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 September 30,
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 of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES x NO ¨
|
|
Indicate
by check mark 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 ¨
|
|
|
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 Exchange Act.)
YES ¨ NO x
|
|
|
|
As of November 9, 2009, there
were 6,618,268 shares of the registrant’s Common Stock, par value $0.10
per share, outstanding.
|
|
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
|
|
Forward
Looking Statements
|
|
Critical
Accounting Policies
|
|
Analysis
of Statement of Condition
|
Part I –
Financial Information
|
|
MidSouth
Bancorp, Inc. and Subsidiaries
|
|
Consolidated
Statements of Condition
(dollars
in thousands, except per share data)
|
|
|
|
September
30,
2009
(unaudited)
|
|
|
December
31,
2008
(audited)
|
|
Assets
|
|
|
|
|
|
|
Cash
and due from banks
|
|
$ |
22,718 |
|
|
$ |
24,753 |
|
Interest-bearing
deposits in other banks
|
|
|
11,522 |
|
|
|
33 |
|
Federal
funds sold
|
|
|
28,345 |
|
|
|
- |
|
Time
deposits in other banks
|
|
|
16,023 |
|
|
|
9,023 |
|
Securities
available-for-sale, at fair value (cost of $211,169 at September 30, 2009
and $223,372 at December 31, 2008)
|
|
|
218,795 |
|
|
|
225,944 |
|
Securities
held-to-maturity (estimated fair value of $3,294 at September
30,
2009
and $6,648 at December 31, 2008)
|
|
|
3,218 |
|
|
|
6,490 |
|
Other
investments
|
|
|
4,428 |
|
|
|
4,309 |
|
Loans
|
|
|
588,589 |
|
|
|
608,955 |
|
Allowance
for loan losses
|
|
|
(8,015 |
) |
|
|
(7,586 |
) |
Loans,
net of allowance
|
|
|
580,574 |
|
|
|
601,369 |
|
Bank
premises and equipment, net
|
|
|
39,049 |
|
|
|
40,580 |
|
Accrued
interest receivable
|
|
|
5,283 |
|
|
|
5,356 |
|
Goodwill
and intangibles
|
|
|
9,508 |
|
|
|
9,605 |
|
Cash
surrender value of life insurance
|
|
|
4,502 |
|
|
|
4,378 |
|
Other
assets
|
|
|
3,865 |
|
|
|
4,975 |
|
Total
assets
|
|
$ |
947,830 |
|
|
$ |
936,815 |
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
Non-interest
bearing
|
|
$ |
181,115 |
|
|
$ |
199,899 |
|
Interest
bearing
|
|
|
590,976 |
|
|
|
566,805 |
|
Total
deposits
|
|
|
772,091 |
|
|
|
766,704 |
|
Securities
sold under agreements to repurchase
|
|
|
55,366 |
|
|
|
24,976 |
|
Federal
funds purchased
|
|
|
- |
|
|
|
14,900 |
|
Other
borrowed money
|
|
|
- |
|
|
|
36,000 |
|
Accrued
interest payable
|
|
|
636 |
|
|
|
1,227 |
|
Junior
subordinated debentures
|
|
|
15,465 |
|
|
|
15,465 |
|
Other
liabilities
|
|
|
6,830 |
|
|
|
4,499 |
|
Total
liabilities
|
|
|
850,388 |
|
|
|
863,771 |
|
Stockholders’
Equity:
|
|
|
|
|
|
|
|
|
Series
A Preferred stock, no par value; 5,000,000 shares authorized, 20,000
shares issued and outstanding at September 30, 2009 and none at
December 31, 2008
|
|
|
19,162 |
|
|
|
- |
|
Common
stock, $0.10 par value; 10,000,000 shares authorized, 6,788,933 issued and
6,618,268 outstanding at September 30, 2009 and 6,788,885 issued and
6,618,220 outstanding at December 31, 2008
|
|
|
679 |
|
|
|
679 |
|
Additional
paid-in capital
|
|
|
53,072 |
|
|
|
52,097 |
|
Unearned
ESOP shares
|
|
|
(245 |
) |
|
|
(18 |
) |
Accumulated
other comprehensive income
|
|
|
5,033 |
|
|
|
1,697 |
|
Treasury
stock – 170,665 shares at September 30, 2009 and December 31,
2008, at cost
|
|
|
(3,544 |
) |
|
|
(3,544 |
) |
Retained
earnings
|
|
|
23,285 |
|
|
|
22,133 |
|
Total
stockholders’ equity
|
|
|
97,442 |
|
|
|
73,044 |
|
Total
liabilities and stockholders’ equity
|
|
$ |
947,830 |
|
|
$ |
936,815 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 September 30,
|
|
|
Nine
Months Ended September 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans,
including fees
|
|
$ |
10,426 |
|
|
$ |
11,101 |
|
|
$ |
31,119 |
|
|
$ |
34,310 |
|
Securities,
time deposits and other investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable
|
|
|
898 |
|
|
|
1,182 |
|
|
|
3,046 |
|
|
|
3,182 |
|
Nontaxable
|
|
|
1,068 |
|
|
|
1,096 |
|
|
|
3,305 |
|
|
|
3,165 |
|
Federal
funds sold
|
|
|
10 |
|
|
|
49 |
|
|
|
29 |
|
|
|
657 |
|
Time
deposits in other banks
|
|
|
56 |
|
|
|
162 |
|
|
|
187 |
|
|
|
322 |
|
Other
investments and interest bearing deposits
|
|
|
40 |
|
|
|
45 |
|
|
|
102 |
|
|
|
138 |
|
Total
interest income
|
|
|
12,498 |
|
|
|
13,635 |
|
|
|
37,788 |
|
|
|
41,774 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
2,014 |
|
|
|
3,016 |
|
|
|
6,228 |
|
|
|
11,024 |
|
Securities
sold under agreements to repurchase
|
|
|
303 |
|
|
|
210 |
|
|
|
775 |
|
|
|
587 |
|
Federal
funds purchased
|
|
|
- |
|
|
|
40 |
|
|
|
5 |
|
|
|
41 |
|
Other
borrowed money
|
|
|
- |
|
|
|
16 |
|
|
|
23 |
|
|
|
34 |
|
Junior
subordinated debentures
|
|
|
249 |
|
|
|
297 |
|
|
|
777 |
|
|
|
919 |
|
Total
interest expense
|
|
|
2,566 |
|
|
|
3,579 |
|
|
|
7,808 |
|
|
|
12,605 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income
|
|
|
9,932 |
|
|
|
10,056 |
|
|
|
29,980 |
|
|
|
29,169 |
|
Provision
for loan losses
|
|
|
1,000 |
|
|
|
500 |
|
|
|
4,100 |
|
|
|
2,555 |
|
Net
interest income after provision for loan losses
|
|
|
8,932 |
|
|
|
9,556 |
|
|
|
25,880 |
|
|
|
26,614 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
charges on deposits
|
|
|
2,736 |
|
|
|
2,761 |
|
|
|
7,700 |
|
|
|
7,693 |
|
ATM
and debit card income
|
|
|
770 |
|
|
|
727 |
|
|
|
2,310 |
|
|
|
1,962 |
|
Other
charges and fees
|
|
|
466 |
|
|
|
493 |
|
|
|
1,350 |
|
|
|
1,718 |
|
Total
non-interest income
|
|
|
3,972 |
|
|
|
3,981 |
|
|
|
11,360 |
|
|
|
11,373 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries
and employee benefits
|
|
|
5,505 |
|
|
|
5,395 |
|
|
|
16,257 |
|
|
|
15,772 |
|
Occupancy
expense
|
|
|
2,287 |
|
|
|
2,283 |
|
|
|
6,916 |
|
|
|
6,281 |
|
FDIC
insurance
|
|
|
328 |
|
|
|
173 |
|
|
|
1,380 |
|
|
|
363 |
|
Other
|
|
|
3,206 |
|
|
|
3,384 |
|
|
|
9,171 |
|
|
|
10,207 |
|
Total
non-interest expenses
|
|
|
11,326 |
|
|
|
11,235 |
|
|
|
33,724 |
|
|
|
32,623 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
|
1,578 |
|
|
|
2,302 |
|
|
|
3,516 |
|
|
|
5,364 |
|
Provision
for income taxes
|
|
|
147 |
|
|
|
445 |
|
|
|
107 |
|
|
|
891 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
|
|
1,431 |
|
|
|
1,857 |
|
|
|
3,409 |
|
|
|
4,473 |
|
Dividends
on preferred stock
|
|
|
299 |
|
|
|
- |
|
|
|
875 |
|
|
|
- |
|
Net
earnings available to common shareholders
|
|
$ |
1,132 |
|
|
$ |
1,857 |
|
|
$ |
2,534 |
|
|
$ |
4,473 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
.17 |
|
|
$ |
.28 |
|
|
$ |
.38 |
|
|
$ |
.68 |
|
Diluted
|
|
$ |
.17 |
|
|
$ |
.28 |
|
|
$ |
.38 |
|
|
$ |
.67 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
notes to unaudited consolidated financial statements.
