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, 1999
______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, 1999
Common stock, $.10 par value 2,464,472
Preferred stock, no par value, $14.25 stated value 152,736
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 - June 30, 1999 and
December 31, 1998 4
Statements of Income - Three and Six Months Ended
June 30, 1999 and 1998 5
Statement of Stockholders' Equity - Six Months
Ended June 30, 1999 6
Statements of Cash Flows - Six Months Ended
June 30, 1999 and 1998 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 17
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 19
<PAGE>
<TABLE>
<CAPTION>
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS (UNAUDITED)
Three Months Ended Six Months Ended
June 30 June 30,
EARNINGS DATA 1999 1998 1999 1998
_________________________________________________
<S> <C> <C> <C> <C>
Net interest income $3,296,977 $2,941,826 $6,319,117 $5,633,548
Provision for loan losses 238,000 238,000 504,950 496,000
Non-interest income 979,195 872,174 1,888,335 1,651,014
Non-interest expense 3,125,265 2,629,198 6,028,358 5,136,454
Provision for income tax 245,050 268,150 409,437 420,948
Net income 667,857 678,652 1,264,707 1,231,160
Preferred dividend requirement 32,903 37,444 66,286 74,964
Income available to common
shareholders $634,954 $641,208 $1,198,421 $1,156,196
======================================================================================
PER COMMON SHARE DATA
Basic earnings per share $0.26 $0.27 $0.49 $0.49
Diluted earnings per share $0.23 $0.23 $0.43 $0.42
Book value at end of period $5.69 $5.05 $5.69 $5.05
Market price at end of period $10.88 $14.54 $10.88 $14.54
Market price of preferred stock at $31.00 $44.25 $31.00 $44.25
Weighted average shares outstanding
Basic 2,450,164 2,396,051 2,444,740 2,388,821
Diluted 2,967,157 2,949,476 2,968,195 2,943,800
======================================================================================
AVERAGE BALANCE SHEET DATA
Total assets $280,657,061 $230,492,703 $269,966,798 $226,389,477
Earning assets 254,546,089 209,768,889 245,118,332 205,514,205
Loans and leases 158,432,030 139,609,048 156,817,654 135,744,324
Interest-bearing deposits 199,047,941 158,387,576 189,767,500 155,086,933
Total deposits 259,606,028 211,819,511 249,391,744 208,344,912
Common stockholders' equity 14,078,482 11,985,587 13,814,301 11,492,493
Total stockholders' equity 16,293,605 14,264,461 16,036,629 13,764,949
======================================================================================
SELECTED RATIOS
Return on average assets (annualize 0.95% 1.18% 0.94% 1.10%
Return on average common equity (an 18.09% 21.46% 17.49% 20.29%
Return on average total equity ( an 16.44% 19.08% 15.90% 18.04%
Leverage capital ratio 5.70% 6.06% 5.70% 6.06%
Tier 1 risk-based capital ratio 9.01% 9.24% 9.01% 9.24%
Total risk-based capital ratio 10.08% 10.36% 10.08% 10.36%
Allowance for loan losses as a %
of total loans 1.17% 1.17% 1.17% 1.17%
=======================================================================================
PERIOD ENDING BALANCE SHEET DATA 6/30/99 6/30/98 Net Change % Change
Total assets $282,503,279 $235,816,742 $46,686,537 19.80%
Earning assets 257,675,940 213,316,617 $44,359,323 20.80%
Loans and leases, net 160,787,191 143,521,513 $17,265,678 12.03%
Interest-bearing deposits 201,570,300 162,003,496 $39,566,804 24.42%
Total deposits 261,272,545 216,994,125 $44,278,420 20.41%
Common stockholders' equity 13,991,819 12,130,557 $1,861,262 15.34%
Total stockholders' equity 16,185,079 14,393,414 $1,791,665 12.45%
=======================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
___________________________________________________________________________________
June 30, December 31,
1999 1998 *
ASSETS (unaudited)
__________ ___________
<S> <C> <C>
Cash and due from banks $11,623,921 $14,003,536
Federal funds sold 10,000,000 6,600,000
Total cash and cash equivalents 21,623,921 20,603,536
Interest bearing deposits in banks 11,208 16,125
Securities available-for-sale, at fair
value (cost of $64,205,061 in
June 1999 and $43,503,268 in
December 1998) 63,635,811 43,938,965
Securities held-to-maturity (estimated
market value of $21,465,132
in June 1999 and $20,421,920 in
December 1998) 21,338,041 19,246,559
