UNITED STATES SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C. 20549
FORM 10QSB
__X___QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended............... September 30, 2002
______TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ..... to .....
COMMISSION FILE NUMBER 2-91-000FW
MIDSOUTH BANCORP, INC.
Louisiana 72 -1020809
102 Versailles Boulevard, Lafayette, Louisiana
70501
(337) 237-8343
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days. YES __X__ NO _____
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.
Outstanding as of November 14, 2002
Common stock, $.10 par value 2,901,142
Transitional Small Business Disclosure Format:
Yes _______ No ____X____
Page 1
Page 2
PART 1 - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (Unaudited) Page
Financial Highlights 3
Consolidated Statements of Condition -
September 30, 2002 and December 31, 2001 4
Consolidated Statements of Income - Three and
Nine Months Ended September 30, 2002 and 2001 5
Consolidated Statement of Stockholders' Equity -
Nine Months Ended September 30, 2002 6
Consolidated Statements of Cash Flows - Nine Months
Ended September 30, 2002 and 2001 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis or Plan
of Operation 9
PART II - OTHER INFORMATION
Item 4. Controls and Procedures 15
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 18
Certifications 19
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS (UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
EARNINGS DATA 2002 2001 2002 2001
______________________________________________________________
Total interest income $6,255,095 $6,595,945 $18,136,770 $20,286,452
Total interest expense 1,665,696 2,562,343 5,168,155 8,290,008
Net interest income 4,589,399 4,033,602 12,968,615 11,996,444
Provision for loan losses 429,250 439,323 1,123,250 1,796,667
Non-interest income 1,827,280 1,241,295 4,989,119 3,790,988
Non-interest expense 4,313,099 3,835,251 12,588,664 11,360,974
Provision for income tax 432,657 217,196 1,098,771 581,650
Net income 1,241,673 783,127 3,147,049 2,048,141
Preferred dividend requirement - - - 52,751
Income available to common
shareholders $1,241,673 $783,127 $3,147,049 $1,995,390
==================================================================================================
PER COMMON SHARE DATA
Basic earnings per share $0.43 $0.29 $1.09 $0.79
Diluted earnings per share $0.42 $0.27 $1.07 $0.72
Book value at end of period $9.08 $7.71 $9.08 $7.71
Market price at end of period $12.90 $10.85 $12.90 $10.85
Weighted average shares outstanding
Basic 2,883,142 2,734,556 2,883,142 2,539,255
Diluted 2,947,053 2,947,085 2,944,338 2,863,059
==================================================================================================
AVERAGE BALANCE SHEET DATA
Total assets $376,774,233 $346,466,354 $364,241,788 $343,777,221
Earning assets 345,278,348 317,629,938 334,193,002 314,937,626
Loans and leases 230,947,797 211,284,662 221,566,006 207,049,089
Interest-bearing deposits 257,883,761 235,974,649 246,259,581 238,212,967
Total deposits 337,519,230 311,691,765 326,889,508 311,134,370
Common stockholders' equity 26,040,366 21,147,781 24,361,215 19,766,463
Total stockholders' equity 26,040,366 21,908,019 24,361,215 21,179,144
==================================================================================================
SELECTED RATIOS
Return on average assets
(annualized) 1.31% 0.90% 1.16% 0.80%
Return on average common equity
(annualized) 18.92% 14.69% 17.27% 13.50%
Return on average total equity
(annualized) 18.92% 14.18% 17.27% 12.93%
Leverage capital ratio 8.24% 8.09% 8.24% 8.09%
Tier 1 risk-based capital ratio 12.09% 11.82% 12.09% 11.82%
Total risk-based capital ratio 13.27% 12.93% 13.27% 12.93%
Allowance for loan losses as a %
of total loans 1.28% 1.21% 1.28% 1.21%
==================================================================================================
PERIOD ENDING BALANCE SHEET DATA 9/30/02 9/30/01 Net Change % Change
Total assets $382,269,838 $351,895,745 $30,374,093 8.63%
Earning assets 349,067,532 320,689,613 $28,377,919 8.85%
Loans and leases, net 232,086,609 211,530,722 $20,555,887 9.72%
Interest-bearing deposits 258,001,766 231,952,055 $26,049,711 11.23%
Total deposits 342,621,887 310,803,760 $31,818,127 10.24%
Common stockholders' equity 26,328,890 22,373,704 $3,955,186 17.68%
==================================================================================================
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
