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, 2001
OR
X 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 (337) 237-8343
area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
Common Stock, $.10 par value registered
____________________________ American Stock Exchange, Inc.
_____________________________
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, 2001 were $21,447,960.
As of February 28, 2002, 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
$19,691,510. As of February 28, 2002 there were outstanding 2,901,142
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 21, 2002 -
(Part III)
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 Bank, N.A. (the
"Bank"), a wholly-owned subsidiary. MidSouth is currently
liquidating a second subsidiary, Financial Services of the South,
Inc. (the "Finance Company"). MidSouth, the Bank and the Finance
Company are referred to collectively herein as "the Company."
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 an 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 eighteen locations
described below under "Item 2 - Properties."
Employees
As of December 31, 2001, the Bank employed 205 full-time equivalent
employees and the Finance Company had no employees. MidSouth
has no employees who are not also employees of the Bank.
Through the Bank, 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 with their employees to be very good.
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 twenty-one state chartered or national banks and 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, 2001, the Company's ratios of Tier 1
and total capital to risk-weighted assets were 12.06% and 13.20%,
respectively. MidSouth's leverage ratio (Tier 1 capital to total
average adjusted assets) was 8.02% at December 31, 2001. All
three regulatory capital ratios for the Company exceeded regulatory
minimums at December 31, 2001.
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, 2001, 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,
2001.
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.
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, three in New Iberia and one
banking office in each of Breaux Bridge, Cecilia, Jeanerette,
Opelousas, Morgan City, Jennings, Lake Charles, and Sulphur
Louisiana. Thirteen 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.
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 2001.
Executive Officers of the Registrant
C. R. Cloutier, 54 - President, Chief Executive Officer and
Director of MidSouth and the Bank
Karen L. Hail, 48 - Executive Vice President of the Bank and
Chief Financial Officer, and Secretary and Treasurer of MidSouth
and the Bank
Donald R. Landry, 45 - Senior Vice President and Senior Loan
Officer of the Bank
Jennifer S. Fontenot, 47 - Senior Vice President of the Bank
Dwight Utz, 48 - Senior Vice President of the Bank since 2001;
prior to his employment at the Bank, Mr. Utz was a Corporate Vice
President for PNC Bank Corporation in Pittsburgh, Pennsylvania.
Teri S. Stelly, 42 - 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, 51 - 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.
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. On August 1, 2001, MidSouth
completed the redemption of its Series A Preferred Stock. Only
3,527 shares had not been converted as of July 26, 2001, the final
day for converting. The remaining 3,527 preferred shares were
redeemed at a Redemption Price of $14.33 per share. As of December 31,
2001, there were 632 common 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. 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.
FIVE-YEAR SUMMARY OF SELECTED
CONSOLIDATED FINANCIAL DATA
Year Ended December 31,
___________________________________________________________________________
2001 2000 1999 1998 1997
___________ ___________ ___________ ___________ ___________
Gross interest income $26,424,027 $24,449,115 $21,072,733 $18,755,764 $15,776,416
Interest expense (10,408,926) (9,787,165) (7,888,351) (6,931,556) (5,894,193)
___________ ___________ ___________ ___________ ___________
Net interest income 16,015,101 14,661,950 13,184,382 11,824,208 9,882,223
Provision for loan losses (2,176,224) (897,038) (906,950) (999,950) (854,400)
Other operating income 5,432,859 4,582,995 3,980,496 3,486,937 2,899,461
Other expenses (15,462,472) (14,501,566) (12,740,307) (11,023,245) (9,585,788)
___________ ___________ ___________ ___________ ___________
Income before income taxes 3,809,264 3,846,341 3,517,621 3,287,950 2,341,496
Provision for income taxes (866,105) (951,204) (867,417) (842,167) (586,804)
___________ ___________ ___________ ___________ ___________
Net Income 2,943,159 2,895,137 2,650,204 2,445,783 1,754,692
Preferred stock dividend
requirement (FN1) (52,751) (246,024) (131,582) (148,971) (154,475)
___________ ___________ ___________ ___________ ___________
Net income available to
common stockholders $2,890,408 $2,649,113 $2,518,622 $2,296,812 $1,600,217
=========== =========== =========== =========== ===========
Basic earnings per share $1.08 $1.07 $1.03 $0.95 $0.69
Diluted earnings per share $1.00 $0.95 $0.90 $0.83 $0.61
Total loans $214,390,121 $204,584,860 $170,468,733 $155,477,263 $130,888,144
Total assets 363,779,863 346,373,433 276,723,841 249,818,268 217,112,415
Total deposits 330,577,458 319,547,205 251,690,206 229,924,302 200,067,751
Cash dividends on common stock 547,966 501,443 492,415 434,334 354,336
Long-term obligations (FN2) 8,431,000 4,650,968 3,459,097 3,503,668 3,198,794
Selected ratios:
Loans to assets 58.93% 59.06% 61.60% 62.24% 60.29%
Loans to deposits 64.85% 64.02% 67.73% 67.62% 65.42%
Deposits to assets 90.87% 92.26% 90.95% 92.04% 92.15%
Return on average assets 0.85% 0.98% 0.97% 1.04% 0.78%
Return on average common equity 14.04% 17.70% 17.45% 19.16% 16.44%
A $107,250 charge resulting from the retirement of 11,000 shares of MidSouth Bancorp, Inc.
Series A Preferred Stock is included in the amount recorded as preferred dividends for the
year ended December 31, 2000. On August 1, 2001, MidSouth completed the redemption of
its Series A Preferred Stock. Only 3,527 shares had not been converted to MidSouth Common
Stock as of July 26, 2001, the final day for converting. The remaining 3,527 Preferred Shares
were redeemed at a Redemption Price of $14.33 per share.
On February 21, 2001, MidSouth completed the issuance of $7,000,000 of junior subordinated
debentures. For regulatory puposes, 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 is calculated before the effect of the $107,250 charge related
to the retirement of 11,000 shares of preferred stock for the year ended December 31, 2000.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Item 6.
MidSouth Bancorp, Inc. ("MidSouth") is a one-bank holding company
that conducts substantially all of its business through its wholly-owned
subsidiaries, MidSouth Bank, N. A. (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, 2001 was $2,943,159
compared to $2,895,137 for the year ended December 31, 2000.
Income available to common shareholders for the year ended
December 31, 2001 was $2,890,408 compared to $2,649,113 for the
year ended December 31, 2000. Income available to common
shareholders for the year 2000 was impacted by the repurchase of
11,000 shares of preferred stock. A reduction to earnings of $107,250
was included in the preferred dividend requirement for that year and
resulted from the excess of the purchase price over the book value of
the preferred stock.
In year-to-date comparison, an increase of $1,353,151 or 9% in net
interest income and $849,864 or 19% in non-interest income for the
year 2001 were offset by an increase in provisions for loan losses of
$1,279,186 and a $960,906 increase in non-interest expenses. The
increase in provisions for loan losses resulted primarily from a $700,000
default and charge-off of one commercial loan in June 2001 and
additional provisions taken at the Finance Company. In the third
quarter of 2001, MidSouth began the process of closing the subsidiary,
accepting payments on existing loans with no new loans being made.
Additional provisions of $274,186 over provisions taken in the year
2000 were approved by management to adequately reserve for future
expected losses in the Finance Company portfolio. The increase in
non-interest expenses occurred primarily in salaries and benefits,
occupancy and data processing expenses.
MidSouth's total consolidated assets increased 5% from $346,373,433
at December 31, 2000 to $363,779,863 at December 31, 2001.
Excluding a short-term deposit of approximately $24.6 million included
in year-end 2000 total deposits, MidSouth recorded a 13% increase in
assets over the year ended December 31, 2001. Deposits, exclusive of
the $24.6 million, increased $35.6 million or 12% to $330.6 million at
December 31, 2001.
Loans, net of Allowance for Loan Losses ("ALL"), increased $9.4
million or 5%, from $202.3 million at December 31, 2000 to $211.7
million at December 31, 2001. Competition for loans increased due to
falling rates in 2001. However, continued cuts in prime lending rates
failed to stimulate loan demand as businesses and consumers exercised
caution with a slowing economy.
Nonperforming loans as a percentage of total loans increased from
..08% or $159,726 in December of 2000 to .36% or $768,753 in
December of 2001 primarily due to three commercial loans added in
2001. Specific allocations have been made in the ALL for possible
losses on these three loans. Loans past due 90 days and over
increased slightly from $967,721 at December 31, 2000 to $999,538
at December 31, 2001. Although the dollar amount of loans past due
90 days or more increased, the percentage of these past due loans to
total loans remained at .47%.
MidSouth's leverage ratio was 8.02% for the year ended December
31, 2001, compared to 6.05% for the year ended December 31, 2000.
The increased leverage ratio resulted primarily from the issuance of
$7,000,000 of Junior Subordinated Debentures by MidSouth in
February 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.
Annualized return on average common equity was 14.04% at
December 31, 2001 compared to 17.70% at December 31, 2000.
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,
2001.
Net interest income increased $1,353,151 for 2001 over 2000 and
$1,477,568 for 2000 over 1999. The increase in net interest income for
2001 resulted primarily from comparable volume increases in both the
loan and investment portfolios. The effect of the increased volume of
earning assets on total interest income was substantially offset by
declining yields on loans and investments. The increase in 2000
resulted primarily from growth in MidSouth's loan portfolio combined
with rising rates. Average loans as a percentage of average earnings
assets increased from 65% in 1999 and to 69% in 2000 and back
down to 66% in 2001. Interest income from loans, including loan fees,
increased $3,158,068 from 1999 to 2000 and $1,098,157 from 2000
to 2001.
