SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 2-91000-FW
MIDSOUTH BANCORP, INC.
(Exact name of registrant as specified in its charter)
Louisiana 72-1020809
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
102 Versailles Blvd., Lafayette, LA 70501
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (318) 237-8343
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, $.10 par value American Stock Exchange, Inc.
Preferred Stock, no par value, American Stock Exchange, Inc.
$14.25 stated value
Securities registered pursuant to Section 12(g) of the Act: none
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-KSB or any amendment to this Form 10-KSB
__X__
Total revenues for the year ended December 31, 1999 were $25,053,229.
As of February 29, 2000, the aggregate market value of the voting
stock held by non-affiliates of the Registrant, calculated by
reference to the closing sale price of MidSouth's common stock on
the AMEX was $11,641,893. As of February 29, 2000 there were
outstanding 2,481,843 shares of MidSouth Bancorp, Inc. common
stock, $.10 par value, which stock is the only class of the
Registrant's common stock.
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement for Annual Meeting of Shareholders to be held
May 10, 2000 - (Part III)
<PAGE>
PART I
ITEM 1 - Business.
The Company
MidSouth Bancorp, Inc. ("MidSouth") is a Louisiana
corporation registered as a bank holding company under the
Bank Holding Company Act of 1956. Its operations are
conducted through, and its primary asset is, MidSouth
National Bank (the "Bank"), a wholly-owned subsidiary.
In the third quarter of 1996, MidSouth formed Financial
Services of the South, Inc. (the "Finance Company") to
provide quality consumer finance throughout its market
area. MidSouth, the Bank and the Finance Company are
referred to collectively herein as "the Company."
On July 31, 1995, MidSouth consummated the
acquisition of Sugarland Bancshares, Inc. which resulted in
Sugarland's subsidiary and sole asset, Sugarland Bank,
being merged into the Bank. Completion of the acquisition
added $17.2 million to MidSouth's total assets.
The Bank
The Bank is a national banking association domiciled
in Lafayette, Louisiana. The Bank provides a complete
range of commercial and retail banking services primarily
to professional, commercial and industrial customers in its
market area. These services include, but are not limited to,
interest bearing and non-interest bearing checking accounts,
investment accounts, credit card services and issuance of
cashier's checks, United States Savings Bonds and travelers
checks. The Bank is a U.S. government depository. The
Bank is also a member of the Electronic Data Services
("EDS") network through Comerica Bank, Dallas, Texas
which provides its customers with automatic teller machine
services through the GulfNet, Cirrus and Plus networks.
Membership in the Community Cash Network provides
MidSouth's customers with additional access throughout
the Greater New Orleans area with no surcharge. The Bank
serves most types of lending demands including short term
business loans, other commercial, industrial and
agricultural loans, real estate construction and mortgage
loans and installment loans. The Bank operates at the
seventeen locations described below under "Item 2 -
Properties."
Employees
As of December 31, 1999, the Bank employed 176
full-time equivalent employees and the Finance Company
employed 6 full-time equivalent employees. MidSouth has
no employees who are not also employees of the Bank. Through
the Bank and the Finance Company, employees receive employee
benefits which include an employee stock ownership plan,
a 401-K plan and life, health and disability insurance plans.
MidSouth considers the relationships of the Bank and the
Finance Company with their employees to be very good.
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Competition
The Bank faces keen competition in its market area not
only with other commercial banks, but also with savings
and loan associations, credit unions, finance companies,
mortgage companies, leasing companies, insurance
companies, money market mutual funds and brokerage
houses. In the Lafayette Parish area there are fifteen state
chartered or national banks and three savings banks.
Several of the banks in Lafayette are subsidiaries of holding
companies or branches of banks having far greater
resources than the Company. In addition, the Company
expects increased competition as a result of the
Gramm-Leach-Bliley Act signed into law on November 12, 1999.
As discussed below, under "Recent Legislation - Gramm-Leach-
Bliley Act," banks will be able to offer their customers
a wider range of financial products and services. The
legislation provides the ability to banks, securities
firms, insurance companies, and financial technology
companies to more readily combine.
Louisiana state banks may establish branch offices
statewide, and national banks domiciled in Louisiana have
the power to establish branches to the full extent that
Louisiana banks may establish branches. Since 1989,
Louisiana has allowed bank holding companies domiciled
in any state of the United States to acquire Louisiana banks
and bank holding companies, if the state in which the bank
holding company is domiciled allows Louisiana banks and
bank holding companies the same opportunities.
In 1994, the Interstate Banking and Branching
Efficiency Act of 1994 (the "Interstate Act") was enacted.
Among other things, the Interstate Act (i) allows bank
holding companies to acquire a bank located in any state,
subject to certain limitations that may be imposed by the
state, (ii) allows banks to merge across state lines, and (iii)
permits banks to establish branches outside their state of
domicile if expressly permitted by the law of the state in
which the branch is to be located. In 1995, the Louisiana
legislature enacted legislation permitting out of state bank
holding companies after June 1, 1997 to convert any banks
owned in Louisiana into branches of out of state banks
owned by such holding companies, subject to certain
limitations.
Supervision and Regulation - Bank Holding Companies
General. As a bank holding company, MidSouth is subject
to the Bank Holding Company Act of 1956 (the "Act") and
is supervised by the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board"). The Act
requires MidSouth to file periodic reports with the Federal
Reserve Board and subjects MidSouth to examination by
the Federal Reserve Board. The Act also requires
MidSouth to obtain the prior approval of the Federal
Reserve Board for acquisitions of substantially all of the
assets of any bank or bank holding company or more than
5% of the voting shares of any bank or bank holding
company. The Act prohibits MidSouth from engaging in
any business other than banking or bank-related activities
specifically allowed by the Federal Reserve Board and from
engaging in certain tie-in arrangements in connection with
any extension of credit or provision of any property or
services.
Recent Legislation - Gramm-Leach-Bliley Act. This
financial services reform legislation proves for three
basic changes: 1) repeal of certain provisions of the
Glass Steagall Act to permit commercial banks to
affiliate with investment banks, 2) modification of the
Bank Holding Company Act of 1956 to permit
companies that own commercial banks to engage in any
type of financial activity, and 3) allows subsidiaries of
banks to engage in a broad range of financial activities
beyond those permitted for banks themselves. As a
result, banks, securities firms, and insurance companies
will be able to combine much more readily. The
legislation also includes important provisions regarding
privacy of customer information; increased access to
the Federal Home Loan Bank System by community
banks; and significant changes to the requirements of
the Community Reinvestment Act.
Under provisions of the legislation, two new types of
regulated entities are authorized to engage in a broad
range of financial activities much more extensive that
those of standard holding companies. A "financial
holding company" can engage in all newly-authorized
activities and is simply a bank holding company whose
depository institutions are well-capitalized, well-
managed, and has a CRA rating of "satisfactory" or
better. A "financial subsidiary" is a direct subsidiary
of a bank that satisfies the same conditions as a
`financial holding company" plus several more. The
"financial subsidiary" can engage in most of the
newly-authorized activities, which are defined as
securities, insurance, merchant banking/equity
investment, "financial in nature," and
"complementary" activities.
The legislation also defines the concept of "functional
supervision", meaning similar activities should be
regulated by the same regulator, with the Federal
Reserve Board serving as an "umbrella" supervisory
authority over bank and financial holding companies.
This legislation creates new opportunities for the
Company to offer expanded services to its customer
base in the future, however the Company has not yet
determined the nature of the expanded services or when
the services will be offered.
Capital Adequacy Requirements. The Federal Reserve
Board monitors the capital adequacy of bank holding
companies through the use of a combination of risk-based
capital guidelines and leverage ratios. Risk-based capital
requirements are intended to make regulatory capital more
sensitive to the risk profile of a company's assets. Certain
off-balance sheet items, such as letters of credit and unused
lines of credit, are also assigned risk-weights and included
in the risk-based capital calculations. The guidelines
require a minimum ratio of total qualifying capital to total
risk-weighted assets of 8.0%, of which 4.0% must be in the
form of Tier 1 capital. At December 31, 1999, the
Company's ratios of Tier 1 and total capital to risk-
weighted assets were 9.47% and 10.55%, respectively.
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MidSouth's leverage ratio (Tier 1 capital to total average
adjusted assets) was 6.23% at December 31, 1999. All
three regulatory capital ratios for the Company exceeded
regulatory minimums at December 31, 1999.
Supervision and Regulation - National Banks
General. As a national banking association, the Bank is
supervised and regulated by the U. S. Comptroller of the
Currency (its primary regulatory authority), the Federal
Reserve Board and the Federal Insurance Deposit
Corporation. Under Section 23A of the Federal Reserve
Act, the Bank is restricted in extending credit to or making
investments in MidSouth and other affiliates defined in that
act. National banks are required by the National Bank Act
to adhere to branch banking laws applicable to state banks
in the states in which they are located and are limited as to
powers, locations and other matters of applicable federal
law.
Capital Adequacy Requirements. A national bank is
subject to regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory, and
possibly discretionary, actions by regulators that, if
undertaken, could have a direct material effect on a bank's
financial statements. Under capital adequacy guidelines
and the regulatory framework for prompt corrective action,
a bank must meet specific capital guidelines that involve
quantitative measures of the bank's assets, liabilities, and
certain off-balance-sheet items as calculated under
regulatory accounting practices. As of December 31, 1999,
the most recent notification from the FDIC categorized the
Bank as "well capitalized" under the regulatory framework
for prompt corrective action. To be categorized as "well
capitalized," the Bank must maintain a minimum of total
risk-based capital and Tier 1 capital to risk-weighted assets
of 10% and 6%, respectively, and a minimum leverage ratio
of 5%. All three regulatory capital ratios for the Bank
exceeded these minimums at December 31, 1999.
Governmental Policies
The operations of financial institutions may be
affected by legislative changes and by the policies of
various regulatory authorities. In particular, bank holding
companies and their subsidiaries are affected by the credit
policies of the Federal Reserve Board. An important
function of the Federal Reserve Board is to regulate the
national supply of bank credit. Among the instruments of
monetary policy used by the Federal Reserve Board to
implement its objectives are open market operations in
United States Government securities, changes in the
discount rate on bank borrowings and changes in reserve
requirements on bank deposits. These policies have
significant effects on the overall growth and profitability of
the loan, investment and deposit portfolios. The general
effects of such policies upon future operations cannot be
accurately predicted.
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ITEM 2 - Properties.
The Bank leases its principal executive and
administrative offices and principal banking facility in
Lafayette, Louisiana under a ten year lease expiring
November 30, 2004. The Bank has six other banking
offices in Lafayette, Louisiana, two in New Iberia and one
banking office in each of Breaux Bridge, Cecilia,
Jeanerette, Opelousas, Morgan City, Jennings, Lake
Charles, and Sulphur Louisiana. Twelve of these offices
are owned and five are leased. MidSouth also leases space
for a loan production office opened in Thibodaux,
Louisiana during the fourth quarter of 1999. A third full
service branch facility is currently under renovation in New
Iberia and is expected to open in the second quarter of
2000.
ITEM 3 - Legal Proceedings.
The Bank has been named as a defendant in various
legal actions arising from normal business activities in
which damages of various amounts are claimed. While the
amount, if any, of ultimate liability with respect to such
matters cannot be determined, management believes, after
consulting with legal counsel, that any such liability will
not have a material adverse effect on the Company's
consolidated financial position, results of operation, or cash
flows.
ITEM 4 - Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of MidSouth's
security holders in the fourth quarter of 1999.
Executive Officers of the Registrant
C. R. Cloutier, 52 - President, Chief Executive Officer and
Director of MidSouth and the Bank
Karen L. Hail, 46 - Executive Vice President of the Bank
and Chief Financial Officer, and Secretary and Treasurer of
MidSouth and the Bank
Donald R. Landry, 43 - Senior Vice President and Senior
Loan Officer of the Bank
Jennifer S. Fontenot, 45 - Senior Vice President of the
Bank
William R. Snyder, 59 - Senior Vice President of the
Bank since 1996; prior to his employment at the Bank, Mr.
Snyder was Senior Vice President for First National Bank
of Ohio for 1 year and Senior Vice President for Banc One,
Cleveland, Ohio for 5 years.
Teri S. Stelly, 40 - Senior Vice President and Controller of
MidSouth and the Bank since 1997; Vice President and
Controller of MidSouth and the Bank since 1992.
David L. Majkowski, 50 - Vice President and Loan
review officer of the Bank since 1997; Loan review officer
of the Bank since 1995; prior to his employment at the
Bank, Mr. Majkowski was Compliance Officer for St.
Martin Bank and Trust, St. Martinville, Louisiana for 15
years.
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All executive officers of the Company are appointed
for one year terms expiring at the first meeting of the Board
of Directors after the annual shareholders meeting next
succeeding his or her election and until his or her successor
is elected and qualified.
PART II
ITEM 5 - Market for Registrant's Common Stock and Related
Stockholder Matters.
On April 19, 1993 MidSouth's common stock was
accepted for listing on the American Stock Exchange,
Inc./Emerging Company Marketplace. Effective August 1,
1995, the Company's common stock and its preferred stock
has been listed on the regular American Stock Exchange,
Inc. ("AMEX") under the symbols MSL and MSL.pr,
respectively. As of March 21, 2000, there were 506
common shareholders of record and 171 preferred
shareholders of record. The high and low sales prices for
the past eight quarters are provided in the Selected
Quarterly Financial Data tables included with this filing
under Item 7 and is incorporated herein by reference.
MidSouth's first common stock dividend was paid at a
rate of $.06 per share on October 2, 1995 to shareholders of
record on September 18, 1995, and quarterly cash
dividends of $.06 per common share were paid through the
second quarter of 1998. Following a three for two stock
split paid on August 31, 1998, MidSouth began paying
quarterly cash dividends of $.05 per common share. It is the
intention of the Board of Directors of MidSouth to continue
paying quarterly dividends on the common stock at a rate
of $.05 per share. Cash dividends on the common stock are
subject to payment of dividends on the preferred stock.
The Company's ability to pay dividends is described in
Item 7 below under the heading "Liquidity - Dividends"
and in Note 12 of notes to the Company's consolidated
financial statements.
On August 31, 1998, MidSouth effected a three for two
stock split by way of a stock dividend to its common
shareholders of record on July 31, 1998. The stock split
increased the common shares outstanding at the time from
1,611,377 to 2,417,195. The conversion rate of the
preferred stock was adjusted to 2.998 due to the stock split.
On August 6, 1997, MidSouth declared a 12 1/2% stock
dividend payable to shareholders of record on August 27,
1997. The conversion rate on the Preferred Stock was
adjusted to 1.999 shares of MidSouth Common Stock for
each share of Preferred Stock converted.
On August 19, 1996, MidSouth effected a four for three
stock split by way of a stock dividend to its common
shareholders of record on July 31, 1996. Accordingly, the
conversion rate on the preferred stock was adjusted to 1.777
shares of MidSouth Common Stock for each share of
MidSouth Preferred Stock converted.
On September 15, 1995, MidSouth effected a four for three
stock split by way of a stock dividend to its common
shareholders of record as of September 7, 1995.
