form10q.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
|
|
|
FORM
10-Q
|
|
|
xQUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For
the quarterly period ended March 31,
2009
OR
¨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 1-11826
MIDSOUTH BANCORP,
INC.
(Exact
name of registrant as specified in its charter)
|
|
|
Louisiana
|
72
–1020809
|
(State
of other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
|
102
Versailles Boulevard, Lafayette, Louisiana 70501
(Address
of principal executive offices, including zip code)
(337)
237-8343
(Registrant’s
telephone number, including area code)
|
|
|
Indicate
by checkmark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act 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 whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a small reporting
company.
Large
accelerated filer ¨ Accelerated
filer x Non-accelerated
filer ¨Small
reporting company ¨
|
|
|
Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act.)
YES ¨ NO x
|
Indicate
by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T
(Section 232.405 of this chapter) during the preceding 12 months (or for
such shorter period that the registrant was required to submit and post
such files).
YES ¨ NO x
|
|
|
As of April 30, 2009, there were
6,788,885 shares of the registrant’s Common Stock, par value $0.10 per
share, outstanding.
|
Part I – Financial Information
Item 1. Financial Statements.
|
Consolidated
Statements of Condition
|
|
Consolidated
Statements of Earnings (unaudited)
|
|
Consolidated
Statement of Stockholders’ Equity
(unaudited)
|
|
Consolidated
Statement of Stockholders’ Equity
(unaudited)
|
|
Consolidated
Statements of Cash Flows
(unaudited)
|
|
Notes
to Interim Consolidated Financial
Statements
|
Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operation.
|
Forward
Looking Statements
|
|
Critical
Accounting Policies
|
|
Analysis
of Statement of Condition
|
|
Impact
of Inflation and Changing Prices
|
Item 3. Quantitative and Qualitative Disclosures About Market
Risk.
Item 4. Controls and Procedures.
Part II – Other Information
Item 1. Legal Proceedings.
Item 1A.
Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Submission of Matters to a Vote of Security
Holders.
Item 5. Other Information.
Signatures
MidSouth
Bancorp, Inc. and Subsidiaries
|
|
Consolidated
Statements of Condition
(dollars
in thousands)
|
|
|
|
March
31,
2009
(unaudited)
|
|
|
|
|
Assets
|
|
|
|
|
|
|
Cash
and due from banks
|
|
$ |
23,464 |
|
|
$ |
24,753 |
|
Interest-bearing
deposits in other banks
|
|
|
10 |
|
|
|
33 |
|
Federal
funds sold
|
|
|
13,507 |
|
|
|
- |
|
Time
deposits in other banks
|
|
|
9,023 |
|
|
|
9,023 |
|
Securities
available-for-sale, at fair value (cost of $209,284 at March 31, 2009 and
$223,372 at December 31, 2008)
|
|
|
212,515 |
|
|
|
225,944 |
|
Securities
held-to-maturity (estimated fair value of $4,814 at March 31, 2009 and
$6,648 at December 31, 2008)
|
|
|
4,677 |
|
|
|
6,490 |
|
Other
investments
|
|
|
4,308 |
|
|
|
4,309 |
|
Loans
|
|
|
597,209 |
|
|
|
608,955 |
|
Allowance
for loan losses
|
|
|
(7,801 |
) |
|
|
(7,586 |
) |
Loans,
net of allowance
|
|
|
589,408 |
|
|
|
601,369 |
|
Bank
premises and equipment, net
|
|
|
40,219 |
|
|
|
40,580 |
|
Accrued
interest receivable
|
|
|
5,589 |
|
|
|
5,356 |
|
Goodwill
and intangibles
|
|
|
9,572 |
|
|
|
9,605 |
|
Cash
surrender value of life insurance
|
|
|
4,418 |
|
|
|
4,378 |
|
Other
assets
|
|
|
6,381 |
|
|
|
4,975 |
|
Total
assets
|
|
$ |
923,091 |
|
|
$ |
936,815 |
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
Non-interest
bearing
|
|
$ |
198,803 |
|
|
$ |
199,899 |
|
Interest
bearing
|
|
|
570,625 |
|
|
|
566,805 |
|
Total
deposits
|
|
|
769,428 |
|
|
|
766,704 |
|
Borrowings
|
|
|
37,612 |
|
|
|
75,876 |
|
Accrued
interest payable
|
|
|
768 |
|
|
|
1,227 |
|
Junior
subordinated debentures
|
|
|
15,465 |
|
|
|
15,465 |
|
Other
liabilities
|
|
|
6,107 |
|
|
|
4,499 |
|
Total
liabilities
|
|
|
829,380 |
|
|
|
863,771 |
|
Stockholders’
Equity:
|
|
|
|
|
|
|
|
|
Series
A Preferred stock, no par value; 5,000,000 shares authorized, 20,000
shares issued and outstanding at March 31, 2009 and none at December 31,
2008
|
|
|
19,063 |
|
|
|
- |
|
Common
stock, $0.10 par value- 10,000,000 shares authorized, 6,788,885 issued and
6,618,220 outstanding at March 31, 2009 and December 31,
2008
|
|
|
679 |
|
|
|
679 |
|
Additional
paid-in capital
|
|
|
53,047 |
|
|
|
52,097 |
|
Unearned
ESOP shares
|
|
|
(300 |
) |
|
|
(18 |
) |
Accumulated
other comprehensive income
|
|
|
2,133 |
|
|
|
1,697 |
|
Treasury
stock – 170,665 shares at March 31, 2009 and December 31, 2008,
at cost
|
|
|
(3,544 |
) |
|
|
(3,544 |
) |
Retained
earnings
|
|
|
22,633 |
|
|
|
22,133 |
|
Total
stockholders’ equity
|
|
|
93,711 |
|
|
|
73,044 |
|
Total
liabilities and stockholders’ equity
|
|
$ |
923,091 |
|
|
$ |
936,815 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
Derived from audited financial statements.
See
notes to unaudited consolidated financial statements.