The increased interest income resulted from increases in average loan
volume of $24.5 million or 13% in 2001 and $22.4 million or 14% in
2000. Average yield on total loans decreased 71 basis points, from
10.55% in 2000 to 9.84% in 2001. An increase of 49 basis points was
recorded in 2000, from 10.06% in 1999 to 10.55%. For the higher
volume commercial loan portfolio, average yields increased from 9.58%
in 1999 to 9.97% in 2000 and then decreased to 8.87% in 2001.
Changes in the New York prime lending rate combined with market
competition for quality credits impacted MidSouth's loan yields over the
past three years. After increasing 75 basis points in 1999 and an
additional 100 basis points in 2000, the New York prime fell 475 basis
points to 4.75% at December 31, 2001.
Average yields in the installment loan portfolio rose from 11.60% in
1999 to 12.45% in 2000 and to 13.53% in 2001. The installment
portfolio yield benefited from the Finance Company's loans, which
averaged $2.1 million and yielded an average rate of 19% in 2001.
Credit card loans averaging $1.7 million with an average yield of 19%
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 loan portfolio yield for the year ended
December 31, 2001 with an average rate of 24% earned on an average
portfolio of $4.6 million.
Following strong loan growth in 2000, loan demand declined in 2001 as
businesses and consumers exercised caution with the slowing economy.
Accordingly, MidSouth experienced increased activity in the investment
securities portfolio during 2001. The average volume of investment
securities increased $17.2 million to $96.0 million in 2001 compared to
$78.8 million in 2000. Average taxable equivalent yields on investment
securities decreased 37 basis points, from 6.61% in 2000 to 6.24% in
2001. The increase in volume, partially offset by a decrease in rate
during 2001, resulted in increased interest income from investment
securities of $643,202 for the year. The volume of federal funds sold
increased $8.5 million and added $233,553 to total interest income in
2001.
MidSouth's deposit mix remained stable over the past three years
ended December 31, ,2001, with non-interest bearing deposits
representing 24% of average total deposits. Additionally, the mix of
average total interest-bearing deposits remained stable with only a slight
increase in the volume of NOW, money market and savings deposits
(39% of average total deposits) compared to certificates of deposit
(37% of average total deposits). These two categories of interest-
bearing deposits were evenly matched at 38% of average total deposits
as of December 31, 2000. For year-ended December 31, 1999,
NOW, money market and savings deposits represented 37% of
average total deposits, while 39% consisted of CD's.
Volume increases in interest-bearing deposits, partially offset by rate
decreases for the year ended December 31, 2001 resulted in increased
interest expense of $349,744 in 2001 compared to an increase of
$1,809,805 in 2000. Average interest-bearing deposits increased
$35.6 million in 2001 and $17.5 million in 2000. The average rate paid
on these deposits fell 52 basis points to 3.98% in 2001 after rising 55
basis points to 4.50% in 2000. The rate increase in 2000 resulted from
the Federal Reserve Bank's decisions to raise rates throughout the year
and from very competitive market rates in MidSouth's markets. In
2001, FHLB advances averaged only $172,000 at an average rate of
5.23%, down from $2.9 million at an average rate of 6.72% during
2000 and $4.0 million at an average rate of 5.45% in 1999.
In February 2001, MidSouth issued $7,000,000 of junior subordinated
debentures. The debentures carry a fixed interest rate of 10.20% and
mature on February 22, 2031. MidSouth paid off its line of credit with
proceeds from the issuance of the debentures. Accordingly, the
average volume of notes payable decreased from $3.9 million at
December 31, 2000 to $1.9 million at December 31, 2001. During
2000, an increase in borrowings on lines of credit for MidSouth and the
Finance Company resulted in an increase in the average volume of notes
payable. With rates on both lines of credit tied to the New York prime,
the average rate paid increased from 7.75% in 1999 to 8.90% in 2000.
The volume increases in MidSouth's earning assets and interest-bearing
liabilities combined with falling interest rates resulted in net taxable-
equivalent net yields on average earning assets of 5.24% in 2001 as
compared to 5.66% for 2000 and 5.52% for 1999.
Table 1
Consolidated Average Balances, Interest and Rates
Taxable-equivalent basis Year Ended December 31,
(in thousands)
2001 2000 1999
____________________________________________________________________________________________________
Average Average Average Average Average Average
Volume Interest Yield/Rate Volume Interest Yield/Rate Volume Interest Yield/Rate
____________________________________________________________________________________________________
ASSETS
Interest Bearing
Deposits $217 $13 5.99% $258 $20 7.75% $104 $1 0.96%
Investment
Securities
Taxable 65,481 3,795 5.80% 54,295 3,426 6.31% 54,894 3,277 5.97%
Tax Exempt 30,259 2,179 7.20% 24,295 1,766 7.27% 21,850 1,593 7.29%
________________ ________________ ________________
Total Investments 95,957 5,987 6.24% 78,848 5,212 6.61% 76,848 4,871 6.34%
Federal Funds Sold
and Securities
Purchased Under
Agreements to
Resell 13,845 565 4.08% 5,352 331 6.18% 8,797 406 4.62%
Loans
Commercial and
Real Estate 165,420 14,668 8.87% 141,340 14,092 9.97% 123,836 11,868 9.58%
Installment 43,378 5,871 13.53% 42,961 5,349 12.45% 38,058 4,415 11.60%
________________ ________________ ________________
Total Loans 208,798 20,539 9.84% 184,301 19,441 10.55% 161,894 16,283 10.06%
Total Earning
Assets 318,600 27,091 8.50% 268,501 24,984 9.30% 247,539 21,560 8.71%
Allowance for Loan
Losses (2,404) (2,022) (1,857)
Nonearning Assets 31,618 28,315 27,035
________ ________ ________
Total Assets $347,814 $294,794 $272,717
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
NOW, Money Market,
and Savings $122,562 $2,992 2.44% $102,709 $3,510 3.42% $91,559 $2,632 2.87%
Certificates of
Deposits 117,163 6,539 5.58% 101,446 5,671 5.59% 95,109 4,739 4.98%
________________ ________________ ________________
Total Interest Bearing
Deposits 239,725 9,531 3.98% 204,155 9,181 4.50% 186,668 7,371 3.95%
Federal Funds Purchased
and Securities
Sold Under
Agreements to Repurchase 1,601 71 4.43% 1,155 63 5.45% 683 35 5.12%
FHLB Advances 172 9 5.23% 2,915 196 6.72% 4,021 219 5.45%
Notes Payable 1,860 177 9.52% 3,898 347 8.90% 3,393 263 7.75%
Junior Subordinated
Debentures 6,073 621 10.20% - - - - - -
Total Interest
________________ ________________ ________________
Bearing
Liabilities 249,431 10,409 4.17% 212,123 9,787 4.61% 194,765 7,888 4.05%
Demand Deposits 74,733 63,713 60,192
Other Liabilities 1,983 1,369 1,127
Stockholders' Equity 21,667 17,589 16,633
________ ________ ________
Total Liabilites and
Stockholders' Equity $347,814 $294,794 $272,717
======== ======== ========
NET INTEREST INCOME AND
NET INTEREST SPREAD $16,682 4.33% $15,197 4.69% $13,672 4.66%
======= ======= =======
NET YIELD ON EARNING ASSETS 5.24% 5.66% 5.52%
Securities classified as available-for-sale are included in average balances
and interest income figures reflect interest earned on such securities.
Interest income of $667,000 for 2001, $535,000 for 2000, and $488,000
is added to interest earned on tax-exempt obligations to reflect tax equivalent
yields using a 34% tax rate.
Interest income includes loan fees of $1,406,000 for 2001, $1,276,000 for 2000,
and $1,144,000 for 1999. Nonaccrual loans are included in average balances
and income on such loans is recognized on a cash basis.
Table 2
Changes in Taxable-Equivalent Net Interest Income
(in thousands)
2001 Compared to 2000 2000 Compared to 1999
________________________________________ ________________________________________
Total Total
Increase Change Attributable To Increase Change Attributable To
(Decrease) Volume Rates (Decrease) Volume Rates
________________________________________ ________________________________________
Taxable-equivalent interest earned on:
Interest Bearing Deposits ($7) ($3) ($4) $19 $3 $16
Investment Securities
Taxable 369 611 (242) 149 (35) 184
Tax Exempt 413 429 (16) 173 178 (5)
Federal Funds Sold and Securities
Purchased Under Agreement to Resell 234 298 (64) (75) (158) 83
Loans, including fees 1,098 2,230 (1,132) 3,158 2,335 823
________ ________________ ________ ________________
TOTAL 2,107 3,565 (1,458) 3,424 2,323 1,101
________ ________________ ________ ________________
Interest Paid On:
Interest Bearing Deposits 350 1,046 (696) 1,810 729 1,081
Federal Funds Purchased and Securities
Sold Under Agreement to Repurchase 8 16 (8) 28 26 2
FHLB Advances (187) (151) (36) (23) (53) 30
Notes Payable (170) (196) 26 84 42 42
Junior Subordinated Debentures 621 621 - - - -
________ ________________ ________ ________________
TOTAL 622 1,336 (714) 1,899 744 1,155
________ ________________ ________ ________________
Taxable-equivalent net interest income $1,485 $2,229 ($744) $1,525 $1,579 ($54)
======== ================ ======== ================
NOTE: Changes due to both volume and rate has generally been allocated to volume and rate
changes in proportion to the relationship of the absolute dollar amounts to the
changes in each. _________
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 and insufficient funds fees increased $299,159 in 2001 and
$262,930 in 2000, primarily due to an increase in the number of
transaction accounts and the volume of insufficient funds checks
processed by MidSouth. Fees earned through the sale of credit life
insurance decreased $25,829 in 2001, following an increase of
$112,861 in 2000 that resulted from internal training, tracking, and
incentives on the product. Non-interest income resulting from other
charges and fees increased $403,777 in 2001 as compared to
$210,582 in 2000. An increase of $192,025 and $76,315 in income
from a third party mortgage program contributed to the increase in other
non-interest income for 2001 and 2000, respectively. An increase in
income on Visa debit cards and merchant programs is included in the
increase in other charges and fees, however, increased expenses on
these programs partially offset the benefit.