September 30, December 31,
2002 2001 *
ASSETS (unaudited)
____________ ___________
Cash and due from banks $17,710,969 $18,547,278
Federal funds sold 3,900,000 17,300,000
____________ ___________
Total cash and cash equivalents 21,610,969 35,847,278
Interest bearing deposits in banks 8,668 109,206
Securities available-for-sale, at fair value
(cost of $84,335,880 in September 2002 and
$75,052,952 in December 2001) 86,478,390 75,780,414
Securities held-to-maturity (estimated market
value of $26,060,306 in September 2002 and
$24,735,122 in December 2001) 23,583,471 23,584,850
Loans, net of allowance for loan losses of
$3,010,394 in September 2002 and $2,705,058
in December 2001 232,086,609 211,685,063
Bank premises and equipment, net 12,514,115 11,950,701
Other real estate owned, net 283,552 359,336
Accrued interest receivable 2,453,883 2,197,794
Goodwill and other intangibles, net 1,072,366 431,987
Other assets 2,177,815 1,833,234
____________ ___________
Total assets $382,269,838 $363,779,863
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing $84,620,121 $91,145,842
Interest bearing 258,001,766 239,431,616
____________ ___________
Total deposits 342,621,887 330,577,458
Securities sold under
repurchase agreements 3,724,552 663,079
Accrued interest payable 624,683 1,057,065
Notes payable 796,000 1,431,000
Junior subordinated debenture 7,000,000 7,000,000
Other liabilities 1,173,826 423,700
____________ ___________
Total liabilities 355,940,948 341,152,302
____________ ___________
Commitments and contingencies - -
Stockholders' Equity:
Common stock, $.10 par value- 5,000,000
shares authorized, 2,901,142 issued and
outstanding on September 30, 2002
and December 31, 2001 290,114 290,114
Surplus 12,997,762 12,972,762
Unearned ESOP shares (119,425) (149,638)
Unrealized gains on securities available-
for-sale, net of deferred taxes
of $738,310 in September 2002 and
$257,500 in December 2001 1,404,200 469,962
Retained earnings 11,756,239 9,044,361
____________ ___________
Total stockholders' equity 26,328,890 22,627,561
____________ ___________
Total liabilities and stockholders' equity $382,269,838 $363,779,863
============ ===========
* The consolidated statement of condition at December 31, 2001 is taken
from the audited balance sheet on that date.
See notes to unaudited consolidated financial statements.
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
==========================================================================================
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
_________________________ __________________________
INTEREST INCOME:
Loans, including fees $5,002,166 $5,171,942 $14,359,603 $15,759,394
Securities
Taxable 775,862 982,619 2,378,771 2,911,550
Nontaxable 444,316 382,437 1,295,718 1,117,992
Federal funds sold 32,751 58,947 102,678 497,516
__________ __________ ___________ ___________
TOTAL 6,255,095 6,595,945 18,136,770 20,286,452
__________ __________ ___________ ___________
INTEREST EXPENSE:
Deposits 1,464,055 2,324,703 4,548,184 7,636,773
Securities sold under repurchase
agreements, federal funds
purchased and advances 17,176 25,256 47,864 57,774
Long term debt 184,465 212,384 572,107 595,461
__________ __________ ___________ ___________
TOTAL 1,665,696 2,562,343 5,168,155 8,290,008
__________ __________ ___________ ___________
NET INTEREST INCOME 4,589,399 4,033,602 12,968,615 11,996,444
PROVISION FOR LOAN LOSSES 429,250 439,323 1,123,250 1,796,667
__________ __________ ___________ ___________
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 4,160,149 3,594,279 11,845,365 10,199,777
__________ __________ ___________ ___________
OTHER OPERATING INCOME:
Service charges on deposits 1,207,055 837,627 3,440,772 2,477,430
Gains on securities, net 712 - 712 46,491
Credit life insurance 62,050 45,800 207,870 180,655
Other charges and fees 557,463 357,868 1,339,765 1,086,412
__________ __________ ___________ ___________
TOTAL OTHER INCOME 1,827,280 1,241,295 4,989,119 3,790,988
__________ __________ ___________ ___________
OTHER EXPENSES:
Salaries and employee benefits 2,077,537 1,865,624 5,995,105 5,405,654
Occupancy expense 960,874 829,819 2,730,133 2,504,716
Other 1,274,688 1,139,808 3,863,426 3,450,604
__________ __________ ___________ ___________
TOTAL OTHER EXPENSES 4,313,099 3,835,251 12,588,664 11,360,974
__________ __________ ___________ ___________
INCOME BEFORE INCOME TAXES 1,674,330 1,000,323 4,245,820 2,629,791