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<TABLE>
<CAPTION>
FIVE-YEAR SUMMARY OF SELECTED
CONSOLIDATED FINANCIAL DATA
Year Ended December 31,
_________________________________________________________________________________
1999 1998 1997 1996 1995
___________ ___________ ___________ ___________ __________
<S> <C> <C> <C> <C> <C>
Gross interest income $21,072,733 $18,755,764 $15,776,416 $12,572,417 $9,727,584
Interest expense (7,888,351) (6,931,556) (5,894,193) (4,541,727) (3,225,326)
___________ ___________ ___________ ___________ __________
Net interest income 13,184,382 11,824,208 9,882,223 8,030,690 6,502,258
Provision for loan losses (906,950) (999,950) (854,400) (674,500) (225,000)
Other operating income 3,980,496 3,486,937 2,899,461 2,138,285 1,583,026
Other expenses (12,740,307) (11,023,245) (9,585,788) (7,840,691) (6,072,129)
___________ ___________ ___________ ___________ __________
Net income 3,517,621 3,287,950 2,341,496 1,653,784 1,788,155
Provision for income taxes (867,417) (842,167) (586,804) (417,286) (546,545)
___________ ___________ ___________ ___________ __________
Net Income $2,650,204 $2,445,783 $1,754,692 $1,236,498 $1,241,610
Preferred stock dividend
requirement ($131,582) ($148,971) ($154,475) ($155,421) ($38,142)
___________ ___________ ___________ ___________ __________
Net income available to
common shareholders $2,518,622 $2,296,812 $1,600,217 $1,081,077 $1,203,468
=========== =========== =========== =========== ==========
Basic earnings per
share <FN1> $1.03 $0.95 $0.69 $0.48 $0.55
Diluted earnings per <FN1> $0.90 $0.83 $0.61 $0.40 $0.51
Total loans $170,468,733 $155,477,263 $130,888,144 $93,740,719 $77,826,707
Total assets 276,723,841 249,818,268 217,112,415 185,228,252 151,183,241
Total deposits 251,690,206 229,924,302 200,067,751 171,616,508 139,029,563
Cash dividends on common
stock 492,415 434,334 354,336 280,461 115,750
Long-term obligations 3,459,097 3,503,668 3,198,794 1,521,435 972,617
Selected ratios:
Loans to assets 61.60% 62.24% 60.29% 50.61% 51.48%
Loans to deposits 67.73% 67.62% 65.42% 54.62% 55.98%
Deposits to assets 90.95% 92.04% 92.15% 92.65% 91.96%
Return on average assets 0.97% 1.04% 0.78% 0.65% 0.98%
Return on average common
equity 17.45% 19.16% 16.44% 13.09% 17.22%
<FN1> Earnings per share have been adjusted to reflect a four
for three stock split paid on September 15,1995 to
shareholders of record on September 7, 1995, a four
for three stock split paid on August 19,1996 to shareholders
of record on July 31, 1996, a 12 1/2% common stock dividend
paid on August 27, 1997 to shareholders of record on
August 6, 1997, and a three for two stock split paid
on August 31, 1998 to shareholders of record on July 31, 1998.
</TABLE>
<PAGE>
ITEM 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
MidSouth Bancorp, Inc. ("MidSouth") is a one-bank holding
company that conducts substantially all of its business through
its wholly-owned subsidiaries, MidSouth National Bank (the
"Bank") and Financial Services of the South, Inc. (the "Finance
Company"). Following is management's discussion of factors
that management believes are among those necessary for an
understanding of MidSouth's financial statements. The
discussion should be read in conjunction with MidSouth's
consolidated financial statements and the notes thereto
presented herein.
OVERVIEW
Net income for the year ended December 31, 1999 totaled
$2,650,204 compared to $2,445,783 for the year ended
December 31, 1998. Basic earnings per common share were
$1.03 and $.95 for the two twelve-month periods, respectively.
Annual diluted earnings per share were $.90 for December 31,
1999 and $.83 for December 31, 1998. Earnings improved
primarily due to increased net interest income and non-interest
income. System upgrades, staff development and market
development campaigns increased operating expenses in annual
comparisons, but resulted in an 11% growth in assets over the
past twelve months. Consolidated assets totaled $276.7 million
at December 31, 1999, up $26.9 million over the $249.8
million at December 31, 1998.
Net interest income improved in annual comparison due to a
higher volume of earning assets. Non-interest income increased
14% 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 twelve months ended
December 31, 1999 as compared to December 31, 1998.
Increased expenses were recorded primarily in salaries and
benefits and occupancy expenses. Increases recorded in other
expenses such as ATM processing and VISA program
expenses were partially offset by increased income from these
products. The increased expenses reflect MidSouth's
investment to strengthen its infrastructure in order to support
recent and anticipated growth.
MidSouth recorded a 9% increase in deposits during the past
twelve months. Deposits totaled $251.7 million at December
31, 1999, up $21.8 million from $229.9 million at December
31, 1998. The majority of the growth over the past twelve
months resulted from two deposit promotions designed to
increase MidSouth's market share. The first promotion resulted
in additional deposits totaling $27.5 million as of the end of the
promotion on May 31, 1999. Cash flows from the increase in
deposits were used to fund loans and securities purchases. A
total of $12 million in additional deposits resulted from the
second deposit promotion held during the fourth quarter of
1999. The increased cash flows from the second deposit
promotion were used to reduce short-term borrowings.
Loans, net of Allowance for Loan Losses ("ALL"), increased
$14.9 million or 10%, from $153.6 million at December 31,
1998 to $168.5 million at December 31, 1999. The majority of
the loan growth occurred in the commercial and real estate
portfolios. Provisions for loan losses totaled $906,950 for the
year ended December 31, 1999 compared to $999,950 for the
year ended December 31, 1998.
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Nonperforming loans as a percentage of total loans decreased
from .34% in December of 1998 to .14% in December of 1999
primarily due to the transfer of commercial real estate credits to
other real estate owned. The transfer of these credits increased
nonperforming assets by $228,940 in annual comparison, from
$607,740 at December 31, 1998 to $836,680 at December
31, 1999. The ALL represented 235% of nonperforming
assets as of December 31, 1999, as compared to 306% as of
December 31, 1998.
MidSouth's leverage ratio was 6.23% for the year ended
December 31, 1999, compared to 6.06% for the year ended
December 31, 1998. Return on average common equity was
17.45% compared to 19.16% for the same periods,
respectively. Annualized return on average assets was .97% for
1999 compared to 1.04% for 1998.
EARNINGS ANALYSIS
Net Interest Income
The primary source of earnings for MidSouth is net interest
income, which is the difference between interest earned on
loans and investments and interest paid on deposits and other
liabilities. Changes in the volume and mix of earning assets and
interest-bearing liabilities combined with changes in market rates
of interest greatly affect net interest income. Tables 1 and 2
analyze the changes in net interest income for each of the three
years in the period ended December 31, 1999.
Net interest income increased $1,360,174 for 1999 over 1998
and $1,941,985 for 1998 over 1997. The increase in net
interest income for 1999 resulted primarily from growth in
MidSouth's loan and investment portfolios. Loan growth was
the primary factor resulting in increased net interest income for
1998. Average loans as a percentage of average earnings
assets increased from 61% in 1997 to 67% in 1998 and
decreased slightly to 65% in 1999. Interest income from loans,
including loan fees, increased $1,479,858 from 1998 to 1999
and $3,177,276 from 1997 to 1998.
The increased interest income resulted from increases in
average loan volume of $17.4 million or 12% in 1999 and
$32.3 million or 29% in 1998. Average yield on total loans
decreased 19 basis points, from 10.25% in 1998 to 10.06% in
1999. A decrease of 11 basis points was recorded in 1998,
from 10.36% in 1997 to 10.25%. For the higher volume
commercial loan portfolio, average yields fell from 10.24% in
1997 to 9.92% in 1998, and to 9.58% in 1999, primarily due
to pricing competition from national and regional banks in
MidSouth's market. In addition, New York's prime lending
rate fell 50 basis points during the fourth quarter of 1998.
MidSouth followed with a 50 basis point drop in its internal
prime lending rate in November 1998. New York prime
increased 75 basis points in 1999, however MidSouth
increased its prime only 50 basis points late in the fourth quarter
of 1999. Average yields in the installment portfolio rose from
10.63% in 1997 to 11.18% in 1998 and to 11.60% in 1999.
The installment portfolio yield benefited from the Finance
Company's loans, which averaged $1.6 million and yielded an
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average rate of 24% in 1999. Credit card loans averaging $1.2
million with an average yield of 18% within the installment
portfolio also contributed to the increased average yield. In
addition, insurance premium financing loans acquired with the
purchase of TMC Financial Services, Inc. ("TMC") in May
1999, boosted the installment yield with an average rate of 26%
earned on an average portfolio of $1.7 million. The Finance
Company and credit card portfolios also increased average
consumer loan yields for 1998.
During the second quarter of 1999, excess funds from a deposit
promotion were invested in the securities portfolio, increasing
the average volume for the year by $17.6 million, from $59.2
million in 1998 to $76.8 million in 1999. The increased volume
was primarily responsible for the $998,004 increase in interest
income from securities in 1999. The average volume of
investment securities decreased $4.8 million in 1998, primarily
due to increased loan funding. The average volume of taxable
securities declined $7.3 million in 1998, partially offset by an
increase of $2.6 million in the average volume of tax-exempt
securities. The net decrease in the average volume was
primarily responsible for a decrease in interest income of
$295,403 in 1998. Changes in the yields on investment
securities had very little impact on interest income in 1999 and
1998.
During 1999, MidSouth's deposit mix continue to shift slightly
with non-interest bearing deposits representing 24% of average
total deposits as compared to 25% in 1998 and 26% in 1997.
As of December 31, 1999, 37% of average total deposits were
NOW, money market and savings deposits and 39% were
certificates of deposit (CD's). For year-ended December 31,
1998, NOW, money market and savings deposits represented
39% of average total deposits, while 36% consisted of CD's.
The shift to a higher percentage of CD's in 1999 resulted
primarily from a deposit promotion in the fourth quarter of
1999. The promotion resulted in the addition of approximately
$12 million in CD's with an APY of 6% for six months with the
option to renew for an additional six months at maturity. For
the year ended December 31, 1997, 39% of average total
deposits represented NOW, money market and savings
deposits and certificates of deposit amounted to 35%.
Volume increases in interest-bearing deposits for the years
ended December 31, 1999 and 1998 resulted in increased
interest expense of $739,263 in 1999 and $1,010,911 in
1998. Average interest-bearing deposits increased $24.2
million in 1999 and $23.2 million in 1998. The average rate
paid on these deposits fell 15 basis points to 3.95% in 1999
from 4.10% in 1998, after increasing 7 basis points from 4.03%
in 1997. The rate decrease in 1999 resulted from the loss of
approximately $18.2 million in higher cost public funds during
the third quarter. Withdrawal of the public fund money
necessitated borrowing from the Federal Home Loan Bank
("FHLB") during 1999. FHLB advances averaged $4.0 million
for the year at a rate of 5.45%. Together with securities sold
under repurchase agreements and federal funds purchased, the
advances added $219,119 in interest expense for 1999.
The average volume of notes payable increased slightly in 1999,
however a decrease in rates resulted in a minimal decrease in
interest expense on long-term debt for that year. An increase in
the average rate on long-term debt resulted in increased interest
expense of $26,452 in 1998.
10
<PAGE>
<TABLE>
<CAPTION>
Table 1
Consolidated Average Balances, Interest and Rates
Taxable-equivalent basis (2)
(in thousands)
1999 1998 1997
_______________________________________________________________________________
Average Average Average
Average Yield/ Average Yield/ Average Yield/
Volume Interest Rate Volume Interest Rate Volume Interest Rate
_______________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest Bearing Deposits $104 $1 0.96% $37 $2 5.41% $76 $5 6.58%
Investment Securities <FN1>
Taxable 54,894 3,277 5.97% 41,455 2,458 5.93% 48,784 2,881 5.91%
Tax Exempt <FN2> 21,850 1,593 7.29% 17,740 1,334 7.52% 15,151 1,146 7.56%
_________________ ________________ _______________
Total Investments 76,848 4,871 6.34% 59,232 3,794 6.41% 64,011 4,032 6.30%
Federal Funds Sold and Securities
Purchased Under Agreements to Resell 8,797 406 4.62% 10,885 568 5.22% 8,758 470 5.37%
Loans <FN3>
Commercial and Real Estate 123,836 11,868 9.58% 106,584 10,570 9.92% 77,039 7,891 10.24%
Installment 38,058 4,415 11.60% 37,872 4,233 11.18% 35,152 3,735 10.63%
_________________ ________________ _______________
Total Loans 161,894 16,283 10.06% 144,456 14,803 10.25% 112,191 11,626 10.36%
Total Earning Assets 247,539 21,560 8.71% 214,573 19,165 8.93% 184,960 16,128 8.72%
Allowance for Loan Losses (1,857) (1,572) (1,415)
Nonearning Assets 27,035 22,766 21,182
________ ________ ________
Total Assets $272,717 $235,767 $204,727
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
NOW, Money Market, and Savings $91,559 $2,632 2.87% $83,598 $2,555 3.06% $73,844 $2,202 2.98%
Certificates of Deposits 95,109 4,739 4.98% 78,907 4,108 5.21% 65,492 3,415 5.21%
_________________ ________________ _______________
Total Interest Bearing Deposits 186,668 7,371 3.95% 162,505 6,663 4.10% 139,336 5,617 4.03%
Federal Funds Purchased and Securities
Sold Under Agreements to Repurchase 683 35 5.12% 64 3 4.69% 632 39 6.17%
FHLB Advances 4,021 219 5.45% - - - -
Notes Payable 3,393 263 7.75% 3,381 265 7.84% 3,301 238 7.21%
_________________ ________________ _______________
Total Interest Bearing Liabilities 194,765 7,888 4.05% 165,950 6,931 4.18% 143,269 5,894 4.11%
Demand Deposits 60,192 54,601 48,480
Other Liabilities 1,127 969 844
Stockholders' Equity 16,633 14,247 12,134
________ ________ ________
Total Liabilites and Stockholders' Equity $272,717 $235,767 $204,727
======== ======== ========
NET INTEREST INCOME AND NET INTEREST SPREAD $13,672 4.66% $12,234 4.75% $10,234 4.61%
======= ======= =======
NET YIELD ON EARNING ASSETS 5.52% 5.70% 5.53%
<FN1>Securities classified as available-for-sale are included in average
balances and interest income figures reflect interest earned on such
securities.
<FN2>Interest income of $488,000 for 1999, $410,000 for 1998, and $352,000
for 1997 is added to interest earned on tax-exempt obligations to reflect
tax equivalent yields using a 34% tax rate.
<FN3>Interest income includes loan fees of $1,144,000 for 1999, $1,062,000
for 1998, and $902,000 for 1997. Nonaccrual loans are included in
average balances and income on such loans is recognized on a cash basis.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Table 2
Changes in Taxable-Equivalent Net Interest Income
(in thousands)
1999 Compared to 1998 1998 Compared to 1997
_____________________________________ ___________________________________________
Total Total
Increase Change Attributable To Increase Change Attributable To
(Decrease) Volume Rates (Decrease) Volume Rates
_____________________________________ ___________________________________________
<S> <C> <C> <C> <C> <C> <C>
Taxable-equivalent interest earned on:
Interest Bearing Deposits ($1) $1 ($2) ($3) ($2) ($1)
Investment Securities
Taxable 819 802 17 (423) (435) 12
Tax Exempt 259 298 (39) 188 195 (7)
Federal Funds Sold and Securities
Purchased Under Agreement to Resell (162) (101) (61) 98 111 (13)
Loans, including fees 1,480 1,748 (268) 3,177 3,304 (127)
_______ _____________________ ___________________________________________
TOTAL 2,395 2,748 (353) 3,037 3,173 (136)
_______ _____________________ ___________________________________________
Interest Paid On:
Interest Bearing Deposits 708 942 (234) 1,046 948 98
Federal Funds Purchased and Securities
Sold Under Agreement to Repurchase 32 32 - (36) (28) (8)
FHLB Advances 219 219 - - - -
Notes Payable (2) 1 (3) 27 6 21
_______ _____________________ ___________________________________________
TOTAL 957 1,194 (237) 1,037 926 111
_______ _____________________ ___________________________________________
Taxable-equivalent net interest income $1,438 $1,554 ($116) $2,000 $2,247 ($247)
======= ===================== ===========================================
NOTE: Changes due to both volume and rate have been allocated to
volume and rate changes in proportion to the relationship
of the absolute dollar amounts to the changes in each.
</TABLE>
The volume changes in MidSouth's earning assets and interest-
bearing liabilities combined with changes in interest rates
resulted in net taxable-equivalent yields on average earning
assets of 5.52% in 1999 as compared to 5.70% for 1998 and
5.53% for 1997.