|
|
|
|
|
|
|
|
|
MidSouth
Bancorp, Inc. and Subsidiaries
|
|
|
|
|
Consolidated
Statements of Earnings (unaudited)
|
|
(in
thousands, except per share data)
|
|
|
|
Three
Months Ended
March
31,
|
|
|
|
2009
|
|
|
2008
|
|
Interest
income:
|
|
|
|
|
|
|
Loans,
including fees
|
|
$ |
10,399 |
|
|
$ |
12,006 |
|
Securities and
other investments:
|
|
|
|
|
|
|
|
|
Taxable
|
|
|
1,222 |
|
|
|
960 |
|
Nontaxable
|
|
|
1,140 |
|
|
|
1,041 |
|
Federal
funds sold
|
|
|
33 |
|
|
|
305 |
|
Total
interest income
|
|
|
12,794 |
|
|
|
14,312 |
|
|
|
|
|
|
|
|
|
|
Interest
expense:
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
2,174 |
|
|
|
4,478 |
|
Borrowings
|
|
|
228 |
|
|
|
228 |
|
Junior
subordinated debentures
|
|
|
266 |
|
|
|
332 |
|
Total
interest expense
|
|
|
2,668 |
|
|
|
5,038 |
|
|
|
|
|
|
|
|
|
|
Net
interest income
|
|
|
10,126 |
|
|
|
9,274 |
|
Provision
for loan losses
|
|
|
1,000 |
|
|
|
1,200 |
|
Net
interest income after provision for loan losses
|
|
|
9,126 |
|
|
|
8,074 |
|
|
|
|
|
|
|
|
|
|
Non-interest
income:
|
|
|
|
|
|
|
|
|
Service
charges on deposits
|
|
|
2,387 |
|
|
|
2,370 |
|
ATM and
debit card income
|
|
|
755 |
|
|
|
589 |
|
Other
charges and fees
|
|
|
388 |
|
|
|
628 |
|
Total
non-interest income
|
|
|
3,530 |
|
|
|
3,587 |
|
|
|
|
|
|
|
|
|
|
Non-interest
expenses:
|
|
|
|
|
|
|
|
|
Salaries and
employee benefits
|
|
|
5,479 |
|
|
|
5,178 |
|
Occupancy
expense
|
|
|
2,335 |
|
|
|
1,950 |
|
Other
|
|
|
3,452 |
|
|
|
3,165 |
|
Total
non-interest expenses
|
|
|
11,266 |
|
|
|
10,293 |
|
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
|
1,390 |
|
|
|
1,368 |
|
Provision
for income taxes
|
|
|
157 |
|
|
|
169 |
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
|
|
1,233 |
|
|
|
1,199 |
|
Dividends
on preferred stock
|
|
|
277 |
|
|
|
- |
|
Net
earnings available to common shareholders
|
|
$ |
956 |
|
|
$ |
1,199 |
|
|
|
|
|
|
|
|
|
|
Earnings
per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
0.14 |
|
|
$ |
0.18 |
|
Diluted
|
|
$ |
0.14 |
|
|
$ |
0.18 |
|
|
|
|
|
|
|
|
|
|
See
notes to unaudited consolidated financial statements.
|
|
MidSouth
Bancorp, Inc. and Subsidiaries
|
|
Consolidated
Statement of Stockholders’ Equity (unaudited)
|
|
For
the Three Months Ended March 31, 2009
(in
thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
Paid-in Capital
|
|
|
|
|
|
Accumulated
Other Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
Balance-
January 1, 2009
|
|
|
- |
|
|
|
- |
|
|
|
6,788,885 |
|
|
$ |
679 |
|
|
$ |
52,097 |
|
|
$ |
(18 |
) |
|
$ |
1,697 |
|
|
$ |
(3,544 |
) |
|
$ |
22,133 |
|
|
$ |
73,044 |
|
Net
earnings
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,233 |
|
|
|
1,233 |
|
Net
change in unrealized gains (losses) on securities available-for-sale, net
of taxes
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
436 |
|
|
|
- |
|
|
|
- |
|
|
|
436 |
|
Comprehensive
income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,669 |
|
Issuance
of Series A cumulative preferred stock and common stock warrants, net of
issuance costs of $46,000
|
|
|
20,000 |
|
|
|
19,014 |
|
|
|
- |
|
|
|
- |
|
|
|
940 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
19,954 |
|
Accretion
of discount associated with preferred stock
|
|
|
- |
|
|
|
49 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(49 |
) |
|
|
- |
|
Dividends
on preferred stock at 5%
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(228 |
) |
|
|
(228 |
) |
Dividends
on common stock, $0.07 per share
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(456 |
) |
|
|
(456 |
) |
Tax
benefit resulting from exercise of stock options
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(4 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(4 |
) |
Increase
in ESOP obligation, net of repayments
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(282 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(282 |
) |
Stock
option expense
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
14 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
14 |
|
Balance-
March 31, 2009
|
|
|
20,000 |
|
|
$ |
19,063 |
|
|
|
6,788,885 |
|
|
$ |
679 |
|
|
$ |
53,047 |
|
|
$ |
(300 |
) |
|
$ |
2,133 |
|
|
$ |
(3,544 |
) |
|
$ |
22,633 |
|
|
$ |
93,711 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
notes to unaudited consolidated financial statements.
|
|
|
|
MidSouth
Bancorp, Inc. and Subsidiaries
|
|
Consolidated
Statement of Stockholders’ Equity (unaudited)
|
|
For
the Three Months Ended March 31, 2008
(in
thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
Paid-in Capital
|
|
|
|
|
|
Accumulated
Other Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
Balance-
January 1, 2008
|
|
|
6,722,993 |
|
|
$ |
672 |
|
|
$ |
51,327 |
|
|
$ |
(133 |
) |
|
$ |
813 |
|
|
$ |
(3,040 |
) |
|
$ |
18,830 |
|
|
$ |
68,469 |
|
Cumulative-effect
adjustment resulting from the adoption of EITF 06-04
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(115 |
) |
|
|
(115 |
) |
Net
earnings
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,199 |
|
|
|
1,199 |
|
Comprehensive
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
change in unrealized gain on securities available-for-sale, net of
taxes
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,081 |
|
|
|
- |
|
|
|
- |
|
|
|
1,081 |
|
Comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,281 |
|
Cash
dividends on common stock, $0.07 per share
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(457 |
) |
|
|
(457 |
) |
Exercise
of stock options
|
|
|
39,539 |
|
|
|
4 |
|
|
|
302 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
306 |
|
Tax
benefit resulting from exercise of stock options
|
|
|
- |
|
|
|
- |
|
|
|
77 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
77 |
|
Purchase
of treasury stock
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(287 |
) |
|
|
- |
|
|
|
(287 |
) |
ESOP
obligation, net of repayments
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
31 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
31 |
|
Excess
of market value over book value of ESOP shares released, net
adjustment
|
|
|
- |
|
|
|
- |
|
|
|
11 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
11 |
|
Stock
option expense
|
|
|
- |
|
|
|
- |
|
|
|
17 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
17 |
|
Balance-
March 31, 2008
|
|
|
6,762,532 |
|
|
$ |
676 |
|
|
$ |
51,734 |
|
|
$ |
(102 |
) |
|
$ |
1,894 |
|
|
$ |
(3,327 |
) |
|
$ |
19,457 |
|
|
$ |
70,332 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
notes to unaudited consolidated financial statements.