PROVISION FOR INCOME TAXES 432,657 217,196 1,098,771 581,650
__________ __________ ___________ ___________
NET INCOME 1,241,673 783,127 3,147,049 2,048,141
PREFERRED DIVIDEND REQUIREMENT - - - 52,751
__________ __________ ___________ ___________
INCOME AVAILABLE TO COMMON
SHAREHOLDERS $1,241,673 $783,127 $3,147,049 $1,995,390
========== ========== =========== ===========
BASIC EARNINGS PER COMMON SHARE $0.43 $0.29 $1.09 $0.79
========== ========== =========== ===========
DILUTED EARNINGS PER COMMON SHARE $0.42 $0.27 $1.07 $0.72
========== ========== =========== ===========
See notes to unaudited consolidated financial statements.
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR NINE MONTHS ENDED SEPTEMBER 30, 2002 (UNAUDITED)
____________________________________________________________________________________________
UNREALIZED
GAINS (LOSSES)
COMMON STOCK ESOP ON SECURITIES RETAINED
SHARES AMOUNT SURPLUS OBLIGATION AFS, NET EARNINGS TOTAL
_____________________ ___________ __________ ____________ ___________ ___________
BALANCE,
JANUARY 1, 2002
2,901,142 $290,114 $12,972,762 ($149,638) $469,962 $9,044,361 $22,627,561
Dividends on
common stock (435,171) (435,171)
Net income 3,147,049 3,147,049
Increase in ESOP obligation,
net of repayments 30,213 30,213
Excess of market value over book
value of ESOP shares released 25,000 25,000
Net change in unrealized
gain/loss on securities
available-for-sale, net of
income taxes 934,238 934,238
_________ ________ ___________ _________ __________ ___________ ___________
BALANCE,
SEPTEMBER 30, 2002 2,901,142 $290,114 $12,997,762 ($119,425) $1,404,200 $11,756,239 $26,328,890
========= ======== =========== ========= ========== =========== ===========
See notes to unaudited consolidated financial statements.
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
______________________________________________________________________________
September 30, 2002 September 30,2001
__________________ _________________
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $3,147,049 $2,048,141
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 989,748 997,412
Provision for loan losses 1,123,250 1,796,667
Deferred income taxes (credit) (21,661) 10,778
Discount accretion, net 342,597 103,674
Net gain on sale of securities (712) (46,491)
(Gain)/loss on sale of premises and equipment 40,175 (2,750)
Loss on sale of other real estate owned 25,571 11,542
Write-down of other real estate owned - 38,830
Change in accrued interest receivable (256,089) (182,650)
Change in accrued interest payable (432,382) (50,574)
Other, net (7,102) 1,235,486
______________ _______________
NET CASH PROVIDED BY OPERATING ACTIVITIES 4,950,444 5,960,065
______________ _______________
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease (increase) in interest-bearing deposits in banks 100,538 (42,510)
Proceeds from sales of securities available-for-sale 585,250 1,647,500
Proceeds from maturities and calls of securities availab 26,052,802 19,052,128
Proceeds from maturities and calls of securities held-to - 65,000
Purchases of securities available-for-sale (36,261,485) (47,520,898)
Loan originations, net of repayments (16,055,612) (11,059,826)
Purchases of premises and equipment (1,577,717) (792,617)
Proceeds from sales of premises and equipment 800 2,750
Proceeds from sales of other real estate owned 225,013 135,266
Net cash received in connection with acquisition 5,882,448 -
______________ _______________
NET CASH USED IN INVESTING ACTIVITIES (21,047,963) (38,513,207)
______________ _______________
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in deposits (130,092) (8,743,445)
Net increase in securities sold under repurchase
agreements and Federal Home Loan Bank advances 3,061,473 5,758,168
Issuance of notes payable - 20,000
Repayments of notes payable (635,000) (2,984,068)
Proceeds from issuance of common stock - 33,764
Payment of dividends (435,171) (453,373)
Retirement of preferred stock - (50,574)
Issuance of junior subordinated debentures - 7,000,000
______________ _______________
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 1,861,210 580,472
______________ _______________
NET DECREASE IN CASH & CASH EQUIVALENTS (14,236,309) (31,972,670)
CASH & CASH EQUIVALENTS AT BEGINNING OF PERIOD 35,847,278 49,798,538
______________ _______________
CASH & CASH EQUIVALENTS AT END OF PERIOD $21,610,969 $17,825,868
============== ===============
See notes to unaudited consolidated financial statements.