Non-Interest Income
Excluding Securities Transactions. Service charges and
fees on deposit accounts represent the primary source of non-
interest income for MidSouth. Income from service charges
and fees on deposit accounts (including ATM fees) and
insufficient funds fees increased $365,121 in 1999 and
$504,947 in 1998 primarily due to an increase in the number of
transaction accounts and ATM machines serviced and the
volume of insufficient funds checks processed by MidSouth.
The total number of transaction accounts (excluding savings
accounts) increased from 19,001 in 1997, to 22,640 in 1998
and to 24,655 in 1999. Income earned through ATM fees
totaled $156,050 in 1999; however, expenses incurred in
providing ATM services totaled $229,763. Non-interest
income resulting from other charges and fees increased
$102,641 in 1999 as compared to $234,815 in 1998. Of the
$102,641 increase in 1999, $70,889 is related to fee income
from MidSouth's Visa debit cards and merchant programs.
However, this increase is offset by a $76,735 increase in
expenses on the Visa programs. An increase of $48,485 in
income from a third party mortgage program contributed to the
increase in other non-interest income for 1999. Fees earned
through the sale of credit life insurance increased $25,797 in
1999 after experiencing a decrease of $57,373 in 1998.
Securities Transactions. No income was realized through the
sale of securities in 1999 and 1998. In June 1997, $7.5 million
in adjustable rate mortgage securities in the available-for-sale
portfolio were sold to reposition the securities portfolio at a net
gain of $127,934. At the same time, management liquidated a
$1.0 million investment in a mutual fund at a loss of $42,578.
Non-interest Expense
Total non-interest expense increased 16% from 1998 to 1999
and 15% from 1997 to 1998. MidSouth's expansion over the
past three years resulted in significant increases in salaries and
employee benefits, occupancy expenses, marketing expenses,
data processing expenses, and the cost of printing and supplies.
These increases reflect MidSouth's long term investment in
staff development, system upgrades, and market penetration.
During 1997, MidSouth opened a Morgan City office and two
Finance Company offices. In May 1998, the new Lake
Charles office was opened to provide full service banking in
Calcasieu Parish. A new Ambassador Caffery office building
was completed and opened in September of 1998. In the third
quarter of 1999, a seventh Lafayette office was opened on
Ambassador Caffery at Dulles, providing banking convenience
to the Scott community. Late in the fourth quarter of 1999,
renovations were completed on an office in Sulphur, Louisiana,
expanding MidSouth's presence in Calcasieu Parish. The
Finance Company also added to MidSouth's coverage of the
Calcasieu Parish market by opening its third location in Lake
Charles during the fourth quarter of 1999.
13
<PAGE>
Accordingly, salaries and employee benefits increased 14%
from 1998 to 1999 and 17% from 1997 to 1998. The number
of full-time equivalent ("FTE") employees increased from 152 in
1998 to 176 in 1999. New hires in 1999 included twelve
employees to staff the Dulles and Sulphur offices, a card
services coordinator, a retail manager for the Lafayette market,
a marketing analyst, and two Finance Company employees. In
addition, five employees manage the insurance premium
financing portfolio acquired with TMC in May of 1999.
MidSouth increased its FTE employees by 13 in 1998, from
139 in 1997 to 152.
Occupancy expenses increased $489,763 or 21% from 1998
to 1999 and $196,810 or 9% from 1997 to 1998 as a result of
increases in building, furniture and equipment depreciation and
maintenance expenses, ad valorem taxes, janitorial services and
utilities. During 1999, premises and equipment totaling
$3,488,024 were purchased, including the new Lafayette Dulles
office and Sulphur office properties, buildings, and furniture and
equipment, and an office building in New Iberia. The
Sulphur office opened in January 2000 to expand MidSouth's
presence in Calcasieu Parish. The third New Iberia office will
be opened in the second quarter of 2000. Premises and
equipment purchases in 1998 totaled $3,063,110 and included
the Lake Charles and Ambassador Caffery offices, ATM cash
machines, renovations at the Moss Street and Cecilia offices,
and computer hardware and software purchases.
Additional increases were recorded in 1999 in marketing
expense, data processing expenses, postage costs and
telephone services. Of these increases, marketing expense
recorded the most significant increase with additional costs of
$116,770. The majority of the increase resulted from deposit
incentives paid during a deposit campaign held during the first
and second quarters of 1999.
Income Taxes
MidSouth's tax expense increased in 1999 by $25,250 and
approximated 25% of income before income taxes. Interest
income on non-taxable municipal securities reduced the 1999
taxes from the expected statutory rate of 34%. Interest income
on non-taxable municipal securities also lowered the effective
tax rate for 1998 to approximately 26%. Notes 1 and 9 to
MidSouth's Consolidated Financial Statements provide
additional information regarding MidSouth's income tax
considerations.
BALANCE SHEET ANALYSIS
Securities
Total investment securities increased $13.8 million, from $63.2
million in 1998 to $77.0 million in 1999. Cash flows from
maturing securities and deposit growth were used to purchase
$29.3 million in U.S. Treasury and Agency securities, corporate
bonds and tax-exempt municipal securities. A decrease of
$1,852,627 in the market value of securities available-for-sale
is included in the net change in 1999. Unrealized losses in the
securities available-for-sale portfolio, net of unrealized gains and
tax effect, were $948,430 at December 31, 1999, compared to
unrealized net gains of $276,700 at December 31, 1998.
14
<PAGE>
These amounts result from interest rate fluctuations and do not
represent permanent adjustments of value. Moreover,
classification of securities as available-for-sale does not
necessarily indicate that the securities will be sold prior to
maturity.
At December 31, 1999, approximately 34% of MidSouth's
securities available-for-sale portfolio represented mortgage-
backed securities and 17% represented collateralized mortgage
obligations ("CMO's"). MidSouth monitors the risks due to
changes in interest rates on mortgage-backed pools by monthly
reviews of prepayment speeds, duration, and purchase yields as
compared to current market yields on each security. The
majority of the CMO's represent FNMA and FHLMC
REMIC pools. Three of the FHLMC pools each had a book
value of approximately 12% of stockholders' equity at
December 31, 1999. All CMO's held by MidSouth are Aaa
rated and not considered "high-risk" securities under the
Federal Financial Institutions Examination Council ("FFIEC")
tests. MidSouth does not own any "high-risk" securities as
defined by the FFIEC. An additional 37% of the available-for-
sale portfolio consisted of U. S. Treasury and agency securities,
while municipal and other securities represented 12% of the
portfolio.
In the held-to-maturity portfolio, MidSouth purchased $2.0
million in non-taxable municipal securities in 1999 and $2.5
million in 1998. A detailed credit analysis was performed on
each municipal offering by an investment advisory firm prior to
purchase. In addition, MidSouth limits the amount of securities
of any one municipality purchased and the amount purchased
within specific geographic regions to reduce the risk of loss
within the non-taxable municipal securities portfolio.
Loan Portfolio
MidSouth's loan portfolio grew $15.0 million during 1999, from
$155.5 million at December 31, 1998 to $170.5 million at
December 31, 1999. The majority of the loan growth occurred
in the second and third quarters of 1999 as business activity
increased in MidSouth's markets. The commercial loan and
real estate portfolios each added approximately $7.0 million in
loans during 1999. The real estate loan growth consisted of
both commercial and consumer credits that carry ten to fifteen
year amortizations with rates fixed for three to five years. The
short term fixed rate structure of these credits allows
management greater flexibility in controlling interest rate risk. In
addition, the Bank purchased an insurance premium financing
company in May 1999, which added approximately $3.0
million to the loan portfolio. Decreases were noted in lease
financing, construction, and installment loans.
Total loans grew 19% in 1998, from $130,888,144 at year-end
1997 to $155,477,263 at year-end 1998. Of the $24.6 million
increase during 1998, $17.1 million resulted from an increase in
real estate mortgage and construction loans. These loans were
funded primarily in the Lafayette and Morgan City market with
the efforts of two new commercial lenders. The commercial
loan portfolio grew $7.6 million during 1998 and lease financing
receivables increased $.9 million within MidSouth's direct
leasing program. Installment loans to individuals decreased
$1.0 million during 1998 due to a combination of high credit
quality requirements and a restructuring of the retail delivery
system which included central loan underwriting. As a quality
15
<PAGE>
control tool, the program is expected to maintain the quality and
consistency of the installment loan portfolio as the economy
softens.
MidSouth has maintained its credit policy and underwriting
procedures and has not relaxed these procedures to stimulate
loan growth. Completed loan applications, credit bureau
reports, financial statements and a committee approval process
remain a part of credit decisions. Documentation of the loan
decision process is required on each credit application, whether
approved or denied, to insure thorough and consistent
procedures.
Asset Quality
Credit Risk Management. MidSouth manages its credit risk
by diversifying its loan portfolio, determining that borrowers
have adequate cash flows for loan repayment, obtaining and
monitoring collateral and continuously reviewing outstanding
loans. The risk management program requires that each
individual loan officer review his or her portfolio on a quarterly
basis and recommend credit gradings on each loan. The senior
loan officer and loan review officer review the gradings. In
addition, the loan review officer performs an independent
evaluation annually of each commercial loan officer's portfolio
and a random sampling of credits in MidSouth's installment loan
portfolio.
Nonperforming Assets. Table 3 contains information about
MidSouth's nonperforming assets and loans past due 90 days
or more and still accruing.
Nonperforming assets totaled $836,680 at December 31,
1999, $607,740 at December 31, 1998 compared to
$319,209 at December 31, 1997. The increase in
nonperforming assets in 1999 resulted from the addition of two
commercial credits and one consumer credit that were
transferred to Other Real Estate Owned. Of the $234,962 in
nonaccrual loans for year end 1999, $47,874 are nonaccrual
loans held by the Finance Company.
Loans past due 90 days and still accruing totaled $793,823 at
December 31, 1999 compared to $329,116 at December 31,
1998 and $245,232 at December 31, 1997. Of the $793,823
in past dues for year end 1999, $116,651 are past dues
reported by the Finance Company.
Loans to commercial borrowers are placed on nonaccrual when
principal or interest is 90 days past due, or sooner if the full
collectability of principal or interest is doubtful, except if the
underlying collateral supports both the principal and accrued
interest and the loan is in the process of collection. Retail loans
that are not placed on nonaccrual but that become 120 days
past due are routinely charged off. Loans classified for
regulatory purposes but not included in Table 3 do not
represent material credits about which management has serious
doubts as to the ability of the borrower to comply with the loan
repayment terms.
16
<PAGE>
<TABLE>
<CAPTION>
TABLE 3
Nonperforming Assets and
Loans Past Due 90 Days
==========================================================================
December 31,
___________________________________________
1999 1998 1997
==========================================================================
<S> <C> <C> <C>
Nonperforming loans $234,962 $533,107 $260,875
Other real estate owned, net 569,963 48,100 45,100
Other assets repossessed 31,755 26,533 13,234
________ ________ ________
Total nonperforming assets $836,680 $607,740 $319,209
======== ======== ========
Loans past due 90 days
or more and still accruing $793,823 $329,116 $245,232
Nonperforming loans as a
% of total loans 0.14% 0.34% 0.20%
Nonperforming assets as a
% of total loans, other real
estate owned and other assets
repossessed 0.49% 0.39% 0.24%
Allowance for loan losses
as a % of nonperforming asse 235.13% 306.13% 340.78%
==========================================================================
</TABLE>
17
<PAGE>
Allowance for Loan Losses. Provisions totaling $906,950,
$999,950, and $854,400 for the years 1999, 1998 and 1997,
respectively, were necessary to bring the allowance to a level
considered by management to be sufficient to cover probable
losses in the loan portfolio. Additional provisions were made in
1999 due primarily to loan growth and charge-off experience in
loans during the year. Provisions made in 1998 were primarily
due to growth in the portfolio. Loan growth combined with
installment loan charge-offs resulted in increased provisions for
1997. Table 4 analyzes activity in the allowance for 1999 and
1998.
The allowance is comprised of specific reserves (assigned to
each loan that is impaired or for which probable loss has been
identified) and an unallocated reserve. Specific reserves within
the allowance are allocated to loans on a nonaccrual status for
which the underlying collateral value is insufficient to cover the
principal remaining on the loan. Factors contributing to the
assignment of specific reserves include the financial condition of
the borrower, changes in the value of collateral and economic
conditions. A portion of the unallocated reserve is assigned to
accruing loans that are classified for regulatory purposes. The
remainder of the allowance represents a percentage of all other
credits based on gradings assigned in the loan review process.
Quarterly evaluations of the allowance are performed in
accordance with Section 217 of the OCC's manual and
Banking Circular 201. Factors considered in determining
provisions include estimated future losses in significant credits;
known deterioration in concentrations of credit; historical loss
experience; trends in nonperforming assets; volume, maturity
and composition of the loan portfolio; off balance sheet credit
risk; lending policies and control systems; national and local
economic conditions; the experience, ability and depth of
lending management and the results of examinations of the loan
portfolio by regulatory agencies and others. The process by
which management determines the appropriate level of the
allowance, and the corresponding provision for possible credit
losses, involves considerable judgment; therefore, no assurance
can be given that future losses will not vary from current
estimates.
18
<PAGE>
<TABLE>
<CAPTION>
TABLE 4 - Summary of Loan Loss Experience
(in thousands)
1999 1998
______ ______
<S> <C> <C>
BALANCE AT BEGINNING OF YEAR $1,860 $1,415
CHARGE-OFFS
Commercial, Financial and Agricultural 282 201
Real Estate - Construction - -
Real Estate - Mortgage - -
Installment Loans to Individuals 599 368
Lease Financing Receivables 33 84
Other 27 49
______ ______
Total Charge-offs 941 702
______ ______
RECOVERIES
Commercial, Financial and Agricultural 11 32
Real Estate - Construction - -
Real Estate - Mortgage 2 4
Installment Loans to Individuals 122 79
Lease Financing Receivables 1 27
Other 5 6
______ ______
Total Recoveries 141 148
______ ______
Net Charge-offs 800 554
Additions to allowance charged to
operating expenses 907 1,000
______ ______
BALANCE AT END OF YEAR $1,967 $1,861
====== ======
Net charge-offs to average loans 0.49% 0.38%
Year-end allowance to year-end loans 1.15% 1.20%
</TABLE>
Refer to "Balance Sheet Analysis - Asset Quality -
Allowance for Loan Losses" for a description of the
factors which influence management's judgement in
determining the amount of the provisions to the
allowance.
<TABLE>
<CAPTION>
% of
% of category
category to total
Allowance for Loan Losses 1999 to total 1998 loans
_______________________________________________________________________________
<S> <C> <C> <C> <C>
Commercial, Financial and Agricultural 72 33.20% 60 31.87%
Real Estate - Construction 1.93% 2.73%
Real Estate - Mortgage 43.80% 43.71%
Installment Loans to Individuals 17.52% 17.94%
Lease Financing Receivables 3.00% 3.67%
Other 0.55% 0.08%
Unallocated 1,895 1,801
____________________________________
$1,967 100.00% $1,861 100.00%
====================================
</TABLE>
Sources of Funds
Deposits. In 1999, MidSouth focused on increasing market
share by strengthening existing client relationships and attracting
new relationships. Total deposits increased $21.8 million, from
$229.9 million at December 31, 1998 compared to $251.7
million at December 31, 1999. In March of 1999, MidSouth
introduced a deposit promotion that provided incentives to
employees for new deposit and loan relationships. The
promotion resulted in additional deposits of $27.5 million as of
the end of the campaign on May 31, 1999. The $27.5 million
increase was partially offset in the third quarter of 1999 by the
withdrawal of approximately $18.2 million in deposits held
under a public fund contract. MidSouth bid on renewal of the
contract, but was not awarded the bid and the contract expired
on June 30, 1999. During the fourth quarter of 1999,
MidSouth offered a CD promotion in selected markets that
offered a 6.0% APY on a six month CD with the option to
renew for a second six month period at maturity. A total of
$12.0 million in CD's were added to MidSouth's deposit base
through this promotion.