Loans, net of allowance for loan losses of
$1,903,689 in June 1999 and $1,860,490
in December 1998 160,787,191 153,616,773
Bank premises and equipment, net 10,363,425 9,054,201
Other real estate owned, net 357,575 48,100
Accrued interest receivable 1,912,167 1,740,514
Goodwill, net 603,853 207,281
Other assets 1,870,087 1,346,214
___________ ___________
Total assets $282,503,279 $249,818,268
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing $59,702,245 $60,361,205
Interest bearing 201,570,300 169,563,097
___________ ___________
Total deposits 261,272,545 229,924,302
Securities sold under
repurchase agreements 752,946 -
Accrued interest payable 647,152 565,896
Notes payable 3,381,895 3,503,668
Other liabilities 263,662 138,280
___________ ___________
Total liabilities 266,318,200 234,132,146
___________ ___________
Commitments and contingencies - -
Stockholders' Equity:
Preferred Stock, no par value, $14.25
stated value - 5,000,000 shares
authorized, 153,913 and 156,927
issued and outstanding on
June 30, 1999 and December 31, 1998,
respectively 2,193,260 2,236,210
Common stock, $.10 par value-
5,000,000 shares authorized,
2,459,121 and 2,432,016
issued and outstanding on
June 30, 1999 and
December 31, 1998, respectively 245,912 243,201
Surplus 10,759,356 10,521,020
Unearned ESOP shares (106,923) (119,051)
Unrealized gains(losses) on securities
available-for-sale, net of deferred
taxes(credit) of (181,300) in June 1999
and $159,000 in December 1998 (387,950) 276,700
Retained earnings 3,481,424 2,528,042
___________ ___________
Total stockholders' equity 16,185,079 15,686,122
___________ ___________
Total liabilities and stockholders' equity $282,503,279 $249,818,268
=========== ===========
* The consolidated statement of condition at
December 31, 1998 is taken from the audited
balance sheet on that date.
________________________________________________________________________________
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
__________________________ ___________________________
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans, including fees $4,000,706 $3,640,074 $7,758,244 $6,961,806
Securities
Taxable 832,024 601,915 1,517,003 1,190,426
Nontaxable 277,107 224,177 537,789 444,253
Federal funds sold 213,666 169,700 372,299 349,737
_________ _________ __________ _________
TOTAL 5,323,503 4,635,866 10,185,335 8,946,222
_________ _________ __________ _________
INTEREST EXPENSE:
Interest on deposits 1,962,089 1,628,696 3,737,355 3,182,996
Interest on note payable 64,437 65,344 128,863 129,678
_________ _________ __________ _________
TOTAL 2,026,526 1,694,040 3,866,218 3,312,674
_________ _________ __________ _________
NET INTEREST INCOME 3,296,977 2,941,826 6,319,117 5,633,548
PROVISION FOR LOAN LOSSES 238,000 238,000 504,950 496,000
_________ _________ __________ _________
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 3,058,977 2,703,826 5,814,167 5,137,548
_________ _________ __________ _________
OTHER OPERATING INCOME:
Service charges on deposits 724,369 629,353 1,430,366 1,214,274
Gains on securities, net - - - -
Credit life insurance 25,172 40,953 41,340 68,071
Other charges and fees 229,654 201,868 416,629 368,669
_________ _________ __________ _________
TOTAL OTHER INCOME 979,195 872,174 1,888,335 1,651,014
_________ _________ __________ _________
OTHER EXPENSES:
Salaries and employee benefits 1,479,320 1,283,611 2,860,928 2,533,904
Occupancy expense 674,631 565,470 1,325,389 1,113,608
Other 971,314 780,117 1,842,041 1,488,942
_________ _________ __________ _________
TOTAL OTHER EXPENSES 3,125,265 2,629,198 6,028,358 5,136,454
_________ _________ __________ _________
INCOME BEFORE INCOME TAXES 912,907 946,802 1,674,144 1,652,108
PROVISION FOR INCOME TAXES 245,050 268,150 409,437 420,948
_________ _________ __________ _________
NET INCOME $667,857 $678,652 $1,264,707 $1,231,160
PREFERRED DIVIDEND REQUIREMENT 32,903 37,444 66,286 74,964
_________ _________ __________ _________
INCOME AVAILABLE TO COMMON
SHAREHOLDERS $634,954 $641,208 $1,198,421 $1,156,196
========= ========= ========== =========
BASIC EARNINGS PER COMMON SHARE $0.26 $0.27 $0.49 $0.49
========= ========= ========== =========
DILUTED EARNINGS PER COMMON SHARE $0.23 $0.23 $0.43 $0.42
========= ========= ========== =========
5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