|
|
MidSouth
Bancorp, Inc. and Subsidiaries
|
|
Consolidated
Statements of Cash Flows (unaudited)
(in
thousands)
|
|
|
|
For
the Three Months
Ended
March 31,
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
earnings
|
|
$ |
1,233 |
|
|
$ |
1,199 |
|
Adjustments
to reconcile net earnings to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
943 |
|
|
|
787 |
|
Provision
for loan losses
|
|
|
1,000 |
|
|
|
1,200 |
|
Provision
for deferred taxes
|
|
|
327 |
|
|
|
(363 |
) |
Amortization
of premiums on securities, net
|
|
|
170 |
|
|
|
107 |
|
Stock
option expense
|
|
|
14 |
|
|
|
17 |
|
Change
in accrued interest receivable
|
|
|
(233 |
) |
|
|
503 |
|
Change
in accrued interest payable
|
|
|
(459 |
) |
|
|
(170 |
) |
Change
in other assets and other liabilities, net
|
|
|
268 |
|
|
|
1,384 |
|
Net
cash provided by operating activities
|
|
|
3,263 |
|
|
|
4,664 |
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Proceeds
from maturities and calls of securities available-for-sale
|
|
|
26,282 |
|
|
|
24,419 |
|
Proceeds
from maturities and calls of securities held-to-maturity
|
|
|
1,815 |
|
|
|
1,000 |
|
Proceeds
from other investments
|
|
|
- |
|
|
|
1,159 |
|
Purchases
of securities available-for-sale
|
|
|
(12,364 |
) |
|
|
(23,055 |
) |
Purchases
of other investments
|
|
|
(1 |
) |
|
|
(691 |
) |
Loan
originations, net of repayments
|
|
|
10,167 |
|
|
|
(890 |
) |
Purchase
of premises and equipment
|
|
|
(551 |
) |
|
|
(1,493 |
) |
Proceeds
from sale of premises and equipment
|
|
|
1 |
|
|
|
6 |
|
Net
cash provided by investing activities
|
|
|
25,349 |
|
|
|
455 |
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Change
in deposits
|
|
|
2,724 |
|
|
|
84,487 |
|
Change
in repurchase agreements
|
|
|
12,636 |
|
|
|
201 |
|
Change
in federal funds purchased
|
|
|
(14,900 |
) |
|
|
- |
|
Repayments
of Federal Reserve Bank discount window
|
|
|
(36,000 |
) |
|
|
- |
|
Proceeds
from FHLB advances
|
|
|
- |
|
|
|
19,100 |
|
Repayments
of FHLB advances
|
|
|
- |
|
|
|
(23,500 |
) |
Net
proceeds from the issuance of preferred stock
|
|
|
19,954 |
|
|
|
- |
|
Purchase
of treasury stock
|
|
|
- |
|
|
|
(287 |
) |
Payment
of dividends on preferred stock
|
|
|
(100 |
) |
|
|
- |
|
Payment
of dividends on common stock
|
|
|
(728 |
) |
|
|
(723 |
) |
Proceeds
from exercise of stock options
|
|
|
- |
|
|
|
305 |
|
Tax
benefit due to exercise of stock options, net adjustment
|
|
|
(3 |
) |
|
|
77 |
|
Net
cash (used in) provided by financing activities
|
|
|
(16,417 |
) |
|
|
79,660 |
|
|
|
|
|
|
|
|
|
|
Net
increase in cash and cash equivalents
|
|
|
12,195 |
|
|
|
84,779 |
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, beginning of period
|
|
|
24,786 |
|
|
|
30,872 |
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, end of period
|
|
$ |
36,981 |
|
|
$ |
115,651 |
|
|
|
|
|
|
|
|
|
|
Supplemental
information on investing and financing activities:
|
|
|
|
|
|
|
|
|
Accrued
preferred stock dividends
|
|
$ |
128 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
See
notes to unaudited consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MidSouth
Bancorp, Inc. and Subsidiaries
|
Notes
to Interim Consolidated Financial Statements
|
March
31, 2009
|
(Unaudited)
|
1. Basis
of Presentation
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 the Company
and its subsidiaries as of March 31, 2009 and the results of their operations
and their cash flows for the periods presented. The interim financial
information should be read in conjunction with the annual consolidated financial
statements and the notes thereto included in the Company’s 2008 Annual Report
and Form 10-K.
The
results of operations for the three month period ended March 31, 2009 are not
necessarily indicative of the results to be expected for the entire
year.
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 disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reported period. Actual
results could differ from those estimates.
Summary of
Significant Accounting Policies — The accounting and reporting policies
of the Company conform with accounting principles generally accepted in the
United States of America and general practices within the banking
industry. There have been no material changes or developments in the
application of accounting principles or in our evaluation of the accounting
estimates and the underlying assumptions or methodologies that we believe to be
Critical Accounting Policies and Estimates as disclosed in our Form 10-K for the
year ended December 31, 2008.
Recent Accounting
Pronouncements— The
Financial Accounting Standards Board (“FASB”) issued three FASB Staff
Positions (“FSPs”) in April 2009 that are effective for interim and
annual reporting periods ending on or after June 15, 2009. FSP
FAS 107-1 and APB 28-1 Interim Disclosures
about Fair Value of Financial Instruments requires fair value disclosures about
financial instruments in interim financial statements as well as disclosures
about estimation methods and disclosure of changes in method from prior periods.
FSP FAS 115-2 and FAS 124-2 Recognition and
Presentation of Other-Than-Temporary Impairments (“OTTI FSP”) create a new model for
evaluating other-than-temporary impairments (“OTTI”) in debt
securities. The OTTI FSP requires an entity to record an OTTI if it intends to
sell a debt instrument or if it cannot assert it is more likely than not that it
will not have to sell the security before recovery. If the entity does not
intend to sell the security but does not expect to recover the amortized cost
basis, the amount of the impairment that is a result of credit related
losses will be reported in earnings and the remaining impairment related to
illiquidity will be reflected in other comprehensive income. FSP FAS 157-4
Determining Fair
Value When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly
requires companies, as
they are estimating fair values for assets and liabilities that are subject to
fair value measurement, to consider various factors to determine whether there
has been a significant decrease in the volume and level of activity compared to
normal market activity and to consider whether an observed transaction was not
orderly based on the weight of available evidence. Implementation of the three
FSPs is not expected to have a material impact on the Company’s consolidated
financial statements.
Reclassifications—Certain
reclassifications have been made to the prior years’ financial statements in
order to conform to the classifications adopted for reporting in
2009. The reclassifications had no impact on stockholders equity or
net income.
2. Allowance
for Loan Losses
A summary
of the activity in the allowance for loan losses is as follows (in
thousands):
|
|
Three
Months
Ended
March 31,
|
|
|
|
|
|
|
|
|
Balance,
beginning of period
|
|
$ |
7,586 |
|
|
$ |
5,612 |
|
Provision
for loan losses
|
|
|
1,000 |
|
|
|
1,200 |
|
Recoveries
|
|
|
71 |
|
|
|
9 |
|
Loans
charged-off
|
|
|
(856 |
) |
|
|
(691 |
) |
Balance,
end of period
|
|
$ |
7,801 |
|
|
$ |
6,130 |
|
3. Earnings
Per Common Share
Following
is a summary of the information used in the computation of earnings per common
share:
|
|
Three
Months
Ended
March 31,
|
|
|
|
|
|
|
|
|
Net
income available to common shareholders
|
|
$ |
956 |
|
|
$ |
1,199 |
|
Weighted
average number of common shares outstanding used in computation of basic
earnings per common share
|
|
|
6,617 |
|
|
|
6,586 |
|
Effect
of dilutive securities:
Stock options
|
|
|
10 |
|
|
|
36 |
|
Weighted
average number of common shares outstanding plus effect of dilutive
securities – used in computation of diluted earnings per
share
|
|
|
6,627 |
|
|
|
6,622 |
|
4. Declaration
of Dividends
On
January 22, 2009, the Company declared a $0.07 per share quarterly dividend for
holders of common stock of record on March 18, 2009. The Company’s
ability to declare and pay dividends on its common stock is subject to first
having paid all accrued cumulative preferred dividends that are
due. For three years following the issuance of Fixed Rate Cumulative
Perpetual Preferred Stock, Series A (“Series A Preferred Stock”) to the U. S.
Department of the Treasury (the “Treasury”) on January 9, 2009, the Company may
not increase its per share common stock dividend rate above what was declared in
2008 without the Treasury’s consent, unless the Treasury has transferred all the
senior preferred shares to third parties.