During 1998, MidSouth continued to focus on the execution of
a sales culture introduced in 1997. This sales focus, combined
with big bank mergers creating an uncertain banking
environment in MidSouth's markets, provided the opportunity
for MidSouth to significantly increase its deposit base for 1998.
MidSouth's deposits grew $29.9 million, from $200.0 million in
1997 to $229.9 million in 1998. A total of $14.8 million of the
19
<PAGE>
$29.8 million increase was realized in the Lafayette market as a
direct result of marketing efforts directed to customers effected
by merger activity. The Morgan City office grew $9.7 million in
its first year of operation, while MidSouth's newest office in
Lake Charles contributed $4.8 million to the increase in
deposits.
Non-interest bearing deposits represented 25% of total
deposits at December 31, 1999 and 26% at December 31,
1998. Core deposits, defined as all deposits other than
certificates of deposit ("CD's") of $100,000 or more,
represented 83% of total deposits at December 31, 1999 and
1998. CD's of $100,000 or more totaled $41.7 million at
year-end 1999, an increase of $3.0 million from the $38.7
million reported at year-end 1998. Additional CD's of
$100,000 or more were deposited in response to specific
market promotions that offered premium rates for a limited time
on new deposits.
MidSouth's deposit rates are competitive within its market and
MidSouth has no brokered deposits. Although time deposits of
$100,000 can exhibit greater volatility due to changes in interest
rates and other factors than do core deposits, management
believes that any volatility experienced could be adequately met
with current levels of asset liquidity or access to alternate
funding sources. Additional information on MidSouth's deposits
appears in Note 6 to MidSouth's Consolidated Financial
Statements.
Borrowed Funds. Long term borrowings decreased $44,571
from December 31, 1998 to December 31, 1999. The
decrease resulted primarily from a decrease in long-term FHLB
advances of $162,572. MidSouth borrowed $75,000 under its
line of credit for operating expenses during 1999. The Finance
Company borrowed an additional $115,000 under its line of
credit , $72,000 of which was paid out prior to year-end 1999.
Advances under the line of credit bear interest at a variable rate
equal to the prime commercial rate of interest quoted in the
"Money Rates" section of the Wall Street Journal minus fifty
basis points (.50%). The current rate is 8.00%. Interest under
the note is due and payable quarterly. Beginning June 30,
2000, principal payments in the amount of 12.50% of the
amount of the loan balance on June 30, 2000 are due and
payable in seven consecutive annual installments with an eighth
and final installment on June 30, 2007.
The Finance Company renewed its line $1,200,000 line of
credit on May 3, 1999. Advances under the line of credit bear
interest at a variable rate equal to the commercial prime rate as
quoted in the "Money Rates" section of the Wall Street Journal
plus 25 basis points (0.25%). The current rate is 8.75%.
Interest on the line is payable monthly, with principal due at
maturity on May 1, 2000.
Additional information regarding long-term debt is provided in
Note 7 to MidSouth's Consolidated Financial Statements.
The ESOP note held by the Bank was refinanced in the amount
of $150,000 on March 11, 1997 at a fixed rate of 7.00%
payable in monthly installments of $2,264 with payment in full
due on March 10, 2004. The ESOP obligation constitutes a
reduction of MidSouth's stockholders' equity because the
primary source of loan repayment is contributions by the Bank
20
<PAGE>
to the ESOP; however, the loan is not guaranteed by MidSouth
Bank or MidSouth. The ESOP note is eliminated from total
loans and long-term debt as an intercompany balance in
MidSouth's December 31, 1998 and 1999 consolidated
financial statements.
Capital. MidSouth and the Bank are required to maintain
certain minimum capital levels. Risk-based capital requirements
are intended to make regulatory capital more sensitive to the
risk profile of an institution's assets. At December 31, 1999,
MidSouth and the Bank were in compliance with statutory
minimum capital requirements. Minimum capital requirements
include a total risk-based capital ratio of 8.0%, with Tier 1
capital not less than 4.0%, and a leverage ratio (Tier 1 to total
average adjusted assets) of 4.0% based upon the regulators
latest composite rating of the institution. As of December 31,
1999, MidSouth's Tier 1 capital to average adjusted assets (the
"leverage ratio") was 6.23% as compared to 6.06% at
December 31, 1998. Tier 1 capital to risk weighted assets was
9.49% and 9.13% for 1999 and 1998, respectively. Total
capital to risk weighted assets was 10.57% and 10.25%,
respectively, for the same periods. The Bank's leverage ratio
was 6.79% at December 31, 1999 compared to 6.67% at
December 31, 1998.
The Federal Deposit Insurance Corporation Improvement Act
of 1991 established a capital-based supervisory system for all
insured depository institutions that imposes increasing
restrictions on the institution as its capital deteriorates. The
Bank continued to be classified as "well capitalized" throughout
1997, 1998 and 1999 and also improved its supervisory
subgroup rating. No significant restrictions are placed on the
Bank as a result of this classification.
As discussed under the heading "Balance Sheet Analysis -
Securities," $948,430 in unrealized losses on securities
available-for-sale, net of a deferred tax asset of $468,500, was
recorded as a reduction to stockholders' equity as of December
31, 1999. As of December 31, 1998, $276,700 in unrealized
gains on securities available-for-sale, net of a deferred tax
liability of $159,000, was recorded as an addition to
stockholders' equity. While the net unrealized gain or loss on
securities available for sale is required to be reported as a
separate component of stockholders' equity, it does not affect
operating results or regulatory capital ratios. The net unrealized
gains and losses reported for December 31, 1999 and 1998
did, however, effect MidSouth's equity to assets ratio for
financial reporting purposes. The ratio of equity to assets was
6.12% at year-end 1999 and 6.28% at year-end 1998.
Interest Rate Sensitivity. Interest rate sensitivity is the
sensitivity of net interest income and economic value of equity to
changes in market rates of interest. The initial step in the
process of monitoring MidSouth's interest rate sensitivity
involves the preparation of a basic gap analysis of earning assets
and interest-bearing liabilities. The analysis presents differences
in the repricing and maturity characteristics of earning assets and
interest-bearing liabilities for selected time periods.
During 1999, MidSouth utilized the Sendero model of asset and
liability management. The Sendero model uses basic gap data
and additional information regarding rates and prepayment
characteristics to construct a gap analysis that factors in
repricing characteristics and cash flows from payments received
on loans and mortgage-backed securities. The resulting
21
<PAGE>
Sendero gap analysis is presented in Table 5.
With the exception of NOW, money market and savings
deposits, the table presents interest-bearing liabilities on a
contractual basis. While NOW, money market and savings
deposits are contractually due on demand, historically,
MidSouth has experienced stability in these deposits despite
changes in market rates. Presentation of these deposits in the
table, therefore, reflects delayed repricing throughout the time
horizon.
The resulting cumulative gap at one year is approximately
($2,377,000) at December 31, 1999. The minimal negative gap
indicates MidSouth's total earning assets and interest-bearing
liabilities maturing within one year are closely matched and the
ratio of the one-year cumulative gap to total assets of (.86)% is
within internal policy guidelines. MidSouth's internal policy
targets a one-year cumulative gap position of a positive or
negative 15% of total assets.
The Sendero model also uses the gap analysis data in Table 5
and additional information regarding rates and payment
characteristics to perform three simulation tests. The tests use
market data to perform rate shock, rate cycle and rate forecast
simulations to measure the impact of changes in interest rates,
the yield curve and interest rate forecasts on MidSouth's net
interest income and economic value of equity. Results of the
simulations at December 31, 1999 were within policy
guidelines. The results of the simulations are reviewed quarterly
and discussed at MidSouth's Funds Management committee
meetings.
MidSouth does not invest in derivatives and has none in its
securities portfolio.
22
<PAGE>
<TABLE>
<CAPTION>
Table 5
Interest Rate Sensitivity and Gap Analysis Table
December 31, 1999
(in thousands)
Non-interest
0-3 MOS 4-6 MOS 7-12 MOS 1-5 YRS > 5YRS Bearing Total
___________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest Bearing Deposits $356 $ - $ - $ - $ - $ - $356
Fed Funds Sold 900 900
Investments
Mutual Funds 961 961
Investment Securities 1,170 3,263 4,993 14,324 22,541 46,291
Mortgage-backed
Securities 1,781 1,424 2,802 16,711 7,007 29,725
Loans
Fixed Rate 29,911 14,884 24,610 55,840 1,417 126,662
Variable Rate 43,807 43,807
Other Assets 29,989 29,989
Allowance for Loan Losses (1,967) (1,967)
___________________________________________________________________________
Total Assets $78,886 $19,571 $32,405 $86,875 $30,965 $28,022 $276,724
===========================================================================
LIABILITIES
NOW $2,351 $2,462 $4,242 $15,280 $3,855 $28,190
MMDA 7,224 6,017 9,314 21,081 1,406 45,042
Savings 1,122 1,019 1,757 6,326 1,597 11,821
CD'S 30,662 39,150 22,901 10,256 102,969
Demand Deposits 63,669 63,669
Other Liabilities 3,607 1,411 1,266 782 1,042 8,108
Stockholders' Equity 16,925 16,925
___________________________________________________________________________
Total Liabilities $44,966 $50,059 $38,214 $54,209 $7,640 $81,636 $276,724
===========================================================================
Repricing/maturity gap:
Period $33,920 ($30,488) ($5,809) $32,666 $23,325 ($53,614)
Cumulative $33,920 $3,432 ($2,377) $30,289 $53,614 $ -
===========================================================================
Cumualtive Gap/Total Assets 12.26% 1.24% -0.86% 10.95% 19.37%
______________________________________________________
</TABLE>
23
<PAGE>
Liquidity
Bank Liquidity. Liquidity is the availability of funds to meet
contractual obligations as they become due and to fund
operations. The Bank's primary liquidity needs involve its ability
to accommodate customers demands for deposit withdrawals
as well as their requests for credit. Liquidity is deemed
adequate when sufficient cash to meet these needs can be
promptly raised at a reasonable cost to the Bank.
Liquidity is provided primarily by three sources: a stable base
of funding sources, an adequate level of assets that can be
readily converted into cash, and borrowing lines with
correspondent banks. MidSouth's core deposits are its most
stable and important source of funding. Further, the low
variability of the core deposit base lessens the need for liquidity.
Cash deposits at other banks, federal funds sold and principal
payments received on loans and mortgage-backed securities
provide primary sources of asset liquidity for the Bank.
Approximately $9.0 million in securities maturing within twelve
months provides an additional source of liquidity. These
securities could be liquidated if necessary prior to maturity.
MidSouth also has borrowing lines with three correspondent
banks, including significant borrowing capacity with the FHLB
of Dallas, Texas. The Bank borrowed an average of $4.0
million from FHLB under short-term advances during 1999 at
an average rate of 5.45%.
Parent Company Liquidity. At the parent company level,
cash is needed primarily to service outstanding debt and pay
dividends on preferred and common stock. The parent
company has a note payable to a financial institution, the terms
of which are described in Note 7 to MidSouth's Consolidated
Financial Statements. Funds to meet payments on notes in the
past several years have come primarily from the sale of
MidSouth's common stock to the Directors' Deferred
Compensation Trust and to the ESOP and from funds received
from the Bank under a tax sharing agreement with the parent
company. In addition, sales of MidSouth common stock
through a dividend reinvestment and direct stock purchase plan
(the "DRIP") introduced in 1998 contributed approximately
$206,000 and $538,000 to the cash flow of the parent
company 1999 and 1998, respectively. Funds received from
these sources are not expected to be sufficient to meet debt
service obligations throughout 2000. Common stock required
for the DRIP, for the Directors' Deferred Compensation Trust,
and for the ESOP will be purchased in the market during 2000
instead of through new issuances from the Company.
Dividends from the Bank will provide additional liquidity for the
parent company in 2000. As of January 1, 2000, the Bank had
the ability to pay dividends to the parent company of
approximately $2.5 million without prior approval from its
primary regulator. As a publicly traded company, MidSouth
also has the ability to issue trust preferred and other securities
instruments to provide additional funds as needed for operations
and future growth of the company.
Dividends. The primary source of cash dividends on
MidSouth's preferred and common stock is distributions from
the Bank. The Bank has the ability to declare dividends to the
parent company without prior approval of its primary regulator.
However, the Bank's ability to pay dividends would be
prohibited if the result would cause the Bank's regulatory capital
to fall below minimum requirements. The Bank paid dividends
totaling $375,000 to the Company in 1999.
Cash dividends totaling $434,334 and $492,415 were declared
to common stockholders during 1998 and 1999, respectively.
It is the intention of the Board of Directors of MidSouth to
continue to pay quarterly dividends on the common stock at the
rate of $.05 per share. Cash dividends on the common stock
are subject to payment of dividends on the Cumulative
Convertible Preferred Stock, Series A ("Preferred Stock")
issued in conjunction with the acquisition of Sugarland Bank, as
well as other considerations. Additional information regarding
MidSouth's Preferred Stock is included in Note 12 to
MidSouth's Consolidated Financial Statements.
On August 31, 1998, MidSouth effected a three for two stock
split by way of a stock dividend to its common shareholders of
record as of July 31, 1998. The stock split increased the
common shares outstanding at the time from 1,611,377 to
2,417,683. The conversion rate on the preferred stock was
24
<PAGE>
adjusted to 2.998 due to the stock split.
A total of $131,582 in dividends were declared on MidSouth's
Preferred Stock in 1999. Assuming no conversion of preferred
stock in 2000, the aggregate amount of dividends on the
preferred stock in 2000 is expected to be $156,927.
Year 2000
To maintain safe and sound banking practices, MidSouth took
appropriate measures to insure efficient operations of computer
systems beyond the year 2000. Beginning in June of 1997,
MidSouth's Board of Directors established a Year 2000
compliance committee. The committee identified mission critical
systems and completed testing and updating of these systems in
1999. To further reduce the risks associated with the century change,
MidSouth requested and received assurances of Year 2000
readiness from all material third party providers and customers.
Contingency plans to provide short-term and long-term
processing capabilities were developed and tested in 1999. In
addition, contingency plans for liquidity needs due to potentially
significant deposit withdrawals during the fourth quarter of 1999
were completed. As of January 31, 2000, MidSouth has not
experienced any processing errors other than those typically
encountered and corrected daily by banks. Management is not
aware of any significant issues related to the Year 2000 that had
an adverse affect on MidSouth's third party providers or
customers. MidSouth plans to continue to monitor processing
systems for possible remaining uncertainties. The costs incurred
with testing and preparation for the Year 2000 were not
significant to MidSouth's earnings.
25
<PAGE>
<TABLE>
<CAPTION>
MIDSOUTH BANCORP, INC.
LOAN PORTFOLIO
LOAN MATURITIES AND SENSITIVITY TO INTEREST RATES
for the Year Ended December 31, 1999
(dollars in thousands)
Fixed and Variable Rate
Loans at Stated Maturities Amounts Over One Year With
_______________________________________________________ ______________________________________
1 Year 1 Year - Over Predetermined Floating
or Less 5 Years 5 Years Total Rates Rates Total
_______________________________________________________ ______________________________________
<S> <C> <C> <C> <C> <C> <C> <C>
Commercial, Financial
Industrial, Commercial
Real Estate Mortgage
and Commercial Real
Estate - Constr $58,990 $46,188 $16,926 $122,104 $35,595 $27,519 $63,114
Installment Loans to
Individuals and Real
Estate Mortgage 22,917 20,015 158 43,090 17,317 2,856 20,173
Lease Financing
Receivables 560 4,560 - 5,120 4,560 - 4,560
Other 155 - - 155 - - -
_______________________________________________________ _____________________________________
TOTAL $82,622 $70,763 $17,084 170,469 $57,472 $30,375 87,847
======================================================= =====================================
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
MIDSOUTH BANCORP, INC.