UNREALIZED
(GAINS)
LOSSES
ON
PREFERRED STOCK COMMON STOCK ESOP SECURITIES- RETAINED
SHARES AMOUNT SHARES AMOUNT SURPLUS OBLIGATION FOR-SALE EARNINGS TOTAL
___________________ ___________________ ___________ ___________________________________ ___________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
DECEMBER 31, 1998 156,927 $2,236,210 2,432,016 $243,201 $10,521,020 ($119,051) $276,700 $2,528,042 $15,686,122
Issuance of common stock 18,073 1,808 196,289 198,097
Dividends paid on common
stock (245,039) (245,039)
Dividends paid on
preferred stock (66,286) (66,286)
Preferred stock
conversion (3,014) (42,950) 9,032 903 42,047 -
Net income 1,264,707 1,264,707
ESOP obligation, net of
repayments 12,128 12,128
Net change in unrealized
gain/loss on securities
available-for-sale,
net of tax (664,650) (664,650)
_______ __________ _________ ________ ___________ ________ ________ __________ ___________
BALANCE,
June 30, 1999 153,913 $2,193,260 2,459,121 $245,912 $10,759,356 ($106,923) ($387,950) $3,481,424 $16,185,079
======= ========== ========= ======== =========== ======== ======== ========== ===========
</TABLE>
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<TABLE>
<CAPTION>
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1999 and 1998
_________________________________________________________________________________________
June 30, 1999 June 30, 1998
_____________ _____________
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $1,264,707 $1,231,160
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 571,616 462,292
Provision for loan losses 504,950 415,000
Provision for deferred income taxes 12,228 49,330
Discount accretion (premium amortization), net 13,660 (13,235)
Gain on sale of premises and equipment (1,925) (750)
Loss on sale of other real estate owned - 3,037
Change in accrued interest receivable (171,653) (7,673)
Change in accrued interest payable 81,256 24,486
Change in other liabilities 125,382 (67,757)
Change in other assets (172,033) (156,618)
_____________ _____________
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,228,188 1,939,272
_____________ _____________
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease (increase) in interest-bearing
deposits in banks 4,917 (4,224)
Proceeds from maturities and calls of securities
available-for-sale 6,313,566 4,988,673
Purchases of securities available-for-sale (27,027,658) (8,241,206)
Purchases of securities held-to-maturity (2,092,845) -
Loan originations, net of repaymens (5,000,180) (14,468,338)
Purchases of premises and equipment (1,851,017) (1,516,789)
Proceeds from sales of premises and equipment 24,000 29,961
Proceeds from sales of other real estate owned 58,724 17,000
Purchase of insurance premium financing company (3,503,497) -
_____________ _____________
NET CASH USED IN INVESTING ACTIVITIES (33,073,990) (19,194,923)
_____________ _____________
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 31,348,243 16,926,374
Net (decrease) increase in securities sold
under repurchase agreements and federal
funds purchased 752,946 (69,443)
Issuance of notes payable 75,000 435,000
Repayments of notes payable (196,774) (89,821)
Proceeds from issuance of common stock 198,097 376,361
Payment of dividends (311,325) (266,550)
Payment of fractional shares resulting from
conversion of preferred stock and stock
dividends - (70)
_____________ _____________
NET CASH PROVIDED BY FINANCING ACTIVITIES 31,866,187 17,311,851
_____________ _____________
NET DECREASE IN CASH & CASH EQUIVALENTS 1,020,385 56,200
CASH & CASH EQUIVALENTS AT BEGINNING OF PERIOD 20,603,536 23,834,024
_____________ _____________
CASH & CASH EQUIVALENTS AT END OF PERIOD $21,623,921 $23,890,224
============= =============
7
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MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. STATEMENT BY MANAGEMENT CONCERNING THE REVIEW OF UNAUDITED
FINANCIAL INFORMATION
The accompanying unaudited consolidated financial statements
and notes thereto contain all adjustments, consisting only
of normal recurring adjustments, necessary to present fairly
the financial position of MidSouth Bancorp, Inc. ("MidSouth")
and its subsidiaries as of June 30, 1999 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 1998
annual consolidated report and Form 10-KSB.