Securities Transactions. MidSouth captured net gains on sales of
_______________________
securities totaling $188,883 in 2001. Sales of $8.6 million in U. S.
Treasury and Agency securities allowed MidSouth to improve the
overall yield on these securities as they neared maturity. A Ford Motor
Credit corporate bond was also sold due to credit quality concerns. In
2000, net gains on the sales of two securities totaled $16,126.
Non-interest Expense
Total non-interest expense increased 6.6% from 2000 to 2001 and
13.8% from 1999 to 2000. MidSouth's growth and 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.
In 2001, the increase in expenses leveled off as MidSouth focused on
improving facilities, operations and risk management. A new Jennings
office building was completed and improvements were made on the
Cecilia office building. Two internal staff auditors, a loan documentation
officer and an electronic banking associate were added during 2001 to
strengthen MidSouth's operations and risk management functions.
These new positions contributed to the $470,188, or 7%, increase in
salaries and employee benefits for 2001. Salaries and employee
benefits increased 13% from 1999 to 2000. New hires in 2000
included five employees for the third New Iberia banking office, an
internet banking associate and two call center operators.
Occupancy expenses increased $162,565 or 5% from 2000 to 2001
and $410,592 or 14% from 1999 to 2000 as a result of increases in
lease expense, property taxes, depreciation, and maintenance expenses.
Premises and equipment totaling approximately $1,500,000 were
added in 2001 and $1,700,000 were added during 2000. Additions in
2001 included the new Jennings facility and renovations on the Cecilia
office. MidSouth also began construction on a storage facility in 2001.
Additions in 2000 included the Admiral Doyle office in New Iberia,
renovation of additional leased space at the main office in Lafayette, and
additional drive through lanes at the Opelousas location. The Sulphur
office opened in January 2000 to expand MidSouth's presence in
Calcasieu Parish.
Total other non-interest expenses increased $328,153 or 7%, from
2000 to 2001 and $558,540 or 15% from 1999 to 2000. Included in
the increase for 2001 is a $80,728 increase in professional fees, which
include consulting costs, and $60,154 in the VISA debit and credit card
programs and ATM processing. Additional increases were realized in
agent commission expense (associated with the insurance premium
financing loan program), directors fees, travel expenses and postage.
Included in the increase for 2000 is $175,214 in increased expenses on
Other Real Estate Owned that resulted primarily from the loss on
valuation of one piece of commercial property. Other increases were
recorded in professional fees, agent commission expense, and credit
reporting expenses.
Income Taxes
MidSouth's tax expense decreased by $85,099 and approximated 23%
of income before income taxes. Increased interest income on non-
taxable municipal securities further reduced 2001 taxes from the
expected statutory rate of 34%. Interest income on non-taxable
municipal securities also lowered the effective tax rate for 2000 to
approximately 25%. 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 $21.8 million, from $77.6 million in
2000 to $99.4 million in 2001. Average duration of the portfolio was
3.1 years as of December 31, 2001 and the average taxable-equivalent
yield was 6.24%. Cash flows from maturities and paydowns within the
portfolio were reinvested primarily in government agency securities and
municipal securities. Slow demand for loans necessitated placement of
excess funds in securities and federal funds sold. A favorable change in
the market value of securities available-for-sale is included in the net
change in 2001. Unrealized net gains in the securities available-for-sale
portfolio were $727,462 at December 31, 2001, compared to
unrealized net gains of $148,100 at December 31, 2000. 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, 2001, approximately 28% of MidSouth's securities
available-for-sale portfolio represented mortgage-backed securities and
27% 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 which each had a book value of less than 10%
of stockholders' equity at December 31, 2001. 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 20% of the available-for-sale portfolio consisted
of U. S. Treasury and agency securities, while municipal and other
securities represented 25% of the portfolio. 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.
The held-to-maturity portfolio remained constant with $22.5 million in
non-taxable and $1.1 million in taxable municipal securities. Municipals
purchased during 2001 were placed in the available-for-sale portfolio.
Loan Portfolio
Loan growth slowed in 2001, with $9.8 million added to the portfolio
compared to $34.9 million added during 2000. MidSouth's loan
portfolio totaled $214.4 million at December 31, 2001 compared to
$204.6 million at December 31, 2000. Weak loan demand
compounded by a competitive rate environment and payouts caused
MidSouth to fall short of budgeted loan growth in 2001. The majority
of the $9.8 million growth in 2001 was in the real estate portfolio, while
the commercial portfolio decreased slightly and the installment portfolio
remained constant. In 2000, MidSouth lenders met budget projections
by growing commercial loans $12.8 million and the real estate portfolio
by $16.3 million. Installment loans to individuals increased $3.2 million
or 12% during the twelve months ended December 31, 2000. The real
estate loan growth in 2001 and 2000 consisted of both commercial and
consumer credits that call for ten to fifteen year amortization terms with
rates fixed for three to five years. The short-term structure of these
credits allows management greater flexibility in controlling interest rate
risk.
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.
TABLE 3
Nonperforming Assets and
Loans Past Due 90 Days
___________________________________________________________________________
December 31, December 31, December 31,
2001 2000 1999
___________________________________________________________________________
Nonperforming loans $768,753 $159,726 $234,962
Other real estate owned, net 359,336 446,046 569,963
Other assets repossessed - - 31,755
__________ ________ ________
Total nonperforming assets $1,128,089 $605,772 $836,680
========== ======== ========
Loans past due 90 days
or more and still accruing $999,538 $967,721 $793,823
Nonperforming loans as a
% of total loans .36% .08% 0.14%
Nonperforming assets as a
% of total loans, other real
estate owned and other assets
repossessed .53% .30% 0.49%
Allowance for loan losses
as a % of nonperforming assets 243.68% 375.75% 235.13%
___________________________________________________________________________
Nonperforming assets totaled $1,128,089 at December 31, 2001,
$605,772 at December 31, 2000 compared to $836,680 at December
31, 1999. The increase in nonperforming assets in 2001 is primarily
due to the addition of three large commercial credits. Specific
allocations have been made within the ALL for possible losses on these
credits. Loans past due 90 days and still accruing totaled $999,538 at
December 31, 2001 compared to $967,721 at December 31, 2000
and $793,823 at December 31, 1999. Although the dollar amount of
loans past due 90 days or more and still accruing increased, the
percentage of these past due loans to total loans remained constant at
..47% for the past three years. Of the $999,538 in 90 days past due
loans still accruing for December 31, 2001, $128,200 was reported
past due 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.
Allowance for Loan Losses. Provisions totaling $2,176,224,
_________________________
$897,038, and $906,950 for the years 2001, 2000 and 1999,
respectively, were necessary to bring the allowance to a level
considered by management to be sufficient to cover probable losses in
the loan portfolio. Table 4 analyzes activity in the allowance for 2001
and 2000.
TABLE 4 - Summary of Loan Loss Experience
(in thousands)
2001 2000
________ ________
BALANCE AT BEGINNING OF YEAR $2,276 $1,967
CHARGE-OFFS
Commercial, Financial and Agricultural 1,032 73
Real Estate - Construction - -
Real Estate - Mortgage 62 12
Installment Loans to Individuals 760 565
Lease Financing Receivables 6 14
Other 53 44
________ ________
Total Charge-offs 1,913 708
________ ________
RECOVERIES
Commercial, Financial and Agricultural 19 3
Real Estate - Construction - -
Real Estate - Mortgage - -
Installment Loans to Individuals 143 107
Lease Financing Receivables - 1
Other 4 9
________ ________
Total Recoveries 166 120
________ ________
Net Charge-offs 1,747 588
Additions to allowance charged to
operating expenses 2,176 897
________ ________
BALANCE AT END OF YEAR $2,705 $2,276
======== ========
Net charge-offs to average loans 0.84% 0.32%
Year-end allowance to year-end loans 1.26% 1.11%
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.
% of category % of category
Allowance for Loan Losses 2001 to total 2000 to total loans
____________________________________________________________________________________________
Commercial, Financial and Agricultural 385 32.05% 10 33.91%
Real Estate - Construction 3.30% 2.32%
Real Estate - Mortgage 185 45.55% 44.46%
Installment Loans to Individuals 15 16.76% 16.73%
Lease Financing Receivables 2.20% 2.46%
Other 0.14% 0.12%
Unallocated 2,120 2,266
________________________________________________
$2,705 100.00% $2,276 100.00%
================================================
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 accounting principles generally accepted in the Unites States of
America and Section 217 of the OCC's manual and Banking Circular
201. Factors considered in determining provisions include estimated
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.
Sources of Funds
Deposits. As of December 31, 2001, total deposits increased $11
________
million to $330.6 million, up from $319.6 million at December 31,
2000. Included in total deposits at year-end 2000 was a significant
short-term deposit of approximately $24.6 million, most of which was
withdrawn within the month of January 2001. Excluding this short-term
deposit, MidSouth realized a $35.6 million increase, or 12% in 2001
and a 17% increase in deposits in 2000. Deposit growth in 2001 was
primarily in non-interest bearing and NOW account deposits. The
growth in 2000 was primarily in money market indexed deposits and
certificates of deposit.
Non-interest bearing deposits represented 26% of total deposits at
December 31, 2001 and 24% at December 31, 2000. Core deposits,
defined as all deposits other than certificates of deposit ("CD's") of
$100,000 or more, remained constant at 86% of total deposits at year-
end 2001 and 2000. CD's of $100,000 or more totaled $47.5 million
at December 31, 2001, an increase of $1.4 million from the $46.1
million reported at year-end 2000.