SECURITIES PORTFOLIO
MATURITIES AND AVERAGE YIELDS
for the Year Ended December 31, 1999
(dollars in thousands)
After 1 but After 5 but
Within 1 Year Within 5 Years Within 10 Years After 10 Years
SECURITIES AVAILABLE FOR SALE Amount Yield Amount Yield Amount Yield Amount Yield Total
____________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and U.S.
Government Agency securities $7,982 5.53% $9,555 6.17% $2,672 6.52% $166 8.03% $20,375
Obligations of State and
Political Subdivisions 60 7.16% 555 7.28% 1,191 6.54% 459 6.44% 2,265
Mortgage Backs and CMOs 301 5.60% 885 7.12% 2,612 6.22% 24,853 6.27% 28,651
Corporates and other securities 898 5.39% 994 5.36% - 1,546 5.40% 3,438
Mutual funds 961 5.25% - - - 961
____________________________________________________________________________________________
Total Fair Value $10,202 $11,989 $6,475 $27,024 $55,690
============================================================================================
After 1 but After 5 but
Within 1 Year Within 5 Years Within 10 Years After 10 Years
HELD TO MATURITY Amount Yield Amount Yield Amount Yield Amount Yield Total
____________________________________________________________________________________________
Obligations of State and
Political Subdivisions $50 5.24% $601 5.74% $13,918 5.22% $6,719 4.97% $21,288
____________________________________________________________________________________________
Total Amortized Cost $50 $601 $13,918 $6,719 $21,288
============================================================================================
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
MIDSOUTH BANCORP, INC.
SUMMARY OF
AVERAGE DEPOSITS
(in thousands)
1999 1998
AVERAGE AVERAGE AVERAGE AVERAGE
AMOUNT YIELD AMOUNT YIELD
_______ ________ _______ ________
<S> <C> <C> <C> <C>
Non-interest bearing $60,192 0.00% $54,601 0.00%
Demand Deposits
Interest bearing Deposits
Savings, NOW, MMKT 91,559 2.87% 83,598 3.06%
Time Deposits 95,109 4.98% 78,907 5.21%
________ ________
Total $246,860 2.99% $217,106 3.07%
======== ========
</TABLE>
<TABLE>
<CAPTION>
MATURITY SCHEDULE
TIME DEPOSITS OF
$100,000 OR MORE
(in thousands)
1999 1998
_______ _______
<S> <C> <C>
3 months or less $15,237 $19,234
3 months through 6 months 14,238 4,391
7 months through 12 months 10,114 9,333
over 12 months 2,154 5,746
_______ _______
Total $41,743 $38,704
======= =======
SUMMARY OF RETURN
ON EQUITY AND ASSETS
1999 1998
_______ _______
Return on Average Assets 0.97% 1.04%
Return on Average Common Equity 17.45% 19.16%
Dividend Payout Ratio
on Common Stock 19.55% 18.91%
Average Equity to
Average Assets 6.10% 6.04%
</TABLE>
28
<PAGE>
MIDSOUTH BANCORP, INC. AND
SUBSIDIARIES
Consolidated Financial Statements for the
Years Ended December 31, 1999, 1998 and 1997
and Independent Auditors' Report
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors
of MidSouth Bancorp, Inc.
Lafayette, Louisiana
We have audited the accompanying consolidated statements of
condition of MidSouth Bancorp, Inc. and its subsidiaries as of
December 31, 1999 and 1998, and the related consolidated
statements of income, comprehensive income, stockholders'
equity, and cash flows for each of the three years in the period
ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of MidSouth
Bancorp, Inc. and subsidiaries at December 31, 1999 and 1998
and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1999 in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 4, 2000
<PAGE>
<TABLE>
<CAPTION>
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
DECEMBER 31, 1999 AND 1998
________________________________________________________________________________________________
ASSETS 1999 1998
<S> <C> <C>
Cash and due from banks $ 13,587,690 $ 14,003,536
Federal funds sold 900,000 6,600,000
___________ ___________
Total cash and cash equivalents 14,487,690 20,603,536
Interest-bearing deposits in banks 356,124 16,125
Securities available-for-sale at fair value (amortized cost of
$57,106,793 in 1999 and $43,503,268 in 1998) 55,689,863 43,938,965
Securities held-to-maturity (estimated fair value of $20,776,767
in 1999 and $20,421,920 in 1998) 21,287,597 19,246,559
Loans, net of allowance for loan losses of $1,967,326 in 1999
and $1,860,490 in 1998 168,501,407 153,616,773
Accrued interest receivable 1,919,182 1,740,514
Premises and equipment, net 11,367,815 9,054,201
Other real estate owned, net 569,963 48,100
Goodwill, net 554,153 207,281
Other assets 1,990,047 1,346,214
___________ ___________
$ 276,723,841 $ 249,818,268
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 63,668,676 $ 60,361,205
Interest bearing 188,021,530 169,563,097
___________ ___________
Total deposits 251,690,206 229,924,302
Securities sold under repurchase agreements 606,601 -
FHLB advances 3,000,000 -
Accrued interest payable 715,171 565,896
Long-term notes payable 3,459.097 3,503,668
Other liabilities 327,605 138,280
___________ ___________
Total liabilities 259,798,680 234,132,146
___________ ___________
Commitments and Contingencies - -
Stockholders' equity:
Convertible preferred stock, $14.25 par value, 5,000,000
shares authorized, 152,736 and 156,927 issued and outstanding
at December 31, 1999 and 1998, respectively 2,176,488 2,236,210
Common stock, $.10 par value, 5,000,000 shares authorized;
2,481,843 and 2,432,016 issued and outstanding at
December 31, 1999 and 1998, respectively 248,184 243,201
Additional paid in capital 10,983,714 10,521,020
Unearned ESOP shares (89,044) (119,051)
Unrealized gains (losses) on securities available-for-sale,
net of deferred taxes (948,430) 276,700
Retained earnings 4,554,249 2,528,042
___________ ___________
Total stockholders' equity 16,925,161 15,686,122
___________ ___________
$ 276,723,841 $ 249,818,268
=========== ===========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
[CAPTION]
<TABLE>
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
______________________________________________________________________________________________________________________
1999 1998 1997
<S> <C> <C> <C>
INTEREST INCOME:
Loans, including fees $ 16,282,923 $ 14,803,065 $ 11,625,789
Securities:
Taxable 3,277,619 2,460,266 2,886,273
Nontaxable 1,105,320 924,669 794,065
Federal funds sold 406,871 567,764 470,289
__________ __________ __________
Total interest income 21,072,733 18,755,764 15,776,416
__________ __________ __________
INTEREST EXPENSE:
Deposits 7,371,194 6,663,372 5,655,770
Securities sold under repurchase agreements,
federal funds purchased and advances 253,869 3,310 76,552
Long-term debt 263,288 264,874 161,871
__________ __________ __________
Total interest expense 7,888,351 6,931,556 5,894,193
__________ __________ __________
NET INTEREST INCOME 13,184,382 11,824,208 9,882,223
PROVISION FOR LOAN LOSSES 906,950 999,950 854,400
__________ __________ __________
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 12,277,432 10,824,258 9,027,823
__________ __________ __________
NONINTEREST INCOME:
Service charges on deposit accounts 2,972,024 2,606,903 2,101,956
Gains on sale of securities, net - - 94,913
Credit life insurance 159,014 133,217 190,590
Other charges and fees 849,458 746,817 512,002
__________ __________ __________
3,980,496 3,486,937 2,899,461
__________ __________ __________
NONINTEREST EXPENSES:
Salaries and employee benefits 6,037,935 5,274,992 4,509,683
Occupancy expense 2,850,428 2,360,665 2,163,855
Other 3,851,944 3,387,588 2,912,250
__________ __________ __________
12,740,307 11,023,245 9,585,788
__________ __________ __________
INCOME BEFORE INCOME TAXES 3,517,621 3,287,950 2,341,496
PROVISION FOR INCOME TAXES 867,417 842,167 586,804
__________ __________ __________
NET INCOME 2,650,204 2,445,783 1,754,692
PREFERRED DIVIDEND REQUIREMENT 131,582 148,971 154,475
__________ __________ __________
NET INCOME AVAILABLE TO COMMON
STOCKHOLDERS $ 2,518,622 $ 2,296,812 $ 1,600,217
========== ========== ==========
EARNINGS PER COMMON SHARE:
BASIC $1.03 $.95 $.69
===== ==== ====
DILUTED $. 90 $.83 $.61
===== ==== ====
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
____________________________________________________________________________________________________________________
1999 1998 1997
<S> <C> <C> <C>
Net income $ 2,650,204 $ 2,445,783 $ 1,754,692
Other comprehensive income (loss):
Unrealized gain (loss) on securities
available-for-sale, net:
Unrealized holding gains (losses) arising
during the year (1,225,130) 194,734 259,139
Less reclassification adjustment for gains
included in net income - - (62,643)
____________ ____________ ___________
Total other comprehensive income (loss) (1,225,130) 194,734 196,496
____________ ____________ ___________
TOTAL COMPREHENSIVE INCOME $ 1,425,074 $ 2,640,517 $ 1,951,188
============ ============ ============
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
___________________________________________________________________________________________________________________________________
Unrealized
Gains (Losses)
Additional on Securities
Preferred Stock Common Stock Paid in ESOP Available Retained
Shares Amount Shares Amount Capital Obligation for Sale Earnings Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997 171,956 $2,450,373 1,364,903 $136,491 $6,738,943 $(30,836) $ (114,530) $2,179,730 $11,360,171
Issuance of common stock 21,598 2,159 258,870 261,029
Dividends on common stock -
$.24 per share (354,336) (354,336)
Dividends on preferred stock (154,474) (154,474)
Preferred stock conversion (11,200) (159,600) 20,056 2,006 157,594 (47) (47)
Stock split on common stock
effected in the form of a
12.5% dividend 174,496 17,450 2,730,862 (2,750,557) (2,245)
Registration and related
costs associated with
dividend reinvestment
plan (23,569) (23,569)
Net income 1,754,692 1,754,692
ESOP obligation repayments (106,407) (106,407)
Net change in unrealized
gains (losses) on
securities available-for
-sale, net of tax 196,496 196,496
________ __________ _________ ________ ___________ ________ __________ __________ ___________
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 36,140 3,612 691,399 695,011
Dividends on common stock -
$.23 per share (434,334) (434,334)
Dividends on preferred stock (148,971) (148,971)
Preferred stock conversion (3,829) (54,563) 8,517 852 53,711 (70) (70)
Stock split on common stock
effected in the form of
50% dividend 806,306 80,631 (72,945) (9,374) (1,688)
Registration and related
costs associated with
dividend reinvestment plan (13,845) (13,845)
Net income 2,445,783 2,445,783
ESOP obligation repayments 18,192 18,192
Net change in unrealized
gains (losses) on
securities available-for-
sale, net of tax 194,734 194,734
________ __________ _________ ________ ___________ ________ __________ __________ ___________
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 37,267 3,727 386,728 390,455
Dividends on common stock -
$.20 per share (492,415) (492,415)
Dividends on preferred stock (131,582) (131,582)
Preferred stock conversion (4,191) (59,722) 12,560 1,256 58,466 -
Excess of market value over
book value of ESOP shares
released 17,500 17,500
Net income 2,650,204 2,650,204
ESOP obligation repayments 30,007 30,007
Net change in unrealized
gains (losses) on
securities available-for
-sale, net of tax (1,225,130) (1,225,130)
________ __________ _________ ________ ___________ ________ __________ __________ ___________
BALANCE, DECEMBER 31, 1999 152,736 $2,176,488 2,481,843 $248,184 $10,983,714 $(89,044) (948,430) $4,554,249 $16,925,161
======== ========== ========= ======== =========== ======== ========== ========== ===========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
____________________________________________________________________________________________________________________
1999 1998 1997
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $ 2,650,204 $ 2,445,783 $ 1,754,692
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 1,199,447 975,889 850,426
Provision for loan losses 906,950 999,950 854,400
Provision for losses on other real
estate owned - - 33,718
Deferred income taxes 20,500 (55,023) (163,196)
(Discount accretion) premium
amortization, net 62,577 (39,702) (150,203)
Gain on sales of securities - - (94,913)
Loss on sales of other real estate owned 5,100 3,037 8,052
(Gain) loss on sales of premises and
equipment (2,756) 10,428 -
Change in accrued interest receivable (178,668) (101,583) (252,335)
Change in accrued interest payable 149,275 21,960 146,677
Other, net (72,512) (321,772) 137,288
__________ __________ __________
Net cash provided by operating
activities 4,740,117 3,938,967 3,124,606
__________ __________ __________
CASH FLOWS FROM INVESTING
ACTIVITIES:
Net decrease (increase) in interest-
bearing deposits in banks (339,999) 32,803 357,870
Proceeds from sales of securities
available-for-sale - - 12,990,400
Proceeds from maturities and calls of
securities available-for-sale 13,596,064 14,675,141 23,579,688
Proceeds from maturities of securities
held-to-maturity 50,000 25,000 229,322
Purchases of securities available-for-sale (27,260,358) (21,387,038) (25,694,503)
Purchases of securities held-to-maturity (2,030,269) (2,539,451) (7,407,947)
Loan originations, net of repayments (13,207,947) (25,148,249) (36,693,406)
Purchases of premises and equipment (3,488,024) (3,063,110) (1,980,003)
Proceeds from sales of premises and
equipment 25,636 30,363 -
Proceeds from sales of other real
estate owned 51,374 17,000 93,400
Purchase of insurance premium financing
company (3,503,497) - -
__________ __________ __________
Net cash used in investing activities (36,107,020) (37,357,541) (34,525,179)
__________ __________ __________
(Continued)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
_______________________________________________________________________________________________________________
1999 1998 1997
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net increase in deposits 21,765,904 29,856,551 28,451,243
Net (increase) in repurchase agreements 606,601 (69,443) (34,971)
Proceeds from FHLB advances, net 3,000,000 - -
Issuance of long-term debt 190,000 460,000 3,254,210
Repayments of long-term debt (234,571) (155,126) (1,576,852)
Proceeds from issuance of common stock 390,455 695,011 261,029
Payment of dividends on common and
preferred stock (467,332) (583,305) (508,810)
Payment of fractional shares resulting from
stock dividend - (1,757) (2,245)
Costs associated with dividend reinvestment plan (13,845) (23,569)
___________ ___________ ___________
Net cash provided by financing activities 25,251,057 30,188,086 29,820,035
___________ ___________ ___________
NET DECREASE IN CASH AND
CASH EQUIVALENTS (6,115,846) (3,230,488) (1,580,538)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 20,603,536 23,834,024 25,414,562
___________ ___________ ___________
CASH AND CASH EQUIVALENTS AT
END OF YEAR $ 14,487,690 $ 20,603,536 $ 23,834,024
=========== =========== ===========
SUPPLEMENTAL CASH FLOW
INFORMATION:
Interest paid $ 7,739,076 $ 6,975,476 $ 5,747,516
=========== =========== ===========
Income taxes paid $ 845,488 $ 970,153 $ 716,467
=========== =========== ===========
See notes to consolidated financial statements.
(Concluded)
</TABLE>
MIDSOUTH BANCORP, INC. AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
__________________________________________________
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements of MidSouth
Bancorp, Inc. (the Company) and its wholly owned
subsidiaries MidSouth National Bank (the Bank) and
Financial Services of the South, Inc. (the Finance
Company), have been prepared in accordance with
generally accepted accounting principles and conform with
general practices within the banking industry. A summary
of significant accounting policies follows:
Description of Business - The Company is a bank holding
company headquartered in Lafayette, Louisiana operating
principally in the community banking business segment by
providing banking services to commercial and retail
customers through its wholly owned subsidiary, the Bank.
The Bank is community oriented and focuses primarily on
offering competitive commercial and consumer loan and
deposit services to individuals and small to middle market
business. The Company also provides consumer loan
services to individuals through the Finance Company.
Comprehensive Income - Comprehensive income includes
net income and other comprehensive income which, in the
case of the Company, includes only unrealized gains and
losses on securities available-for-sale.