The results of operations for the six month period ended
June 30, 1999 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)
1999 1998
__________ ______________
<S> <C> <C>
Balance at beginning of period $1,860,490 $1,414,826
Provision for loan losses 504,950 496,000
Recoveries 65,122 83,129
Loans charged off (526,873) (308,267)
__________ __________
Balance at end of period $1,903,689 $1,685,688
========== ==========
</TABLE>
3. COMPREHENSIVE INCOME
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 (losses) 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, 1999 and 1998.
<TABLE>
<CAPTION>
1999 1998
__________ __________
<S> <C> <C>
Net income $1,264,707 $1,231,160
Other comprehensive income,
(losses), net of tax (664,650) 112,309
__________ __________
Total comprehensive income $600,057 $1,343,469
========== ==========
</TABLE>
<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 1998 annual consolidated
financial statements, the notes thereto and the related
Management's Discussion and Analysis.
MidSouth's second quarter 1999 earnings reflect a strategic
focus on its long term investment in system upgrades, staff
development and market penetration. The significant 20%
growth in assets over the past twelve months is a direct
result of this investment. MidSouth now stands well
positioned as a dominant community bank offering big
bank services.
Net income totaled $667,857 for the second quarter of
1999, compared to net income of $678,652 for the second
quarter of 1998. Income available to common shareholders
totaled $634,954 for the second quarter of 1999, compared
to $641,208 for the second quarter of 1998. Basic earnings
per share were $.26 and $.27 for the quarters ended June
30, 1999 and 1998, respectively. Diluted earnings per
share were $.23 for both the second quarter of 1999 and the
second quarter of 1998.
Net income for the six months ended June 30, 1999 totaled
$1,264,707 compared to $1,231,160 for the six months
ended June 30, 1998. Basic earnings per share were $.49
for both six-month periods ended June 30, 1999 and 1998.
Year-to-date diluted earnings per share were $.43 for June
30, 1999 and $.42 for June 30, 1998.
In both quarterly and year-to-date comparisons, net interest
income increased 12% due to a higher volume of earning
assets. Non-interest income increased 12% in quarterly
comparison and 14% in year-to-date comparison, primarily
due to increases in service charges on deposit accounts and
insufficient funds fees. The increased net interest income
and non-interest income was substantially offset by
increases in non-interest expense for the three and six
months periods ended June 30, 1999 as compared to the
three and six months periods ended June 30, 1998.
Increased expenses were recorded primarily in salaries and
benefits and occupancy expenses. These increases reflect
MidSouth's investment to strengthen its infrastructure in
order to support recent and anticipated growth. In addition,
marketing expenses increased due to promotions designed
to take advantage of opportunity created by mergers and
acquisitions of major banks in MidSouth's market area.
During the second quarter of 1999, MidSouth completed
testing of systems identified as "mission critical" for year
2000 computer operations, including the internal network
system. Core data processing hardware and software
testing were completed in the first quarter of 1999. Costs
associated with testing and other year 2000 direct expenses
totaled approximately $27,000 for the first six months of
1999.
9
<PAGE>
MidSouth recorded substantial deposit growth and
continued loan growth during the past twelve months.
Deposits grew $44.3 million or 20%, from $217.0 million
at June 30, 1998 to $261.3 million at June 30, 1999.
Of the $44.3 million increase, $39.6 million
represented interest-bearing deposits. Most
of the growth resulted from a deposit promotion designed
to increase MidSouth's market share. The promotion began
March 1, 1999 and resulted in additional deposits totaling
$27.5 million as of the end of the promotion on May 31,
1999. Total deposits at the end of the second quarter of
1999 included approximately $18.2 million held under a
public fund contract that expired June 30, 1999. The
majority of these funds were withdrawn within the first
week of July 1999.
Loans, net of Allowance for Loan Losses ("ALL"),
increased $17.3 million or 12%, from $143.5 million at
June 30, 1998 to $160.8 million at June 30, 1999. The
majority of the loan growth occurred in the commercial and
real estate portfolios during the second half of 1998.
Moderate growth continued in these portfolios for the first
six months of 1999. Additionally, on May 15, 1999,
MidSouth's subsidiary, MidSouth National Bank purchased
the assets of TMC Financial Services, Inc. which consisted
primarily of $3.0 million in insurance premium financing
loans. Provisions for loan and lease losses totaled
$504,950 for the six months ended June 30, 1999 compared
to $496,000 for the six months ended June 30, 1998.