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. At December 31, 2001, the note payables to
______________
financial institutions consisted of advances against a Line of Credit
established by Financial Services of the South, Inc. The Line of Credit
is in the amount of $2,000,000 and is dated April 30, 2001. 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, 2001 and 2000, the effective rate was 5.00% and
9.75%, respectively. Interest on this note is payable monthly, with
principal due at maturity on April 30, 2002. Advances under this note
totaled $1,431,000 at December 31, 2001 and $1,975,000 at
December 31, 2000. A Line of Credit for MidSouth with a principal
balance of $2,500,000 at December 31, 2000 was paid in full in
February 2001 with proceeds received from the MidSouth's issuance
of junior subordinated debentures. Two long-term FHLB borrowings
totaling $175,968 at December 31, 2000 matured during 2001.
On February 22, 2001, MidSouth issued $7,000,000 in junior
subordinated debentures. These debentures qualify as Tier 1 capital
and are presented in the Consolidated Statements of Condition as
"Junior Subordinated Debentures." These debentures bear interest at a
rate of 10.20% and mature on February 22, 2031. 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. A second note was financed on May 11, 2000 in the amount of
$130,656 at a fixed rate of 8.00% payable in monthly installments of
$1,701 with payment in full due on May 10, 2009. The ESOP
obligation constitutes a reduction of MidSouth's stockholders' equity
because the primary source of loan repayment is contributions by the
Bank 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, 2001 and 2000 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, 2001, 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, 2001,
MidSouth's Tier 1 capital to average adjusted assets (the "leverage
ratio") was 8.02% as compared to 6.05% at December 31, 2000. Tier
1 capital to risk weighted assets was 12.06% and 8.54% for 2001 and
2000, respectively. Total capital to risk weighted assets was 13.20%
and 9.55%, respectively, for the same periods. The increased capital
ratios resulted primarily from the issuance of $7,000,000 of junior
subordinated debentures by MidSouth in February 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. The Bank's leverage ratio
was 7.41% at December 31, 2001 compared to 6.74% at December
31, 2000.
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 the three years ended
December 31, 2001. No significant restrictions are placed on the Bank
as a result of this classification.
As discussed under the heading "Balance Sheet Analysis - Securities,"
$727,462 in unrealized gains on securities available-for-sale, less a
deferred tax liability of $257,500, was recorded as an addition to
stockholders' equity as of December 31, 2001. As of December 31,
2000, $148,100 in unrealized gains on securities available-for-sale, less
a deferred tax liability of $62,900, 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 reported for December 31,
2001 and 2000 did, however, effect MidSouth's equity to assets ratio
for financial reporting purposes. The ratio of equity to assets was
6.22% at December 31, 2001 and 5.73% at December 31, 2000.
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 2001, 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 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 $50,843,000,
or 13.98% of total assets at December 31, 2001. The 13.98% ratio is
within internal policy guidelines of + or - 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, 2001 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.
Table 5
Interest Rate Sensitivity and Gap Analysis Table
December 31, 2001
(in thousands)
Non-interest
0-3 MOS 4-6 MOS 7-12 MOS 1-5 YRS > 5YRS Bearing Total
______________________________________________________________
ASSETS
Interest Bearing Deposits $109 $ - $ - $ - $ - $ - $109
Fed Funds Sold 17,300 17,300
Investments
Mutual Funds 970 970
Investment Securities 1,007 70 1,436 22,020 32,541 57,074
Mortgage-backed Securitie 9,209 12,568 8,272 11,029 244 41,322
Loans
Fixed Rate 45,614 23,853 35,533 57,017 842 162,859
Variable Rate 51,531 51,531
Other Assets 35,320 35,320
Allowance for Loan Losses (2,705) (2,705)
______________________________________________________________
Total Assets $125,740 $36,491 $45,241 $90,066 $33,627 $32,615 $363,780
==============================================================
LIABILITIES
NOW $3,763 $3,405 $5,867 $21,131 $5,333 $39,499
MMDA 9,000 9,597 14,855 33,621 2,241 69,314
Savings 1,415 1,281 2,207 7,950 2,007 14,860
CD'S 34,202 29,802 39,141 12,614 115,759
Demand Deposits 91,146 91,146
Other Liabilities 663 1,431 7,000 1,481 10,575
Stockholders' Equity 22,627 22,627
______________________________________________________________
Total Liabilities $49,043 $45,516 $62,070 $75,316 $16,581 $115,254 $363,780
==============================================================
Repricing/maturity gap:
Period $76,697 ($9,025)($16,829) $14,750 $17,046 ($82,639)
Cumulative $76,697 $67,672 $50,843 $65,593 $82,639 $ -
====================================================
Cumualtive Gap/Total Assets 21.08% 18.60% 13.98% 18.03% 22.72%
___________________________________________
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 additional primary sources of asset liquidity for the Bank.
Approximately $20.8 million in projected cash flows from securities
during 2002 provides an additional source of liquidity. MidSouth also
has borrowing lines with three correspondent banks, including significant
borrowing capacity with the FHLB of Dallas, Texas.
Parent Company Liquidity. At the parent company level, cash is
________________________
needed primarily to meet interest payments on the junior subordinated
debentures and pay dividends on common stock. The parent company
issued $7,000,000 in junior subordinated debentures in February 2001,
the terms of which are described in Note 7 to MidSouth's Consolidated
Financial Statements. As of December 31, 2001, MidSouth had $2.4
million in interest-bearing balances remaining of proceeds from the
issuance of the debentures. Dividends from the Bank totaling $200,000
and $925,000 provided additional liquidity for the parent company in
2001 and 2000, respectively. As of January 1, 2002, the Bank had the
ability to pay dividends to the parent company of approximately $5.3
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
_________
common stock is cash on hand remaining from the issuance of junior
subordinated debentures and dividends 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.
Cash dividends totaling $547,966 and $501,443 were declared to
common stockholders during 2001 and 2000, 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.
On August 1, 2001, MidSouth completed the redemption of its Series
A Preferred Stock. Only 3,527 shares had not been converted to
MidSouth Common Stock as of the final day for converting. The
remaining 3,527 Preferred Shares were redeemed at a Redemption
Price of $14.33 per share. Additional information regarding
MidSouth's Preferred Stock is included in Note 12 to MidSouth's
Consolidated Financial Statements.
Forward Looking Statements
The Private Securities Litigation Act of 1995 provides a safe harbor for
disclosure of information about a company's anticipated future financial
performance. This act protects a company from unwarranted litigation
if actual results differ from management expectations. This
management's discussion and analysis reflects management's current
views and estimates of future economic circumstances, industry
conditions, MidSouth's performance and financial results. A number of
factors and uncertainties could cause actual results to differ from the
anticipated results and expectations expressed in the discussion.
MIDSOUTH BANCORP, INC.
LOAN PORTFOLIO
LOAN MATURITIES AND SENSITIVITY TO INTEREST RATES
for the Year Ended December 31, 2001
(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
_______________________________________________ __________________________________________
Commercial, Financial
Industrial, Commercial
Real Estate Mortgage
and Commercial Real
Estate - Constr $43,556 $76,764 $35,716 $156,036 $76,901 $35,579 $112,480
Installment Loans to
Individuals and Real
Estate Mortgage 16,809 35,808 716 $53,333 33,161 3,363 $36,524
Lease Financing
Receivables 269 4,461 - $4,730 4,461 - $4,461
Other 291 - - $291 - - -
_______________________________________________ __________________________________________
TOTAL $60,925 $117,033 $36,432 $214,390 $114,523 $38,942 $153,465
=============================================== ==========================================
MIDSOUTH BANCORP, INC.
SECURITIES PORTFOLIO
MATURITIES AND AVERAGE YIELDS
for the Year Ended December 31, 2001
(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
___________________________________________________________________________________________
U.S. Treasury and U.S.
Government Agency securities $1,007 6.50% $10,333 4.87% $3,408 2.47% $106 4.24% $14,854
Obligations of State and
Political Subdivisions 452 2.80% 5,331 2.94% 4,107 4.29% 3,757 4.94% 13,647
Mortgage Backs and CMOs - - 2,326 4.65% 8,754 4.94% 30,243 5.97% 41,323
Corporates and other securities 1,024 5.64% 2,627 5.96% - - 1,335 4.30% 4,986
Mutual funds 970 5.41% - - - - - - 970
___________________________________________________________________________________________
Total Fair Value $3,453 $20,617 $16,269 $35,441 $75,780
===========================================================================================
After 1 but After 5 but
Within 1 Year Within 5 Years Within 10 Years After 10 Years
HELD TO MATURITY Amont Yield Amount Yield Amount Yield Amount Yield Total
___________________________________________________________________________________________
Obligations of State and
Political Subdivisions $30 5.74% $3,728 5.31% $15,374 5.10% $4,453 5.11% $23,585
___________________________________________________________________________________________
Total Amortized Cost $30 $3,728 $15,374 $4,453 $23,585
===========================================================================================
MIDSOUTH BANCORP, INC.
