million, from $70.5
million at September 30, 1997 to $62.3 million at
September 30, 1998 due to increased loan funding. The
average taxable-equivalent yield on investments improved
by 17 basis points for the same period, from 6.12% to
6.29%. The change in mix and increase in the volume of
earning assets boosted the taxable-equivalent yield on
quarterly average earning assets 31 basis points, from
8.76% for the third quarter of 1997 to 9.07% for the third
quarter of 1998.
An average volume increase of $20.8 million and a 5 basis
point rate increase on interest-bearing liabilities resulted in
increased interest expense for the quarter ended September
30, 1998 compared to the quarter ended September 30,
1997. The percentage of average interest-bearing deposits
to average total deposits remained constant at 75% in
quarterly comparison. In addition, the average rate paid on
interest-bearing deposits remained stable, with a decrease
of only 2 basis points from 4.14% at September 30, 1997 to
4.12% at September 30, 1998. The average rate paid on all
interest-bearing liabilities decreased 5 basis points for the
same period, from 4.25% to 4.20% due to a decrease in the
volume of funds borrowed by the Bank. In September
1997, a public funds contract representing approximately
$28 million in deposits held by the Bank expired. To fund
the withdrawal of these deposits, the Bank borrowed $8.5
million in overnight and short-term funds. The short-term
borrowings were paid out on November 4, 1997.
The net effect of changes in the volume and mix of average
earning assets and interest-bearing liabilities increased net
interest income $590,513 in quarterly comparison. The net
taxable-equivalent yield on average earning assets
increased 38 basis points, from 5.44% for the quarter ended
September 30, 1997 to 5.82% for the quarter ended
September 30, 1998.
10
<PAGE>
Review of the changes in the volume and yields of average
earning assets and interest-bearing liabilities between the
two nine month periods ended September 30, 1998 and
1997 reflected results similar to the quarterly comparison.
The net taxable-equivalent yield on average earning assets
for the nine months ended September 30, 1998 increased 32
basis points to 5.75% at September 30, 1998 as compared
to 5.43% at September 30, 1997.
Non-interest Income
MidSouth's primary source of non-interest income, service
charges on deposit accounts, increased $120,098 for the
three months and $373,296 for the nine months ended
September 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 $77,412 in quarterly
comparison and $183,107 in year-to-date comparison with
significant increases recorded 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. Significant decreases were realized in income from
the sale of credit life insurance of $25,878 for the quarter
and $59,062 for the nine months period ended September
30, 1998 as compared to the same periods ended September
30, 1997. Sales of credit life insurance were higher in 1997
due to a retail loan promotion held during the first quarter.
Non-interest Expense
Non-interest expense increased $413,929 for the three
months and $998,651 for the nine months ended September
30, 1998 compared to the three and nine months ended
September 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 12, from 139 in
September 1997 to 151 in September 1998. Eight of the
twelve FTE employees were added in administrative and
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 nine month
periods ended September 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
added in March 1997, expansion of MidSouth's ATM cash
11
<PAGE>
machine network and upgrading of computer equipment
throughout 1998 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. In addition,
construction of another Lafayette office is scheduled to
begin in December 1998 or January 1999.
Balance Sheet Analysis
MidSouth ended the third quarter of 1998 with consolidated
assets of $250,386,189, an increase of $33.3 million or
15% from the $217,112,415 reported for December 31,
1997. Deposits increased over the nine months ended
September 30, 1998 by $30.4 million. Of the $30.4 million
increase, $3.3 million was in public fund deposits and
$27.1 million was in retail deposits. A new deposit
relationship totaling approximately $14 million in
investment accounts contributed to the $27.1 million retail
deposit growth. A money market account indexed to the
90-day Treasury bill attracted approximately $5 million in
interest-bearing retail deposits during the first nine months
of 1998. Retail checking and savings deposits and
Certificates of Deposit grew $8.1 million in the same
period. Commercial deposits remained stable, with some
deposit dollars shifting from non-interest bearing accounts
to interest bearing accounts.
