10QSB 1 tenjun.txt FORM 10QSB - MIDSOUTH BANCORP, INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10QSB __X___QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended..................... June 30, 2001 _____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ..... to ..... COMMISSION FILE NUMBER 2-91-000FW MIDSOUTH BANCORP, INC. Louisiana 72 -1020809 102 Versailles Boulevard, Lafayette, Louisiana 70501 (337) 237-8343 Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES __X__ NO _____ State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. Outstanding as of July 31, 2001 Common stock, $.10 par value 2,591,921 Transitional Small Business Disclosure Format: Yes _______ No __X__ Page 1 Page 2 PART 1 - FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Page Financial Highlights 3 Statements of Condition - June 30, 2001 and December 31, 2000 4 Statements of Income - Three and Six Months Ended June 30, 2001 and 2000 5 Statement of Stockholders' Equity - Six Months Ended June 30, 2001 6 Statements of Cash Flows - Six Months Ended June 30, 2001 and 2000 7 Notes to Financial Statements 8 Item 2. Management's Discussion and Analysis or Plan of Operation 9 PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 15 Item 6. Exhibits and Reports on Form 8-K 16 Signatures 17
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES FINANCIAL HIGHLIGHTS (UNAUDITED) Three Months Ended Six Months Ended June 30, June 30, EARNINGS DATA 2001 2000 2001 2000 _________________________________________________ Net interest income $4,079,659 $3,631,617 $7,962,842 $7,104,344 Provision for loan losses 1,034,244 177,391 1,357,344 394,353 Non-interest income 1,366,477 1,157,794 2,549,693 2,195,064 Non-interest expense 3,821,855 3,510,911 7,525,723 7,099,702 Provision for income tax 120,200 309,550 364,454 465,526 Net income 469,837 791,559 1,265,014 1,339,827 Preferred dividend requirement 22,458 35,405 52,751 73,464 Income available to common shareholders $447,379 $756,154 $1,212,263 $1,266,363 ====================================================================================== PER COMMON SHARE DATA Basic earnings per share $0.18 $0.30 $0.48 $0.51 Diluted earnings per share $0.16 $0.27 $0.43 $0.45 Book value at end of period $7.64 $6.31 $7.64 $6.31 Market price at end of period $11.10 $8.06 $11.10 $8.06 Market price of preferred stock at $33.25 $25.50 $33.25 $25.50 Weighted average shares outstanding Basic 2,514,972 2,500,019 2,503,647 2,485,285 Diluted 2,920,454 2,968,851 2,916,902 2,964,430 ====================================================================================== AVERAGE BALANCE SHEET DATA Total assets $351,131,021 $286,226,612 $342,429,938 $283,262,166 Earning assets 321,869,855 259,193,740 313,583,347 256,023,672 Loans and leases 206,236,001 177,420,427 204,910,390 174,468,558 Interest-bearing deposits 244,218,691 195,972,355 239,285,181 195,862,109 Total deposits 316,936,547 258,855,188 310,780,542 257,994,626 Common stockholders' equity 19,944,382 15,020,942 19,187,898 14,822,693 Total stockholders' equity 21,699,964 17,078,628 20,988,803 16,931,294 ====================================================================================== SELECTED RATIOS Return on average assets (annualize 0.54% 1.10% 0.74% 0.95% Return on average common equity (an 9.00% 19.97% 12.74% 17.13% Return on average total equity ( an 8.68% 18.39% 12.15% 15.87% Leverage capital ratio (1) 7.80% 6.34% 7.80% 6.34% Tier 1 risk-based capital ratio 11.68% 9.20% 11.68% 9.20% Total risk-based capital ratio 12.72% 10.25% 12.72% 10.25% Allowance for loan losses as a % of total loans 1.14% 1.13% 1.14% 1.13% ======================================================================================= PERIOD ENDING BALANCE SHEET DATA 6/30/01 6/30/00 Net Change % Change Total assets $342,550,304 $290,655,749 $51,894,555 17.85% Earning assets 314,864,754 261,394,994 $53,469,760 20.46% Loans and leases, net 210,532,711 180,998,954 $29,533,757 16.32% Interest-bearing deposits 233,194,779 195,136,541 $38,058,238 19.50% Total deposits 308,890,932 259,557,897 $49,333,035 19.01% Common stockholders' equity 19,794,639 15,863,166 $3,931,473 24.78% Total stockholders' equity 21,315,114 17,881,251 $3,433,863 19.20% ======================================================================================== (FN1) On February 21, 2001, MidSouth completed the issuance of $7,000,000 of Trust Preferred Securities. For regulatory purposes, these funds qualify as Tier 1 Capital. For financial reporting purposes, these funds are included as a liability under generally accepted accounting principles.