SUMMARY OF
AVERAGE DEPOSITS
(in thousands)
2001 2000
AVERAGE AVERAGE AVERAGE AVERAGE
AMOUNT YIELD AMOUNT YIELD
________ _______ _______ _______
Non-interest bearing $74,732 0.00% $63,713 0.00%
Demand Deposits
Interest bearing Deposits
Savings, NOW, MMKT 122,562 2.44% 102,709 3.42%
Time Deposits 117,163 5.58% 101,446 5.59%
________ ________
Total $314,457 3.98% $267,868 3.43%
======== ========
MATURITY SCHEDULE
TIME DEPOSITS OF
$100,000 OR MORE
(in thousands)
2001 2000
_______ _______
3 months or less $18,083 $13,059
3 months through 6 months 9,140 9,956
7 months through 12 months 14,872 13,283
over 12 months 3,983 9,774
_______ _______
Total $46,078 $46,072
======== =======
SUMMARY OF RETURN
ON EQUITY AND ASSETS
2001 2000
________ _______
Return on Average Assets 0.85% 0.98%
Return on Average Common Equity 14.04% 17.70%
Dividend Payout Ratio
on Common Stock 18.96% 18.93%
Average Equity to
Average Assets 6.23% 5.97%
Selected Quarterly Financial Data
(unaudited)
2001
___________________________________________________________
(Dollars in thousands, except per share IV III II I
_______ _______ _______ _______
Interest income $6,138 $6,596 $6,922 $6,768
Interest expense 2,119 2,563 2,843 2,885
_______ _______ _______ _______
Net interest income 4,019 4,033 4,079 3,883
Provision for possible credit losses 380 439 1,034 323
_______ _______ _______ _______
Net interest income after provision
for possible credit losses 3,639 3,594 3,045 3,560
Noninterest income,
excluding securities gains 1,499 1,241 1,298 1,183
Net securities gains 142 - 68 -
Noninterest expense 4,101 3,835 3,822 3,704
_______ _______ _______ _______
Income before income tax expense 1,179 1,000 589 1,039
Income tax expense 284 217 120 244
_______ _______ _______ _______
Net income 895 783 469 795
Preferred stock dividend requirement - - (22) (30)
_______ _______ _______ _______
Income applicable to common shareholders $895 $783 $447 $765
======= ======= ======= =======
Earnings per common share
Basic $0.31 $0.29 $0.18 $0.31
Diluted $0.31 $0.27 $0.16 $0.27
Market price of common stock
High $11.60 $11.05 $11.90 $10.40
Low $10.70 $10.27 $10.35 $9.90
Close $11.60 $10.85 $11.10 $9.99
Average shares outstanding
Basic 2,877,891 2,734,556 2,514,972 2,492,196
Diluted 2,931,866 2,947,085 2,920,454 2,924,741
2000
___________________________________________________________
(Dollars in thousands, except per share IV III II I
_______ _______ _______ _______
Interest income $6,733 $6,238 $5,885 $5,592
Interest expense 2,886 2,528 2,254 2,119
_______ _______ _______ _______
Net interest income 3,847 3,710 3,631 3,473
Provision for possible credit losses 302 201 177 217
_______ _______ _______ _______
Net interest income after provision
for possible credit losses 3,545 3,509 3,454 3,256
Noninterest income,
excluding securities gains 1,243 1,131 1,158 1,035
Net securities gains - 14 - 2
Noninterest expense 3,819 3,582 3,511 3,589
_______ _______ _______ _______
Income before income tax expense 969 1,072 1,101 704
Income tax expense 209 276 310 156
_______ _______ _______ _______
Net income 760 796 791 548
Preferred stock dividend requirement (33) (140) (35) (38)
_______ _______ _______ _______
Income applicable to common shareholders $727 $656 $756 $510
======= ======= ======= =======
Earnings per common share
Basic $0.29 $0.26 $0.30 $0.21
Diluted $0.26 $0.24 $0.27 $0.18
Market price of common stock
High $8.69 $8.38 $8.81 $9.44
Low $8.13 $7.75 $8.00 $8.63
Close $8.63 $8.25 $8.06 $8.75
Average shares outstanding
Basic 2,489,829 2,489,829 2,500,019 2,470,551
Diluted 2,910,494 2,901,198 2,968,851 2,964,655
MIDSOUTH BANCORP, INC. AND
SUBSIDIARIES
Item 7.
Consolidated Financial Statements for the
Years Ended December 31, 2001, 2000 and 1999
and Independent Auditors' Report
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, 2001
and 2000, 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, 2001. 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 auditing standards generally
accepted in the United States of America. 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, 2001 and 2000 and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 2001 in conformity with accounting principles
generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 1, 2002
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
DECEMBER 31, 2001 AND 2000
_______________________________________________________________________________________________
ASSETS 2001 2000
Cash and due from banks $ 18,547,278 $ 15,698,538
Federal funds sold 17,300,000 34,100,000
____________ ____________
Total cash and cash equivalents 35,847,278 49,798,538
Interest-bearing deposits in banks 109,206 68,682
Securities available-for-sale at fair value (amortized
cost of $75,052,952 in 2001 and $53,821,526 in 2000) 75,780,414 53,969,626
Securities held-to-maturity (estimated fair value of
$24,735,122 in 2001 and $24,474,077 in 2000) 23,584,850 23,611,057
Loans, net of allowance for loan losses of $2,705,058
in 2001 and $2,276,187 in 2000 211,685,063 202,308,673
Accrued interest receivable 2,197,794 2,365,350
Premises and equipment, net 11,950,701 11,739,575
Other real estate owned, net 359,336 446,046
Goodwill, net 431,987 493,071
Other assets 1,833,234 1,572,815
____________ ____________
$363,779,863 $346,373,433
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 91,145,842 $ 75,151,653
Interest bearing 239,431,616 244,395,552
____________ ____________
Total deposits 330,577,458 319,547,205
Securities sold under repurchase agreements 663,079 997,616
Accrued interest payable 1,057,065 1,007,302
Notes payable 1,431,000 4,650,968
Junior subordinated debentures 7,000,000 -
Other liabilities 423,700 307,964
____________ ____________
Total liabilities 341,152,302 326,511,055
____________ ____________
Commitments and Contingencies - -
Stockholders' equity:
Convertible preferred stock, $14.25 par value, 5,000,000
shares authorized, -0- and 130,620 issued and outstanding
at December 31, 2001 and 2000, respectively - 1,861,335
Common stock, $.10 par value, 5,000,000 shares authorized;
2,901,142 and 2,515,166 issued and outstanding at
December 31, 2001 and 2000, respectively 290,114 251,517
Additional paid in capital 12,972,762 11,147,534
Unearned ESOP shares (149,638) (185,127)
Unrealized gains on securities available-for-sale,
net of deferred taxes 469,962 85,200
Retained earnings 9,044,361 6,701,919
____________ ____________
Total stockholders' equity 22,627,561 19,862,378
____________ ____________
$363,779,863 $346,373,433
============ ============
See notes to consolidated financial statements.
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
__________________________________________________________________________________________________
2001 2000 1999
INTEREST INCOME:
Loans, including fees $ 20,539,148 $ 19,440,991 $ 16,282,923
Securities:
Taxable 3,807,820 3,445,594 3,277,619
Nontaxable 1,512,050 1,231,074 1,105,320
Federal funds sold 565,009 331,456 406,871
____________ ____________ ____________
Total interest income 26,424,027 24,449,115 21,072,733
____________ ____________ ____________
INTEREST EXPENSE:
Deposits 9,530,743 9,180,999 7,371,194
Securities sold under repurchase agreements,
federal funds purchased and advances 73,703 259,399 253,869
Long-term debt 804,480 346,767 263,288
____________ ____________ ____________
Total interest expense 10,408,926 9,787,165 7,888,351
____________ ____________ ____________
NET INTEREST INCOME 16,015,101 14,661,950 13,184,382
PROVISION FOR LOAN LOSSES 2,176,224 897,038 906,950
____________ ____________ ____________
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 13,838,877 13,764,912 12,277,432
____________ ____________ ____________
NONINTEREST INCOME:
Service charges on deposit accounts 3,534,113 3,234,954 2,972,024
Gains on sale of securities, net 188,883 16,126 -
Credit life insurance 246,046 271,875 159,014
Other charges and fees 1,463,817 1,060,040 849,458
____________ ____________ ____________
5,432,859 4,582,995 3,980,496
____________ ____________ ____________
NONINTEREST EXPENSES:
Salaries and employee benefits 7,300,250 6,830,062 6,037,935
Occupancy expense 3,423,585 3,261,020 2,850,428
Other 4,738,637 4,410,484 3,851,944
____________ ____________ ____________
15,462,472 14,501,566 12,740,307
____________ ____________ ____________
INCOME BEFORE INCOME TAXES 3,809,264 3,846,341 3,517,621
PROVISION FOR INCOME TAXES 866,105 951,204 867,417
____________ ____________ ____________
NET INCOME 2,943,159 2,895,137 2,650,204
PREFERRED DIVIDENDS AND OTHER 52,751 246,024 131,582
____________ ____________ ____________
NET INCOME AVAILABLE TO COMMON
STOCKHOLDERS 2,890,408 2,649,113 2,518,622
============ ============ ============
EARNINGS PER COMMON SHARE:
BASIC $1.08 $1.07 $1.03
===== ===== =====
DILUTED $1.00 $ .95 $. 90
===== ===== =====
See notes to consolidated financial statements.
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
_________________________________________________________________________________________________
2001 2000 1999
Net income $2,943,159 $2,895,137 $ 2,650,204
Other comprehensive income (loss):
Unrealized gain (loss) on securities
available-for-sale, net:
Unrealized holding gains (losses) arising
during the year 509,425 1,044,273 (1,225,130)
Less reclassification adjustment for gains
included in net income (124,663) (10,643) -
___________ ___________ ___________
Total other comprehensive income (loss) 384,762 1,033,630 (1,225,130)
___________ ___________ ___________
TOTAL COMPREHENSIVE INCOME $3,327,921 $3,928,767 $ 1,425,074
=========== =========== ===========
See notes to consolidated financial statements.