5. Fair
Value Measurement
The
Company groups its financial assets and financial liabilities measured at fair
value in three levels, based on the markets in which the assets and liabilities
are traded and the reliability of the assumptions used to determine fair value.
Effective January 1, 2009, the Company adopted FSP 157-2 for nonfinancial assets
and liabilities. Upon adoption, the Company also groups its
nonfinancial assets and liabilities carried at fair value on a recurring and
nonrecurring basis into three levels of fair value.
These
levels are:
Level 1 —
Valuations for assets and liabilities traded in active exchange markets, such as
the New York Stock Exchange. Level 1 also includes securities that are traded by
dealers or brokers in active markets. Valuations are obtained from readily
available pricing sources for market transactions involving identical assets or
liabilities.
Level 2 —
Valuations for assets and liabilities traded in less active dealer or broker
markets. For example, municipal securities valuations are based on markets that
are currently offering similar financial products. Valuations are obtained from
third party pricing services for identical or comparable assets or
liabilities.
Level 3 —
Valuations for assets and liabilities that are derived from other valuation
methodologies, including option pricing models, discounted cash flow models and
similar techniques, and not based on market exchange, dealer, or broker traded
transactions. Level 3 valuations incorporate certain assumptions and projections
in determining the fair value assigned to such assets or
liabilities.
Below is
a table that presents information about certain assets and liabilities measured
at fair value on a recurring basis (in thousands):
|
|
Total
Carrying Amount in Statement of Condition at |
|
|
Assets
/ Liabilities Measured at Fair Value at |
|
|
Fair
Value Measurements at March 31, 2009 using:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities
|
|
$ |
212,515 |
|
|
$ |
212,515 |
|
|
$ |
71 |
|
|
$ |
212,444 |
|
|
$ |
- |
|
Certain
assets and liabilities are measured at fair value on a nonrecurring basis and
therefore are not included in the table above. Impaired loans are
level 2 assets measured using appraisals of the collateral from external parties
less any prior liens. As of March 31, 2009, the fair value of
impaired loans was approximately $18.1 million. Other real estate
owned are also level 2 assets measured using appraisals from external parties,
which had a fair value of approximately $843,000 as of March 31,
2009.
MidSouth
Bancorp, Inc. (“the Company") is a bank holding company headquartered in
Lafayette, Louisiana that conducts substantially all of its business through its
wholly-owned subsidiary bank MidSouth Bank, N.A (“the
Bank”). MidSouth Bank, N.A. offers complete banking services to
commercial and retail customers in south Louisiana and southeast Texas with 35
locations and more than 170 ATMs. The Company is community oriented
and focuses primarily on offering commercial and consumer loan and deposit
services to individuals, small businesses, and middle market
businesses.
Following
is management's discussion of factors that management believes are among those
necessary for an understanding of the Company's financial
statements. The discussion should be read in conjunction with the
Company's consolidated financial statements and the notes thereto presented
herein and with the financial statements, the notes thereto, and related
Management’s Discussion and Analysis in the Company’s 10-K for the year ended
December 31, 2008.
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, the Company’s
performance, and financial results based on reasonable assumptions. A
number of factors and uncertainties could cause actual results to differ
materially from the anticipated results and expectations expressed in the
discussion. These factors and uncertainties include, but are not
limited to:
|
·
|
changes
in interest rates and market prices that could affect the net interest
margin, asset valuation, and expense
levels;
|
|
·
|
changes
in local economic and business conditions that could adversely affect
customers and their ability to repay borrowings under agreed upon terms
and/or adversely affect the value of the underlying collateral related to
the borrowings;
|
|
·
|
increased
competition for deposits and loans which could affect rates and
terms;
|
|
·
|
changes
in the levels of prepayments received on loans and investment securities
that adversely affect the yield and value of the earning
assets;
|
|
·
|
a
deviation in actual experience from the underlying assumptions used to
determine and establish the Allowance for Loan Losses
(“ALL”);
|
|
·
|
changes
in the availability of funds resulting from reduced liquidity or increased
costs;
|
|
·
|
the
timing and impact of future acquisitions, the success or failure of
integrating operations, and the ability to capitalize on growth
opportunities upon entering new
markets;
|
|
·
|
the
ability to acquire, operate, and maintain effective and efficient
operating systems;
|
|
·
|
increased
asset levels and changes in the composition of assets that would impact
capital levels and regulatory capital
ratios;
|
|
·
|
loss
of critical personnel and the challenge of hiring qualified personnel at
reasonable compensation levels;
|
|
·
|
changes
in government regulations and accounting principles, policies, and
guidelines applicable to financial holding companies and banking;
and
|
|
·
|
acts
of terrorism, weather, or other events beyond the Company’s
control.
|
Critical
Accounting Policies
Certain
critical accounting policies affect the more significant judgments and estimates
used in the preparation of the consolidated financial statements. The
Company’s significant accounting policies are described in the notes to the
consolidated financial statements included in Form 10-K for the year ended
December 31, 2008. The accounting principles followed by the Company
and the methods of applying these principles conform with accounting principles
generally accepted in the United States of America (“GAAP”) and general banking
practices. The Company’s most critical accounting policy relates to
its allowance for loan losses, which reflects the estimated losses resulting
from the inability of its borrowers to make loan payments. If the
financial condition of its borrowers were to deteriorate, resulting in an
impairment of their ability to make payments, the Company’s estimates would be
updated and additional provisions for loan losses may be required (see Asset Quality).
Another
of the Company’s critical accounting policies relates to its goodwill and
intangible assets. Goodwill represents the excess of the purchase
price over the fair value of net assets acquired. In accordance with
SFAS No. 142, Goodwill and
Other Intangible Assets, goodwill is not amortized but evaluated for
impairment annually. If the fair value of an asset exceeds the
carrying amount of the asset, no charge to goodwill is made. If the
carrying amount exceeds the fair value of the asset, goodwill will be adjusted
through a charge to earnings. Given the current instability of the
economic environment, the Company’s common stock traded below its stated book
value during the first quarter of 2009. Accordingly, the
Company engaged a third party to assist management in assessing the current fair
value of its common stock and performed a goodwill impairment analysis as of
March 31, 2009. Upon review and analysis of the factors influencing
value and utilizing the market value and investment value approaches, the
Company determined the fair value of the common stock to be greater than stated
and tangible book value, and therefore no impairment of the goodwill was
recorded at the Company.
Compliance
with accounting for stock-based compensation requires that management make
assumptions including stock price volatility and employee turnover that are
utilized to measure compensation expense. The fair value of the stock
options granted is estimated at the date of grant using the Black-Scholes
option-pricing model. This model requires the input of highly
subjective assumptions. The Company recognized stock option expense
of $14,065 for the grant-date fair value of stock options vested in the three
months ended March 31, 2009. The Company did not grant any new stock
options in the first quarter of 2009.
If the
economic environment causes further instability in the market, it is reasonably
possible that the methodology of the assessment of potential loan losses,
goodwill impairment, and other fair value measurements could change in the
near-term or could result in impairment going forward.