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CONDITION =================================================================================== June 30, December 31, 2001 2000 * ASSETS (unaudited) ___________ ____________ Cash and due from banks $13,326,198 $15,698,538 Federal funds sold 2,200,000 34,100,000 ____________ _____________ Total cash and cash equivalents 15,526,198 49,798,538 Interest bearing deposits in banks 253,387 68,682 Securities available-for-sale, at fair value (cost of $75,009,058 in June 2001 and $53,821,526 in December 2000) 75,830,558 53,969,626 Securities held-to-maturity (estimated market value of $24,787,544 in June 2001 and $24,474,077 in December 2000) 23,609,795 23,611,057 Loans, net of allowance for loan losses of $2,438,303 in June 2001 and $2,276,187 in December 2000 210,532,711 202,308,673 Bank premises and equipment, net 11,462,791 11,739,575 Other real estate owned, net 343,729 446,046 Accrued interest receivable 2,474,792 2,365,350 Goodwill, net 462,529 493,071 Other assets 2,053,814 1,572,815 ____________ _____________ Total assets $342,550,304 $346,373,433 ============ ============= LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Non-interest bearing $75,696,153 $75,151,653 Interest bearing 233,194,779 244,395,552 ____________ _____________ Total deposits 308,890,932 319,547,205 Securities sold under repurchase agreements 1,656,155 997,616 Accrued interest payable 1,186,527 1,007,302 Notes payable 1,995,000 4,650,968 Junior subordinated deferrable interest debenture 7,000,000 - Other liabilities 506,576 307,964 ____________ _____________ Total liabilities 321,235,190 326,511,055 ____________ _____________ Commitments and contingencies - - Stockholders' Equity: Preferred Stock, no par value, $14.25 stated value - 5,000,000 shares authorized, 106,700 and 130,620 issued and outstanding on June 30, 2001 and December 31, 2000, respectively 1,520,475 1,861,335 Common stock, $.10 par value- 5,000,000 shares authorized, 2,591,921 and 2,515,166 issued and outstanding on June 30, 2001 and December 31, 2000, respectively 259,192 251,517 Surplus 11,514,483 11,147,534 Unearned ESOP shares (167,953) (185,127) Unrealized gains on securities available-for-sale, net of deferred taxes of $291,200 in June 2001 and $62,900 in December 530,300 85,200 Retained earnings 7,658,617 6,701,919 ____________ _____________ Total stockholders' equity 21,315,114 19,862,378 ____________ _____________ Total liabilities and stockholders' equity $342,550,304 $346,373,433 ============ ============= * The consolidated statement of condition at December 31, 2000 is taken from the audited balance sheet on that date. See notes to unaudited consolidated financial statements.