Consolidation - The consolidated financial statements of
the Company include the accounts of the Company, the
Bank and the Finance Company. Significant intercompany
transactions and balances have been eliminated.
Use of Estimates - The preparation of financial statements
in conformity with generally accepted accounting
principles requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities, and disclosures of contingent assets and
liabilities at the date of the financial statement and the
reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
Securities - Securities are being accounted for in
accordance with Statement of Financial Accounting
Standards (SFAS) No. 115 "Accounting for Certain
Investments in Debt and Equity Securities". SFAS No. 115
requires the classification of securities into one of three
categories: trading, available-for-sale, or held-to-maturity.
Management determines the appropriate classification of
debt securities at the time of purchase and re-evaluates this
classification periodically. Trading account securities are
held for resale in anticipation of short-term market
movements. Debt securities are classified as
held-to-maturity when the Company has the positive intent
and ability to hold the securities to maturity. Securities not
classified as held-to-maturity or trading are classified as
available-for-sale. The Company had no trading account
securities during the three years ended December 31, 1999.
Held-to-maturity securities are stated at amortized cost.
Available-for-sale securities are stated at fair value, with
unrealized gains and losses, net of deferred taxes, reported
as a separate component of stockholders' equity until
realized.
<PAGE>
The amortized cost of debt securities classified as
held-to-maturity or available-for-sale is adjusted for
amortization of premiums and accretion of discounts to
maturity or, in the case of mortgage-backed securities, over
the estimated life of the security. Amortization, accretion
and accrued interest are included in interest income on
securities. Realized gains and losses, and declines in value
judged to be other than temporary, are included in net
securities gains. Gains and losses on the sale of securities
available-for-sale are determined using the
specific-identification method.
Loans - Loan origination fees and certain direct origination
costs are capitalized and recognized as an adjustment to
yield over the life of the related loan. Interest on
commercial and real estate mortgage loans is recorded as
income based upon the principal amount outstanding.
Unearned income on installment loans is credited to
operations based on a method which approximates the
interest method. Where doubt exists as to collectibility of a
loan, the accrual of interest is discontinued and subsequent
payments received are applied first to principal. Upon such
discontinuances all unpaid accrued interest is reversed.
Interest income is recorded after principal has been
satisfied and as payments are received.
The Company considers a loan to be impaired when, based
upon current information and events, it believes it is
probable that the Company will be unable to collect all
amounts due according to the contractual terms of the loan
agreement. The Company's impaired loans include
troubled debt restructurings, and performing and
non-performing major loans in which full payment of
principal or interest is not expected. The Company
calculates a reserve required for impaired loans based on
the present value of expected future cash flows discounted
at the loan's effective interest rate, or at the loan's
observable market price or the fair value of its collateral.
Generally, loans of all types which become 90 days
delinquent are either in the process of collection through
repossession or foreclosure or alternatively, are deemed
currently uncollectible. Loans deemed currently
uncollectible are charged-off against the allowance
account. As a matter of policy, loans are placed on a
non-accrual status where doubt exists as to collectibility.
Allowance for Loan Losses - The allowance for loan losses
is a valuation account available to absorb probable losses
on loans. All losses are charged to the allowance for loan
losses when the loss actually occurs or when a
determination is made that a loss is likely to occur.
Recoveries are credited to the allowance for loan losses at
the time of recovery. Periodically during the year,
management estimates the probable level of losses in the
existing portfolio based on the Company's past loan loss
experience, known inherent risks in the portfolio, adverse
situations that may affect the borrowers ability to repay, the
estimated value of any underlying collateral and current
economic conditions. Based on these estimates, the
allowance for loan losses is increased by charges to income
and decreased by charge-offs (net of recoveries).
Premises and Equipment - Premises and equipment are
stated at cost less accumulated depreciation and
amortization. Depreciation and amortization are computed
using the straight-line method over the estimated useful
lives of the assets which generally range from 3 to 30
years. Leasehold improvements are amortized over the
estimated useful lives of the improvements or the term of
the lease, whichever is shorter.
Other Real Estate Owned - Real estate properties acquired
through, or in lieu of, loan foreclosures are initially
recorded at fair value at the date of foreclosure establishing
a new cost basis. After foreclosure, valuations are
periodically performed by management and the real estate
is carried at the lower of carrying amount or fair value less
cost to sell. Revenues and expenses from operations and
changes in the valuation allowance are included in loss on
foreclosed real estate.
Income Taxes - Deferred income taxes are provided for
temporary differences between items of income or expense
reported in the consolidated financial statements and those
reported for income tax purposes.
<PAGE>
The Company computes deferred income taxes based on
the difference between the financial statements and tax
basis of assets and liabilities using enacted tax rates in
effect in the years in which the differences are expected to
reverse.
Goodwill - Goodwill represents the excess of the cost over
the fair value of net assets purchased and is being
amortized over 15 years. During 1999, the Company
acquired a small company involved in the financing of
insurance premiums. An intangible asset of approximately
$400,000 resulted from this acquisition which was
accounted for using the purchase method.
Stock-Based Compensation - The Company applies APB
Opinion No. 25 and related interpretations in accounting
for its stock options. Since all options are exercisable at
the estimated fair value at the date of grant, no
compensation cost has been recognized. The pro forma
disclosures required by SFAS 123 are included in Note 11.
Basic and Diluted Earnings Per Common Share - Basic
earnings per common share (EPS) excludes dilution and is
computed by dividing income available to common
stockholders by the weighted-average number of common
shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur if securities or other
contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of
common stock that then shared in the income of the
Company. Diluted EPS is computed by dividing net
income by the total of the weighted-average number of
shares outstanding plus the effect of outstanding options
and convertible preferred stock.
Statements of Cash Flows - For purposes of reporting cash
flows, cash and cash equivalents include cash on hand,
amounts due from banks, and federal funds sold.
Generally, federal funds are purchased or sold for one-day
periods.
Reclassifications - Certain reclassifications have been
made to the 1997 and 1998 consolidated financial
statements in order to conform to the classifications
adopted for reporting in 1999.
2. CASH AND DUE FROM BANKS
The Company is required to maintain average reserve
balances with the Federal Reserve Bank. "Cash and due
from banks" in the consolidated statements of condition
included amounts so restricted of $4,898,000 and
$4,380,000 at December 31, 1999 and 1998, respectively.
<PAGE>
3. INVESTMENT SECURITIES
The portfolio of securities consisted of the following:
<TABLE>
<CAPTION>
December 31, 1999
_________________________________________________________
Gross Gross
Amortized Unrealized Unrealized
Available-for-Sale Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 11,632,385 $ 16,262 $ 22,951 $ 11,625,696
U.S. Government agencies 8,871,214 - 121,932 8,749,282
Obligations of states and
political subdivisions 2,408,808 495 144,280 2,265,023
Mortgage-backed securities 19,940,622 5,027 883,289 19,062,360
Collateralized mortgage
obligations 9,785,272 - 196,043 9,589,229
Corporate securities 1,922,792 - 31,219 1,891,573
Mutual funds 1,000,000 - 39,000 961,000
Other 1,545,700 - - 1,545,700
____________ ________ ___________ ____________
$ 57,106,793 $ 21,784 $ 1,438,714 $ 55,689,863
============ ======== =========== ============
</TABLE>
<TABLE>
<CAPTION>
December 31, 1998
_____________________________________________________________
Gross Gross
Amortized Unrealized Unrealized
Available-for-Sale Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 19,360,196 $ 307,187 $ 263 $ 19,667,120
U.S. Government agencies 4,385,381 33,877 - 4,419,258
Obligations of states and
political subdivisions 2,266,469 26,110 13,655 2,278,924
Mortgage-backed securities 7,578,135 116,796 8,534 7,686,397
Collateralized mortgage
obligations 6,381,355 24,261 10,980 6,394,636
Corporate securities 1,427,482 - 7,102 1,420,380
Mutual funds 1,000,000 - 32,000 968,000
Other 1,104,250 - - 1,104,250
_____________ __________ _________ _____________
$ 43,503,268 $ 508,231 $ 72,534 $ 43,938,965
============= ========== ========= =============
</TABLE>
<TABLE>
<CAPTION>
December 31, 1999
_____________________________________________________________
Gross Gross
Amortized Unrealized Unrealized
Held-to-Maturity Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
Obligations of states and
political subdivisions $21,287,597 $ 67,787 $ 578,617 $ 20,776,767
=========== ========== ========= =============
</TABLE>
<TABLE>
<CAPTION>
December 31, 1998
_____________________________________________________________
Gross Gross
Amortized Unrealized Unrealized
Held-to-Maturity Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
Nontaxable obligations of states
and political subdivisions $19,246,559 $ 1,185,447 $ 10,086 $ 20,421,920
=========== ========== ========= =============
</TABLE>
<PAGE>
The amortized cost and fair value of securities at
December 31, 1999 by contractual maturity, are shown
below. Expected maturities may differ from contractual
maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
Amortized
Available-for-Sale Cost Fair Value
<S> <C> <C>
Due in one year or less $ 8,974,913 $ 8,939,070
Due after one year through five years 11,168,902 11,104,585
Due after five years through ten years 4,016,091 3,862,311
Due after ten years 675,293 625,608
Mortgage-backed securities 29,725,894 28,651,589
Other securities 1,545,700 1,545,700
Mutual funds 1,000,000 961,000
______________ ______________
$ 57,106,793 $ 55,689,863
============== ==============
</TABLE>
<TABLE>
<CAPTION>
Amortized
Held-to-Maturity Cost Fair Value
<S> <C> <C>
Due in one year or less $ 50,000 $ 50,194
Due after one year through five years 600,515 606,462
Due after five years through ten years 13,918,426 13,802,504
Due after ten years 6,718,656 6,317,607
______________ ______________
$ 21,287,597 $ 20,776,767
============== ==============
</TABLE>
There were no sales of securities available-for-sale during
1998 or 1999. Proceeds from sales of securities
available-for-sale during 1997 were $12,990,400. A gross
gain of $146,616 was recognized on sales in 1997. A gross
loss of $61,437 was recognized on sales in 1997.
Securities with an aggregate carrying value of
approximately $18,000,000 and $31,000,000 at
December 31, 1999 and 1998 were pledged to secure
public funds on deposit and for other purposes required or
permitted by law.
The Company's collateralized mortgage obligations
(CMO's) consist of (1) four Fixed Rate FNMA Remic
securities, two with a collateral pass-thru pay structure, one
with a planned amortization class pay structure, and one
with a targeted amortization class pay structure, (2) three
fixed rate FHLMC Remic securities, one with a sequential
pay structure and two with a planned amortization class pay
structure, (3) and three AAA Fixed Rate Private Remic
securities, one subordinated with a call option and two with
sequential pay structures. All are classified as
available-for-sale and seven have estimated average lives
of one to four years with one having an estimated average
life of more then ten years.
<PAGE>
4. LOANS
The loan portfolio consisted of the following:
<TABLE>
<CAPTION>
December 31,
___________________________________
1999 1998
<S> <C> <C>
Commercial, financial and agricultural $ 56,598,730 $ 49,543,647
Lease financing receivable 5,119,795 5,706,060
Real estate - mortgage 74,665,579 67,961,708
Real estate - construction 3,297,150 4,245,718
Installment loans to individuals 30,632,469 27,899,592
Other 155,010 120,538
___________ ___________
170,468,733 155,477,263
Less allowance for loan losses (1,967,326) (1,860,490)
___________ ___________
$ 168,501,407 $ 153,616,773
=========== ===========
</TABLE>
Loans are stated net of unearned income and loan
origination fees in the above table. The amount of such
items is not significant.
The Company generally makes loans in its market areas of
Lafayette, Jefferson Davis, Iberia, St. Landry, St. Mary,
Calcasieu, and St. Martin Parishes. Loans on which the
accrual of interest has been discontinued amounted to
$234,962 and $533,107 at December 31, 1999 and 1998,
respectively. If interest on these types of loans had been
accrued, the income that would have been recognized
would have approximated $65,000, $69,000 and $89,000
for the years ended December 31, 1999, 1998 and 1997.
Interest income recognized on those loans, which is
recorded only when received, amounted to $20,000,
$72,000 and $3,500 for 1999, 1998 and 1997, respectively.
An analysis of the activity in the allowance for loan losses
is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
_____________________________________________
1999 1998 1997
<S> <C> <C> <C>
Balance at beginning of year $ 1,860,490 $ 1,414,826 $ 1,087,790
Provision for loan losses 906,950 999,950 854,400
Recoveries 141,299 147,817 205,409
Loans charged off (941,413) (702,103) (732,773)
____________ ____________ ____________
Balance at end of year $ 1,967,326 $ 1,860,490 $ 1,414,826
============ ============ ============
</TABLE>
During the years ended December 31, 1999 and 1998,
approximately $581,000 and $14,000, respectively, of
loans were transferred to other real estate owned. No loans
were transferred to other real estate owned during the year
ended December 31, 1997.
As of December 31, 1999 and 1998, loans outstanding to
directors, executives officers, and their affiliates were
$841,178 and $941,947, respectively. In the opinion of
management, all transactions entered into between the
Bank and such related parties have been and are made in
the ordinary course of business, on substantially the same
terms and conditions, including interest rates and collateral,
as similar transactions with unaffiliated persons and do not
involve more than the normal risk of collection.
<PAGE>
An analysis of the 1999 activity with respect to these
related party loans is as follows:
<TABLE>
<CAPTION>
<S> <C>
Balance, January 1, 1999 $ 941,947
New loans 329,523
Repayments (430,292)
__________
Balance, December 31, 1999 $ 841,178
==========
</TABLE>
At December 31, 1999 and 1998, the recorded investment
in loans that are considered to be impaired was $120,959
and $80,232, respectively, substantially all of which had
related reserves recorded. The related reserves for these
loans were $72,000 and $60,000 at December 31, 1999 and
1998, respectively. Interest income on these types of loans
would have approximated $1,400, $42,000 and $37,000 for
1999, 1998 and 1997, respectively, if interest had been
accrued. Interest income actually recognized on those
loans amounted to $-0-, $23,000 and $3,500 for 1999, 1998
and 1997, respectively.
5. BANK PREMISES AND EQUIPMENT
Premises and equipment consisted of the following:
<TABLE>
<CAPTION>
December 31,
_______________________________
1999 1998
<S> <C> <C>
Buildings and improvements $ 7,960,581 $ 5,385,629
Furniture, fixtures, and equipment 6,585,951 5,404,800
Automobiles 270,328 261,804
Leasehold improvements 640,410 668,176
Construction-in-process 887,943 1,501,938
_____________ ____________
16,345,213 13,222,347
Less accumulated depreciation and amortization (4,977,398) (4,168,146)
_____________ ____________
$ 11,367,815 $ 9,054,201
============= ============
</TABLE>
6. DEPOSITS
Deposits consisted of the following:
<TABLE>
<CAPTION>
December 31,
___________________________________
1999 1998
<S> <C> <C>
Non-interest bearing $ 63,668,676 $ 60,361,205
Savings and money market 56,862,506 50,870,448
NOW accounts 28,190,168 31,839,882
Time deposits under $100,000 61,225,647 48,149,035
Time deposits over $100,000 41,743,209 38,703,732
_______________ ______________
$ 251,690,206 $ 229,924,302
=============== ==============
</TABLE>
Approximately $92,713,000 of time deposits mature in
2000 and the balance of $10,256,000 principally in 2001.
<PAGE>
7. FHLB ADVANCES AND LONG-TERM DEBT
At December 31, 1999, the Company has a $3,000,000
short-term advance outstanding with the Federal Home
Loan Bank. This advance bears interest at 6.02% and is
due January 21, 2000.
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
December 31,
__________________________________
1999 1998
<S> <C> <C>
Notes payable to financial institutions $ 3,235,024 $ 3,117,023
FHLB advances - long term 224,073 386,645
___________ ___________
$ 3,459,097 $ 3,503,668
=========== ===========
</TABLE>
The notes payable to financial institutions consist of
advances against Lines of Credit established by the
Company and the Finance Company.