|
|
|
|
MidSouth
Bancorp, Inc. and Subsidiaries
|
|
Consolidated
Statement of Stockholders’ Equity (unaudited)
|
|
For
the Nine Months Ended September 30, 2009
(in
thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
Additional
Paid-in
|
|
|
Unearned
ESOP
|
|
|
Accumulated
Other Comprehensive
|
|
|
Treasury
|
|
|
Retained
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance-
January 1, 2009
|
|
|
- |
|
|
|
- |
|
|
|
6,788,885 |
|
|
$ |
679 |
|
|
$ |
52,097 |
|
|
$ |
(18 |
) |
|
$ |
1,697 |
|
|
$ |
(3,544 |
) |
|
$ |
22,133 |
|
|
$ |
73,044 |
|
Net
earnings
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,409 |
|
|
|
3,409 |
|
Net
change in unrealized gains on securities available-for-sale, net of
taxes
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,336 |
|
|
|
- |
|
|
|
- |
|
|
|
3,336 |
|
Comprehensive
income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
6,745 |
|
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 |
|
Dividends
on preferred stock and accretion of common stock warrants
|
|
|
- |
|
|
|
148 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(875 |
) |
|
|
(727 |
) |
Dividends
on common stock, $0.21 per share
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,382 |
) |
|
|
(1,382 |
) |
Exercise
of stock options
|
|
|
- |
|
|
|
- |
|
|
|
48 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Tax
benefit resulting from exercise of stock options, net
adjustment
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(3 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(3 |
) |
ESOP
compensation expense
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
19 |
|
|
|
(227 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(208 |
) |
Stock
option expense
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
19 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
19 |
|
Balance-
September 30, 2009
|
|
|
20,000 |
|
|
$ |
19,162 |
|
|
|
6,788,933 |
|
|
$ |
679 |
|
|
$ |
53,072 |
|
|
$ |
(245 |
) |
|
$ |
5,033 |
|
|
$ |
(3,544 |
) |
|
$ |
23,285 |
|
|
$ |
97,442 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
notes to unaudited consolidated financial statements.
|
|
|
|
MidSouth
Bancorp, Inc. and Subsidiaries
|
|
Consolidated
Statement of Stockholders’ Equity (unaudited)
|
|
For
the Nine Months Ended September 30, 2008
(in
thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
Additional
Paid-in
|
|
|
Unearned
ESOP
|
|
|
Accumulated
Other Comprehensive
|
|
|
Treasury
|
|
|
Retained
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance-
January 1, 2008
|
|
|
6,722,993 |
|
|
$ |
672 |
|
|
$ |
51,326 |
|
|
$ |
(133 |
) |
|
$ |
813 |
|
|
$ |
(3,040 |
) |
|
$ |
18,830 |
|
|
$ |
68,468 |
|
Cumulative-effect
adjustment for the adoption of EITF 06-4
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(115 |
) |
|
|
(115 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
4,473 |
|
|
|
4,473 |
|
Comprehensive
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in unrealized losses
on securities available-for-sale, net of taxes
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,285 |
) |
|
|
- |
|
|
|
- |
|
|
|
(1,285 |
) |
Comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,188 |
|
Cash
dividends on common stock, $0.21 per share
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,384 |
) |
|
|
(1,384 |
) |
Exercise
of stock options
|
|
|
65,891 |
|
|
|
7 |
|
|
|
469 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
476 |
|
Tax
benefit resulting from exercise of stock options
|
|
|
- |
|
|
|
- |
|
|
|
204 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
204 |
|
Purchase
of treasury stock
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(498 |
) |
|
|
- |
|
|
|
(498 |
) |
ESOP
compensation
expense
|
|
|
- |
|
|
|
- |
|
|
|
25 |
|
|
|
87 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
112 |
|
Stock
option expense
|
|
|
- |
|
|
|
- |
|
|
|
52 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
52 |
|
Balance-
September 30, 2008
|
|
|
6,788,884 |
|
|
$ |
679 |
|
|
$ |
52,076 |
|
|
$ |
(46 |
) |
|
$ |
(472 |
) |
|
$ |
(3,538 |
) |
|
$ |
21,804 |
|
|
$ |
70,503 |
|
|
|
MidSouth
Bancorp, Inc. and Subsidiaries
|
|
Consolidated
Statements of Cash Flows (unaudited)
(in
thousands)
|
|
|
|
For
the Nine Months Ended September 30,
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
earnings
|
|
$ |
3,409 |
|
|
$ |
4,473 |
|
Adjustments
to reconcile net earnings to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
2,797 |
|
|
|
2,461 |
|
Provision
for loan losses
|
|
|
4,100 |
|
|
|
2,555 |
|
Provision
for deferred tax expense (benefit)
|
|
|
(459 |
) |
|
|
473 |
|
Amortization
of premiums on securities, net
|
|
|
642 |
|
|
|
271 |
|
Stock
option expense
|
|
|
19 |
|
|
|
52 |
|
Net
loss on sale of premises and equipment
|
|
|
16 |
|
|
|
190 |
|
Net
loss on sale of other real estate owned
|
|
|
23 |
|
|
|
- |
|
Change
in accrued interest receivable
|
|
|
73 |
|
|
|
76 |
|
Change
in accrued interest payable
|
|
|
(591 |
) |
|
|
(305 |
) |
Other,
net
|
|
|
2,676 |
|
|
|
(496 |
) |
Net
cash provided by operating activities
|
|
|
12,705 |
|
|
|
9,750 |
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Net
increase in time deposits in other banks
|
|
|
(7,000 |
) |
|
|
(15,000 |
) |
Proceeds
from maturities and calls of securities available-for-sale
|
|
|
63,249 |
|
|
|
43,961 |
|
Proceeds
from maturities and calls of securities held-to-maturity
|
|
|
3,277 |
|
|
|
3,219 |
|
Proceeds
from other investments
|
|
|
- |
|
|
|
1,469 |
|
Purchases
of securities available-for-sale
|
|
|
(51,687 |
) |
|
|
(87,209 |
) |
Purchases
of other investments
|
|
|
(124 |
) |
|
|
(1,756 |
) |
Loan
originations (repayments), net
|
|
|
15,869 |
|
|
|
(12,258 |
) |
Purchase
of premises and equipment
|
|
|
(1,195 |
) |
|
|
(3,658 |
) |
Proceeds
from sale of premises and equipment
|
|
|
9 |
|
|
|
10 |
|
Proceeds
from sales of other real estate owned
|
|
|
122 |
|
|
|
- |
|
Net
cash provided by (used in) investing activities
|
|
|
22,520 |
|
|
|
(71,222 |
) |
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Change