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME Three Months Ended Six Months Ended June 30, June 30, 2001 2000 2001 2000 ____________________________ ____________________________ INTEREST INCOME: Loans, including fees $5,310,285 $4,654,319 $10,587,452 $9,047,119 Securities Taxable 1,060,091 910,005 1,928,931 1,768,858 Nontaxable 379,155 305,964 735,555 594,098 Federal funds sold 172,796 15,048 438,569 67,286 __________ __________ ___________ ___________ TOTAL 6,922,327 5,885,336 13,690,507 11,477,361 __________ __________ ___________ ___________ INTEREST EXPENSE: Deposits 2,595,423 2,088,645 5,312,070 4,110,632 Securities sold under repurchase agreements, federal funds purchased and advances 21,750 83,893 32,518 107,991 Notes Payable 225,495 81,181 383,077 154,394 __________ __________ ___________ ___________ TOTAL 2,842,668 2,253,719 5,727,665 4,373,017 __________ __________ ___________ ___________ NET INTEREST INCOME 4,079,659 3,631,617 7,962,842 7,104,344 PROVISION FOR LOAN LOSSES 1,034,244 177,391 1,357,344 394,353 NET INTEREST INCOME AFTER __________ __________ ___________ ___________ PROVISION FOR LOAN LOSSES 3,045,415 3,454,226 6,605,498 6,709,991 __________ __________ ___________ ___________ OTHER OPERATING INCOME: Service charges on deposits 846,841 832,610 1,639,803 1,573,495 Gains on securities, net 46,491 - 46,491 1,770 Credit life insurance 68,237 68,435 134,855 125,729 Other charges and fees 404,908 256,749 728,544 494,070 __________ __________ ___________ ___________ TOTAL OTHER INCOME 1,366,477 1,157,794 2,549,693 2,195,064 __________ __________ ___________ ___________ OTHER EXPENSES: Salaries and employee benefits 1,778,554 1,670,078 3,540,030 3,324,315 Occupancy expense 845,139 790,133 1,674,897 1,570,665 Other 1,198,162 1,050,700 2,310,796 2,204,722 __________ __________ ___________ ___________ TOTAL OTHER EXPENSES 3,821,855 3,510,911 7,525,723 7,099,702 __________ __________ ___________ ___________ INCOME BEFORE INCOME TAXES 590,037 1,101,109 1,629,468 1,805,353 PROVISION FOR INCOME TAXES 120,200 309,550 364,454 465,526 __________ __________ ___________ ___________ NET INCOME $469,837 $791,559 $1,265,014 $1,339,827 PREFERRED DIVIDEND REQUIREMENT 22,458 35,405 52,751 73,464 INCOME AVAILABLE TO COMMON __________ __________ ___________ ___________ SHAREHOLDERS $447,379 $756,154 1,212,263 $1,266,363 BASIC EARNINGS PER COMMON SHARE $0.18 $0.30 $0.48 $0.51 ========== ========== =========== =========== DILUTED EARNINGS PER COMMON SHARE $0.16 $0.27 $0.43 $0.45 ========== ========== =========== ============ * See notes to consolidated financial statements. 5
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR SIX MONTHS ENDED JUNE 30, 2001 (UNAUDITED) =================================================================================================================================== UNREALIZED (GAINS) LOSSES ON SECURITIES PREFERRED STOCK COMMON STOCK ESOP AVAILABLE- RETAINED SHARES AMOUNT SHARES AMOUNT SURPLUS OBLIGATION FOR-SALE EARNINGS TOTAL _______________________ ____________________ ____________ __________________________________ _________ BALANCE, JANUARY 1, 2001 130,620 $1,861,335 2,515,166 $251,517 $11,147,534 ($185,127) $85,200 $6,701,919 $19,862,378 Issuance of common stock 5,062 506 33,258 33,764 Dividends on common stock (255,565) (255,565) Dividends on preferred stock (52,751) (52,751) Conversion of preferred stock (23,920) ($340,860) 71,693 7,169 333,691 1,265,014 1,265,014 Increase in ESOP obligation,net of repayments 17,174 17,174 Net change in unrealized gain/loss available-for-sale, net of tax 445,100 445,100 ________ __________ _________ ________ ___________ __________ ________ ____________ ___________ BALANCE, JUNE 30, 2001 106,700 $1,520,475 2,591,921 $259,192 $11,514,483 ($167,953) $530,300 $7,658,617 $21,315,114 ======== ========== ========= ======== ============ ========== ======== ============ =========== See notes to consolidated financial statements.