The Line of Credit for the Company is in the amount of
$2,500,000 and is dated June 23, 1997. Advances under
the Line of Credit bear interest at a variable rate equal to
the prime commercial rate of interest as quoted in the
"Money Rates" section of the Wall Street Journal minus
fifty basis points (0.50%). At December 31, 1999 and
1998, the effective rate was 8.00% and 7.25%,
respectively. Interest under the note is due and payable
quarterly. Principal payments in the amount of 12.50% of
the amount of the loan balance on June 30, 2000 are due
and payable in seven consecutive annual installments. The
remaining balance of the loan is due and payable in a
eighth and final installment on June 30, 2007. The
Company has pledged all of the Bank's stock as collateral
on this note. The loan agreement has certain covenants
which, among other things, require the maintenance of
certain levels of stockholders' equity and net income and
sets a limit on the maximum amount of nonperforming
assets. The Company was in compliance with these
covenants at December 31, 1999. The principal balance on
this note at December 31, 1999 and 1998 was $2,085,024
and $2,010,023, respectively.
The Line of Credit for Financial Services of the South is in
the amount of $1,200,000 and was last renewed May 3,
1999. Advances under the Line of Credit bear interest at a
variable rate equal to the commercial prime rate as quoted
in the "Money Rates" section of the Wall Street Journal
plus twenty-five basis points (0.25%). At December 31,
1999 and 1998, the effective rate was 8.75% and 8.00%,
respectively. Interest on this note is payable monthly, with
principal due at maturity on May 1, 2000. Advances under
this note totaled $1,150,000 at December 31, 1999 and
$1,107,000 at December 31, 1998. The Finance Company
has pledged (1) all its promissory notes, credit sales
agreements, installment sales contracts, chattel paper,
negotiable paper or other written evidence of indebtedness;
(2) all of its accounts receivable; and (3) all of its common
stock as collateral on this note.
At December 31, 1999, the Bank had two long-term FHLB
borrowings outstanding. These borrowings bear interest at
rates of 6.17% and 7.28%, and have maturities from April
2001 to June 1, 2004. Monthly principal and interest
payments range from approximately $354 on the smallest
borrowing to approximately $4,732 on the largest
borrowing, with balloon payments due at maturity. The
FHLB short-term and long-term advances are collaterized
by a blanket floating lien on certain of the Bank's mortgage
loans.
<PAGE>
<TABLE>
<CAPTION>
Aggregate annual maturities on long-term debt are payable
as follows:
<S> <C>
2000 $ 1,410,628
2001 484,701
2002 260,628
2003 260,628
2004 260,628
Thereafter 781,886
___________
$ 3,459,097
===========
</TABLE>
8. COMMITMENTS AND CONTINGENCIES
At December 31, 1999, future annual minimum rental
payments due under noncancellable operating leases,
primarily for land, are as follows:
<TABLE>
<CAPTION>
<S> <C>
2000 $ 411,927
2001 407,051
2002 392,097
2003 389,856
2004 348,562
Thereafter through 2058 772,983
_________
$2,722,476
=========
</TABLE>
Minimum rental payments have not been reduced by
minimum sublease rentals of approximately $60,000 due in
the future under noncancellable subleases.
Rental expense under operating leases for 1999, 1998 and
1997 was $447,409, $422,662, and $399,961, respectively.
Sublease income for 1999, 1998 and 1997 amounted to
$31,800 each year.
The Company and its subsidiaries are parties to various
legal proceedings arising in the ordinary course of
business. In the opinion of management, the ultimate
resolution of these legal proceedings will not have a
material adverse effect on the Company's financial
position, results of operations or cash flows.
<PAGE>
9. INCOME TAXES
Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes. Significant
components of the Company's deferred tax assets and
liabilities as of December 31, 1999 and 1998 are as
follows:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Deferred tax assets:
Unrealized loss on securities $ 468,500 $ -
Allowance for loan losses 469,000 470,000
Other 16,000 88,000
_________ ________
Total deferred tax assets 953,500 558,000
_________ ________
Deferred tax liabilities:
FHLB stock dividends (56,000) (41,000)
Depreciation (178,000) (140,000)
Unrealized gain on securities - (159,000)
Other (84,500) (190,000)
_________ ________
Total deferred tax liabilities (318,500) (530,000)
_________ ________
Net deferred tax asset $ 635,000 $ 28,000
========= ========
</TABLE>
Components of income tax expense are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C>
Current $ 846,917 $ 897,190 $ 750,000
Deferred 20,500 (55,023) (163,196)
_________ ________ ________
$ 867,417 $ 842,167 $ 586,804
========= ======== ========
</TABLE>
The provision for federal income taxes differs from the
amount computed by applying the U.S. Federal income tax
statutory rate of 34% on income as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
________________________________________
1999 1998 1997
<S> <C> <C> <C>
Taxes calculated at statutory rate $1,195,991 $1,117,903 $ 796,109
Increase (decrease) resulting from:
Tax-exempt interest (334,386) (280,412) (242,420)
Other 5,812 4,676 33,115
_________ _________ ________
$ 867,417 $ 842,167 $ 586,804
========= ========= ========
</TABLE>
The deferred income tax expense (credit) relating to
unrealized gains (losses) on securities available-for-sale
included in other comprehensive income amounted to
$(627,500) in 1999, $107,495 in 1998 and $101,225 in
1997. Income taxes relating to gains on sale of securities
amounted to $32,270 in 1997.
<PAGE>
10. EMPLOYEE BENEFITS
The Company sponsors a leveraged employee stock
ownership plan (ESOP) that covers all employees who
meet minimum age and service requirements. The
Company makes annual contributions to the ESOP in
amounts as determined by the Board of Directors. These
contributions are used to pay debt service and purchase
additional shares. Certain ESOP shares are pledged as
collateral for this debt. As the debt is repaid, shares are
released from collateral and allocated to active employees,
based on the proportion of debt service paid in the year.
The note is payable to the Bank. Because the source of the
loan payments are contributions received by the ESOP
from the Company, the related note receivable is shown as
a reduction of stockholders' equity. The balance of the
note receivable from the ESOP was $89,044 and $119,051
at December 31, 1999 and 1998, respectively. In
accordance with the American Institute of Certified Public
Accountants' Statement of Position 93-6 (SOP),
compensation costs relating to shares purchased subsequent
to December 31, 1992 are based on the market price of the
shares on the date released for allocation and the related
unreleased shares are not considered outstanding in the
computation of income per common share. The Company
has elected to not apply the provisions of the SOP to shares
purchased on or before December 31, 1992 and therefore
compensation costs relating to those shares was based upon
cost and those shares were considered as outstanding in the
computation of income per common share. All of the
unrealized shares at December 31, 1999 and 1998 were
purchased after December 31, 1992. ESOP compensation
expense was $145,500, $102,000 and $90,000 for the years
ended December 31, 1999, 1998 and 1997, respectively.
The ESOP shares as of December 31, 1999 and 1998 were
as follows:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Allocated shares 228,990 223,187
Shares released for allocation 5,002 3,558
Unreleased shares 13,462 18,463
_________ _________
Total ESOP shares 247,454 245,208
========= =========
Fair value of unreleased shares at
December 31, $ 132,741 $ 214,201
========= =========
</TABLE>
During 1996 the Company adopted a deferred
compensation plan for certain officers which qualifies as a
defined contribution plan. Contributions to the plan are
required only if "excess earnings", as defined, are
achieved. The participants accrue benefits based only on
the contributions made. During 1999, 1998 and 1997 no
contributions were required.
11. EMPLOYEE STOCK PLANS
In May 1997 the stockholders of the Company approved
the 1997 Stock Incentive Plan to provide incentives and
awards for employees of the Company and its subsidiaries.
"Awards" as defined in the Plan includes, with limitations,
stock options (including restricted stock options), stock
appreciation rights, performance shares, stock awards and
cash awards, all on a stand-alone, combination or tandem
basis. A total of 8% of the Company's common shares
outstanding can be granted under the Plan. The exercise
price of options is equal to the market price on the date of
grant. The Company is applying APB Opinion No. 25 and
related interpretations in accounting for stock options.
Since all options are exercisable at the estimated fair
market value at the date of grant, no compensation expense
has been recognized.
During 1998, options to purchase 23,155 shares were
granted which are exercisable at $15.42 per share. During
1997, options to purchase 139,223 shares were granted
which are exercisable at $6.67 per share.
<PAGE>
These options are exercisable in 20% increments beginning
one year from the date of grant. The options expire ten
years after the date of
grant.
Below is a summary of the transactions:
<TABLE>
<CAPTION>
Exercise Price
____________________________
Number of Average
Options Price
Outstanding Per Share
<S> <C> <C>
Balance, January 1, 1997 - -
Granted 139,223 6.67
_______ ______
Balance, December 31, 1997 139,223 6.67
Granted 23,155 15.42
_______ ______
Balance, December 31, 1998 162,378 7.92
Granted - -
_______ ______
Balance, December 31, 1999 162,378 7.92
======= ======
</TABLE>
Options on 55,690 shares at $6.67 per share and on 4,631
shares at $15.42 per share were exercisable at
December 31, 1999. Options on 27,845 shares at $6.67 per
share were exercisable at December 31, 1998.
The weighted average remaining contractual life of options
outstanding at December 31, 1999 was 7.3 years.
The Company has adopted the disclosure-only option under
SFAS No. 123, "Accounting for Stock Based
Compensation." The fair value of options granted were
$4.63 and $2.17 in 1999 and 1998, respectively. Had
compensation cost for the Company's stock options been
determined based on the fair value at the grant date
consistent with the method under SFAS No. 123, the
Company's net income available to common stockholders
and income per common share would have been as
indicated below:
<TABLE>
<CAPTION>
Year Ended
___________________________________________________
1999 1998 1997
<S> <C> <C> <C>
Net income available to common stockholders:
As reported $ 2,518,622 $ 2,296,812 $ 1,600,217
Pro forma 2,434,668 2,169,732 1,485,217
Basic income per common share:
As reported $ 1.03 $ .95 $ .69
Pro forma 1.00 .90 .64
Diluted income per common share:
As reported $ .90 $ .83 $ .61
Pro forma .87 .79 .57
</TABLE>
The fair value of the options granted under the Company's
stock option plans during the years ended December 31,
1998 and 1997 was estimated using the Black-Scholes
Pricing Model with the following assumptions used:
dividend yield of 1.5% for 1998 and 1997, expected
volatility of 20% for 1998 and 1997, risk free interest rate
of 4.9% for 1998 and 5.8% for 1997, and expected lives of
8 years for 1998 and 1997.
<PAGE>
12. STOCKHOLDERS' EQUITY
On July 31, 1995, the Company issued 187,286 shares of
Series A Cumulative Convertible Preferred Shares with a
stated value of $14.25. The Convertible Preferred Shares
are convertible at any time at the option of the holder into
common stock, at the rate of 2.998 shares of Common
Stock for each Convertible Preferred Share. On or after
July 31, 2000, the Convertible Preferred Shares are
redeemable, in whole or in part, at the option of the
Company at the stated value of $14.25. The liquidation
value of the Convertible Preferred Stock is $14.25 plus
accrued dividends. Dividends on the Convertible Preferred
Shares are determined each year on an annual rate, fixed on
December 31 of each year for the ensuing calendar year
and was 7.03% at December 31, 1999. The dividends are
cumulative and payable quarterly in arrears. Holders of
Convertible Preferred Shares are not entitled to normal
voting rights unless certain conditions exist.
The payment of dividends by the Bank to the Company is
restricted by various regulatory and statutory limitations.
At December 31, 1999, the Bank has approximately
$2,500,000 available to pay dividends to the Parent
Company without regulatory approval.
13. NET INCOME PER COMMON SHARE
Following is a summary of the information used in the
computation of earnings per common share.
<TABLE>
<CAPTION>
Year Ended December 31,
___________________________________________________
1999 1998 1997
<S> <C> <C> <C>
Net income - used in computation of
diluted earnings per common share $ 2,650,204 $ 2,445,783 $ 1,754,692
Preferred dividend requirement 131,582 148,971 154,475
____________ ______________ ______________
Net income available to common
stockholders - used in computation of
basic earnings per common share $ 2,518,622 $ 2,296,812 $ 1,600,217
============ ============== ==============
Weighted average number of common
shares outstanding - used in computation
of basic earnings per common share 2,441,461 2,410,926 2,332,452
Effect of dilutive securities:
Stock options 51,616 72,317 24,737
Convertible preferred stock 463,185 475,138 498,819
____________ ______________ ______________
Weighted average number of common
shares outstanding plus effect of dilutive
securities - used in computation of
diluted earnings per common share 2,956,262 2,958,381 2,856,008
============ ============== ==============
</TABLE>
14. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Bank is a party to various financial instruments with
off-balance sheet risk in the normal course of business to
meet the financing needs of its customers and to reduce its
own exposure to fluctuations in interest rates. These
financial instruments include commitments to extend credit
and standby letters of credit. Those instruments involve, to
varying degrees, elements of credit and interest rate risk in
excess of the amounts recognized in the statements of
financial condition. The contract or notional amounts of
those instruments reflect the extent of the involvement the
Bank has in particular classes of financial instruments.
<PAGE>
The Bank's exposure to loan loss in the event of
nonperformance by the other party to the financial
instrument for commitments to extend credit, standby
letters of credit and financial guarantees is represented by
the contractual amount of those instruments. The Bank
uses the same credit policies, including considerations of
collateral requirements, in making these commitments and
conditional obligations as it does for on-balance sheet
instruments.
<TABLE>
<CAPTION>
Contract or Notional
Amount
_________________________________________
1999 1998
<S> <C> <C>
Financial instruments whose contract
amounts represent credit risk:
Commitments to extend credit $32,900,000 $29,400,000
Standby letters of credit 800,000 800,000
</TABLE>
Commitments to extend credit are agreements to lend to a
customer as long as there is no violation of any condition
established in the contract. Commitments generally have
fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments
are expected to expire without being fully drawn upon, the
total commitment amounts disclosed above do not
necessarily represent future cash requirements.
Substantially all of these commitments are at variable rates.
Standby letters of credit and financial guarantees are
conditional commitments issued by the Bank to guarantee
the performance of a customer to a third party. The credit
risk involved in issuing letters of credit is essentially the
same as that involved in extending loan facilities to its
customers. Approximately 95% of these letters of credit
were secured by marketable securities, cash on deposits or
other assets at December 31, 1999 and 1998.
15. REGULATORY MATTERS
The Company and the Bank are subject to various
regulatory capital requirements administered by the federal
banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory-and possibly
additional discretionary-actions by regulators that, if
undertaken, could have a direct material effect on the
financial statements. Under capital adequacy guidelines,
the Company and the Bank must meet specific capital
guidelines that involve quantitative measures of assets,
liabilities, and certain off-balance-sheet items as calculated
under regulatory accounting practices. The capital amounts
and classification are also subject to qualitative judgments
by the regulators about components, risk weightings, and
other factors.
Quantitative measures established by regulation to ensure
capital adequacy require the Company and the Bank to
maintain minimum amounts and ratios (set forth in the
table below) of total and Tier I capital (as defined in the
regulations) to risk-weighted assets (as defined), and of
Tier I capital (as defined) to average assets (as defined).
As of December 31, 1999 and 1998, the most recent
notifications from the Federal Deposit Insurance
Corporation categorized the Bank as well capitalized under
the regulatory framework for prompt corrective action. To
be categorized as well capitalized the Bank must maintain
minimum total risk-based, Tier I risk-based, Tier I leverage
ratios as set forth in the table. There are no conditions or
events since those notifications that management believes
have changed the Bank's category.
<PAGE>
The Company's and the Bank's actual capital amounts and
ratios are presented in the table.