Results
of Operations
Earnings
Analysis
Net
income available to common shareholders totaled $956,000 for the first quarter
ended March 31, 2009, a decrease of 20.3% from net income of $1,199,000 reported
for the first quarter of 2008 and 10.2% below net income of $1,064,000 reported
for the fourth quarter of 2008. Diluted earnings per share for the first
quarter of 2009 were $0.14 per share, a decrease of 22.2% from the $0.18 per
share for the first quarter of 2008 and 12.5% below the $0.16 per share for the
fourth quarter of 2008. In the first quarter of 2009, the Company
recorded $277,000 in dividends on its Series A Preferred Stock issued to the
Treasury on January 9, 2009 under the Capital Purchase Plan.
Net
interest income for the first quarter of 2009 increased $852,000 in comparison
to the first quarter of 2008 due to a $2.4 million decrease in interest expense
which was partially offset by a $1.5 million decrease in interest
income. The improvement in net interest income was offset by a
$973,000 increase in non-interest expenses, primarily in occupancy expenses,
group health insurance costs and increased FDIC deposit insurance
premiums. Non-interest income decreased $57,000 in prior year
quarterly comparison primarily due to a one-time payment of $131,000 received
from VISA during the first quarter of 2008. The payment was related
to VISA’s redemption of a portion of its Class B shares outstanding in
connection with its initial public offering. A $200,000
decrease in provision for loan losses in quarterly comparison, contributed to
the $34,000 improvement to net earnings before dividends on preferred stock for
the first quarter of 2009.
First
quarter 2009 earnings were impacted by a $1.0 million provision for loan losses
as a result of net charge-offs totaling $785,000 for the quarter, combined with
credit downgrades and increased risk factors. During the first
quarter of 2009, $6.4 million in loans were placed on nonaccrual status, $5.7
million of which is attributable to one shared national participation credit in
the Company’s Baton Rouge market. The $5.7 million credit was
identified as a potential problem loan in the fourth quarter of 2008 and was a
contributing factor in the $2.0 million recorded as provision expense in that
quarter. Of the total $15.7 million in nonaccrual loans reported at
March 31, 2009, $13.9 million, or 88.5%, are real estate credits in the Baton
Rouge market and are continually monitored by the Company’s risk management
officers.
The
Company's tax expense totaled $157,000 for the first quarter of 2009 and
$169,000 for the first quarter of 2008 and approximated 11% and 12% of income
before taxes, respectively. The lower effective tax rate for both periods was
due to decreased earnings combined with sustained tax-exempt interest income on
municipal securities within the investment portfolio.
The
Company’s total assets for the first quarter ended March 31, 2009 were $923.1
million, a $13.7 million, or 1.5%, decrease from the $936.8 million in total
assets recorded at December 31, 2008. Deposits were $769.4 million as
of March 31, 2009, an increase of $2.7 million, or .35%, from the $766.7 million
as of December 31, 2008. Money market and NOW deposits increased $16.4
million during the first quarter of 2009, offsetting a $12.9 million decrease
in
certificates of deposit. Total loans were $597.2 million, a decrease
of $11.7 million, or 1.92%, from $608.9 million as of December 31,
2008. Nonperforming assets to total assets were 1.96% as of March 31,
2009, compared to 1.17 % for the fourth quarter of 2008.
Net Interest
Income
The
primary source of earnings for the Company is the difference between interest
earned on loans and investments (earning assets) and interest paid on deposits
and other liabilities (interest-bearing 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.
The
Company’s net interest margin on a taxable-equivalent basis, which is net
interest income as a percentage of average earning assets, was 5.13% for the
three months ended March 31, 2009, up 25 basis points from 4.88% for the three
months ended March 31, 2008. Tables 1 and 2 following this discussion
analyze the changes in taxable-equivalent net interest income for the three
months ended March 31, 2009 and 2008.
Taxable-equivalent
net interest income totaled $10,599,000 for the first quarter of 2009, an
increase of 9.2%, or $892,000, from the $9,707,000 reported for the first
quarter of 2008. The improvement in taxable-equivalent net interest
income resulted primarily from a decrease of $2.4 million in interest expense
which offset a decrease of $1.5 million in interest income. The
impact to interest income of a $31.6 million increase in the average volume of
loans, from $569.2 million at March 31, 2008 to $600.8 million at March 31,
2009, was offset by a 146 basis point reduction in the average yield on loans in
quarterly comparison. The average yields on loans declined from 8.48%
in the first quarter of 2008 to 7.02% in the first quarter of 2009 as New York
Prime (“Prime”) fell 200 basis points, from 5.25% to 3.25% during the same
period. The average volume of investment securities, including
federal funds sold and other interest earning assets, increased $5.8 million in
quarterly comparison, while the taxable-equivalent yield increased 16 basis
points, from 4.76% to 4.92%.
The
decrease in interest expense in quarterly comparison resulted from a 148 basis
point decrease in the average rate paid on interest-bearing liabilities, from
3.19% in the first quarter of 2008 to 1.71% in the first quarter of
2009. Additionally, a $3.9 million decline in the average
volume of interest-bearing liabilities contributed to the decrease in interest
expense in quarterly comparison. The decrease in the volume of
interest-bearing liabilities was primarily in commercial platinum money market
deposits and was partially offset by increases in the average volume of
repurchase agreements, federal funds purchased and short term
borrowings.
The
average rate paid on the Company’s junior subordinated debentures decreased 161
basis points from first quarter of 2008 to first quarter of 2009 on the $8.2
million of such debentures issued in the fourth quarter of 2004. The
debentures carry a floating rate equal to the 3-month LIBOR plus 2.50%,
adjustable and payable quarterly. The rate at March 31, 2009 was
3.78%. The debentures mature on September 20, 2034 and, under certain
circumstances, are subject to repayment on September 20, 2009 or
thereafter. In February 2001, the Company issued $7.2 million of
junior subordinated debentures. The debentures carry a fixed interest
rate of 10.20% and mature on February 22, 2031.