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. STATEMENT BY MANAGEMENT CONCERNING THE REVIEW OF UNAUDITED
FINANCIAL INFORMATION
The accompanying unaudited consolidated financial statements
and notes thereto contain all adjustments, consisting only
of normal recurring adjustments, necessary to present fairly,
in accordance with accounting principles generally accepted
in the United States of America, the financial position of
MidSouth Bancorp, Inc. ("MidSouth") and its subsidiaries as
of September 30, 2002 and the results of their operations
and their cash flows for the periods presented. The
consolidated financial statements should be read in
conjunction with the annual consolidated financial
statements and the notes thereto included in MidSouth's
2001 annual consolidated report and Form 10KSB.
The results of operations for the nine month period ended
September 30, 2002 are not necessarily indicative of the
results to be expected for the entire year.
2. ALLOWANCE FOR LOAN AND LOSSES
An analysis of the activity in the allowance for loan losses
is as follows:
Nine Months Ended
September 30,
2002 2001
__________ __________
Balance at beginning of period $2,705,058 $2,276,187
Provision for loan losses 1,123,250 1,796,667
Recoveries 111,064 75,199
Loans charged off (928,978) (1,550,124)
__________ __________
Balance at end of period $3,010,394 $2,597,929
========== ==========
3. COMPREHENSIVE INCOME
Comprehensive income includes net income and other comprehensive
income (losses) which, in the case of MidSouth, only includes
unrealized gains and losses on securities available-for-sale.
Following is a summary of MidSouth's comprehensive income for
the nine months ended September 30, 2002 and 2001.
Nine Months Ended
September 30,
2002 2001
__________ __________
Net income $3,147,049 $2,629,791
Other comprehensive income
Unrealized gains (losses)
on securities available-
for-sale, net:
Unrealized holding gains
arising during the period 934,701 983,610
Less reclassification
adjustment for gains
included in net income (463) (30,219)
__________ __________
Total other comprehensive
income 934,238 953,391
__________ __________
Total comprehensive income $4,081,287 $3,583,182
========== ==========
4. ACQUISITION OF BRANCH
On June 21, 2002 MidSouth acquired the Morgan City, Louisiana
branch of IberiaBank for an amount which was approximately
$500,000 in excess of book value of those assets on IberiaBank's
books. The purchase included, among other things, approximately
$6.0 million of cash, $5.4 million of loans, and the assumption
of $12.2 million of deposits. MidSouth is presently evaluating
the assets purchased and liabilities assumed, and expects to
complete that evaluation by December 31, 2002. It is presently
estimated that any intangible associated with this acquisition
will relate to core deposit intangibles and will be amortized
over approximately 8 - 10 years on an accelerated basis.
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This review should be read in conjunction with MidSouth
Bancorp Inc.'s ("MidSouth") consolidated financial
statements and accompanying notes contained herein, as
well as with MidSouth's 2001 annual consolidated
financial statements, the notes thereto and the related
Management's Discussion and Analysis.
MidSouth Bancorp, Inc. announced net income of
$1,241,673 for the third quarter of 2002, a 59% increase
compared to $783,127 for the third quarter of 2001. Basic
earnings per share were $.43 and $.29 for the quarters
ended September 30, 2002 and 2001, respectively. Diluted
earnings per share were $.42 for the third quarter of 2002
compared to $.27 for the third quarter of 2001. The
increase resulted from increases of $555,797 in net interest
income, attributable primarily to a decline in interest
expense, and of $585,273 in non-interest income, primarily
due to increased transaction volume on deposit accounts.