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
_______________________ _______________________ _________________________
Amount Ratio Amount Ratio Amount Ratio
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1999:
Total capital to risk
weighted assets:
Company $ 19,247,764 10.55 % $ 14,600,062 8.00 % N/A N/A
Bank 20,628,906 11.41 % 14,465,478 8.00 % 18,081,848 10.00 %
Tier I capital to risk
weighted assets:
Company 17,280,438 9.47 % 7,300,031 4.00 % N/A N/A
Bank 18,729,581 10.36 % 7,232,739 4.00 % 10,849,107 6.00 %
Tier I capital to
average assets:
Company 17,280,438 6.23 % 11,093,925 4.00 % N/A N/A
Bank 18,729,581 6.79 % 11,035,784 4.00 % 13,794,731 5.00 %
</TABLE>
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
_______________________ ______________________ _______________________
Amount Ratio Amount Ratio Amount Ratio
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1998:
Total capital to risk
weighted assets:
Company $ 17,030,631 10.25 % $ 13,292,134 8.00 % N/A N/A
Bank 18,372,000 11.17 % 13,160,778 8.00 % 16,450,973 10.00 %
Tier I capital to risk
weighted assets:
Company 15,170,141 9.13 % 6,646,067 4.00 % N/A N/A
Bank 16,578,963 10.08 % 6,580,389 4.00 % 9,870,584 6.00 %
Tier I capital to
average assets:
Company 15,170,141 6.06 % 10,012,901 4.00 % N/A N/A
Bank 16,578,963 6.67 % 9,947,224 4.00 % 12,434,030 5.00 %
</TABLE>
<PAGE>
16. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to
estimate the fair value of each class of financial instruments
for which it is practicable to estimate that value:
Cash, Due From Banks and Federal Funds Sold - For
those short-term instruments, the carrying amount is a
reasonable estimate of fair value.
Securities - For securities, fair value equals quoted market
price, if available. If a quoted market price is not available,
fair value is estimated using quoted market prices for
similar securities.
Loans, Net - The fair value of loans is estimated by
discounting the future cash flows using the current rates at
which similar loans would be made to borrowers with
similar credit ratings and for the same remaining maturities.
Deposits - The fair value of demand deposits, savings
accounts, and certain money market deposits is the amount
payable on demand at the reporting date. The fair value of
fixed-maturity certificates of deposit is estimated using the
rates currently offered for deposits of similar remaining
maturities.
Notes Payable - Rates currently available to the Company
for debt with similar terms and remaining maturities are
used to estimate fair value of existing debt.
Commitments - The fair value of commitments to extend
credit was not significant.
The estimated fair values of the Company's financial
instruments are as follows at December 31, 1999 and 1998
(in thousands):
<TABLE>
<CAPTION>
1999 1998
_________________________________________________
Carrying Fair Carrying Fair
Amount Value Amount Value
<S> <C> <C> <C> <C>
Financial assets:
Cash, due from banks and federal
fund sold $ 14,488 $ 14,488 $ 20,604 $ 20,604
Securities available-for-sale 55,690 55,690 43,939 43,939
Securities held-to-maturity 21,288 20,777 19,247 20,422
Loans, net 168,501 168,793 153,617 153,700
Financial liabilities:
Non-interest bearing deposits 63,669 63,669 60,361 60,361
Interest bearing deposits 188,022 188,135 169,563 169,792
FHLB advances 3,000 3,000 -
Long-term notes payable 3,459 3,459 3,504 3,504
</TABLE>
<PAGE>
17. OTHER NON-INTEREST EXPENSE
Other non-interest expense consisted of the following for
the years ended December 31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Professional fees $ 369,672 $ 397,880 $ 337,824
FDIC assessments 27,470 23,540 21,267
Marketing expenses 789,666 672,896 515,097
Data processing 192,360 163,839 162,016
Postage 249,836 211,179 224,761
Education and travel 172,559 168,038 124,287
Printing and supplies 341,452 319,713 279,806
Telephone 267,325 241,455 202,999
Other 1,441,604 1,189,048 1,044,193
_________ _________ _________
$3,851,944 $3,387,588 $2,912,250
========= ========= =========
</TABLE>
18. CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY
Summarized financial information for MidSouth Bancorp,
Inc. (parent company only) follows:
<TABLE>
<CAPTION>
STATEMENTS OF CONDITION
December 31,
__________________________________
ASSETS 1999 1998
<S> <C> <C>
Cash and interest-bearing deposits in banks $ 202,782* $ 18,901*
Other assets 102,444 118,127
Investment in and advances to subsidiaries 18,954,629* 17,692,418*
_____________ _____________
$ 19,259,855 $ 17,829,446
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Dividends payable $ 156,664 $ -
Notes payable to financial institutions 2,087,486 2,010,023
Note payable to Bank 90,544* 133,301*
_____________ _____________
Total liabilities 2,334,694 2,143,324
_____________ _____________
Total stockholders' equity 16,925,161 15,686,122
_____________ _____________
$ 19,259,855 $ 17,829,446
============= =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF INCOME
Years Ended December 31,
________________________________________________
1999 1998 1997
<S> <C> <C> <C>
Revenue:
Equity in income of subsidiaries $2,844,841* $2,614,618* $1,895,208*
Rental and other income 42,988 44,553 32,827
__________ __________ __________
2,887,829 2,659,171 1,928,035
__________ __________ __________
Expenses:
Interest on notes payable 157,000 146,831 100,109
Professional fees 99,741 83,304 87,548
Other expense 79,636 66,544 58,086
__________ __________ __________
336,377 296,679 245,743
__________ __________ __________
Income before income taxes 2,551,452 2,362,492 1,682,292
Income tax benefit 98,752 83,291 72,400
__________ __________ __________
Net income $2,650,204 $2,445,783 $1,754,692
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
Years Ended December 31,
_________________________________________________
1999 1998 1997
<S> <C> <C> <C>
Cash flows from operating activities:
Distributions from bank $ 375,000* $ 85,000* $ -
Change in other assets and liabilities, 15,683 10,792 751
Other operating (147,131) (168,836) (140,516)
___________ ____________ ____________
Net cash provided by (used in)
operating activities 243,552 (73,044) (139,765)
___________ ____________ ____________
Cash flows from investing activities:
Investment in and advances to subsidiaries - (350,000)* (500,000)*
___________ ____________ ____________
Net cash used in investing activities - (350,000) (500,000)
___________ ____________ ____________
Cash flows from financing activities:
Capital stock transactions 372,955 679,409 235,168
Payment of dividends (467,332) (583,305) (508,810)
Proceeds of notes payable, net 34,706 325,000 881,943
___________ ____________ ____________
Net cash provided by financing activities (59,671) 421,104 608,301
___________ ____________ ____________
Net increase (decrease) in cash 183,881 (1,940) (31,464)
Cash, beginning of year 18,901 20,841 52,305
___________ ____________ ____________
Cash, end of year $ 202,782 $ 18,901 $ 20,841
=========== ============ ============
*Eliminated in consolidation
</TABLE>
<PAGE>
19. IMPACT OF NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board
issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" which establishes
accounting and reporting standards for derivative
instruments, including certain derivative instruments
embedded in other contracts and for hedging activities.
Under this statement, a company that elects to apply hedge
accounting is required to establish at the inception of the
hedge the method it will use for assessing the effectiveness
of the hedging derivative and the measurement approach
for determining the ineffective aspect of the hedge. At the
date of initial application, a company may transfer any
held-to-maturity security into the available-for-sale
category or the trading category. A company will then be
able in the future to designate a security transferred into the
available-for-sale category as the hedged item. The
unrealized holding gain or loss on a held-to-maturity
security transferred to another category at the date of the
initial application will be reported in net income or
accumulated other comprehensive income consistent with
the requirements of SFAS No. 115. Such transfers from
the held-to-maturity category at the date of initial adoption
will not call into question a company's intent to hold other
debt securities to maturity in the future.
SFAS No. 133 applies to all entities and is effective for all
fiscal quarters of fiscal years beginning after June 15, 2000.
Earlier adoption of this Statement is permitted. The
Company expects to adopt this accounting standard on
January 1, 2001
* * * * * *
<PAGE>
<TABLE>
<CAPTION>
Selected Quarterly Financial Data
(unaudited)
1999
_________________________________________________________
(Dollars in thousands, except per share IV III II I
______ ______ ______ ______
<S> <C> <C> <C> <C>
Interest income $5,494 $5,393 $5,324 $4,862
Interest expense 2,090 1,932 2,027 1,840
______ ______ ______ ______
Net interest income 3,404 3,461 3,297 3,022
Provision for possible credit losses 229 173 238 267
______ ______ ______ ______
Net interest income after provision
for possible credit losses 3,175 3,288 3,059 2,755
Noninterest income,
excluding securities gains 1,044 1,048 979 909
Net securities gains - - - -
Noninterest expense 3,352 3,360 3,125 2,903
______ ______ ______ ______
Income before income tax expense 867 976 913 761
Income tax expense 194 263 245 164
______ ______ ______ ______
Net income 673 713 668 597
Preferred stock dividend requirement (33) (33) (33) (33)
______ ______ ______ ______
Income applicable to common shareholders $640 $680 $635 $564
====== ====== ====== ======
Earnings per common share (1)
Basic $0.26 $0.28 $0.26 $0.23
Diluted $0.23 $0.24 $0.23 $0.20
Market price of common stock
High $10.13 $11.00 $11.69 $11.63
Low $9.00 $9.63 $10.50 $10.75
Close $9.00 $9.69 $10.88 $11.06
Average shares outstanding
Basic 2,460,413 2,448,731 2,450,164 2,439,256
Diluted 2,961,008 2,957,899 2,967,157 2,965,203
ck totals
1998
(Dollars in thousands, except per share IV III II I
______ ______ ______ ______
Interest income $4,908 $4,902 $4,636 $4,310
Interest expense 1,824 1,795 1,694 1,619
______ ______ ______ ______
0
Net interest income 3,084 3,107 2,942 2,691
Provision for possible credit losses 244 260 238 258
______ ______ ______ ______
0
Net interest income after provision
for possible credit losses 2,840 2,847 2,704 2,433
Noninterest income,
excluding securities gains 929 907 872 779
Net securities gains - - - -
Noninterest expense 2,999 2,888 2,629 2,507
______ ______ ______ ______
0
Income before income tax expense 770 866 947 705
Income tax expense 179 242 268 153
______ ______ ______ ______
0
Net income 591 624 679 552
Preferred stock dividend requirement (37) (37) (38) (37)
______ ______ ______ ______
0
Income applicable to common shareholders $554 $587 $641 $515
====== ====== ====== ======
Earnings per common share (1)
Basic $0.23 $0.24 $0.27 $0.21
Diluted $0.20 $0.21 $0.23 $0.19
Market price of common stock
High $13.50 $14.50 $15.25 $15.67
Low $10.88 $13.25 $14.46 $14.08
Close $11.13 $13.25 $14.54 $14.50
Average shares outstanding
Basic 2,429,107 2,417,457 2,396,051 2,381,511
Diluted 2,960,165 2,963,618 2,949,486 2,935,610
</TABLE>
<PAGE>
ITEM 8 - Changes in and Disagreements with
Accountants on Accounting and Financial Disclosure.
Not applicable.
PART III
ITEM 9 - Directors, Executive Officers, Promotors and
Control Persons; Compliance with Section 16(a) of the
Exchange Act
The information contained in Registrant's definitive proxy
statement for its 2000 annual meeting of shareholders, is
incorporated herein by reference in response to this Item.
Information concerning executive officers is provided
following Item 4.
ITEM 10 - Executive Compensation
The information contained in Registrant's definitive proxy
statement for its 2000 annual meeting of shareholders is
incorporated herein by reference in response to this Item.
ITEM 11 - Security Ownership of Certain Beneficial
Owners and Management
The information contained in Registrant's definitive proxy
statement for its 2000 annual meeting of shareholders is
incorporated herein by reference in response to this Item.
ITEM 12 - Certain Relationships and Related
Transactions
The information contained in Registrant's definitive proxy
statement for its 2000 annual meeting of shareholders is
incorporated herein by reference in response to this Item.
<PAGE>
ITEM 13 - Exhibits and Reports on Form 8-K.
Exhibits
Exhibit No.
Description
3.1 Amended and Restated Articles of Incorporation
of MidSouth Bancorp, Inc. are included as
Exhibit 3.1 to MidSouth's Annual Report on
Form 10-K for the Year Ended December 31, 1993,
and is incorporated herein by reference.
3.2 Articles of Amendment to Amended and Restated
Articles of Incorporation dated July 19,1995
are included as Exhibit 4.2 to MidSouth's
Registration Statement on Form S-8 filed September
20, 1995 and is incorporated herein by reference.
3.3 Amended and Restated By-laws of MidSouth are
included as Exhibit 3.2 to Amendment No. 1 to
MidSouth's Registration Statement on Form S-4
(Reg. No. 33-58499) filed on June 1, 1995,
and is incorporated herein by reference.
4.1 MidSouth agrees to furnish to the Commission
on request a copy of the instruments defining
the rights of the holder of its long-term
debt, which debt does not exceed 10% of the
total consolidated assets of MidSouth.
10.1 MidSouth National Bank Lease Agreement with
Southwest Bank Building Limited Partnership
is included as Exhibit 10.7 to the
Company's annual report on Form 10-K for the
Year Ended December 31, 1992, and is
incorporated herein by reference.
10.2 First Amendment to Lease between MBL Life
Assurance Corporation, successor in interest
to Southwest Bank Building Limited Partnership
in Commendam, and MidSouth National Bank
is included as Exhibit 10.1 to the Company's
annual report on Form 10-KSB for the year ended
December 31, 1994, and is incorporated herein
by reference.
10.3 Amended and Restated Deferred Compensation Plan
and Trust is included as Exhibit 10.3 to
MidSouth's Annual Report on Form 10-K for the
year ended December 31, 1992 and is incorporated
herein by reference.
10.5 Employment Agreements with C. R. Cloutier and
Karen L. Hail are included as Exhibit 5c to
MidSouth's Form 1-A and are incorporated herein
by reference.
<PAGE>
10.6 The MidSouth Bancorp, Inc. 1997 Stock Incentive
Plan is included as a form of option agreement in
Exhibit 4.5 to MidSouth's definitive proxy
statement filed April 11, 1997 and is incorporated
herein by reference.
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 to MidSouth Bancorp, Inc.'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
to MidSouth Bancorp, Inc.'s Form 10-QSB filed on
August 13, 1999 and is incorporated herein by
reference.
21 Subsidiaries of the Registrant
23 Independent Auditors' Consent
27 Financial Data Schedule
Reports on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MIDSOUTH BANCORP, INC.
By: /s/ C. R. Cloutier
C. R. Cloutier
President and Chief
Executive Officer
Dated: March 30, 2000
Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below
by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.
Signatures Title Date
/s/ C. R. Cloutier President, Chief Executive March 30, 2000
C. R. Cloutier Officer and Director
/s/ Karen L. Hail Chief Financial Officer, March 30, 2000
Karen L. Hail Executive Vice President,
Secretary/Treasurer
and Director
/s/ Teri S. Stelly Chief Accounting Officer March 30, 2000
Teri S. Stelly
/s/ J. B. Hargroder, M.D. Director March 30, 2000
J. B. Hargroder, M.D.
/s/ William M. Simmons Director March 30, 2000
William M. Simmons
<PAGE>
/s/ Will G. Charbonnet, Sr. Director March 30, 2000
Will G. Charbonnet, Sr.
/s/ Clayton Paul Hilliard Director March 30, 2000
Clayton Paul Hilliard
/s/ James R. Davis Director March 30, 2000
James R. Davis, Jr.
/s/ Milton B. Kidd, III Director March 30, 2000
Milton B. Kidd, III., O.D.
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
MidSouth National Bank
Financial Services of the South, Inc.
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in
Registration Statement No. 333-32107 of
MidSouth Bancorp, Inc. on Form S-3D of our report
dated February 4, 2000, appearing in this Annual
Report on Form 10-KSB of MidSouth Bancorp, Inc.
for the year ended December 31, 1999.
DELOITTE & TOUCHE, LLP
New Orleans, Louisiana
March 30, 2000
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<FISCAL-YEAR-END> DEC-31-1999
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