Table
1
|
|
Consolidated
Average Balances, Interest and Rates
(in
thousands)
|
|
|
|
Three
Months Ended
March
31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable
|
|
$ |
101,777 |
|
|
|
1,146 |
|
|
|
4.50 |
% |
|
$ |
78,825 |
|
|
$ |
958 |
|
|
|
4.86 |
% |
|
|
|
119,825 |
|
|
|
1,614 |
|
|
|
5.39 |
% |
|
|
108,933 |
|
|
|
1,474 |
|
|
|
5.41 |
% |
Other
investments
|
|
|
4,308 |
|
|
|
33 |
|
|
|
3.06 |
% |
|
|
3,693 |
|
|
|
31 |
|
|
|
3.36 |
% |
Total
investments
|
|
|
225,910 |
|
|
|
2,793 |
|
|
|
4.95 |
% |
|
|
191,451 |
|
|
|
2,463 |
|
|
|
5.14 |
% |
Federal
funds
|
|
|
1,587 |
|
|
|
1 |
|
|
|
0.25 |
% |
|
|
38,970 |
|
|
|
274 |
|
|
|
2.78 |
% |
Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
and real estate
|
|
|
488,297 |
|
|
|
8,036 |
|
|
|
6.67 |
% |
|
|
456,435 |
|
|
|
9,419 |
|
|
|
8.30 |
% |
Installment
|
|
|
112,485 |
|
|
|
2,362 |
|
|
|
8.52 |
% |
|
|
112,719 |
|
|
|
2,587 |
|
|
|
9.23 |
% |
|
|
|
600,782 |
|
|
|
10,398 |
|
|
|
7.02 |
% |
|
|
569,154 |
|
|
|
12,006 |
|
|
|
8.48 |
% |
Other
earning assets
|
|
|
9,071 |
|
|
|
75 |
|
|
|
3.35 |
% |
|
|
386 |
|
|
|
2 |
|
|
|
2.08 |
% |
Total
earning assets
|
|
|
837,350 |
|
|
|
13,267 |
|
|
|
6.43 |
% |
|
|
799,961 |
|
|
|
14,745 |
|
|
|
7.41 |
% |
Allowance
for loan losses
|
|
|
(7,416 |
) |
|
|
|
|
|
|
|
|
|
|
(5,531 |
) |
|
|
|
|
|
|
|
|
Nonearning
assets
|
|
|
92,156 |
|
|
|
|
|
|
|
|
|
|
|
89,728 |
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$ |
922,090 |
|
|
|
|
|
|
|
|
|
|
$ |
884,158 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and stockholders’ equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW,
money market, and savings
|
|
$ |
421,942 |
|
|
$ |
1,104 |
|
|
|
1.06 |
% |
|
$ |
450,702 |
|
|
$ |
2,929 |
|
|
|
2.61 |
% |
Time
deposits
|
|
|
144,063 |
|
|
|
1,070 |
|
|
|
3.01 |
% |
|
|
141,073 |
|
|
|
1,549 |
|
|
|
4.42 |
% |
Total
interest bearing deposits
|
|
|
566,005 |
|
|
|
2,174 |
|
|
|
1.56 |
% |
|
|
591,775 |
|
|
|
4,478 |
|
|
|
3.04 |
% |
Federal
funds purchased and securities sold under repurchase
agreements
|
|
|
30,899 |
|
|
|
205 |
|
|
|
2.80 |
% |
|
|
26,150 |
|
|
|
212 |
|
|
|
3.21 |
% |
FHLB
advances
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
1,663 |
|
|
|
16 |
|
|
|
3.81 |
% |
Federal
Reserve Bank discount window
|
|
|
18,756 |
|
|
|
23 |
|
|
|
0.50 |
% |
|
|
- |
|
|
|
- |
|
|
|
|
|
Total
borrowings
|
|
|
49,655 |
|
|
|
228 |
|
|
|
1.84 |
% |
|
|
27,813 |
|
|
|
228 |
|
|
|
3.24 |
% |
Junior
subordinated debentures
|
|
|
15,465 |
|
|
|
266 |
|
|
|
6.88 |
% |
|
|
15,465 |
|
|
|
332 |
|
|
|
8.49 |
% |
Total
interest bearing liabilities
|
|
|
631,125 |
|
|
|
2,668 |
|
|
|
1.71 |
% |
|
|
635,053 |
|
|
|
5,038 |
|
|
|
3.19 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand
deposits
|
|
|
192,319 |
|
|
|
|
|
|
|
|
|
|
|
174,109 |
|
|
|
|
|
|
|
|
|
Other
liabilities
|
|
|
4,793 |
|
|
|
|
|
|
|
|
|
|
|
5,095 |
|
|
|
|
|
|
|
|
|
Stockholders’
equity
|
|
|
93,853 |
|
|
|
|
|
|
|
|
|
|
|
69,901 |
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity
|
|
$ |
922,090 |
|
|
|
|
|
|
|
|
|
|
$ |
884,158 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income and net interest spread
|
|
|
|
|
|
$ |
10,599 |
|
|
|
4.72 |
% |
|
|
|
|
|
$ |
9,707 |
|
|
|
4.22 |
% |
Net
yield on interest earning assets
|
|
|
|
|
|
|
|
|
|
|
5.13 |
% |
|
|
|
|
|
|
|
|
|
|
4.88 |
% |
1 Securities classified as
available-for-sale are included in average balances. Interest income
figures reflect interest earned on such securities.
2 Interest income of $474,000 for 2009
and $433,000 for 2008 is added to interest earned on tax-exempt obligations to
reflect tax equivalent yields using a 34% tax rate.
3 Interest income includes loan fees of
$798,000 for 2009 and $929,000 for 2008. 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)
|
|
|
|
Three
Months Ended
March
31, 2009 compared to March 31, 2008
|
|
|
|
Total
Increase
|
|
|
Change
Attributable
To
|
|
|
|
|
|
|
|
|
|
|
|
Taxable-equivalent
earned on:
|
|
|
|
|
|
|
|
|
|
Investment
securities
|
|
|
|
|
|
|
|
|
|
Taxable
|
|
$ |
188 |
|
|
$ |
262 |
|
|
$ |
(74 |
) |
Tax
exempt
|
|
|
140 |
|
|
|
147 |
|
|
|
(7 |
) |
Other
investments
|
|
|
2 |
|
|
|
5 |
|
|
|
(3 |
) |
Federal
funds sold
|
|
|
(273 |
) |
|
|
(140 |
) |
|
|
(133 |
) |
Loans,
including fees
|
|
|
(1,608 |
) |
|
|
634 |
|
|
|
(2,242 |
) |
Other
earning assets
|
|
|
73 |
|
|
|
71 |
|
|
|
2 |
|
Total
|
|
|
(1,478 |
) |
|
|
979 |
|
|
|
(2,457 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
paid on:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
bearing deposits
|
|
|
(2,304 |
) |
|
|
(185 |
) |
|
|
(2,119 |
) |
Federal
funds purchased and securities sold under repurchase
agreements
|
|
|
(7 |
) |
|
|
25 |
|
|
|
(32 |
) |
FHLB
advances
|
|
|
(16 |
) |
|
|
(16 |
) |
|
|
- |
|
Federal
Reserve Bank discount window
|
|
|
23 |
|
|
|
23 |
|
|
|
- |
|
Junior
subordinated debentures
|
|
|
(66 |
) |
|
|
- |
|
|
|
(66 |
) |
Total
|
|
|
(2,370 |
) |
|
|
(153 |
) |
|
|
(2,217 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable-equivalent
net interest income
|
|
$ |
892 |
|
|
$ |
1,132 |
|
|
$ |
(240 |
) |
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
Non-interest
income for the first quarter of 2009 totaled $3.5 million, or 1.6 % below the
$3.6 million earned in the first quarter of 2008. The decrease in prior-year
quarterly comparison resulted primarily from a one-time payment totaling
$131,000 received from VISA during the first quarter of 2008. The
one-time payment was related to VISA’s redemption of a portion of its Class B
shares outstanding in connection with an initial public offering. Net
of the VISA payment, service charges on deposit accounts increased $17,000 and
ATM and debit card income increased $166,000 in quarterly
comparison.
Non-interest
Expenses
Non-interest
expense increased $973,000 in prior-year quarterly comparison, primarily due to
increased occupancy expenses, group health insurance costs, and FDIC insurance
premiums. Although the number of full-time equivalent employees
decreased to 418 at March 31, 2009, from 423 at March 31, 2008, salaries and
benefits costs increased $301,000, primarily due to a $269,000 increase in group
health insurance. Occupancy expenses increased $385,000, primarily
due to increases in lease expense and depreciation expense on premises and
equipment. Additional increases were recorded in FDIC insurance
premiums ($214,000) due to increased premium rates assessed and in professional
fees ($131,000), which included subscription and other costs associated with the
on-going implementation of a Customer Relationship Management (“CRM”)
system.