in deposits
|
|
|
5,387 |
|
|
|
37,594 |
|
Change
in repurchase agreements
|
|
|
30,390 |
|
|
|
10,343 |
|
Change
in federal funds purchased
|
|
|
(14,900 |
) |
|
|
500 |
|
Change
in Federal Reserve Discount Window borrowings
|
|
|
(36,000 |
) |
|
|
16,882 |
|
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
|
|
|
- |
|
|
|
(498 |
) |
Payment
of dividends on preferred stock
|
|
|
(600 |
) |
|
|
- |
|
Payment
of dividends on common stock
|
|
|
(1,654 |
) |
|
|
(1,649 |
) |
Proceeds
from exercise of stock options
|
|
|
- |
|
|
|
476 |
|
Excess
tax benefit from stock option exercises, net adjustment
|
|
|
(3 |
) |
|
|
204 |
|
Net
cash provided by financing activities
|
|
|
2,574 |
|
|
|
59,452 |
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
37,799 |
|
|
|
(2,020 |
) |
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, beginning of period
|
|
|
24,786 |
|
|
|
30,873 |
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, end of period
|
|
$ |
62,585 |
|
|
$ |
28,853 |
|
|
|
|
|
|
|
|
|
|
Supplemental
information- Noncash items
|
|
|
|
|
|
|
|
|
Accrued preferred stock
dividends
|
|
$ |
127 |
|
|
$ |
- |
|
Transfer of loans to other real
estate owned
|
|
|
599 |
|
|
|
500 |
|
Loan to ESOP
|
|
|
227 |
|
|
|
89 |
|
|
|
|
|
|
|
|
|
|
See
notes to unaudited consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MidSouth
Bancorp, Inc. and Subsidiaries
|
Notes
to Interim Consolidated Financial Statements
|
September
30, 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 September 30, 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 on Form 10-K.
The
results of operations for the nine month period ended September 30, 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— In June 2009, the FASB
issued Accounting Standards Update No. 2009-01 (“ASU 2009-01” or the
"Statement"), Topic 105 –
Generally Accepted Accounting Principles amendments based on Statement of
Financial Accounting Standards No. 168 – The FASB Accounting Standards
Codification TM and the Hierarchy of Generally
Accepted Accounting Principles. ASU 2009-01 amends the FASB
Accounting Standards Codification for the issuance of FASB Statement No. 168
(“SFAS 168”), The FASB
Accounting Standards Codification TM and the Hierarchy of Generally
Accepted Accounting Principles. ASU 2009-1 includes SFAS 168
in its entirety, including the accounting standards update instructions
contained in Appendix B of the Statement. The FASB Accounting
Standards Codification TM
(“Codification”) became the source of authoritative U.S. generally accepted
accounting principles (“GAAP”) recognized by the FASB to be applied by
nongovernmental entities. Rules and interpretive releases of the
Securities and Exchange Commission (“SEC”) under authority of federal securities
laws are also sources of authoritative GAAP for SEC registrants. On the
effective date of this Statement, the Codification will supersede all
then-existing non-SEC accounting and reporting standards. All other
non-grandfathered non-SEC accounting literature not included in the Codification
will become non-authoritative. This Statement is effective for the Company’s
financial statements beginning in the interim period ended September 30,
2009.
Following
this Statement, the FASB will not issue new standards in the form of Statements,
FASB Staff Positions, or Emerging Issues Task Force
Abstracts. Instead, it will issue Accounting Standards
Updates. The FASB does not consider Accounting Standards Updates as
authoritative in their own right. Accounting Standards Updates serve
only to update the Codification, provide background information about the
guidance, and provide the bases for conclusions on the change(s) in the
Codification. FASB Statement No. 162, The Hierarchy of Generally
Accepted Accounting Principles, which became effective on November 13, 2008,
identified the sources of accounting principles and the framework for selecting
the principles used in preparing the financial statements of nongovernmental
entities that are presented in conformity with GAAP. Statement 162
arranged these sources of GAAP in a hierarchy for users to apply
accordingly. Upon becoming effective, all of the content of the
Codification carries the same level of authority, effectively superseding
Statement 162. In other words, the GAAP hierarchy has been modified to include
only two levels of GAAP: authoritative and non-authoritative. As a
result, this Statement replaces Statement 162 to indicate this change to the
GAAP hierarchy. The adoption of the Codification and ASU 2009-01 did
not have any effect on the Company’s
results
of operations or financial position. All references to accounting
literature included in the notes to the financial statements have been changed
to reference the appropriate sections of the Codification.
In June
2009, the FASB issued Accounting Standards Update No. 2009-02 (“ASU 2009-02”),
Omnibus Update – Amendments to
Various Topics for Technical Corrections. The adoption of ASU
2009-02 did not have a material effect on the Company’s results of operations,
financial position or disclosures.
In August
2009, the FASB issued Accounting Standards Update No. 2009-03 (“ASU 2009-03”),
SEC Update – Amendments to
Various Topics Containing SEC Staff Accounting Bulletins. ASU
2009-03 represents technical corrections to various topics containing SEC Staff
Accounting Bulletins to update cross-references to Codification
text. This ASU did not have a material effect on the Company’s
results of operations, financial position or disclosures.
In August
2009, the FASB issued Accounting Standards Update No. 2009-04 (“ASU 2009-04”),
Accounting for Redeemable
Equity Instruments – Amendment to Section 480-10-S99. ASU
2009-04 represents an update to Section 480-10-S99, Distinguishing Liabilities from
Equity, per Emerging Issues Task Force (“EITF”) Topic D-98, Classification and Measurement of
Redeemable Securities. ASU 2009-04 did not have a material
effect on the Company’s results of operations, financial position or
disclosures.