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
_______________________________________________________________________________________________________________________________
Unrealized
Gains
(Losses) on
Preferred Stock Common Stock Additional Securities
__________________ __________________ Paid in ESOP Available Retained
Shares Amount Shares Amount Capital Obligation for Sale Earnings Total
BALANCE, JANUARY 1, 1999 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
Dividends on common stock -
$.20 per share - - - - - - - (501,443) (501,443)
Dividends on preferred stock - - - - - - - (138,774) (138,774)
Preferred stock conversion (11,116) (158,403) 33,323 3,333 155,070 - - - -
Redemption of preferred stock (11,000) (156,750) - - - - - (107,250) (264,000)
Excess of market value over book
value of ESOP shares released - - - - 8,750 - - - 8,750
Net income - - - - - - - 2,895,137 2,895,137
ESOP new obligations, net - - - - - (96,083) - - (96,083)
Net change in unrealized gains
(losses) on securities
available-for-sale, net of tax - - - - - - 1,033,630 - 1,033,630
_________ _________ _________ _______ __________ ________ ________ _________ __________
BALANCE, DECEMBER 31, 2000 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 -
$.20 per share - - - - - - - (547,966) (547,966)
Dividends on preferred stock - - - - - - - (52,751) (52,751)
Preferred stock conversion (127,092)(1,811,061) 380,914 38,091 1,772,970 - - - -
Redemption of preferred stock (3,528) (50,274) - - - - - - (50,274)
Excess of market value over book
value of ESOP shares released - - - - 19,000 - - - 19,000
Net income - - - - - - - 2,943,159 2,943,159
ESOP obligation, repayments - - - - - 35,489 - - 35,489
Net change in unrealized gains
(losses) on securities
available-for-sale, net of tax - - - - - - 384,762 - 384,762
_________ _________ _________ _______ __________ ________ ________ _________ __________
BALANCE, DECEMBER 31, 2001 - - 2,901,142 $290,114 $12,972,762 $(149,638) $469,962 $9,044,361 $22,627,561
========= ========= ========= ======= ========== ======== ======== ========= ==========
See notes to consolidated financial statements.
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
___________________________________________________________________________________________
2001 2000 1999
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $ 2,943,159 $ 2,895,137 $ 2,650,204
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 1,310,180 1,371,272 1,199,447
Provision for loan losses 2,176,224 897,038 906,950
Provision for and losses on other real
estate owned 92,687 104,226 5,100
Deferred income taxes (benefit) (70,000) (17,000) 20,500
Amortization of premiums on securities, net 204,538 80,327 62,577
Gain on sales of securities (188,883) (16,126) -
Change in accrued interest receivable 167,556 (446,168) (178,668)
Change in accrued interest payable 49,763 292,131 149,275
Other, net 61,530 (205,911) (75,268)
Net cash provided by operating __________ _________ _________
activities 6,746,754 4,954,926 4,740,117
__________ _________ _________
CASH FLOWS FROM INVESTING
ACTIVITIES:
Net decrease (increase) in interest-
bearing deposits in banks (40,524) 287,442 (339,999)
Proceeds from sales of securities
available-for-sale 9,794,538 2,064,519 0
Proceeds from maturities and calls of
securities available-for-sale 28,736,270 14,949,666 13,596,064
Proceeds from maturities of securities
held-to-maturity 25,000 50,000 50,000
Purchases of securities available-for-sale (59,776,682) (13,790,321) (27,260,358)
Purchases of securities held-to-maturity - (2,376,258) (2,030,269)
Loan originations, net of repayments (11,675,897) (34,881,779) (13,207,947)
Purchases of premises and equipment (1,506,020) (1,681,950) (3,488,024)
Proceeds from sales of other real
estate owned 117,306 197,186 51,374
Purchase of insurance premium financing
company - - (3,503,497)
Other, net 8,533 - 25,636
__________ _________ _________
Net cash used investing activities (34,317,476) (35,181,495) (36,107,020)
______________ ___________ ___________
(Continued)
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
_________________________________________________________________________________________
2001 2000 1999
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net increase in deposits 11,030,253 67,856,999 21,765,904
Net increase (decrease) in repurchase
agreements (334,537) 391,015 606,601
Proceeds from (repayments of) FHLB
advances, net (175,968) (3,000,000) 3,000,000
Issuance of notes payable 20,000 1,525,000 190,000
Proceeds from junior subordinated
debentures, net 6,774,297 - -
Repayments of notes payable (3,064,000) (333,129) (234,571)
Proceeds from issuance of common stock 33,764 - 390,455
Payment of dividends on common and
preferred stock (614,073) (638,468) (467,332)
Redemption of preferred stock (50,274) (264,000) -
____________ ____________ ____________
Net cash provided by financing
activities 13,619,462 65,537,417 25,251,057
____________ ____________ ____________
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (13,951,260) 35,310,848 (6,115,846)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 49,798,538 14,487,690 20,603,536
____________ ____________ ____________
CASH AND CASH EQUIVALENTS AT
END OF YEAR $ 35,847,278 $ 49,798,538 $ 14,487,690
============ ============ ============
SUPPLEMENTAL CASH FLOW
INFORMATION:
Interest paid $ 10,359,163 $ 9,495,034 $ 7,739,076
============ ============ ============
Income taxes paid $ 800,155 $ 985,408 $ 845,488
============ ============ ============
See notes to consolidated financial statements.
(Concluded)
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
_______________________________________________________________________
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements of MidSouth Bancorp, Inc.
(the Company) and its wholly owned subsidiaries MidSouth Bank,
N.A. (the Bank) and Financial Services of the South, Inc. (the
Finance Company), have been prepared in accordance with
accounting principles generally accepted in the United States of
America 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. All significant intercompany transactions and
balances have been eliminated.
Use of Estimates - The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States of America 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 statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Securities - Securities are 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, 2001. 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.
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.
Derivative Instruments - The Company recognizes all derivatives
as either assets or liabilities in the Company's balance sheet and
measures 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. The
Company is not currently engaged in any significant activities with
derivatives.
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. Non-major homogenous loans, which are
evaluated on an overall basis, generally include all loans under
$50,000. The Company calculates the allowance 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.
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 is amortized on the straight-line basis over a
fifteen year period. Amortization expense amounted to
approximately $60,584 in 2001, $60,584 in 2000 and $47,917 in
1999. Accumulated amortization at December 31, 2001 and 2000
was $421,705 and $361,121, respectively.
In June 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 141 "Business
Combinations" and No. 142 "Goodwill and Other Intangibles."
These Statements provide that, among other things, (1) all business
combinations on or after July 1, 2001 be accounted for as purchases,
(2) any related goodwill on those acquisitions does not require
amortization, but is subject to a periodic impairment test and that (3)
goodwill on any of the Company's acquisitions prior to July 1, 2001
not be amortized after January 1, 2002, but is subject to a periodic
impairment test. The Company has performed a transitional fair
value based impairment test on its goodwill and determined that the
fair value exceeded the recorded value at December 31, 2001. No
impairment loss, therefore, will be recorded on January 1, 2002.
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 sold for
one-day periods.
2. CASH AND DUE FROM BANKS
The Company is required to maintain average balances relating to its
deposit liabilities. This requirement is ordinarily satisfied by cash on
hand.
3. INVESTMENT SECURITIES
The portfolio of securities consisted of the following:
December 31, 2001
____________________________________________________________
Gross Gross
Amortized Unrealized Unrealized
Available-for-Sale Cost Gains Losses Fair Value
U.S. Government agencies $ 14,710,956 $ 185,389 $ 42,379 $ 14,853,966
Obligations of states and
political subdivisions 13,477,575 192,205 22,214 13,647,566
Mortgage-backed securities 20,775,671 383,355 61,746 21,097,280
Collateralized mortgage
obligations 20,184,344 73,305 32,177 20,225,472
Corporate securities 3,569,50 82,423 700 3,651,230
Mutual funds 1,000,00 - 30,000 970,000
Other 1,334,90 - - 1,334,900
_______________ ___________ ________ ____________
$ 75,052,953 $ 916,677 $189,216 $ 75,780,414
=============== =========== ========= ============
December 31, 2000
____________________________________________________
Gross Gross
Amortized Unrealized Unrealized
Available-for-Sale Cost Gains Losses Fair Value
U.S. Treasury securities $ 5,610,508 $ 42,980 $ - $ 5,653,488
U.S. Government agencies 9,125,358 84,558 - 9,209,916
Obligations of states and
political subdivisions 5,385,799 94,933 - 5,480,732
Mortgage-backed securities 22,067,196 - 47,964 22,019,232
Collateralized mortgage
obligations 6,866,052 - 11,659 6,854,393
Corporate securities 2,519,313 22,252 2,541,565
Mutual funds 1,000,000 - 37,000 963,000
Other 1,247,300 - - 1,247,300
____________ _________ ________ ____________
$ 53,821,526 $ 244,723 $ 96,623 $ 53,969,626
============ ========= ======== ============
December 31, 2001
________________________________________________________
Gross Gross
Amortized Unrealized Unrealized
Held-to-Maturity Cost Gains Losses Fair Value
Obligations of states and
political subdivisions $ 23,584,850 $ 1,183,889 $ 33,617 $ 24,735,122
============= ============ =========== =============
December 31, 2000
_______________________________________________________
Gross Gross
Amortized Unrealized Unrealized
Held-to-Maturity Cost Gains Losses Fair Value
Obligations of states and
political subdivisions $ 23,611,057 $ 871,464 $ 8,444 $ 24,474,077
============= =========== ========= =============
The amortized cost and fair value of securities at December 31,
2001 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.
Amortized
Available-for-Sale Cost Fair Value
Due in one year or less $ 2,461,936 $ 2,483,517
Due after one year through five years 18,030,113 18,291,193
Due after five years through ten years 7,506,506 7,515,442
Due after ten years 3,759,483 3,862,610
Mortgage-backed securities and collaterized
mortgage obligations 40,960,015 41,322,752
Mutual funds 1,000,000 970,000
Other securities 1,334,900 1,334,900
____________ ____________
$ 75,052,953 $ 75,780,414
============ ============
Amortized
Held-to-Maturity Cost Fair Value
Due in one year or less $ 30,000 $ 30,087
Due after one year through five years 3,728,353 3,983,494
Due after five years through ten years 15,373,441 16,114,395
Due after ten years 4,453,056 4,607,146
_____________ _____________
$ 23,584,850 $ 24,735,122
============= =============
Proceeds from sales of securities available-for-sale during 2001 and
2000 were $9,794,538 and $2,064,519, respectively. There were no
sales of securities available-for-sale during 1999. A gross gain of
$188,883 and $16,126 was recognized on sales in 2001 and 2000,
respectively.