Analysis
of Statement of Condition
Consolidated
assets totaled $923.1 million at March 31, 2009, down $13.7 million from $936.8
million at December 31, 2008 primarily due to maturities and calls within the
investment portfolio and loan payouts. Cash flows from the loan and
investment portfolios reduced the Company’s federal funds purchased and Federal
Reserve Bank Discount Window borrowings during the first three months of
2009. Additionally, $20.0 million received from the Treasury for
the
Company’s
Series A Preferred Stock added liquidity and capital for the first quarter of
2009. The Company participated in the Treasury’s Capital Purchase
Plan for the purpose of funding loans within its markets.
Deposits
totaled $769.4 million at the end of the first quarter of 2009, an increase of
$2.7 million from $766.7 million at December 31, 2008. Growth in NOW,
money market, and savings deposits totaling $16.3 million was mostly offset by a
$12.5 million decrease in certificates of deposit (“CD’S”) and a $1.1 million
decrease in non-interest bearing balances within the Company’s
markets. The decrease in the CD portfolio occurred as higher yielding
promotional CD’s were offered lowered rates at renewal. Securities
sold under agreements to repurchase increased $12.6 million, as a few of the
Company’s commercial depositors that maintain higher account balances sought
additional security collateral to supplement FDIC insurance.
Securities
available-for-sale totaled $212.5 million at March 31, 2009, down $13.4 million
from $225.9 million at December 31, 2008. The portfolio of securities
held-to-maturity decreased $1.8 million, from $6.5 million at December 31, 2008
to $4.7 million at March 31, 2009. Both portfolios were affected by
maturities and calls within the first quarter of 2009.
Loans
totaled $597.2 million at March 31, 2009 compared to $608.9 million at December
31, 2008, a decrease of $11.7 million over the first three months of
2009. Loan payouts exceeded new loans funded during the quarter
and loan demand softened. The composition of the Company’s loan
portfolio is reflected in Table 3 below.
|
|
|
|
|
|
|
Table
3
Composition
of Loans
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial,
financial, and agricultural
|
|
$ |
202,315 |
|
|
$ |
210,058 |
|
Lease
financing receivable
|
|
|
7,377 |
|
|
|
8,058 |
|
Real
estate – mortgage
|
|
|
236,594 |
|
|
|
234,588 |
|
Real
estate – construction
|
|
|
64,389 |
|
|
|
65,327 |
|
Installment
loans to individuals
|
|
|
85,604 |
|
|
|
89,901 |
|
Other
|
|
|
930 |
|
|
|
1,023 |
|
Total loans
|
|
$ |
597,209 |
|
|
$ |
608,955 |
|
Within
the $236.6 million real estate mortgage portfolio at March 31, 2009, $170.1
million represented loans secured primarily by commercial real estate, 65.4% of
which was owner-occupied. Real estate mortgage loans secured by 1-4
family residential properties totaled $66.5 million, 78.2% of which represented
loans secured by first liens. Within the $64.4 million real estate construction
portfolio, 87.0% represented commercial construction and land development and
13.0% represented residential construction and consumer
property. Management believes the Company’s risk within the real
estate and construction portfolios is diversified throughout its markets and
that current exposure within the two portfolios is sufficiently provided for
within the ALL at March 31, 2009.
Liquidity
Liquidity
is the availability of funds to meet operational cash flow requirements and to
meet maturing contractual obligations. 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. The Bank’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, principal payments received on loans and mortgage-backed securities, and
maturities of investment securities provide additional primary sources of asset
liquidity for the Bank. The Bank also has significant borrowing
capacity with the Federal Reserve Bank of Atlanta (“FRB”) and with the
FHLB of Dallas, Texas (“FHLB–Dallas”). As of March 31, 2009, the
Company had no borrowings with the FRB Discount Window or the
FHLB-Dallas. The Company has $31.0 million in collateral pledged to
the Discount Window and has the ability to post additional collateral of
approximately $99.0 million if necessary to meet liquidity
needs. Under existing agreements with the FHLB-Dallas, the Company’s
borrowing
capacity
totaled $144.0 million at March 31, 2009. With concerns about the
stability of the FHLB system in the current economic environment, the Company is
finalizing the process of transferring loan collateral from the FHLB-Dallas for
pledging under a Borrower-in-Custody (“BIC”) line with the FRB. An
additional unsecured borrowing line totaling $21.0 million is available to the
Company through a primary correspondent bank. The unsecured line has
been tested recently to ensure availability and the Company monitors the
stability of its primary correspondent bank. The Company utilizes
these contingency funding alternatives to meet deposit volatility, which is more
likely in the current environment, given unusual competitive offerings within
the Company’s markets.
At the
parent company level, cash is needed primarily to meet interest payments on the
junior subordinated debentures and to pay dividends on the preferred and common
stock. On January 9,
2009, the Company’s participation in the Capital Purchase Plan of the Treasury
added $20.0 million in liquidity and capital. The Company distributed the
majority of the proceeds to the Bank for the purpose of funding
loans. Some of the proceeds were retained at the Company to meet the
5% dividend requirement on the Series A Preferred Stock.
Other
capital transactions include an $8.2 million issuance of junior subordinated
debentures on September 20, 2004, the proceeds of which were used to partially
fund the Lamar Bancshares acquisition. The parent company previously
issued $7.2 million in junior subordinated debentures in February
2001. Currently, dividends from the Bank primarily provide liquidity
for the parent company. Dividends from the Bank totaled $4,000,000 in
2008. The Bank has the ability to declare dividends to the Company
without prior approval of its primary regulators. 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. As a
publicly traded company, the parent company also has the ability to issue other
securities instruments to provide funds as needed for operations and future
growth.
Capital
The
Company 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 March 31, 2009, the Company and the Bank were in
compliance with statutory minimum capital requirements and was classified as
“well capitalized”. 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 March 31, 2009,
the Company’s leverage ratio was 10.66%, Tier 1 capital to risk-weighted assets
was 14.20% and total capital to risk-weighted assets was 15.37%. The
Bank had a leverage capital ratio of 10.14% at March 31, 2009.
Asset
Quality
Credit
Risk Management
The
Company manages its credit risk by observing written, board approved policies
that govern all underwriting activities. The credit risk management
program requires that each individual loan officer review his or her portfolio
on a scheduled basis and assign recommended credit ratings on each
loan. These efforts are supplemented by independent reviews performed
by the loan review department and other validations performed by the internal
audit department. The results of the reviews are reported directly to
the Audit Committee of the Board of Directors. Additionally, bank
concentrations are monitored and reported to the Board of Directors quarterly
whereby individual customer and aggregate industry leverage, profitability, risk
rating distributions, and liquidity are evaluated for each major standard
industry classification segment.
Nonperforming
Assets and Allowance for Loan Losses
Table 4
summarizes the Company's nonperforming assets for the quarters ending March 31,
2009 and 2008, and December 31, 2008.