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 1. STATEMENT BY MANAGEMENT CONCERNING THE REVIEW OF UNAUDITED FINANCIAL INFORMATION The accompanying unaudited consolidated financial statements and notes thereto contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position of MidSouth Bancorp, Inc. ("MidSouth") and its subsidiaries as of June 30, 2001 and the results of their operations and their cash flows for the periods presented. The consolidated financial statements should be read in conjunction with the annual consolidated financial statements and the notes thereto included in MidSouth's 2000 annual consolidated report and Form 10-KSB. The results of operations for the six months period ended June 30, 2001 are not necessarily indicative of the results to be expected for the entire year. 2. ALLOWANCE FOR LOAN AND LOSSES
An analysis of the activity in the allowance for loan losses is as follows: Six Months Ended June 30, 2001 2000 __________ __________ Balance at beginning of period $2,276,187 $1,967,326 Provision for loan losses 1,357,344 394,353 Recoveries 42,414 76,871 Loans charged off (1,237,642) (370,368) ___________ ___________ Balance at end of period $2,438,303 $2,068,182 =========== ===========
3. COMPREHENSIVE INCOME Comprehensive income includes net income and other comprehensive income (losses) which, in the case of MidSouth, only includes unrealized gains and losses on securities available-for-sale.
Following is a summary of MidSouth's comprehensive income for the six months ended June 30, 2001 and 2000. 2001 2000 __________ __________ Net income $1,265,014 $1,339,827 Other comprehensive income Unrealized gains on securities available-for-sale, net: Unrealized holding gains arising during the period 475,319 53,431 Less reclassification adjustment for gains included in net income (30,219) (1.151) __________ __________ Total other comprehensive income 445,100 52,280 Total comprehensive income $1,710,114 $1,392,107 =========== ===========
4. DERIVATIVE INSTRUMENTS Effective January 1, 2001, MidSouth adopted SFAS No. 133. The Statement was issued in June 1998 and requires MidSouth to recognize all derivatives as either assets or liabilities in MidSouth's balance sheet and measure those instruments at fair value. If certain conditions are met, a derivative may be specially designated as a hedge. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. MidSouth is not currently engaged in any significant activities with derivatives; therefore, management believes that the impact of the adoption of this Statement is not significant. 5. JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE On February 22, 2001 MidSouth issued a $7,000,000 Junior Subordinated Deferrable Interest Debenture. This debenture bears interest at 10.20% and is due in 2031. 6. PREFERRED STOCK In May 2001, MidSouth called its convertible preferred stock for redemption on August 1, 2001.
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 2001 and 2000 _________________________________________________________________________________________ June 30,2001 June 30, 2000 ____________ ______________ CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $1,265,014 $1,339,827 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 677,731 671,201 Provision for loan losses 1,357,344 394,353 Provision for deferred income taxes 10,778 4,548 Discount accretion, net 43,638 45,370 Net gain on sale of securities (46,491) (1,770) Gain on sale of premises and equipment (2,700) (5,338) Loss on sale of other real estate owned 11,542 - Write-down of other real estate owned 22,787 93,000 Change in accrued interest receivable (109,442) (260,455) Change in accrued interest payable 179,225 (38,118) Other, net (521,465) 49,046 _____________ _____________ NET CASH PROVIDED BY OPERATING ACTIVITIES 2,887,961 2,291,664 _____________ _____________ CASH FLOWS FROM INVESTING ACTIVITIES: Net (increase) decrease in interest-bearing deposits in banks (184,705) 227,505 Proceeds from sales of securities available-for-sale 1,647,500 1,027,765 Proceeds from maturities and calls of securities available-for-sale 12,464,181 6,463,539 Purchases of securities available-for-sale (35,295,098) (6,642,548) Purchases of securities held-to-maturity - (2,031,305) Loan originations, net of repayments (9,631,486) (13,066,444) Purchases of premises and equipment (370,405) (1,330,481) Proceeds from sales of premises and equipment 2,700 6,250 Proceeds from sales of other real estate owned 135,266 76,612 _____________ _____________ NET CASH USED IN INVESTING ACTIVITIES (31,232,047) (15,269,107) _____________ _____________ CASH FLOWS FROM FINANCING ACTIVITIES: Net (decrease) increase in deposits (10,656,273) $7,867,691 Net (decrease) increase in securities sold under repurchase agreements and federal funds purchased 658,539 4,867,870 Issuance of notes payable 20,000 415,000 Repayments of notes payable (2,675,968) (308,649) Proceeds from issuance of common stock 33,764 - Payment of dividends (308,316) (323,390) Issuance of junior subordinated debentures 7,000,000 - _____________ _____________ NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (5,928,254) 12,518,522 _____________ _____________ NET DECREASE IN CASH & CASH EQUIVALENTS (34,272,340) (458,921) CASH & CASH EQUIVALENTS AT BEGINNING OF PERIOD 49,798,538 14,487,690 _____________ _____________ CASH & CASH EQUIVALENTS AT END OF PERIOD $15,526,198 $14,028,769 ============= ============= See notes to unaudited consolidated financial statements.