Loans grew $25.2 million in the first nine months of 1998,
with the majority of the increase recorded in real estate,
construction and commercial loans during the second and
third quarters. The growth resulted primarily from the
addition of two commercial lenders hired in the first quarter
of 1998. Deposit growth funded increases in securities
available-for-sale and held-to-maturity of $9.2 million and
$.9 million, respectively. The increase reflects purchases of
$18.0 million and maturities and principal paydowns of
$8.5 million. Unrealized gains in the securities available-
for-sale portfolio, net of unrealized losses and tax effect,
were $466,000 at September 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
represent a permanent change in 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 September 30, 1998, MidSouth's leverage ratio was
6.10% as compared to 6.00% at December 31, 1997. Tier 1
capital to risk-weighted assets was 8.90% and total capital
to risk-weighted assets was 9.98% at the end of the third
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 $484,395 in the first
nine months of 1998.
12
<PAGE>
The Year 2000 Issue
To maintain safe and sound banking practices, institutions
are required to take appropriate measures to insure efficient
operations of computer systems beyond the year 2000.
MidSouth's Board of Directors established a Year 2000
compliance committee in June of 1997. The committee
inventoried MidSouth's hardware and software programs
and 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 15% of computer software, with the
exception of the primary data processing hardware and
software. Testing on the primary processing system was
originally scheduled for the third quarter of 1998, but with
the purchase of a system hardware upgrade, the testing has
been rescheduled for the first quarter of 1999.
Management's decision to upgrade system hardware was
based on high utilization and growth expectations, not on
year 2000 issues. 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
========================================================================
September December September
30, 31, 30,
1998 1997 1997
========================================================================
<S> <C> <C> <C>
Nonperforming loans
Nonaccrual loans $610,725 $260,875 $365,595
Restructured loans - - -
________________________________________
Total nonperforming loans 610,725 260,875 365,595
Other real estate owned, net 39,100 45,100 146,552
Other assets repossessed 9,845 13,234 16,826
________________________________________
Total nonperforming assets $659,670 $319,209 $528,973
========================================
Loans past due 90 days
or more and still accruing $518,879 $245,232 $133,755
Nonperforming loans as a
% of total loans .39% 0.20% 0.29%
Nonperforming assets as a
% of total loans, other real
estate owned and other assets
repossessed 0.42% 0.24% 0.42%
ALL as a % of nonperforming
loans 292.62% 542.30% 366.50%
</TABLE>
14
<PAGE>
Nonperforming assets were $659,670 as of September 30,
1998, an increase of $340,461 from the $319,209 reported
for December 31, 1997 and an increase of $130,697 from
the $528,973 reported for September 30, 1997. The
increase resulted primarily from the transfer of one
commercial loan to nonaccrual status. Loans past due 90
days or more increased from $133,755 in September 1997
to $245,232 in December 1997 and to $518,879 as of
September 30, 1998. Of the $518,879 in loans past due 90
days or more, $161,631 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
$1,787,130 in the reserve as of September 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>
Item 6. Exhibits and Reports on Form 8-K Page 16
(a) Exhibits
Exihibit Number Document Description
3.1 Amended and Restated Articles of Incorporation of
MidSouth Bancorp, Inc. is included as Exhibit 3.1
to the MidSouth's Report on Form 10-K for the year
ended December 31, 1993, and is incorporated herein
by reference.
3.2 Articles of Amendment to Amended and Restated
Articles of Incorporation dated July 19, 1995 are
included as Exhibit 4.2 to MidSouth's Registration
Statement on Form S-8 filed September 20, 1995
and is incorporated herein by reference.
3.3 Amended and Restated By-laws adopted by the Board
of Directors on April 12, 1995 are included as
Exhibit 3.2 to Amendment No. 1 to MidSouth's
Registration Statement on Form S-4 (Reg. No.
33-58499) filed on June 1, 1995.
10.1 MidSouth National Bank Lease Agreement with
Southwest Bank Building Limited Partnership is
included as Exhibit 10.7 to the Company's annual
report on Form 10-K for the Year Ended December 31,
1992, and is incorporated herein by reference.
10.2 First Amendment to Lease between MBL Life Assurance
Corporation, successor in interest to Southwest Bank
Building Limited Partnership in Commendam, and
MidSouth National Bank is included as Exhibit 10.1
to Report on the Company's annual report on
Form 10-KSB for the year ended December 31, 1994,
and is incorporated herein by reference.