In August
2009, the FASB issued Accounting Standards Update No. 2009-05 (“ASU 2009-05”),
Fair Value Measurements and
Disclosures (Topic 820) – Measuring Liabilities at Fair
Value. ASU 2009-05 applies to all entities that measure
liabilities at fair value within the scope of ASC Topic 820. ASU
2009-05 provides clarification that in circumstances in which a quoted price in
an active market for the identical liability is not available, a reporting
entity is required to measure fair value using one or more of the following
techniques:
1)
|
A
valuation technique that uses:
|
a.
|
The
quoted price of the identical liability when traded as an
asset;
|
b.
|
Quoted
prices for similar liabilities or similar liabilities when traded as
assets.
|
2)
|
Another
valuation technique that is consistent with the principles of ASC Topic
820. Two examples would be an income approach, such as a
technique that is based on the amount at the measurement date that the
reporting entity would pay to transfer the identical liability or would
receive to enter into the identical
liability.
|
The
amendments in ASU 2009-5 also clarify that when estimating the fair value of a
liability, a reporting entity is not required to include a separate input or
adjustment to other inputs relating to the existence of a restriction that
prevents the transfer of the liability. It also clarifies that both a
quoted price in an active market for the identical liability at the measurement
date and the quoted price for the identical liability when traded as an asset in
an active market when no adjustments to the quoted price of the asset are
required are Level 1 fair value measurements. The guidance provided
in ASU 2009-5 is effective for the Company in the fourth quarter of
2009. Because the Company does not currently have any liabilities
that are recorded at fair value, the adoption of this guidance is not expected
to have any impact on results of operations, financial position or
disclosures.
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. Investment
Securities
The
portfolio of securities consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Government agencies
|
|
$ |
43,025 |
|
|
$ |
542 |
|
|
$ |
- |
|
|
$ |
43,567 |
|
Obligations
of state and political subdivisions
|
|
|
110,340 |
|
|
|
5,610 |
|
|
|
25 |
|
|
|
115,925 |
|
GSE
Mortgage-backed securities
|
|
|
15,679 |
|
|
|
688 |
|
|
|
1 |
|
|
|
16,366 |
|
Collateralized
mortgage obligations
|
|
|
41,875 |
|
|
|
1,050 |
|
|
|
68 |
|
|
|
42,857 |
|
Financial
institution equity security
|
|
|
250 |
|
|
|
- |
|
|
|
170 |
|
|
|
80 |
|
|
|
$ |
211,169 |
|
|
$ |
7,890 |
|
|
$ |
264 |
|
|
$ |
218,795 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Government agencies
|
|
$ |
39,163 |
|
|
$ |
584 |
|
|
$ |
- |
|
|
$ |
39,747 |
|
Obligations
of state and political subdivisions
|
|
|
116,811 |
|
|
|
2,350 |
|
|
|
548 |
|
|
|
118,613 |
|
GSE
Mortgage-backed securities
|
|
|
19,433 |
|
|
|
234 |
|
|
|
6 |
|
|
|
19,661 |
|
Collateralized
mortgage obligations
|
|
|
47,715 |
|
|
|
258 |
|
|
|
144 |
|
|
|
47,829 |
|
Financial
institution equity security
|
|
|
250 |
|
|
|
- |
|
|
|
156 |
|
|
|
94 |
|
|
|
$ |
223,372 |
|
|
$ |
3,426 |
|
|
$ |
854 |
|
|
$ |
225,944 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations
of state and political subdivisions
|
|
$ |
3,218 |
|
|
$ |
76 |
|
|
$ |
- |
|
|
$ |
3,294 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations
of state and political subdivisions
|
|
$ |
6,490 |
|
|
$ |
158 |
|
|
$ |
- |
|
|
$ |
6,648 |
|
With the
exception of one private-label collateralized mortgage obligation (“CMO”) with a
balance remaining of $176,000 at September 30, 2009, all of the Company’s CMOs
are government-sponsored enterprise securities.
The
amortized cost and fair value of debt securities at September 30, 2009 by
contractual maturity are shown below (in thousands). Except for
mortgage-backed securities, expected maturities may differ from contractual
maturities because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.
|
|
|
|
|
|
|
Available-for-sale:
|
|
|
|
|
|
|
Due
in one year or less
|
|
$ |
7,373 |
|
|
$ |
7,428 |
|
Due
after one year through five years
|
|
|
78,005 |
|
|
|
80,474 |
|
Due
after five years through ten years
|
|
|
48,754 |
|
|
|
51,540 |
|
Due
after ten years
|
|
|
19,233 |
|
|
|
20,050 |
|
Mortgage-backed
securities and collateralized mortgage obligations
|
|
|
57,554 |
|
|
|
59,223 |
|
|
|
$ |
210,919 |
|
|
$ |
218,715 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity:
|
|
|
|
|
|
|
|
|
Due
in one year or less
|
|
$ |
255 |
|
|
$ |
256 |
|
Due
after one year through five years
|
|
|
2,028 |
|
|
|
2,075 |
|
Due
after five years through ten years
|
|
|
935 |
|
|
|
963 |
|
|
|
$ |
3,218 |
|
|
$ |
3,294 |
|
|
|
|
|
|
|
|
|
|
Details
concerning investment securities with unrealized losses as of September 30, 2009
are as follows (in thousands):
|
|
Securities
with losses
under
12 months
|
|
|
Securities
with losses
over
12 months
|
|
|
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Government agencies
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Obligations
of state and political subdivisions
|
|
|
1,794 |
|
|
|
25 |
|
|
|
- |
|
|
|
- |
|
|
|
1,794 |
|
|
|
25 |
|
GSE
mortgage-backed securities
|
|
|
- |
|
|
|
- |
|
|
|
115 |
|
|
|
1 |
|
|
|
115 |
|
|
|
1 |
|
Collateralized
mortgage obligations
|
|
|
4,044 |
|
|
|
40 |
|
|
|
314 |
|
|
|
28 |
|
|
|
4,358 |
|
|
|
68 |
|
Financial
institution equity security
|
|
|
- |
|
|
|
- |
|
|
|
80 |
|
|
|
170 |
|
|
|
80 |
|
|
|
170 |
|
Add
total lines
|
|
$ |
5,838 |
|
|
$ |
65 |
|
|
$ |
509 |
|
|
$ |
199 |
|
|
$ |
6,347 |
|
|
$ |
264 |
|
Management
evaluates each quarter whether unrealized losses on securities represent
impairment that is other than temporary. For debt securities, the Company
considers its intent to sell the securities or if it is more likely than not the
Company will be required to sell the securities. If such impairment
is identified, based upon the intent to sell or the more likely than not
threshold, the carrying amount of the security is reduced to fair value with a
charge to earnings. Upon the result of the aforementioned review, management
then reviews for potential other than temporary impairment based upon other
qualitative factors. In making this evaluation, management considers
changes in market rates relative to those available when the security was
acquired, changes in market expectations about the timing of cash flows from
securities that can be prepaid, performance of the debt security, and changes in
the market’s perception of the issuer’s financial health and the security’s
credit quality. If determined that a debt security has incurred other
than temporary impairment, then the amount of the credit related impairment is
determined. If a credit loss is evident, the amount of the credit
loss is charged to earnings and the non-credit related impairment is recognized
through other comprehensive income.