MANAGEMENT'S DISCUSSION AND ANALYSIS This review should be read in conjunction with MidSouth Bancorp Inc.'s ("MidSouth") consolidated financial statements and accompanying notes contained herein, as well as with MidSouth's 2000 annual consolidated financial statements, the notes thereto and the related Management's Discussion and Analysis. MidSouth Bancorp, Inc. recorded net income of $469,837 for the second quarter of 2001, a 41% decrease from net income of $791,559 reported for the second quarter of 2000. The decrease resulted primarily from an increase in loss loan provisions of $856,853 over last year's second quarter, including $700,000 for the default and charge- off of one commercial loan. MidSouth announced in a news release on June 21, 2001 the anticipated net after tax effect on earnings of $500,000 resulting from the default on the loan. Income available to common shareholders totaled $447,379 for the second quarter of 2001, compared to $756,154 for the second quarter of 2000. Basic earnings per share were $.18 and $.30 for the quarters ended June 30, 2001 and 2000, respectively. Diluted earnings per share were $.16 for the second quarter of 2001 compared to $.27 for the second quarter of 2000. Net income for the six months ended June 30, 2001 totaled $1,265,014 compared to $1,339,827 for the six months ended June 30, 2000. The loan loss provision increased $962,991 over the six months ended June 30, 2001. Basic earnings per share were $.48 and $.51 for the two six month periods, respectively. Diluted earnings per share were $.43 for the six months ended June 30, 2001 compared to $.45 for the six months ended June 30, 2000. Despite decreased earnings due to increased loan loss provisions, MidSouth's net interest income continued to improve in quarterly and year-to-date comparisons primarily due to a higher volume of earning assets. Net interest income increased 12%, or $448,042 in quarterly comparison and $858,498 in year-to-date comparison. Improvement was also noted in non-interest income from service charges on deposit accounts for the three and six month periods ending June 30, 2001. Non-interest expense, primarily salaries and benefits and occupancy expenses, increased 9% or $310,944, in quarterly comparison and 6%, or $426,021 in year-to-date comparison. Total end-of-period consolidated assets increased 18%, or $51.9 million, from $290.7 million at June 30, 2000 to $342.6 million at June 30, 2001. Interest-bearing deposits increased $38.0 million and total deposits increased $49.3 million, from $259.6 million at June 30, 2000 to $308.9 million at June 30, 2001. Loans, net of Allowance for Loan Losses ("ALL"), increased $29.5 million or 16%, from $181.0 million in the second quarter of 2000 to $210.5 million in the second quarter of 2001. Provisions for loan and lease losses totaled $1,034,244 in the second quarter of 2001 compared to $177,391 in the second quarter of 2000, and $1,357,344 in the first six months of 2001 compared to $394,353 in the comparable 2000 period. Nonperforming loans as a percentage of total loans increased from .08% at June 30, 2000 to .20% at June 30, 2001. Loans past due ninety days and over increased, from $491,871 at June 30, 2000 to $854,216 at June 30, 2001. Other real estate owned decreased $118,507 for the same period. The ALL represented 339% of nonperforming assets as of June 30, 2000 compared to 315% as of June 30, 2001. MidSouth's leverage ratio was 7.80% at June 30, 2001, up from 6.34% at June 30, 2000. During the first quarter of 2001, MidSouth completed the issuance of $7,000,000 of Trust Preferred Securities. For regulatory purposes, these funds qualify as Tier 1 Capital. For financial reporting purposes, these funds are included as a liability under generally accepted accounting principles. Return on average common equity for the quarter was 9.00% and return on average assets was .54%. EARNINGS ANALYSIS Net Interest Income Average earning assets increased 24%, or $62.7 million, from $259.2 million for the three months ended June 30, 2000 to $321.9 million for the three months ended June 30, 2001. The mix of earning assets shifted from 68% of average earning assets in loans for the second quarter of 2000 down to 64% in the second quarter of 2001. The average yield on loans decreased 8 basis points, from 10.41% to 