The increases in net interest income and non-interest
income were partially offset by a $477,848 increase in non-
interest expense which included increases in salaries and
benefits, building lease expense, maintenance and
depreciation of computer hardware and software
and other professional fees.
Net income for the nine months ended September 30, 2002
totaled $3,147,049 compared to $2,048,141 for the nine
months ended September 30, 2001. Basic earnings per
share were $1.09 for the nine months ended September 30,
2002 and $.79 for the nine months ended September 30,
2001. Diluted earnings per share were $1.07 compared to
$.72 for the two nine month periods, respectively.
Increases in net interest income of $972,171 and non-
interest income of $1,198,131 were partially offset by a
$1,227,690 increase in non-interest expense, but a decrease
in provision for loan losses of $673,417 helped to boost net
earnings 54% in year-to-date comparison.
MidSouth ended the third quarter 2002 with consolidated
assets of $382.3 million, an increase of $30.4 million from
the $351.9 million reported at September 30, 2001.
Interest-bearing deposits increased $26.0 million and total
deposits increased $31.8 million, from $310.8 million at
September 30, 2001 to $342.6 million at September 30,
2002.
Loans, net of Allowance for Loan Losses ("ALL"),
increased $20.6 million or 10%, from $211.5 million in the
third quarter of 2001 to $232.1 million in the third quarter
of 2002. Provisions for loan and lease losses totaled
$429,250 in the third quarter of 2002 compared to $439,323
in the third quarter of 2001, and $1,123,250 in the first nine
months of 2002 compared to $1,796,667 in the comparable
2001 period. Provisions for loan losses were higher in
2001 due to the default and charge-off of a large
commercial loan in the second quarter of that year.
Nonperforming loans as a percentage of total loans
increased from .09% at September 30, 2001 to .31% at
September 30, 2002, primarily due to two large credits
totaling $578,000. Loans past due ninety days and over
decreased slightly, from $1,344,389 at September 30, 2001
1
to $1,275,233 at September 30, 2002. Other real estate
owned decreased $44,134 for the same period. The ALL
represented 298% of nonperforming assets as of September
30, 2002 compared to 497% as of September 30, 2001.
MidSouth's leverage ratio was 8.24% at September 30,
2002, up from 8.09% at September 30, 2001. Return on
average common equity for the third quarter of 2002 was
18.92% compared to 14.69% for the third quarter of 2001.
Return on average assets was 1.31% for the quarter ended
September 30, 2002 compared to .90% for the quarter
ended September 30, 2001.
EARNINGS ANALYSIS
Net Interest Income
Average earning assets increased $27.6 million from
$317.6 million for the three months ended September 30,
2001 to $345.2 million for the three months ended
September 30, 2002. The mix of earning assets remained
relatively constant, with 67% of average earning assets in
loans and 33% in investments and federal funds sold. The
average yield on loans decreased 112 basis points, from
9.71% to 8.59% in quarterly comparison. The taxable-
equivalent yield on investments declined 82 basis points,
from 6.14% in September 2001 to 5.32% in September
2002.
Decreases in the prime lending rate and market competition
for quality credits lowered commercial and real estate loan
yields by 107 basis points in quarterly comparison. The
average volume of the commercial and real estate portfolio
grew 10% or $17.3 million in quarterly comparison, from
$167.0 million for the quarter ending September 30, 2001
to $184.3 million for the quarter ending September 30,
2002. Quarterly comparison of the consumer loan portfolio
showed little change in yield and a $2.4 million increase in
average volume from $44.2 million for the quarter ending
September 30, 2001 to $ 46.6 million for the quarter ending
September 30, 2002.
Average investment volume increased by $6.2 million from
$99.0 million at September 30, 2001 to $105.2 million at
September 30, 2002. The volume of federal funds sold
increased $1.8 million in quarterly comparison. Lower
yields in both loans and investments decreased the taxable-
equivalent yield on quarterly average earning assets 104
basis points, from 8.45% for the third quarter of 2001 to
7.41% for the third quarter of 2002.
Average interest-bearing deposits increased $21.9 million
in quarterly comparison, from $236.0 million for the
quarter ending September 30, 2001 to $257.9 million for
the quarter ending September 30, 2002, primarily in NOW
and money market deposits. Average non-interest bearing
deposits increased $3.9 million in quarterly comparison and
remained stable at 24% of average total deposits. The rate
paid on interest-bearing deposits decreased 166 basis points
for the same period, from 3.91% to 2.25%.