Nonperforming loans as a percentage of total loans
decreased from .24% in June of 1998 to .10% in June of
1999 primarily due to the transfer of two commercial real
estate credits totaling $357,575 to other real estate owned.
Accordingly, nonperforming assets increased $179,395 in
quarterly comparison, from $341,419 at June 30, 1998 to
$565,768 at June 30, 1999. The ALL represented 364% of
nonperforming loans and other real estate owned as of June
30, 1999, as compared to 443% as of June 30, 1998.
MidSouth's leverage ratio was 5.70% at June 30, 1999.
Return on average common equity was 18.09% and return
on average assets was .95%.
Earnings Analysis
Net Interest Income
Average earning assets increased 21%, or $44.8 million,
from $209.8 million for the three months ended June 30,
1998 to $254.6 million for the three months ended June 30,
1999. The mix of earning assets shifted significantly, from
67% of average earning assets in loans for the second
quarter of 1998 down to 62% in the second quarter of 1999.
The average yield on loans decreased 33 basis points, from
10.46% to 10.13% at June 30, 1999. Yields on
commercial and real estate loans declined 54 basis points,
while consumer loan yields rose 55 basis points.
10
<PAGE>
Market competition for quality credits, combined with
decreased loan fee income caused commercial and real
estate loan yields to decline. Consumer loan yields
increased primarily due to loans funded by Financial
Services of the South, Inc. (the "Finance Company"), credit
card loans and insurance premium financing loans acquired
with the purchase of TMC Financial Services, Inc.
("TMC"). TMC's portfolio averaged $3.0 million with an
average yield of approximately 33%. The Finance
Company's portfolio averaged $1.6 million in consumer
finance loans yielding an average of 23%. Credit card
loans at the Bank averaged $1.2 million and yielded an
average of 18%.
Investment volume increased significantly by $20.2
million, from $57.7 million at June 30, 1998 to $77.9
million at June 30, 1999. Growth in MidSouth's deposits
resulting from the deposit promotion in the second quarter
of 1999 far exceeded the moderate loan demand for the
same period. Subsequently, excess dollars were invested in
investment securities. The average taxable-equivalent yield
on investments declined by 10 basis points, from 6.44% at
June 30, 1998 to 6.34% at June 30, 1999. The change in
the mix of earning assets combined with lower yields
decreased the taxable-equivalent yield on quarterly average
earning assets 47 basis points, from 9.05% for the second
quarter of 1998 to 8.58% for the second quarter of 1999.
An average volume increase of $40.7 million in interest-
bearing liabilities resulted in increased interest expense for
the quarter ended June 30, 1999 compared to the quarter
ended June 30, 1998. The percentage of average interest-
bearing deposits to average total deposits increased from
75% at June 30, 1998 to 77% at June 30, 1999. The
average rate paid on interest-bearing deposits decreased 17
basis points, from 4.12% at June 30, 1998 to 3.95% at June
30, 1999.
The net effect of changes in the volume and mix of average
earning assets and interest-bearing liabilities increased net
interest income $355,151 in quarterly comparison. The net
taxable-equivalent yield on average earning assets declined
43 basis points, from 5.82% for the quarter ended June 30,
1998 to 5.39% for the quarter ended June 30, 1999.
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, 1999 and 1998
reflected results similar to the quarterly comparison. The
net taxable-equivalent yield on average earning assets for
the six months ended June 30, 1999 decreased 33 basis
points from 5.72% at June 30, 1998 to 5.39% at June 30,
1999. However, the volume increase in earning assets
resulted in increased net interest income of $685,569
between the two six month periods reviewed.
Non-interest Income
MidSouth's primary source of non-interest income, service
charges on deposit accounts, increased $107,021 for the
three months and $237,321 for the six months ended June
30, 1999 as compared to the same periods for 1998. The
increases resulted primarily from additional insufficient
funds fees and an increase in service charge income due to
a higher volume of accounts serviced.
11
<PAGE>
Other non-interest income, net of gains on sales of
investment securities, increased $27,786 in quarterly
comparison and $47,960 in year-to-date comparison. A
new mortgage origination program with a third party
processor contributed $14,725 to the increase for the
quarter and $22,667 for the six months ended June 30,
1999. VISA merchant and debit card income increased
significantly in 1999, however, expenses associated with
these programs have also increased, offsetting the income.
Income from the sale of credit life insurance decreased
$15,781 for the quarter and $26,731 for the six months
period ended June 30, 1999 as compared to the same
periods ended June 30, 1998. Sales of credit life insurance
are expected to increase in the third quarter of 1999 as a
result of a retail loan promotion scheduled in that quarter.