Securities with an aggregate carrying value of approximately
$33,000,000 and $20,000,000 at December 31, 2001 and 2000 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 primarily of first and second tranche sequential pay and/or
planned amortization class (PAC) instruments.
4. LOANS
The loan portfolio consisted of the following:
December 31,
_____________________________
2001 2000
Commercial, financial and agricultural $ 68,710,853 $ 69,383,791
Lease financing receivable 4,729,558 5,025,722
Real estate - mortgage 97,647,501 90,952,647
Real estate - construction 7,090,105 4,740,917
Installment loans to individuals 35,920,805 34,243,331
Other 291,299 238,452
_____________ _____________
214,390,121 204,584,860
Less allowance for loan losses (2,705,058) (2,276,187)
_____________ _____________
$ 211,685,063 $ 202,308,673
============= =============
Loans are stated net of unearned income and loan origination fees in
the above table. The amount of such items is not significant.
An analysis of the activity in the allowance for loan losses is as
follows:
Year Ended December 31,
_________________________________________
2001 2000 1999
Balance at beginning of year $ 2,276,187 $ 1,967,326 $ 1,860,490
Provision for loan losses 2,176,224 897,038 906,950
Recoveries 165,980 120,250 141,299
Loans charged off (1,913,333) (708,427) (941,413)
___________ ___________ ___________
Balance at end of year $ 2,705,058 $ 2,276,187 $ 1,967,326
=========== =========== ===========
During the years ended December 31, 2001, 2000 and 1999, there
were approximately $123,000, $177,000 and $581,000,
respectively, of net transfers from loans to other real estate owned.
As of December 31, 2001 and 2000, loans outstanding to directors,
executives officers, and their affiliates were $1,916,721 and
$1,240,383, respectively. In the opinion of management, all
transactions entered into between the Company 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.
An analysis of the 2001 activity with respect to these related party
loans is as follows:
Balance, January 1, 2001 $1,240,383
New loans 890,030
Repayments (213,692)
__________
Balance, December 31, 2001 $1,916,721
==========
Non-accrual and renegotiated loans amounted to approximately
$769,000 and $160,000 at December 31, 2001 and 2000,
respectively. The Company's other individually evaluated impaired
loans were not significant at December 31, 2001 and 2000. The
related allowance amounts on impaired loans were not significant
and there was no significant change in these amounts during the
years ended December 31, 2001, 2000 or 1999. The amount of
interest not accrued on these loans did not have a significant effect
on net income in 2001, 2000 or 1999.
5. BANK PREMISES AND EQUIPMENT
Premises and equipment consisted of the following:
December 31,
______________________________
2001 2000
Buildings and improvements $ 9,262,747 $ 9,302,432
Furniture, fixtures, and equipment 7,813,027 7,621,387
Automobiles 259,655 276,151
Leasehold improvements 652,274 685,568
Construction-in-process 1,147,540 2,978
____________ ____________
19,135,243 17,888,516
Less accumulated depreciation and amortization (7,184,542) (6,148,941)
____________ ____________
$ 11,950,701 $ 11,739,575
============ ============
6. DEPOSITS
Deposits consisted of the following:
December 31,
_______________________________
2001 2000
Non-interest bearing $ 91,145,842 $ 75,151,653
Savings and money market 84,174,077 100,306,058
NOW accounts 39,498,633 31,317,013
Time deposits under $100,000 69,681,325 66,700,305
Time deposits over $100,000 46,077,581 46,072,176
_____________ _____________
$ 330,577,458 $ 319,547,205
============= =============
Approximately $103,145,000 of time deposits mature in 2002 and
the balance of $12,614,000 principally in 2003.
7. NOTES PAYABLE AND LONG-TERM DEBT
Notes payable and long-term debt consisted of the following:
December 31,
___________________________
2001 2000
Notes payable to financial institutions $ 1,431,000 $ 4,475,000
FHLB advances - long term - 175,968
Junior subordinated debentures 7,000,000 -
___________ ___________
$ 8,431,000 $ 4,650,968
=========== ===========
At December 31, 2001, the notes payable to financial institutions
consisted of advances against a line of credit established by
Financial Services of the South, Inc. The line of credit is in the
amount of $2,000,000 and is dated April 30, 2001. 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, 2001 and 2000, the effective rate was 5.00% and
9.75%, respectively. Interest on this note is payable monthly, with
principal due at maturity on April 30, 2002. Advances under this
note totaled $1,431,000 at December 31, 2001 and $1,975,000 at
December 31, 2000. FSS has pledged (1) all its promissory notes,
credit sales agreements, installments sales contracts, chattel paper,
negotiable paper or other written evidence of indebtedness to FSS;
(2) all of its accounts receivable; and (3) all of its common stock as
collateral on this note.
A line of credit for the Company with a principal balance of
$2,500,000 at December 31, 2000 was paid in full in February 2001
with proceeds received from the Company's issuance of junior
subordinated debentures. Two long-term FHLB borrowings totaling
$175,968 at December 31, 2000 matured during 2001.
On February 22, 2001, the Company, issued $7,000,000 of junior
subordinated debentures. The $7,000,000 qualifies as Tier 1 capital
for regulatory capital purposes, but is classified as a liability under
accounting principles generally accepted in the United States of
America. These debentures are presented in the Consolidated
Statements of Condition as "Junior Subordinated Debentures."
These junior subordinated debentures carry an interest rate of
10.20% with interest paid semi-annually in arrears and mature on
February 22, 2031. Under certain circumstances, these debentures
are subject to repayment on February 11, 2011 or thereafter.
8. COMMITMENTS AND CONTINGENCIES
At December 31, 2001, future annual minimum rental payments due
under noncancellable operating leases, primarily for land, are as
follows:
2002 $ 440,571
2003 426,410
2004 382,397
2005 169,634
2006 157,604
Thereafter 459,082
____________
$ 2,035,698
============
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 2001, 2000 and 1999 was
approximately $540,000, $520,000, and $447,000, respectively.
Sublease income for 2001, 2000 and 1999 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.
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, 2001 and 2000 are as
follows:
2001 2000
Deferred tax assets:
Allowance for loan losses $ 620,000 $ 557,000
Other 116,000 89,000
_________ _________
Total deferred tax assets 736,000 646,000
_________ _________
Deferred tax liabilities:
FHLB stock dividends (88,000) (78,000)
Depreciation (276,000) (260,000)
Unrealized gain on securities (258,000) (63,000)
Other (119,000) (125,000)
_________ _________
Total deferred tax liabilities (741,000) (526,000)
========= =========
Net deferred tax asset (liability) $ (5,000) $ 120,000
========= =========
Components of income tax expense are as follows:
2001 2000 1999
Current $936,105 $968,204 $846,917
Deferred expense (benefit) (70,000) (17,000) 20,500
________ ________ ________
$866,105 $951,204 $867,417
======== ======== ========
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:
Year Ended December 31,
_____________________________________
2001 2000 1999
Taxes calculated at statutory rate $1,295,150 $1,307,756 $1,195,991
Increase (decrease) resulting from:
Tax-exempt interest (450,711) (370,894) (334,386)
Other 21,666 14,342 5,812
__________ __________ __________
$ 866,105 $ 951,204 $ 867,417
========== ========== ==========
The deferred income tax expense (credit) relating to unrealized gains
(losses) on securities available-for-sale included in other
comprehensive income amounted to $258,820 in 2001, $531,500 in
2000 and, $(627,500) in 1999. Income taxes relating to gains on
sales of securities amounted to $64,220 in 2001 and $5,483 in 2000.
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 $149,638 and $185,127 at December 31, 2001
and 2000, respectively. In accordance with the American Institute of
Certified Public Accountants' Statement of Position 93-6 (SOP),
compensation costs relating to shares purchased 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 earnings per common share. ESOP compensation
expense was $175,000, $156,750 and $145,500 for the years ended
December 31, 2001, 2000 and 1999, respectively. The ESOP shares
as of December 31, 2001 and 2000 were as follows:
2001 2000
Allocated shares 263,590 245,516
Shares released for allocation 5,049 5,211
Unreleased shares 18,202 23,251
_________ _________
Total ESOP shares 286,841 273,978
========= =========
Fair value of unreleased shares at
December 31, $ 211,143 $ 200,540
========= =========
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 2001, 2000 and 1999, 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. 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. Options to purchase 5,062 shares at
$6.67 per share were exercised in the year ended December 31,
2001. None of the other options have been exercised and all of them
are outstanding at December 31, 2001.
Options on 106,316 shares at $6.67 per share and on 13,893 shares
at $15.42 per share were exercisable at December 31, 2001.
Options on 83,533 shares at $6.67 per share and on 9,262 shares at
$15.42 per share were exercisable at December 31, 2000. The
weighted average remaining contractual life of options outstanding at
December 31, 2001 was 5.1 years.
The Company has adopted the disclosure-only option under SFAS
No. 123, "Accounting for Stock Based Compensation." 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:
Year Ended
______________________________________
2001 2000 1999
Net income available to common stockholders:
As reported $ 2,890,408 $ 2,649,113 $ 2,518,622
Pro forma 2,855,539 2,601,041 2,434,668
Basic income per common share:
As reported $ 1.08 $ 1.07 $ 1.03
Pro forma 1.07 1.05 1.00
Diluted income per common share:
As reported $ 1.00 $ .95 $ .90
Pro forma .99 .94 .87
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 were 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. During the year ended December 31, 2001, the Company
called for redemption of all outstanding shares and upon that notice,
substantially all of the remaining outstanding preferred stock of
130,620 shares was converted into common stock by their holders.
The Convertible Preferred Shares were redeemable, in whole or in
part, at the option of the Company at the stated value of $14.25.