Table
4
Nonperforming
Assets and Loans Past Due 90 Days or More and Still Accruing
(in
thousands)
|
|
|
|
March
31,
|
|
|
March
31,
|
|
|
December
31,
|
|
Nonaccrual
loans
|
|
$ |
15,713 |
|
|
$ |
1,899 |
|
|
$ |
9,355 |
|
Loans
past due 90 days and over and still accruing
|
|
|
1,250 |
|
|
|
2,275 |
|
|
|
1,005 |
|
Total
nonperforming loans
|
|
|
16,963 |
|
|
|
4,174 |
|
|
|
10,360 |
|
Other
real estate owned
|
|
|
843 |
|
|
|
143 |
|
|
|
329 |
|
Other
foreclosed assets
|
|
|
255 |
|
|
|
315 |
|
|
|
306 |
|
Total nonperforming
assets
|
|
$ |
18,061 |
|
|
$ |
4,632 |
|
|
$ |
10,995 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming
assets to total assets
|
|
|
1.96 |
% |
|
|
0.49 |
% |
|
|
1.17 |
% |
Nonperforming
assets to total loans + OREO + other foreclosed assets
|
|
|
3.02 |
% |
|
|
0.81 |
% |
|
|
1.80 |
% |
ALL
to nonperforming loans
|
|
|
45.99 |
% |
|
|
146.86 |
% |
|
|
73.22 |
% |
ALL
to total loans
|
|
|
1.31 |
% |
|
|
1.08 |
% |
|
|
1.25 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
YTD
charge-offs
|
|
$ |
856 |
|
|
$ |
691 |
|
|
$ |
2,624 |
|
YTD
recoveries
|
|
|
71 |
|
|
|
9 |
|
|
|
192 |
|
YTD
net charge-offs
|
|
$ |
785 |
|
|
$ |
682 |
|
|
$ |
2,432 |
|
YTD
net charge-offs to total loans
|
|
|
0.13 |
% |
|
|
0.12 |
% |
|
|
0.40 |
% |
Annualized
net charge-offs to total loans |
|
|
0.53
|
% |
|
|
0.48 |
% |
|
|
0.40 |
% |
At March
31, 2009, nonperforming assets, including loans past due 90 days and over and
still accruing, totaled $18.1 million, or 1.96% of total assets, as compared to
the $4.6 million, or 0.49% of total assets recorded at March 31, 2008 and $11.0
million, or 1.17% of total assets, at December 31, 2008. The increase
in non-performing assets in prior year comparison resulted primarily from an
increase of $13.8 million in nonaccrual loans and a $640,000 net increase in
other real estate owned and other assets repossessed, partially offset by a $1.0
million reduction in loans past due 90 days and over and still
accruing. During the first quarter of 2009, $6.4 million in loans
were placed on nonaccrual status, $5.7 million of which is attributable to one
shared national participation credit in the Company’s Baton Rouge
market.
Allowance
coverage for nonperforming loans was 45.99% at March 31, 2009, compared to
146.86% at March 31, 2008 and 73.22% at December 31, 2008. Net
charge-offs were 0.13% of total loans for the first quarter 2009 compared to
0.12 % the first quarter of 2008 and .40% for year ended December 31,
2008. Management’s most recent analysis of the Allowance for Loan
Losses (“ALL”) indicated that the ALL/total loans ratio of 1.31% was appropriate
at March 31, 2009. The ALL/total loans ratio was 1.08% at March 31,
2008 and 1.25% at December 31, 2008.
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. 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 processes by which management determines the
appropriate level of the allowance, and the corresponding provision for probable
credit losses, involves considerable judgment; therefore, no assurance can be
given that future losses will not vary from current
estimates. Management believes the $7.8 million in the allowance as
of March 31, 2009 is sufficient to cover probable losses in the loan
portfolio.
Impact of
Inflation and Changing Prices
The
consolidated financial statements of and notes thereto, presented herein, have
been prepared in accordance with accounting principles generally accepted in the
United States of America, which require the measurement of financial position
and operating results in terms of historical dollars without considering the
change in the relative purchasing power of money over time due to inflation. The
impact of inflation is reflected in the increased cost of the Company’s
operations. Unlike most industrial companies, nearly all the assets
and liabilities of the Company are financial. As a result, interest
rates have a greater impact on the Company’s performance than do the effects of
general levels of inflation. Interest rates do not necessarily move
in the same direction or to the same extent as the prices of goods and
services.
In the
normal course of conducting business, the Company is exposed to market risk,
principally interest rate risk, through operation of its
subsidiaries. Interest rate risk arises from market fluctuations in
interest rates that affect cash flows, income, expense and values of financial
instruments. The Asset/Liability Management Committee (“ALCO”) is
responsible for managing the Company’s interest rate risk position in compliance
with the policy approved by the Board of Directors.
There
have been no significant changes from the information regarding market risk
disclosed under the heading “Interest Rate Sensitivity” in the Company’s Annual
Report for the year ended December 31, 2008.
The
Company’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-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”)). As of the end of the period covered by this
Quarterly Report on Form 10-Q (the “Evaluation Date”), the principal executive
officer and principal financial officer have concluded that such disclosure
controls and procedures are effective to ensure that information required to be
disclosed by the Company in reports that it submits under the Exchange Act is
recorded, processed, summarized, and reported within the time periods specified
in the Securities and Exchange Commission rules and forms.
During
the first quarter of 2009, there were no significant changes in the Company’s
internal controls over financial reporting that has materially affected, or is
reasonably likely to affect, the Company’s internal controls over financial
reporting.
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 currently 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
operations, or cash flows.
Item
1A. Risk Factors.
No
change.
The
following table provides information with respect to purchases made by or on
behalf of the Company or any “affiliated purchaser,” as defined in Securities
Exchange Act Rule 10b-8(a)(3), of equity securities during the quarter ended
March 31, 2009.
|
Total
Number
of
Shares
Purchased
|
|
Average
Price Paid
per
Share
|
|
Total
Number of
Shares
Purchased as
Part
of a Publicly
Announced
Plan4
|
|
Maximum
Number
of
Shares That May
Yet
be Purchased
Under
the Plan4
|
January
2009
|
None
|
|
|
|
|
|
|
February
2009
|
None
|
|
|
|
|
|
|
March
2009
|
None
|
|
|
|
|
|
|
The
Company is prohibited from repurchasing its common shares due to its
participation in the Capital Purchase Plan with the Treasury.
None.
None.
None.
(a) Exhibits
Exhibit
Number Document
Description
31.1
|
Certification
pursuant to Exchange Act Rules 13(a) –
14(a)
|
31.2
|
Certification
pursuant to Exchange Act Rules 13(a) –
14(a)
|
32.1
|
Certification
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
32.2
|
Certification
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
4 Under a share repurchase program
approved by the Company’s Board of Directors on November 13, 2002, the Company
can repurchase up to 5% of its common stock outstanding through open market or
privately negotiated transactions. The repurchase program does not
have an expiration date.
(b) Reports
Filed on Form 8-K
A press
release regarding the Company’s earnings for the quarter ended March 31, 2009
was attached as Exhibit 99.1 to the Form 8-K filed on April 24,
2009.
A
press release regarding the resignation of the Company’s Chief Retail Officer
was attached as Exhibit 99.1 to the Form 8-K filed April 28, 2009.
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: May 8,
2009
|
|
|
/s/
C. R. Cloutier
|
|
C.
R. Cloutier, President /CEO
|
|
(Principal
Executive Officer)
|
|
/s/
Teri S. Stelly
|
|
Teri
S. Stelly, SVP/Interim CFO
|
|
(Principal
Financial Officer) |