The
unrealized losses on debt securities at September 30, 2009 resulted from
changing market interest rates over the yields available at the time the
underlying securities were purchased. Management identified no impairment
related to credit quality. At September 30, 2009, management had no
intent to sell the securities and determined it was more likely than not that
the Company would not have to sell the securities and no other than temporary
impairment was evident. No other than temporary impairment losses
were recognized during the nine months ended September 30, 2009.
Each
quarter management evaluates whether the unrealized losses on its equity
security represents impairment that is other than
temporary. Management assesses the likelihood of recovery in fair
value and the length of time over which a recovery would
occur. Management also considers whether there is both the ability
and intent to hold the impaired security until an anticipated recovery, in which
case the impairment would be considered temporary. The equity
security is an investment in a portfolio of common stocks of community bank
holding companies. Management believes that the financial institution
industry is in the midst of a recovery and anticipates that the equity security
will recover the fair value over a foreseeable period of
time. However, if the security does not begin to recover its fair
value as anticipated in the near future, management’s assessment may
change.
Of the
206 securities issued by state and political subdivisions, 3 contained
unrealized losses. Of the mortgage-backed securities, 3 out of 47
contained unrealized losses. Of the collateralized mortgage
obligations, 3 out of 20 contained unrealized losses. The only equity
security held by the Company at September 30, 2009 contained an unrealized
loss.
During
the nine months ended September 30, 2009 and the year ended December 31, 2008,
the Company did not sell any securities. Securities with an aggregate
carrying value of approximately $108,418,000 and $111,781,000 at September 30,
2009 and December 31, 2008, respectively, were pledged to secure public funds on
deposit and for other purposes required or permitted by law.
3. Other
Investments
The
Company is required to own stock in the Federal Reserve Bank of Atlanta
(“FRB-Atlanta”) and as a member of the Federal Home Loan Bank system, owns stock
in the Federal Home Loan Bank of Dallas (“FHLB-Dallas”). The Company
accounts for FRB-Atlanta and FHLB-Dallas stock as other investments along with
stock ownership in two correspondent banks and a Community Reinvestment Act
(“CRA”) investment in the Senior Housing Crime Prevention program in Louisiana.
The CRA investment consisted of one government-sponsored agency mortgage-backed
security purchased by the Company and held by the Senior Housing Crime
Prevention program. The majority of the interest earned on the
security provides income to the program.
For
impairment analysis, the Company reviews quarterly financial statements and
regulatory capital ratios for each of the banks in which the Company owns stock
to verify financial stability and regulatory compliance with capital
requirements. As of September 30, 2009 and December 31, 2008, based
upon quarterly reviews, management determined that there was no impairment in
the bank stocks held as other investments.
The
aggregate carrying amount of other investments consisted of the following (in
thousands):
|
|
|
September 30, 2009
|
|
|
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
FRB-Atlanta
|
|
$ |
1,022 |
|
|
$ |
1,021 |
|
|
|
FHLB-Dallas
|
|
|
562 |
|
|
|
438 |
|
|
|
Other
bank stocks
|
|
|
713 |
|
|
|
713 |
|
|
|
CRA
investment
|
|
|
2,131 |
|
|
|
2,137 |
|
|
|
|
|
$ |
4,428 |
|
|
$ |
4,309 |
|
|
4. Allowance
for Loan Losses
A summary
of the activity in the allowance for loan losses is as follows (in
thousands):
|
|
Three
Months Ended
September
30,
|
|
|
Nine
Months Ended
September
30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
beginning of period
|
|
$ |
8,039 |
|
|
$ |
6,286 |
|
|
$ |
7,586 |
|
|
$ |
5,612 |
|
Provision
for loan losses
|
|
|
1,000 |
|
|
|
500 |
|
|
|
4,100 |
|
|
|
2,555 |
|
Recoveries
|
|
|
68 |
|
|
|
39 |
|
|
|
200 |
|
|
|
125 |
|
Loans
charged-off
|
|
|
(1,092 |
) |
|
|
(555 |
) |
|
|
(3,871 |
) |
|
|
(1,873 |
) |
Reclassifications
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(149 |
) |
Balance,
end of period
|
|
$ |
8,015 |
|
|
$ |
6,270 |
|
|
$ |
8,015 |
|
|
$ |
6,270 |
|
In the
second quarter of 2008, approximately $149,000 of the allowance for loan loss
was identified as a reserve for unfunded loan commitments. The
reserve was classified as a liability in accordance with SFAS No. 5, Accounting for Contingencies,
in the same period.
The
Company’s individually evaluated impaired loans were approximately $22,679,000
at September 30, 2009 and $19,522,000 at December 31, 2008. Specific
reserves totaling $2,501,000 were established for $13,075,000 of impaired loans
reported at September 30, 2009. At December 31, 2008, specific
reserves totaling $2,272,000 were established for $12,933,000 of impaired loans
reported for the fourth quarter 2008.
5. Earnings
Per Common Share
Following
is a summary of the information used in the computation of earnings per common
share:
|
|
Three
Months Ended September 30,
|
|
|
Nine
Months Ended September 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings available to common shareholders
|
|
$ |
1,132 |
|
|
$ |
1,857 |
|
|
$ |
2,534 |
|
|
$ |
4,473 |
|
Weighted
average number of common shares outstanding used in computation of basic
earnings per common share
|
|
|
6,592 |
|
|
|
6,614 |
|
|
|
6,596 |
|
|
|
6,604 |
|
Effect
of dilutive securities:
Stock options
|
|
|
20 |
|
|
|
22 |
|
|
|
17 |
|
|
|
23 |
|
Weighted
average number of common shares outstanding plus effect of dilutive
securities – used in computation of diluted earnings per
share
|
|
|
6,612 |
|
|
|
6,636 |
|
|
|
6,613 |
|
|
|
6,627 |
|
Options
and warrants on 233,456 shares of common stock were not included in computed
diluted earnings for the quarter and nine months ended September 30, 2009
because the effect of these shares was anti-dilutive. Options on 46,365 shares
of common stock were not included in computed diluted earnings for the quarter
and nine months ended September 30, 2008 because of the effect of these shares
was anti-dilutive.
6. Declaration
of Dividends
On July
16, 2009 the Company declared a $0.07 per share quarterly dividend for holders
of common stock of record on September 16, 2009, payable October 1,
2009. A fourth quarter dividend of $0.07 per share for holders of
common stock of record on December 16, 2009 was declared on October 28, 2009 and
is payable January 4, 2010.
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 the $0.32 declared in 2008 without the Treasury’s consent,
unless the Treasury has transferred all the Series A Preferred Stock to third
parties.