Non-interest Expense
Non-interest expense increased $496,067 for the three
months and $891,904 for the six months ended June 30,
1999 compared to the three and six months ended June 30,
1998. Increases were recorded primarily in the categories
of salaries and employee benefits, occupancy expenses,
marketing expenses, VISA programs and ATM processing
fees. These increases reflect MidSouth's long term
investment in staff development, system upgrades and
market penetration. In addition, MidSouth paid $25,495 in
insurance agent commissions associated with TMC
insurance premium financing portfolio added during the
second quarter of 1999.
Salaries and employee benefits increased primarily due to
additional staff and an increase in the cost of group health
insurance. The number of full-time equivalent ("FTE")
employees increased by 19, from 150 in June 1998 to 169
in June 1999. The increase includes nine employees added
with the merger of TMC on May 15, 1999. Other positions
added over the past twelve months include trainer, internal
auditor, retail sales manager and several customer contact
positions.
Occupancy expense increased in the three and six month
periods ended June 30, 1999 compared to the same period
of 1998 due to increases in depreciation of building,
furniture, and equipment and maintenance expenses
incurred on fixed assets. In addition, MidSouth recorded
increases in ad valorem taxes and janitorial expense.
Balance Sheet Analysis
MidSouth ended the second quarter of 1999 with
consolidated assets of $282,503,279, an increase of $32.7
million or 13% from the $249,818,268 reported for
December 31, 1998. Deposits increased over the six
months ended June 30, 1999 by $31.4 million, $27.5
million of which resulted from a deposit promotion held
during the months of March, April and May 1999.
The majority of the growth occurred in money market
deposits and certificates of deposit. At the end of the
second quarter of 1999, total deposits included
approximately $18.2 million held under a public fund
contract that expired June 30, 1999. The majority of these
funds were withdrawn within the first week of July.
12
<PAGE>
Loans experienced moderate growth of $7.2 million in the
first six months of 1999, with the majority of the increase
in commercial and real estate loans. Due to an influx of
deposits from the deposit promotion in the first six months
of 1999, excess funds were used to purchase additional
securities and federal funds sold. Securities available-for-
sale increased $19.7million, from $43.9 million at
December 31, 1998 to $63.6 million at June 30, 1999. The
increase reflects purchases of $ 27.0 million and maturities
and principal paydowns of $6.3 million. Purchases of
securities held-to-maturity totaled $2.1 million for the same
period. Unrealized losses in the securities available-for-
sale portfolio, net of unrealized gains and tax effect, were
$387,950 at June 30, 1999, compared to a net unrealized
gain of $ 276,700 at December 31, 1998. These amounts
result from interest rate fluctuations and do not represent
permanent adjustment 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, 1999, MidSouth's leverage ratio was 5.70%
as compared to 6.06% at December 31, 1998. Tier 1 capital
to risk-weighted assets was 9.01% and total capital to risk-
weighted assets was 10.08% at the end of the second
quarter of 1999. At year-end 1998, Tier 1 capital to risk-
weighted assets was 9.24% and total capital to risk-
weighted assets was 10.36%.
The Year 2000 Issue
The Year 2000 issue arises from the storage of data within
computer systems using a two digit field rather than a four
digit field to define the year. Consequently, computer
programs may recognize a date using "00" as the year 1900
instead of 2000. To maintain safe and sound banking
practices, financial 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 1997. The committee inventoried
MidSouth's hardware and software programs, identified
mission critical systems and forwarded letters to the
providers regarding Year 2000 compliance. As of June 30,
1999, testing and updating has been performed on 100% of
MidSouth's mission critical systems, including the core
data processing hardware and software. In addition,
MidSouth has received a warranty from the software
provider as to the completion of internal testing and
readiness of their programs.
To further reduce the risks associated with the Year 2000,
MidSouth continues to work with commercial customers
and community businesses in preparation for the Year
2000. In May 1998, MidSouth provided Year 2000
seminar participants with software designed to help them
identify issues within their organizations. The software
guides the user through the vendor identification and
tracking process and provides assistance in other issues
such as contingency planning. As part of its own
contingency planning, MidSouth has agreements with and
has tested the capabilities of two vendors to provide short-
term and long-term processing.
13
<PAGE>
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 $93,500 have been identified for testing and
other expenses. MidSouth directly expensed approximately
$27,000 of these costs during the first six months of 1999.