2
Included in interest-bearing liabilities is $7,000,000 in trust
preferred securities issued in February 2001. The interest
rate on the trust preferred securities is 10.20% with interest
payable semi-annually. The average rate paid on total
interest-bearing liabilities decreased 167 basis points, from
4.12% for the quarter ended September 30, 2001 to 2.45%
for the quarter ended September 30, 2002.
The net effect of changes in the volume, mix of average
earning assets and interest-bearing liabilities resulted in a
24 basis point improvement in the net taxable-equivalent
yield on average earning assets, from 5.25% for the quarter
ended September 30, 2001 to 5.49% for the quarter ended
September 30, 2002. A review of the changes in the
volume and yields of average earning assets and interest-
bearing liabilities between the two nine month periods
ended September 30, 2001 and 2002 reflected results
similar to the quarterly comparison. The net taxable-
equivalent yield on average earning assets for the nine
months ended September 30, 2002 increased 11 basis
points from 5.30% at September 30, 2001 to 5.41% at
September 30, 2002.
Non-interest Income
MidSouth's primary source of non-interest income, service
charges on deposit accounts, increased $369,428 or 44% for
the three months and $963,342 or 39% for the nine months
ended September 30, 2002 as compared to the same periods
for 2001. The increases were due primarily to a higher
volume of transactions on deposit accounts, which resulted
in increased insufficient funds fees. Other non-interest
income, net of gains on sales of investment securities,
increased $215,845 in quarterly comparison and $280,568
in year-to-date comparison, primarily due to increased
mortgage origination fee income.
Non-interest Expense
Non-interest expense increased $477,848 for the three
months and $1,227,690 for the nine months ended
September 30, 2002 compared to the three and nine months
ended September 30, 2001. Increases were recorded
primarily in the categories of salaries and employee
benefits, occupancy expense and professional fees.
Salaries and employee benefits increased primarily due to
additional staff and an increase in the cost of group health
insurance. The number of full-time equivalent ("FTE")
employees increased from 199 in September 2001 to 203 in
September 2002. Staff additions over the past twelve
months included two senior level positions in credit
administration and compliance and two internal auditors.
The staff additions enhanced the risk management and loan
administration functions.
Occupancy expense increased in the three and nine months
periods ended September 30, 2002 compared to the same
period of 2001 due to increases in lease expense,
depreciation and maintenance expenses on computer
hardware and software and property taxes.
3
The increase in professional fees resulted primarily
from consulting fees associated with a process
and workflow review of MidSouth's retail, lending and
technology areas.
BALANCE SHEET ANALYSIS
MidSouth ended the third quarter of 2002 with consolidated
assets of $382,269,838, an increase of $18.5 million from
the $363,779,863 reported for December 31, 2001.
Deposits increased over the nine months ended September
30, 2002 by $12.0 million, from $310,803,760 at December
31, 2001 to $342,621,887 primarily due to the $12.2
million in deposits acquired through the IberiaBank
Morgan City branch purchase on June 21, 2002. Non-
interest bearing deposits decreased $6.5 million primarily
due to balance fluctuations within commercial deposit
accounts. Interest-bearing deposits increased $18.5 million,
primarily in NOW and money market accounts.
The loan portfolio grew $20.7 million in the first nine
months of 2002, $5.4 million of which was acquired
through the branch purchase. Securities available-for-sale
increased by $10.7 million, from $75.8 million at
December 31, 2001 to $86.5 million at June 30, 2002. The
increase reflects purchases of $36.3 million offset by sales,
maturities and principal paydowns of $26.6 million. Net
unrealized gains in the securities available-for-sale
portfolio, net of tax effect, were $1,404,200 at September
30, 2002, compared to a net unrealized gain of $469,962 at
December 31, 2001. These amounts result from interest
rate fluctuations and do not represent permanent adjustment
of value. Moreover, classification of securities as
available-for-sale does not necessarily indicate that the
securities will be sold prior to maturity.