7. 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 began disclosure for its nonfinancial
assets and liabilities that are recorded 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):
|
|
Assets
/ Liabilities Measured at Fair
Value
|
|
|
Fair
Value Measurements at
September
30, 2009 using:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Government agencies
|
|
$ |
43,567 |
|
|
$ |
- |
|
|
$ |
43,567 |
|
|
$ |
- |
|
Obligations
of state and political subdivisions
|
|
|
115,925 |
|
|
|
- |
|
|
|
115,925 |
|
|
|
- |
|
GSE
Mortgage-backed securities
|
|
|
16,366 |
|
|
|
- |
|
|
|
16,366 |
|
|
|
- |
|
Collateralized
mortgage obligations
|
|
|
42,857 |
|
|
|
- |
|
|
|
42,857 |
|
|
|
- |
|
Financial
institution equity security
|
|
|
80 |
|
|
|
80 |
|
|
|
- |
|
|
|
- |
|
Certain
assets and liabilities are measured at fair value on a nonrecurring basis and
are included in the table below. Impaired loans are level 2 assets at
fair value less costs to sell measured using appraisals of the collateral from
external parties. Other real estate owned are also level 2 assets at
fair value less costs to sell measured using appraisals from external
parties.
|
|
Assets
/ Liabilities Measured at Fair
Value
|
|
|
Fair
Value Measurements at
September
30, 2009 using:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired
loans
|
|
$ |
10,574 |
|
|
$ |
- |
|
|
$ |
10,574 |
|
|
$ |
- |
|
Other
real estate owned
|
|
|
758 |
|
|
|
- |
|
|
|
758 |
|
|
|
- |
|
8. Disclosures
About Fair Value of Financial
Instruments
|
The
Company is required to disclose the fair value of financial instruments, whether
or not recognized in the balance sheet, for which it is practicable to estimate
that value. In cases where quoted market prices are not available,
fair values are based on estimates using present value or other valuation
techniques.
The
following methods and assumptions were used to estimate the fair value of each
class of financial instruments for which it is practicable to estimate that
value:
Cash and
Cash Equivalents—For cash on hand, amounts due from banks, federal funds sold,
and interest-bearing deposits with original maturities less than 90 days the
carrying amount is a reasonable estimate of fair value.
Time
Deposits in Other Banks – Fair values for fixed-rate time deposits are estimated
using a discounted cash flow analysis that applies interest rates currently
being offered on time deposits of similar terms of maturity.
Investment
Securities— Refer to Note 6 - Fair Value Measurements for disclosure of these
fair value measurements.
Other
Investments— Other investments include Federal Reserve Bank and Federal Home
Loan Bank stock and other correspondent bank stocks which have no readily
determined market value and are carried at cost.
Loans,
net—For variable-rate loans that reprice frequently and with no significant
change in credit risk, fair values are based on carrying values. The
fair values for all other loans and leases are estimated based upon a discounted
cash flow analysis, using interest rates currently being offered for loans and
leases with similar terms to borrowers of similar credit quality. For
impaired loans refer to Note 6 - Fair Value Measurements.
Cash
Surrender Value of Life Insurance —Fair value for life insurance cash surrender
value is based on cash surrender values indicated by the insurance
companies.
Deposits—The
fair value of demand deposits, savings accounts, and certain money market
deposits is the amount payable on demand at the reporting date. Fair
values for fixed-rate time deposits are estimated using a discounted cash flow
analysis that applies interest rates currently being offered on deposits of
similar terms of maturity.
Borrowings—The
fair value approximates the carrying value of repurchase agreements, federal
funds purchased, Federal Home Loan Bank advances, and Federal Reserve Discount
Window borrowings due to their short-term nature.
Junior
Subordinated Debentures—For junior subordinated debentures that bear interest on
a floating basis, the carrying amount approximates fair value. For
junior subordinated debentures that bear interest on a fixed rate basis, the
fair value is estimated using a discounted cash flow analysis that applies
interest rates currently being offered on similar types of
borrowings.
Commitments
to Extend Credit, Commercial Letters of Credit—Off-balance sheet instruments
(commitments to extend credit and commercial letters of credit) are generally
short-term and at variable interest rates. Therefore, both the
carrying value and estimated fair value associated with these instruments are
immaterial.
Limitations—Fair
value estimates are made at a specific point in time, based on relevant market
information and information about the financial instrument. These
estimates do not reflect any premium or discount that could result from offering
for sale at one time the Company’s entire holdings of a particular financial
instrument. Because no market exists for a significant portion of the
Company’s financial instruments, fair value estimates are based on many
judgments. These estimates are subjective in nature and involve
uncertainties and matters of significant judgment and therefore cannot be
determined with precision. Changes in assumptions could significantly
affect the estimates.
Fair
value estimates are based on existing on and off-balance sheet financial
instruments without attempting to estimate the value of anticipated future
business and the value of assets and liabilities that are not considered
financial instruments. Significant assets and liabilities that are
not considered financial instruments include deferred income taxes and premises
and equipment. In addition, the tax ramifications related to the
realization of the unrealized gains and losses can have a significant effect on
fair value estimates and have not been considered in the estimates.
The
estimated fair values of the Company’s financial instruments are as follows at
September 30, 2009 and December 31, 2008 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
62,585 |
|
|
$ |
62,585 |
|
|
$ |
24,786 |
|
|
$ |
24,786 |
|
Time
deposits held in banks
|
|
|
16,023 |
|
|
|
16,089 |
|
|
|
9,023 |
|
|
|
9,023 |
|
Securities
available-for-sale
|
|
|
218,795 |
|
|
|
218,795 |
|
|
|
225,944 |
|
|
|
225,944 |
|
Securities
held-to-maturity
|
|
|
3,218 |
|
|
|
3,294 |
|
|
|
6,490 |
|
|
|
6,648 |
|
Loans,
net
|
|
|
580,574 |
|
|
|
588,892 |
|
|
|
601,369 |
|
|
|
604,829 |
|
Other
investments
|
|
|
4,428 |
|
|
|
4,428 |
|
|
|
4,309 |
|
|
|
4,309 |
|
Cash
surrender value of life insurance policies
|
|
|
4,502 |
|
|
|
4,502 |
|
|
|
4,378 |
|
|
|
4,378 |
|
Financial
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing
deposits
|
|
|
181,115 |
|
|
|
181,115 |
|
|
|
199,899 |
|
|
|
199,899 |
|
Interest-bearing
deposits
|
|
|
590,976 |
|
|
|
592,163 |
|
|
|
566,805 |
|
|
|
568,306 |
|
Repurchase
agreements
|
|
|
55,366 |
|
|
|
55,366 |
|
|
|
24,976 |
|
|
|
24,976 |
|
Federal
funds purchased
|
|
|
- |
|
|
|
- |
|
|
|
14,900 |
|
|
|
14,900 |
|
FRB
Discount Window
|
|
|
- |
|
|
|
- |
|
|
|
36,000 |
|
|
|
36,000 |
|
Junior
subordinated debentures
|
|
|
15,465 |
|
|
|
16,133 |
|
|
|
15,465 |
|
|
|
15,395 |
|
Management
evaluates events and transactions that may occur subsequent to the balance sheet
date for potential recognition or disclosure in the financial
statements. The Company has evaluated subsequent events through
November 9, 2009, the date the financial statements were issued, and no events
or changes in circumstances were identified that would have an adverse impact on
the financial statements.
Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operation.
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 of the Financial Condition and Result
of Operation in the Company’s Annual Report on Form 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 intends to protect a company from unwarranted
litigation if actual results differ from management
expectations. This Management’s Discussion and Analysis of the
Financial Condition and Result of Operation 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, those described in our Form 10-K for the year ended
December 31, 2008 under Item 1A-Risk Factors and the following:
|
·
|
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.
|
The
Company can give no assurance that any of the events anticipated by the
forward-looking statements will occur or, if any of them does, what impact they
will have on the Company’s results of operations and financial condition. The
Company disclaims any intent or obligation to publicly update or revise any
forward-looking statements, regardless of whether new information becomes
available, future developments occur or otherwise.
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 our 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. 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. The Company
annually evaluates its goodwill for impairment as of December 31st of
each year or more often if circumstances indicate an impairment may have
occurred. 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, which was deemed a triggering event for interim
analysis. 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. During the second and third quarters of 2009, the Company’s
goodwill was not evaluated for impairment due to no triggering events having
occurred during these quarters.
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 $19,339 for the grant-date fair value of stock options vested in the nine
months ended September 30, 2009. The Company did not grant any new
stock options in the first nine months 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
The
Company reported net income available to common shareholders of $1,132,000 for
the third quarter ended September 30, 2009, a decrease of 39.0% below net income
available to common shareholders of $1,857,000 reported for the third quarter of
2008. Diluted earnings per common share for the third quarter of 2009
were $0.17 per share, a decrease of 39.3% from the $0.28 per common share for
the third quarter of 2008. Beginning the first quarter of 2009, the
Company recorded dividends on its Fixed Rate Cumulative Perpetual Preferred
Stock, Series A (“Series A Preferred Stock”) issued to the U. S. Department of
the Treasury on January 9, 2009 under the Capital Purchase
Plan. Dividends recorded on the Series A Preferred Stock reduced net
income available to common shareholders by $299,000 for the third and second
quarters of 2009 and $277,000 for the first quarter of 2009.
For the
nine months ended September 30, 2009, net income available to common
shareholders totaled $2,534,000, a 43.3% decrease from net income available to
common shareholders of $4,473,000 for the first nine months of
2008. Dividends recorded on the Series A Preferred Stock reduced net
income available to common shareholders by $875,000 for the nine months ended
September 30, 2009. Diluted earnings per common share were $0.38 for
the first nine months of 2009, compared to $0.67 for the first nine months of
2008.
In
prior-year quarterly comparison, third quarter 2009 net earnings before
dividends on Series A Preferred Stock totaled $1,431,000, a decrease of $426,000
below the $1,857,000 earned in the third quarter of 2008. Third
quarter 2009 earnings were impacted by a $1.0 million provision for loan losses
compared to $500,000 in the third quarter of 2008. Quarterly revenues
for the Company, defined as net interest income and non-interest income,
decreased $133,000 primarily due to margin compression as earning asset yields
continued to decline. Non-interest expenses increased $91,000, as
increased salaries and benefit costs and FDIC premiums were partially offset by
decreases in other non-interest expense categories. Third quarter
2009 earnings were positively impacted by a $298,000 reduction in tax expense
due to the effect of lower pre-tax profits combined with sustained tax exempt
income levels and certain federal tax credits.
In
year-to-date comparison, net earnings before dividends on Series A Preferred
Stock decreased $1,064,000 primarily due to a $1,545,000 increase in provisions
for loan losses and a $1,101,000 increase in non-interest expense in
2009. The increases in provisions for loan losses and non-interest
expense were partially offset by an $811,000 improvement in net interest income
and a $784,000 reduction in income tax expense. Included in the
$1,101,000 increase in non-interest expense is a $1,017,000 increase in FDIC
premiums, a $485,000 increase in salaries and benefits costs, and a $635,000
increase in occupancy expense. Significant decreases in other
non-interest expense categories, including a decrease of $737,000 in
marketing costs and $223,000 in data processing expenses, reduced the impact of
the increased FDIC premiums in year-
to-date
comparison. Income tax expense decreased $784,000 due to the effect
of certain federal tax credits combined with lower pre-tax profits and sustained
tax exempt income levels.
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.
Net
interest income totaled $9,932,000 for the third quarter of 2009, a decrease of
1.2%, or $124,000, from the $10,056,000 reported for the third quarter of
2008. The decrease in net interest income resulted primarily from a
decrease of $1.1 million in interest income which exceeded a decrease of $1.0
million in interest expense. The impact to interest income of a $21.4
million increase in the average volume of loans, from $572.7 million at
September 30, 2008 to $594.1 million at September 30, 2009, was offset by a 75
basis point reduction in the average yield on loans in quarterly
comparison. The average yields on loans declined from 7.71% in the
third quarter of 2008 to 6.96% in the third quarter of 2009 as New York Prime
Rate (“Prime”) fell 175 basis points, from 5.00% to 3.25% during the same
period. A decrease in the volume of investment securities combined
with decreases in yields on investment securities, federal funds sold and time
deposits in other banks further reduced interest income in the third quarter of
2009 compared to 2008.
The
decrease in interest expense in quarterly comparison resulted from a 63 basis
point decrease in the average rate paid on interest-bearing liabilities, from
2.19% at September 30, 2008 to 1.56% at September 30, 2009. The
average volume of interest-bearing deposits remained relatively flat, while the
average volume of retail repurchase agreements, included in securities sold
under agreements to repurchase, increased $11.6 million in quarterly
comparison. The impact of decreased yields on average earning assets
exceeded the decrease in yields on average interest-bearing liabilities and
resulted in a 19 basis point decline in the taxable-equivalent net interest
margin, from 5.01% for the third quarter of 2008 to 4.82% for the third quarter
of 2009.
In
year-to-date comparison, net interest income increased $811,000 as interest
expense decreased $4,797,000, offsetting a $3,986,000 decline in interest
income. Interest expense decreased primarily due to a 93 basis point
reduction in the average rate paid on interest-bearing liabilities, from 2.56%
at September 30, 2008 to 1.63% at September 30, 2009. Additionally,
the average volume of interest-bearing liabilities decreased $18.1 million in
year-to-date comparison. The decrease in interest income on average
earning assets resulted primarily from a 109 basis point decline in the average
yield earned on loans, from 8.06% at September 30, 2008 to 6.97% at September
30, 2009. An average volume increase of $28.4 million in loans
partially offset the impact of lower yields. As a result, the
taxable-equivalent net interest margin improved 7 basis points, from 4.89% for
the nine months ended September 30, 2008 to 4.96% for the nine months ended
September 30, 2009.
The
average rate paid on the Company’s junior subordinated debentures decreased 121
basis points from third quarter of 2008 to third quarter of 2009 on the $8.2
million of outstanding debentures. The debentures carry a floating
rate equal to the 3-month LIBOR plus 2.50%, adjustable and payable
quarterly. The rate at September 30, 2009 was 2.79%. The
debentures mature on September 20, 2034 oyt may be repaid sooner under certain
circumstances. The Company also has outstanding $7.2 million of
junior subordinated debentures due 2031 that carry a fixed interest rate of
10.20% .