10.33% for the three months ended June 30, 2001. Decreases in the prime lending rate and market competition for quality credits lowered commercial and real estate loan yields by 32 basis points in quarterly comparison. The average volume of the commercial and real estate portfolio grew 19% or $26 million in quarterly comparison, from $138.2 million for the quarter ending June 30, 2000 to $164.2 million for the quarter ending June 30, 2001. Consumer loan yields increased 85 basis points primarily due to growth in the insurance premium financing portfolio acquired with the purchase of TMC Financial Services, Inc. ("TMC") on May 15,1999. For the quarter ending June 30, 2001, TMC's portfolio averaged $4.4 million with an average yield of approximately 25%. Also included in calculating consumer loan yields, the Finance Company's portfolio averaged $2.3 million in consumer finance loans yielding an average of 25% for the second quarter of 2001. Investment volume increased significantly by $18.4 million, from $82.1 million at June 30, 2000 to $100.5 million at June 30, 2001. In addition, the volume of federal funds sold increased $14 million in quarterly comparison. The average taxable-equivalent yield on investments decreased 11 basis points, from 6.52% at June 30, 2000 to 6.41% at June 30, 2001. The change in the mix of earning assets combined with lower yields decreased the taxable-equivalent yield on quarterly average earning assets 33 basis points, from 9.16% for the second quarter of 2000 to 8.83% for the second quarter of 2001. Average interest-bearing deposits increased $48.2 million in quarterly comparison, from $196.0 million for the quarter ending June 30, 2000 to $244.2 million for the quarter ending June 30, 2001. The growth was evenly distributed between money market deposits and certificates of deposit. The rate paid on interest-bearing deposits increased 3 basis points for the same period, from 4.23% to 4.26. Included in interest- bearing liabilities for the quarter ending June 30, 2001 is $7,000,000 in trust preferred securities issued in February 2001. The interest rate on the trust preferred securities is 10.20% with interest payable semi- annually. A portion of the proceeds from the issuance of the trust preferred securities was used to pay off MidSouth's $2.5 million line of credit with the Bankers Bank of Georgia. The average rate paid on total interest-bearing liabilities increased 11 basis points, from 4.36% for the quarter ended June 30, 2000 to 4.47% for the quarter ended June 30, 2001. The net effect of changes in the volume, mix of average earning assets and interest-bearing liabilities increased net interest income $448,042 in quarterly comparison. The increased net interest income was significant in spite of a 44 basis point decrease in the net taxable- equivalent yield on average earning assets, from 5.73% for the quarter ended June 30, 2000 to 5.29% for the quarter ended June 30, 2001. A review of the changes in the volume and yields of average earning assets and interest-bearing liabilities between the two six month periods ended June 30, 2000 and 2001 reflected results similar to the quarterly comparison. The net taxable-equivalent yield on average earning assets for the six months ended June 30, 2001 decreased 41 basis points from 5.74% at June 30, 2000 to 5.33% at June 30, 2001. Volume increases in earning assets resulted in an increase to net interest income of $858,498 between the two six month periods reviewed. Non-interest Income MidSouth's primary source of non-interest income, service charges on deposit accounts, increased $14,231 for the three months and $66,308 for the six months ended June 30, 2001 as compared to the same periods for 2000. The increases resulted primarily from an increase insufficient funds fees. Other non-interest income, net of gains on sales of investment securities, increased $148,159 in quarterly comparison and $234,474 in year-to-date comparison. A mortgage origination program with a third party processor contributed $64,767 to the increase for the quarter and $101,113 for the six months ended June 30, 2001. VISA merchant, debit card and ATM fee income increased in 2001, however, expenses associated with these programs have also increased, offsetting the income. Non-interest Expense Non-interest expense increased $310,944 for the three months and $426,021 for the six months ended June 30, 2001 compared to the three and six months ended June 30, 2000. Increases were recorded primarily in the categories of salaries and employee benefits, occupancy expense and marketing expense. Salaries and employee benefits increased primarily due to additional staff and an increase in the cost of group health insurance. The number of full-time equivalent ("FTE") employees increased by 14, from 183 in June 2000 to 197 in June 2001. The increase results primarily from staffing a third New Iberia office and from new hires to develop the Calcasieu market. Occupancy expense increased in the three and six month periods ended June 30, 2001 compared to the same period of 2000 due to increases in depreciation of computer hardware and software, maintenance expenses and property taxes. Marketing expenses increased $79,295 for the three months and $89,479 for the six months ended June 30, 2000 compared to the three and six months ended June 30, 2001. The increase resulted primarily from an advertising campaign focused on building customer relationships. BALANCE SHEET ANALYSIS MidSouth ended the second quarter of 2001 with consolidated assets of $342,550,304, a decrease of $3.8 million from the $346,373,433 reported for December 31, 2000. Deposits decreased over the six months ended June 30, 2001 by $10.7 million, from $319,547,205 at December 31, 2000 to $308,890,932 due primarily to the withdrawal of a significant short-term deposit of approximately $24.6 million in January 2001. Loans experienced growth of $8.4 million in the first six months of 2001, primarily during the second quarter, with the majority of the increase in commercial and real estate loans. Securities available-for- sale increased significantly by $21.8 milllion, from $54.0 million at December 31, 2000 to $75.8 million at June 30, 2001. The increase reflects purchases of $35.3 million offset by sales, maturities and principal paydowns of $14.1 million. Net unrealized gains in the securities available-for-sale portfolio, net of tax effect, were $530,300 at June 30, 2001, compared to a net unrealized gain of $85,200 at December 31, 2000. These amounts result from interest rate fluctuations and do not represent permanent adjustment of value. Moreover, classification of securities as available-for-sale does not necessarily indicate that the securities will be sold prior to maturity. Capital As of June 30, 2001, MidSouth's leverage ratio was 7.80% as compared to 6.05% at December 31, 2000. Tier 1 capital to risk-weighted assets was 11.68% and total capital to risk-weighted assets was 12.72% at the end of the second quarter of 2001. At year-end 2000, Tier 1 capital to risk-weighted assets was 8.54% and total capital to risk-weighted assets was 9.55%. The increase in capital ratios results from the issuance of $7 million in Trust Preferred Securities during the first quarter of 2001. For regulatory purposes, these funds qualify as Tier 1 capital. For financial reporting purposes, these funds are included as a liability under generally accepted accounting principles.
Nonperforming Assets and Past Due Loans Table 1 summarizes MidSouth's nonaccrual, past due and restructured loans and nonperforming assets. Nonperforming Assets and Loans Past Due 90 Days ================================================================= June December June 30 31, 30 2001 2000 2000 ================================================================= Nonperforming loan $431,570 $159,726 $147,145 Other real estate owned, net 343,729 446,046 462,236 Other assets repossessed - - - __________________________________ Total nonperforming assets $775,299 $605,772 $609,381 ================================== Loans past due 90 days or more and still accruing $854,216 $967,721 $491,871 Nonperforming loans as a % of total loans .20% 0.08% 0.08% Nonperforming assets as a % of total loans, other real estate owned and other assets Repossessed 0.36% 0.30% 0.33% ALL as a % of nonperforming assets 314.50% 375.75% 339.39%