10.3 Amended and Restated Deferred Compensation Plan and
Trust is included as Exhibit 10.3 to the Company's
annual report on Form 10-K for the year ended
December 31, 1992 and is incorporated herein by
reference.
10.4 Employment Agreements with C. R. Cloutier and
Karen L. Hail are included as Exhibit 5(c) to
MidSouth's Form 1-A and are incorporated
herein by reference.
10.6 MidSouth Bancorp, Inc.'s 1997 Stock Incentive Plan
is included as Exhibit 4.5 to MidSouth's definitive
Proxy Statement filed April 11, 1997, and is
incorporated herein by reference.
Page 17
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: November 14, 1998
/s/ C. R. Cloutier
_______________________
C. R. Cloutier, President
& CEO
/s/ Karen L. Hail
_______________________
Karen L. Hail, Executive
Vice President & CFO
/s/ Teri S. Stelly
_______________________
Teri S. Stelly, Senior
Vice President & Controller
<PAGE>
<TABLE>
<CAPTION>
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE (Unaudited)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
Third Quarter Third Quarter Year-to-Date Year-to-Date
September 30, September 30, September 30, September 30,
BASIC 1998 1997 1998 1997
_____________ _____________ _____________ _____________
<S> <C> <C> <C> <C>
Earnings:
Income applicable to common
stock $587,103 $371,851 $1,743,298 $1,156,031
============= ============= ============= =============
Shares:
Weighted average number of
common shares outstanding 2,417,457 2,378,288 2,404,799 2,364,621
============= ============= ============= =============
16593080
Basic earnings per common share:
Income applicable to common
stock $0.24 $0.16 $0.72 $0.49
============= ============= ============= =============
DILUTED
Earnings:
Net income $624,106 $409,293 $1,855,265 $1,273,226
============= ============= ============= =============
Weighted average number of
common shares outstanding 2,417,457 2,378,288 2,404,799 2,364,621
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 72,891 35,117 75,485 10,655
Assuming conversion of
preferred stock at a
conversion rate of 1 to
2.998 shares 473,270 499,335 499,335 507,205
Weighted average number of
common shares outstanding,
as adjusted 2,963,618 2,912,740 2,979,619 2,882,481
============= ============= ============= =============
Diluted earnings per common share $0.21 $0.14 $0.62 $0.44
============= ============= ============= =============
</TABLE>
18
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1998
<CASH> 12,618,694
<INT-BEARING-DEPOSITS> 1,727
<FED-FUNDS-SOLD> 7,400,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 46,093,450
<INVESTMENTS-CARRYING> 17,622,120
<INVESTMENTS-MARKET> 18,707,155
<LOANS> 156,107,304
<ALLOWANCE> 1,787,130
<TOTAL-ASSETS> 250,386,189
<DEPOSITS> 230,445,040
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,066,754
<LONG-TERM> 3,532,919
0
2,236,210
<COMMON> 242,426
<OTHER-SE> 12,862,840
<TOTAL-LIABILITIES-AND-EQUITY> 250,386,189
<INTEREST-LOAN> 10,889,514
<INTEREST-INVEST> 2,517,771
<INTEREST-OTHER> 441,304
<INTEREST-TOTAL> 13,848,589
<INTEREST-DEPOSIT> 4,910,000
<INTEREST-EXPENSE> 5,107,576
<INTEREST-INCOME-NET> 8,741,013
<LOAN-LOSSES> 756,450
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,558,176
<INCOME-PRETAX> 2,518,263
<INCOME-PRE-EXTRAORDINARY> 1,855,265
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,855,265
<EPS-PRIMARY> .72
<EPS-DILUTED> .62
<YIELD-ACTUAL> 5.12
<LOANS-NON> 610,725
<LOANS-PAST> 518,879
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,414,826
<CHARGE-OFFS> 506,524
<RECOVERIES> 122,378
<ALLOWANCE-CLOSE> 1,787,130
<ALLOWANCE-DOMESTIC> 80,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,707,130
</TABLE>