Additional costs are expected, but it is management's
opinion that the costs will not be material to MidSouth's
earnings.
14
<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,
1999 1998 1998
=================================================================
<S> <C> <C> <C>
Nonperforming loans
Nonaccrual loans $165,630 $ 533,107 $341,419
Restructured loans - - -
_____________________________________
Total nonperforming loans 165,630 533,107 341,419
Other real estate owned,
net 357,575 48,100 39,100
Other assets repossessed 42,563 26,533 5,854
_____________________________________
Total nonperforming
assets $565,768 $607,740 $386,373
=====================================
Loans past due 90 days
Or more and still
accruing $550,516 $329,116 $322,080
Nonperforming loans
as a % of total
loans .10% 0.34% 0.24%
Nonperforming assets
as a % of total
loans, other real
Estate owned and
other assets
Repossessed 0.35% 0.39% 0.27%
ALL as a % of
nonperforming loans
and other real estate
owned 363.85% 320.11% 443.00%
</TABLE>
15
<PAGE>
Nonperforming assets were $565,768 as of June 30, 1999, a
decrease of $41,972 from the $607,740 reported for
December 31, 1998 and an increase of $179,395 from the
$386,373 reported for June 30, 1998. Two related
commercial credits totaling $357,575 were moved from
nonaccrual loans into other real estate owned in June 1999.
Loans past due 90 days or more increased from $322,080
in June 1998 to $329,116 in December 1998 and to
$550,516 as of June 30, 1999. Of the $550,516 in loans
past due 90 days or more, $77,602 were funded by the
Finance Company and $49,188 represent past due
insurance premium financing loans at TMC.
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
$1,903,689 in the reserve as of June 30, 1999 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.
16
<PAGE>
Page 17
Item 4. Submission of Matters to a Vote of Security Holders
At the annual meeting of shareholders of MidSouth Bancorp, Inc.
held May 12, 1999 at 2:00 p.m., the Class III Directors were
elected.
<TABLE>
<CAPTION>
The following provides information as to the votes:
Election of Directors For Withheld Abstentions Broker Non-Votes
<S> <C> <C> <C> <C>
James R. Davis, Jr. 2,129,728 26,113
Karen L. Hail 2,127,855 27,986
Milton B. Kidd, III 2,128,783 27,058
</TABLE>
Proposal to approve the Amendment to the Articles to increase
the authorized Common Stock was approved by a vote of 1,985,897
shares voted for, 156,644 shares voted against, 13,358 shares
abstained from voting and 58 broker non-votes.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K Page 18
(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>
Page 19
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.
10.9 Modification Agreement to the Loan Agreement
and Master Note for the Line of Credit
established for MidSouth Bancorp, Inc. is
included as Exhibit 10.9 of this filing.
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 13, 1999
_______________
/s/ C. R. Cloutie
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
MODIFICATION AGREEMENT
State of Georgia Loan Number 4013321-101
June 30, 1999
This agreement between MidSouth Bancorp, Inc., a Louisiana
corporation (the "Borrower"), and The Bankers Bank, a banking
corporation, of Atlanta, Georgia, (the "Lender"). WITNESSETH,
that
WHEREAS, Borrower has requested Lender to modify certain
provisions and conditions pertaining to the aforesaid loan; and
WHEREAS, Lender has agreed, subject to the terms of this
agreement to consent to the Borrower's request.
NOW THEREFORE, in consideration of the premises and other
good and valuable consideration, Borrower agrees with Lender as
follows, to-wit:
Page 2, Paragraph 2 of the Grid Promissory Note dated
June 23, 1997 is hereby deleted and the following inserted in lieu
thereof:
1. Commencing June 30, 2000, and continuing on June 30 of
each succeeding calendar year, the indebtedness evidenced by this
Note shall be due and payable in seven (7) consecutive annual
installments of principal, each in the amount of 12.5% of the
amount of the Loan on June 30, 2000, plus all accrued and unpaid
interest as hereinabove provided. The entire outstanding balance
of the indebtedness evidenced by this Note, together with all
accrued and unpaid interest, shall be due and payable in a eighth
(8th) and final installment on June 30, 2007.
2. Borrower hereby authorizes and directs Lender to take any
action necessary to conform the original Note, security instruments
and other collateral doucments to the terms as herein modified, and
by these presents accepts and confirms their liability under said
Note, security instruments and other collateral documents, with the
terms as herein modified. Borrower further agrees that the
foregoing Modification shall in no way affect or otherwise release
any collateral held by Lender as security to said Note, but
acknowledges and agrees that all collateral held by Lender as
security to said Note shall continue to secure the note to the same
extent and in the same manner as if the foregoing Modification had
not been affected.