Nonperforming assets were $431,570 as of June 30, 2001 an increase of $271,844 from the $159,726 reported for December 31, 2000 and an increase of $284,425 from the $147,145 reported for June 30, 2000. Loans past due 90 days or more increased from $491,871 in June 2000 to $967,721 in December 2000 and decreased to $854,216 as of June 30, 2001. Of the $854,216 in loans past due 90 days or more, $92,012 were funded by the Finance Company and $58,515 represent past due insurance premium financing loans at TMC. Specific reserves have been established in the ALL to cover probable losses on nonperforming assets. The ALL is analyzed quarterly and additional reserves, if needed, are allocated at that time. Management believes that the $2,438,303 in the allowance as of June 30, 2001 is sufficient to cover probable losses in nonperforming assets and in the loan portfolio. Loans classified for regulatory purposes but not included in Table 1 do not represent material credits about which management has serious doubts as to the ability of the borrower to comply with loan repayment terms. Page 15 Item 4. Submission of Matters to a Vote of Security Holders At the annual meeting of shareholders of MidSouth Bancorp, Inc. held May 8, 2001 at 4:00 p.m., the Class II Directors were elected. The following provides information as to the votes: Election of Directors For Withheld Will G. Charbonnet 1,944,488 5,258 Clayton Paul Hilliard 1,942,915 6,831 Item 6. Exhibits and Reports on Form 8-K Page 16 (a) Exhibits Exihibit Number Document Description _______________ ____________________ 3.1 Amended and Restated Articles of Incorporation of MidSouth Bancorp, Inc. is included as Exhibit 3.1 to the MidSouth's Report on Form 10-K for the year ended December 31, 1993, and is incorporated herein by reference. 3.2 Articles of Amendment to Amended and Restated Articles of Incorporation dated July 19, 1995 are included as Exhibit 4.2 to MidSouth's Registration Statement on Form S-8 filed September 20, 1995 and is incorporated herein by reference. 3.3 Amended and Restated By-laws adopted by the Board of Directors on April 12, 1995 are included as Exhibit 3.2 to Amendment No. 1 to MidSouth's Registration Statement on Form S-4 (Reg. No. 33-58499) filed on June 1, 1995. 10.1 MidSouth National Bank Lease Agreement with Southwest Bank Building Limited Partnership is included as Exhibit 10.7 to the Company's annual report on Form 10-K for the Year Ended December 31, 1992, and is incorporated herein by reference. 10.2 First Amendment to Lease between MBL Life Assurance Corporation, successor in interest to Southwest Bank Building Limited Partnership in Commendam, and MidSouth National Bank is included as Exhibit 10.1 to Report on the Company's annual report on Form 10-KSB for the year ended December 31, 1994, and is incorporated herein by reference. 10.3 Amended and Restated Deferred Compensation Plan and Trust is included as Exhibit 10.3 to the Company's annual report on Form 10-K for the year ended December 31, 1992 and is incorporated herein by reference. 10.4 Employment Agreements with C. R. Cloutier and Karen L. Hail are included as Exhibit 5(c) to MidSouth's Form 1-A and are incorporated herein by reference. 10.6 MidSouth Bancorp, Inc.'s 1997 Stock Incentive Planis included as Exhibit 4.5 to MidSouth's definitive Proxy Statement filed April 11, 1997, and is incorporated herein by reference. Page 17 10.7 The MidSouth Bancorp, Inc. Dividend Reinvestment and Stock Purchase Plan is included as Exhibit 4.6 to MidSouth Bancorp, Inc.'s Form S-3D filed on July 25, 1997 and is incorporated herein by reference. 10.8 Loan Agreements and Master Notes for lines of credit established for MidSouth Bancorp, Inc. and Financial Services of the South, Inc. are included as Exhibit 10.7 of MidSouth's Form 10-QSB filed on August 14, 1997 and is incorporated herein by reference. 10.9 Modification Agreement to the Loan Agreement and Master Note for the Line of Credit established for MidSouth Bancorp, Inc. is included as Exhibit 10.9 of MidSouth's Form 10-QSB filed on August 13, 1999 and is incorporated herein by reference. 11 Computation of earnings per share (b) Reports Filed on Form 8-K (none) Signatures In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MidSouth Bancorp, Inc. (Registrant) Date: August 14, 2001 ________________ /s/ C. R. Cloutier _______________________________ C. R. Cloutier, President & CEO /s/ Karen L. Hail ______________________________ Karen L. Hail, Executive Vice President & CFO /s/ Teri S. Stelly _______________________________ Teri S. Stelly, Senior Vice President & Controller