Dividends on the Convertible Preferred Shares was determined each
year on an annual rate, fixed on December 31 of each year for the
ensuing calendar year and was 6.51% at December 31, 2000. The
dividends were cumulative and payable quarterly in arrears. Holders
of Convertible Preferred Shares were not entitled to normal voting
rights unless certain conditions existed. During the year ended
December 31, 2000, the Company redeemed 11,000 shares for
$107,250 in excess of their carrying amount. The $107,250 was
included in the amount recorded as preferred stock dividends in order
to compute net income available to common stockholders.
The payment of dividends by the Bank to the Company is restricted
by various regulatory and statutory limitations. At December 31,
2001, the Bank has approximately $5,300,000 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.
Year Ended December 31,
___________________________________________
2001 2000 1999
Net income $ 2,943,159 $ 2,895,137 $ 2,650,204
Preferred dividend requirement on shares
redeemed - 107,250 -
____________ ____________ ____________
Net income, as adjusted - used in
computation of diluted earnings per
common share 2,943,159 2,787,887 2,650,204
Preferred dividend requirement on shares
excluding shares redeemed 52,751 138,774 131,582
____________ ____________ ____________
Net income available to common
stockholders - used in computation of
basic earnings per common share $ 2,890,408 $ 2,649,113 $ 2,518,622
============ ============ ============
Weighted average number of common
shares outstanding - used in computation
of basic earnings per common share 2,679,348 2,487,187 2,441,461
Effect of dilutive securities:
Stock options 49,579 29,196 51,616
Convertible preferred stock 220,617 406,428 463,185
_____________ ___________ ____________
Weighted average number of common
shares outstanding plus effect of dilutive
securities - used in computation of
diluted earnings per common share 2,949,544 2,922,811 2,956,262
============= =========== ============
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.
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.
Contract or Notional
Amount
____________________________
2001 2000
Financial instruments whose contract
amounts represent credit risk:
Commitments to extend credit $78,000,000 $52,700,000
Standby letters of credit 1,200,000 1,200,000
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 75% of these letters of
credit were secured by marketable securities, cash on deposits or
other assets at December 31, 2001 and 2000.
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, 2001 and 2000, 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.
The Company's and the Bank's actual capital amounts and ratios
are presented in the table.
To Be Well
Required For Capitalized Under
Minimum Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
___________________________ _______________________ ____________________
Amount Ratio Amount Ratio Amount Ratio
As of December 31, 2001:
Total capital to risk
weighted assets:
Company $ 31,400,670 13.20 % $ 19,035,031 8.00 % N/A N/A
Bank 28,881,917 12.23 % 18,891,533 8.00 % 23,614,416 10.00 %
Tier I capital to risk
weighted assets:
Company 28,695,612 12.06 % 9,517,515 4.00 % N/A N/A
Bank 26,379,246 11.17 % 9,445,767 4.00 % 14,168,650 6.00 %
Tier I capital to
average assets:
Company 28,695,612 8.02 % 14,314,377 4.00 % N/A N/A
Bank 26,379,246 7.41 % 14,239,231 4.00 % 17,799,038 5.00 %
To Be Well
Required For Capitalized Under
Minimum Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
_______________________ _______________________ _____________________
Amount Ratio Amount Ratio Amount Ratio
As of December 31, 2000:
Total capital to risk
weighted assets:
Company $ 21,523,294 9.55 % $ 18,023,954 8.00 % N/A N/A
Bank 23,506,666 10.54 % 17,842,682 8.00 % 22,303,352 10.00
Tier I capital to risk
weighted assets:
Company 19,247,294 8.54 % 9,011,977 4.00 % N/A N/A
Bank 21,313,084 9.56 % 8,921,341 4.00 % 13,382,011 6.00 %
Tier I capital to
average assets:
Company 19,247,107 6.05 % 12,734,767 4.00 % N/A N/A
Bank 21,313,084 6.74 % 12,654,316 4.00 % 15,817,895 5.00 %
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 and Debentures - Rates currently available to the
Company for debt with similar terms and remaining maturities are
used to estimate the 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, 2001 and 2000 (in thousands):
2001 2000
______________________ _____________________
Carrying Fair Carrying Fair
Amount Value Amount Value
Financial assets:
Cash, due from banks and federal
fund sold $ 35,956 $ 35,956 $ 49,867 $ 49,867
Securities available-for-sale 75,780 75,780 53,970 53,970
Securities held-to-maturity 23,585 24,735 23,611 24,474
Loans, net 211,685 212,900 202,309 202,200
Financial liabilities:
Non-interest bearing deposits 91,146 91,146 75,152 75,152
Interest bearing deposits 239,432 241,000 244,396 244,800
Long-term notes payable 1,431 1,431 4,651 4,651
Junior subordinated debentures 7,000 7,300 - -
17. OTHER NON-INTEREST EXPENSE
Other non-interest expense consisted of the following for the years
ended December 31, 2001, 2000 and 1999:
2001 2000 1999
Professional fees $ 455,740 $ 375,012 $ 369,672
FDIC assessments 56,367 50,612 27,470
Marketing expenses 749,808 748,261 789,666
Data processing 184,371 193,796 192,360
Postage 285,066 249,950 249,836
Education and travel 180,331 156,851 172,559
Printing and supplies 377,538 366,652 341,452
Telephone 275,277 281,890 267,325
Other 2,174,139 1,987,460 1,441,604
__________ __________ __________
$4,738,637 $4,410,484 $3,851,944
========== ========== ==========
18. CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY
Summarized financial information for MidSouth Bancorp, Inc.
(parent company only) follows:
STATEMENTS OF CONDITION
December 31,
____________________________
ASSETS 2001 2000
Cash and interest-bearing deposits in banks $ 2,485,457 $ 226,744
Other assets 505,837 87,840
Investment in and advances to subsidiaries 27,393,727 22,391,334
____________ _____________
$ 30,385,021 $ 22,705,918
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Dividends payable $ 145,057 $ 158,413
Notes payable to financial institutions - 2,500,000
Junior subordinated debentures 7,000,000 -
Note payable to Bank 149,638 185,127
Other 462,765 -
____________ _____________
Total liabilities 7,757,460 2,843,540
____________ _____________
Total stockholders' equity 22,627,561 19,862,378
____________ _____________
$ 30,385,021 $ 22,705,918
============ =============
STATEMENTS OF INCOME
Years Ended December 31,
_______________________________________
2001 2000 1999
Revenue:
Dividends from Bank $ 200,000 $ 925,000 $ 375,000
Equity in undistributed income of
subsidiaries 3,165,996 2,169,325 2,469,831
Rental and other income 190,314 50,682 42,998
___________ ___________ ___________
3,556,310 3,145,007 2,887,829
Expenses:
Interest on short and long-term debt 652,656 192,131 157,000
Professional fees 73,925 75,073 99,741
Other expenses 103,837 84,820 79,636
___________ ___________ ___________
830,418 352,024 336,377
___________ ___________ ___________
Income before income taxes 2,725,892 2,792,983 2,551,452
Income tax benefit 217,267 102,154 98,752
___________ ___________ ___________
Net income $ 2,943,159 $ 2,895,137 $ 2,650,204
=========== =========== ============
STATEMENTS OF CASH FLOWS
Years Ended December 31,
____________________________________
2001 2000 1999
Cash flows from operating activities:
Dividends from bank $ 200,000 $ 925,000 $ 375,000
Other, net (85,001) (184,584) (131,448)
___________ _________ _________
Net cash provided by (used in)
operating activities 114,999 740,416 243,552
___________ _________ _________
Cash flows from investing activities:
Investment in and advances to
subsidiaries (1,500,000) (225,000) -
___________ _________ _________
Net cash used in investing
activities (1,500,000) (225,000) -
___________ _________ _________
Cash flows from financing activities:
Capital stock transactions 33,764 (96,083) 372,955
Redemption of Preferred Stock (50,274) (264,000) -
Payment of dividends (614,073) (638,468) (467,332)
(Repayments) proceeds of notes
payable, net (2,500,000) 507,097 34,706
Proceeds from junior subordinated
debentures, net 6,774,297 - -
___________ _________ _________
Net cash provided by financing
activities 3,643,714 (491,454) (59,671)
___________ _________ _________
Net increase in cash 2,258,713 23,962 183,881
Cash, beginning of year 226,744 202,782 18,901
___________ _________ _________
Cash, end of year $ 2,485,457 $ 226,744 $ 202,782
=========== ========= =========
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 2002 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 2002 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 2002 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 2002 annual meeting of shareholders is incorporated herein
by reference in response to this Item.
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.
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.
10.10 Junior Subordinated Debentures Interest Debenture issued on
February 22, 2001 by MidSouth Bancorp, Inc. is included as
Exhibit 99 to MidSouth Bancorp, Inc.'s Form 10-QSB filed on
May 15, 2001, and is incorporated herein by reference.
21 Subsidiaries of the Registrant
23 Independent Auditors' Consent
Reports on Form 8-K
None
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: ___________________________
C. R. Cloutier
President and
Chief Executive Officer
Dated: March 27, 2002
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 27, 2002
C. R. Cloutier Officer and Director
/s/ Karen L. Hail Chief Financial Officer, March 27, 2002
Karen L. Hail Executive Vice President,
Secretary/Treasurer
and Director
/s/ Teri S. Stelly Chief Accounting Officer March 27, 2002
Teri S. Stelly
/s/ J. B. Hargroder, M.D. Director March 27, 2002
J. B. Hargroder, M.D.
/s/ William M. Simmons Director March 27, 2002
William M. Simmons
/s/ Will G. Charbonnet, Sr. Director March 27, 2002
Will G. Charbonnet, Sr.
/s/ Clayton Paul Hilliard Director March 27, 2002
Clayton Paul Hilliard
/s/ James R. Davis Director March 27, 2002
James R. Davis, Jr.
/s/ Milton B. Kidd, III Director March 27, 2002
Milton B. Kidd, III., O.D.