3. Borrower hereby warrants that there are no subordinate
liens on the collateral securing the original note and that Lender
shall maintain its priority and position on collateral, both real and
personal, as appropriate.
4. Ratification; No Set-off: Expect as modified herein, the
Note shall remain unchanged in full force and effect, and is hereby
ratified and confirmed. Borrower acknowledges there are no set-
offs or defenses as to the Note, nor shall this modification be
construed a novation, discharge, or release, of any person, entity,
or agreement whatsoever. Each and every term, covenant, and
condition of the Note is hereby incorporated herein such that the
Note and this Modification shall be read and construed as one
instrument.
<PAGE>
MODIFICATION AGREEMENT Loan Number: 4013321-101
IN WITNESS WHEREOF, the parties have executed this
instrument this 30th day of June, 1999.
MIDSOUTH BANCORP, INC. THE BANKERS BANK
Borrower Lender
By: /s/ C. R. Cloutier By: /s/ Jack Gardner
C. R. Cloutier Jack Gardner
Title: President Senior Vice President
Attest: /s/ Karen L. Hail
Karen L. Hail
Title: Secretary
[CORPORATE SEAL]
<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, 1999 AND 1998
Second Quarter Second Quarter Year-to-Date Year-to-Date
June 30, June 30, June 30, June 30,
BASIC 1999 1998 1999 1998
______________ ______________ ____________ ____________
<S> <C> <C> <C> <C>
Earnings:
Income applicable to common
stock $634,954 $641,208 $1,198,421 $1,156,196
============ =========== ============ ============
Shares:
Weighted average number of
common shares outstanding 2,450,164 2,396,051 2,444,740 2,388,821
============ =========== ============ ============
Earnings per common share:
Income applicable to common
stock $0.26 $0.27 $0.49 $0.49
============ =========== ============ ============
DILUTED
Earnings:
Net income $667,857 $678,652 $1,264,707 $1,231,160
============ =========== ============ ============
Weighted average number of
common shares outstanding 2,450,164 2,396,051 2,444,740 2,388,821
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 56,160 77,022 56,750 76,729
Assuming conversion of
preferred stock
at a conversion rate of
1 to 2.998 shares 461,431 476,403 466,705 478,250
____________ ___________ ____________ ____________
Weighted average number of
common shares outstanding,
as adjusted 2,967,755 2,949,476 2,968,195 2,943,800
============ =========== ============ ============
Fully diluted earnings per common
share $0.23 $0.23 $0.43 $0.42
============ =========== ============ ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 11,623,921
<INT-BEARING-DEPOSITS> 11,208
<FED-FUNDS-SOLD> 10,000,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 63,635,811
<INVESTMENTS-CARRYING> 21,338,041
<INVESTMENTS-MARKET> 21,465,132
<LOANS> 162,690,880
<ALLOWANCE> 1,903,689
<TOTAL-ASSETS> 282,503,279
<DEPOSITS> 261,272,545
<SHORT-TERM> 752,946
<LIABILITIES-OTHER> 910,814
<LONG-TERM> 3,381,895
0
2,193,260
<COMMON> 245,912
<OTHER-SE> 13,745,907
<TOTAL-LIABILITIES-AND-EQUITY> 282,503,279
<INTEREST-LOAN> 7,758,244
<INTEREST-INVEST> 2,054,792
<INTEREST-OTHER> 372,299
<INTEREST-TOTAL> 10,185,335
<INTEREST-DEPOSIT> 3,737,355
<INTEREST-EXPENSE> 3,866,218
<INTEREST-INCOME-NET> 6,319,117
<LOAN-LOSSES> 504,950
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 6,028,358
<INCOME-PRETAX> 1,674,144
<INCOME-PRE-EXTRAORDINARY> 1,264,707
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,264,707
<EPS-BASIC> .49
<EPS-DILUTED> .43
<YIELD-ACTUAL> 4.95
<LOANS-NON> 165,630
<LOANS-PAST> 550,516
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,860,490
<CHARGE-OFFS> 526,873
<RECOVERIES> 65,122
<ALLOWANCE-CLOSE> 1,903,689
<ALLOWANCE-DOMESTIC> 40,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,863,689
</TABLE>