Capital
As of September 30, 2002, MidSouth's leverage ratio was
8.24% as compared to 7.80% at December 31, 2001. Tier 1
capital to risk-weighted assets was 12.09% and total capital
to risk-weighted assets was 13.27% at the end of the third
quarter of 2002. At year-end 2001, Tier 1 capital to risk-
weighted assets was 11.68% and total capital to risk-
weighted assets was 12.72%. Included in the capital ratio
calculations is $7 million in Trust Preferred Securities
issued in February of 2001. For regulatory purposes, these
funds qualify as Tier 1 capital. For financial reporting
purposes, these funds are included as a liability under
generally accepted accounting principles.
4
Nonperforming Assets and Past Due Loans
Table 1 summarizes MidSouth's nonaccrual, past due and
restructured loans and nonperforming assets.
UPDATE
Nonperforming Assets and
Loans Past Due 90 Days
=====================================================================
September December September
30, 31, 30,
2002 2001 2001
======================================================================
Nonperforming loans $726,069 $768,753 $194,570
Other real estate owned, net 283,552 359,336 327,686
________________________________________
Total nonperforming assets $1,009,621 $1,128,089 $522,256
========================================
Loans past due 90 days
or more and still accruing $1,275,233 $999,538 $1,344,389
Nonperforming loans as a
% of total loans 0.31% 0.38% 0.09%
Nonperforming assets as a
% of total loans, other real
estate owned and other assets
Repossessed 0.43% 0.55% 0.24%
ALL as a % of nonperforming
assets 298.17% 201.77% 497.44%
5
Nonperforming assets were $1,009,621 as of September 30,
2002 a decrease of $118,468 from the $1,128,089 reported
for December 31, 2001 and an increase of $487,365 from
the $522,256 reported for September 30, 2001. Three
commercial loans were added to nonperforming loans in
December 2001 and specific allocations were made within
the ALL to allow for possible losses on the credits. Loans
past due 90 days or more increased in September 2002 to
$1,275,233 from $999,538 in December 2001 and
decreased from $1,344,389 as of September 30, 2001.
Specific reserves have been established in the ALL to cover
probable losses on nonperforming assets. The ALL is
analyzed quarterly and additional reserves, if needed, are
allocated at that time. Management believes that the
$3,010,394 in the allowance as of September 30, 2002 is
sufficient to cover probable losses in nonperforming assets
and in the loan portfolio. Loans classified for regulatory
purposes but not included in Table 1 do not represent
material credits about which management has serious
doubts as to the ability of the borrower to comply with loan
repayment terms.
6
Item 4. Controls and Procedures
MidSouth's Chief Executive Officer and Chief Financial Officer
have evaluated the effectiveness of the disclosure controls
and procedures (as such term is defined in Rules 13a-14(c) and
15d-14(c) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as of a date within 90 days
prior to the filing date of the quarterly report (the "Evaluation
Date"). Based on such evaluation, such officers have concluded
that, as of the Evaluation Date, MidSouth's disclosure controls
and procedures are effective in alerting them on a timely
basis to material information relating to MidSouth (including
its consolidated subsidiaries) required to be included in
MidSouth's periodic filings under the Exchange Act.
Since the Evaluation Date, there have not been any significant
changes in MidSouth's internal controls or in other factors
that could significantly affect such controls.
Item 6. Exhibits and Reports on Form 8-K Page 15
(a) Exhibits
Exihibit Number Document Description
3.1 Amended and Restated Articles of Incorporation of
MidSouth Bancorp, Inc. is included as Exhibit 3.1
to the MidSouth's Report on Form 10-K for the year
ended December 31, 1993, and is incorporated herein
by reference.
3.2 Articles of Amendment to Amended and Restated
Articles of Incorporation dated July 19, 1995 are
included as Exhibit 4.2 to MidSouth's Registration
Statement on Form S-8 filed September 20, 1995
and is incorporated herein by reference.
3.3 Amended and Restated By-laws adopted by the Board
of Directors on April 12, 1995 are included as
Exhibit 3.2 to Amendment No. 1 to MidSouth's
Registration Statement on Form S-4 (Reg. No.
33-58499) filed on June 1, 1995.
10.1 MidSouth National Bank Lease Agreement with
Southwest Bank Building Limited Partnership is
included as Exhibit 10.7 to the Company's annual
report on Form 10-K for the Year Ended December 31,
1992, and is incorporated herein by reference.
10.2 First Amendment to Lease between MBL Life Assurance
Corporation, successor in interest to Southwest
Bank Building Limited Partnership in Commendam,
and MidSouth National Bank is included as Exhibit
10.1 to Report on the Company's annual report on
Form 10-KSB for the year ended December 31, 1994,
and is incorporated herein by reference.
10.3 Amended and Restated Deferred Compensation Plan
and Trust is included as Exhibit 10.3 to the
Company's annual report on Form 10-K for the year
ended December 31, 1992 and is incorporated herein
by reference.
10.4 Employment Agreements with C. R. Cloutier and
Karen L. Hail are included as Exhibit 5(c) to
MidSouth's Form 1-A and are incorporated
herein by reference.
10.6 MidSouth Bancorp, Inc.'s 1997 Stock Incentive Plan
is included as Exhibit 4.5 to MidSouth's definitive
Proxy Statement filed April 11, 1997, and is
incorporated herein by reference.
Page 16
10.7 The MidSouth Bancorp, Inc. Dividend Reinvestment and
Stock Purchase Plan is included as Exhibit 4.6 to
MidSouth Bancorp, Inc.'s Form S-3D filed on
July 25, 1997 and is incorporated herein by
reference.
10.8 Loan Agreements and Master Notes for lines of credit
established for MidSouth Bancorp, Inc. and Financial
Services of the South, Inc. are included as Exhibit
10.7 of MidSouth's Form 10-QSB filed on August 14,
1997 and is incorporated herein by reference.
10.9 Modification Agreement to the Loan Agreement and
Master Note for the Line of Credit established for
MidSouth Bancorp, Inc. is included as Exhibit 10.9
of MidSouth's Form 10-QSB filed on August 13, 1999
and is incorporated herein by reference.
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.
11 Computation of earnings per share
99.1 Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
99.2 Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
(b) Reports Filed on Form 8-K
(none)
Signatures
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
MidSouth Bancorp, Inc.
(Registrant)
Date: November 14, 2002
_________________
_______________________________
C. R. Cloutier, President & CEO
_______________________________
Karen L. Hail, Executive
Vice President & CFO
_______________________________
Teri S. Stelly, Senior
Vice President & Controller
CERTIFICATION
I, C. R. Cloutier, President and CEO, certify that:
1. I have reviewed this quarterly report on Form 10-QSB
of MidSouth Bancorp, Inc.;
2. Based on my knowledge, this quarterly report does
not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements,
and other financial information included in this quarterly report,
fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and
for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and
15d-14) for the registrant and have:
a) designed such disclosure controls and
procedures to ensure that material
information relating to the registrant,
including its consolidated subsidiaries, is
made known to us by others within those
entities, particularly during the period in
which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a
date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date");
and
c) presented in this quarterly report our
conclusions about the effectiveness of the
disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the registrant's
auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent functions):
a) all significant deficiencies in the design or
operation of internal controls which could
adversely affect the registrant's ability to
record, process, summarize and report
financial data and have identified for the
registrant's auditors any material weaknesses
in internal controls; and
b) any fraud, whether or not material, that
involves management or other employees
who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have
indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
Date: November 14, 2002
_________________
/s/C.R. Cloutier
________________
Chief Executive Officer
CERTIFICATION
I, Karen L. Hail, Senior Executive Vice President & CFO, certify that:
1. I have reviewed this quarterly report on Form 10-
QSB of MidSouth Bancorp, Inc.;
2. Based on my knowledge, this quarterly report does
not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements,
and other financial information included in this quarterly report,
fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and
for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and
15d-14) for the registrant and have:
a) designed such disclosure controls and
procedures to ensure that material
information relating to the registrant,
including its consolidated subsidiaries, is
made known to us by others within those
entities, particularly during the period in
which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a
date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date");
and
c) presented in this quarterly report our
conclusions about the effectiveness of the
disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the registrant's
auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent functions):
a) all significant deficiencies in the design or
operation of internal controls which could
adversely affect the registrant's ability to
record, process, summarize and report
financial data and have identified for the
registrant's auditors any material weaknesses
in internal controls; and
b) any fraud, whether or not material, that
involves management or other employees
who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have
indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
Date: November 14, 2002
_________________
/s/Karen L. Hail
________________
Chief Financial Officer