Table
1
|
|
Consolidated
Average Balances, Interest and Rates
(in
thousands)
|
|
|
|
Three
Months Ended September 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
securities1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable
|
|
$ |
99,178 |
|
|
$ |
898 |
|
|
|
3.62 |
% |
|
$ |
108,346 |
|
|
$ |
1,182 |
|
|
|
4.36 |
% |
Tax
exempt2
|
|
|
112,670 |
|
|
|
1,511 |
|
|
|
5.36 |
% |
|
|
115,660 |
|
|
|
1,551 |
|
|
|
5.36 |
% |
Other
investments
|
|
|
7,562 |
|
|
|
40 |
|
|
|
2.12 |
% |
|
|
5,607 |
|
|
|
45 |
|
|
|
3.21 |
% |
Total
investments
|
|
|
219,410 |
|
|
|
2,449 |
|
|
|
4.46 |
% |
|
|
229,613 |
|
|
|
2,778 |
|
|
|
4.84 |
% |
Time
deposits in other banks
|
|
|
16,458 |
|
|
|
56 |
|
|
|
1.35 |
% |
|
|
21,640 |
|
|
|
162 |
|
|
|
2.98 |
% |
Federal
funds
|
|
|
24,587 |
|
|
|
10 |
|
|
|
0.16 |
% |
|
|
9,882 |
|
|
|
49 |
|
|
|
1.94 |
% |
Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
and real estate
|
|
|
483,993 |
|
|
|
8,070 |
|
|
|
6.62 |
% |
|
|
457,841 |
|
|
|
8,557 |
|
|
|
7.44 |
% |
Installment
|
|
|
110,057 |
|
|
|
2,356 |
|
|
|
8.49 |
% |
|
|
114,834 |
|
|
|
2,544 |
|
|
|
8.81 |
% |
Total
loans3
|
|
|
594,050 |
|
|
|
10,426 |
|
|
|
6.96 |
% |
|
|
572,675 |
|
|
|
11,101 |
|
|
|
7.71 |
% |
Total
earning assets
|
|
|
854,505 |
|
|
|
12,941 |
|
|
|
6.01 |
% |
|
|
833,810 |
|
|
|
14,090 |
|
|
|
6.72 |
% |
Allowance
for loan losses
|
|
|
(7,867 |
) |
|
|
|
|
|
|
|
|
|
|
(6,220 |
) |
|
|
|
|
|
|
|
|
Nonearning
assets
|
|
|
87,881 |
|
|
|
|
|
|
|
|
|
|
|
89,038 |
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$ |
934,519 |
|
|
|
|
|
|
|
|
|
|
$ |
916,628 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and stockholders’ equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW,
money market, and savings
|
|
$ |
444,378 |
|
|
$ |
1,216 |
|
|
|
1.09 |
% |
|
$ |
445,431 |
|
|
$ |
1,580 |
|
|
|
1.41 |
% |
Time
deposits
|
|
|
140,555 |
|
|
|
798 |
|
|
|
2.25 |
% |
|
|
141,622 |
|
|
|
1,436 |
|
|
|
4.03 |
% |
Total
interest bearing deposits
|
|
|
584,933 |
|
|
|
2,014 |
|
|
|
1.37 |
% |
|
|
587,053 |
|
|
|
3,016 |
|
|
|
2.04 |
% |
Securities
sold under repurchase agreements
|
|
|
50,359 |
|
|
|
303 |
|
|
|
2.39 |
% |
|
|
38,712 |
|
|
|
210 |
|
|
|
2.15 |
% |
Federal
funds purchased
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
5,738 |
|
|
|
40 |
|
|
|
2.73 |
% |
Other
borrowings
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,758 |
|
|
|
16 |
|
|
|
2.31 |
% |
Junior
subordinated debentures
|
|
|
15,465 |
|
|
|
249 |
|
|
|
6.30 |
% |
|
|
15,465 |
|
|
|
297 |
|
|
|
7.51 |
% |
Total
interest bearing liabilities
|
|
|
650,757 |
|
|
|
2,566 |
|
|
|
1.56 |
% |
|
|
649,726 |
|
|
|
3,579 |
|
|
|
2.19 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand
deposits
|
|
|
180,843 |
|
|
|
|
|
|
|
|
|
|
|
189,904 |
|
|
|
|
|
|
|
|
|
Other
liabilities
|
|
|
6,181 |
|
|
|
|
|
|
|
|
|
|
|
5,231 |
|
|
|
|
|
|
|
|
|
Stockholders’
equity
|
|
|
96,738 |
|
|
|
|
|
|
|
|
|
|
|
71,767 |
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity
|
|
$ |
934,519 |
|
|
|
|
|
|
|
|
|
|
$ |
916,628 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income and net interest spread
|
|
|
|
|
|
$ |
10,375 |
|
|
|
4.45 |
% |
|
|
|
|
|
$ |
10,511 |
|
|
|
4.53 |
% |
Net
yield on interest earning assets
|
|
|
|
|
|
|
|
|
|
|
4.82 |
% |
|
|
|
|
|
|
|
|
|
|
5.01 |
% |
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 $443,000 for 2009
and $455,000 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
$792,000 for 2009 and $961,000 for 2008. Nonaccrual loans are
included in average balances and income on such loans is recognized on a cash
basis.
Table
2
|
|
Consolidated
Average Balances, Interest and Rates
(in
thousands)
|
|
|
|
Nine
Months Ended September 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
securities4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable
|
|
$ |
97,979 |
|
|
$ |
3,046 |
|
|
|
4.15 |
% |
|
$ |
94,162 |
|
|
$ |
3,182 |
|
|
|
4.51 |
% |
Tax
exempt5
|
|
|
116,116 |
|
|
|
4,678 |
|
|
|
5.37 |
% |
|
|
110,480 |
|
|
|
4,482 |
|
|
|
5.41 |
% |
Other
investments
|
|
|
5,539 |
|
|
|
102 |
|
|
|
2.46 |
% |
|
|
6,320 |
|
|
|
138 |
|
|
|
2.91. |
% |
Total
investments
|
|
|
219,634 |
|
|
|
7,826 |
|
|
|
4.75 |
% |
|
|
210,962 |
|
|
|
7,802 |
|
|
|
4.93 |
% |
Time
deposits in other banks
|
|
|
11,895 |
|
|
|
187 |
|
|
|
2.10 |
% |
|
|
15,297 |
|
|
|
322 |
|
|
|
2.81 |
% |
Federal
funds
|
|
|
17,418 |
|
|
|
29 |
|
|
|
0.22 |
% |
|
|
37,709 |
|
|
|
657 |
|
|
|
2.29 |
% |
Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
and real estate
|
|
|
486,154 |
|
|
|
24,044 |
|
|
|
6.61 |
% |
|
|
455,165 |
|
|
|
26,729 |
|
|
|
7.84 |
% |
Installment
|
|
|
110,749 |
|
|
|
7,075 |
|
|
|
8.54 |
% |
|
|
113,345 |
|
|
|
7,581 |
|
|
|
8.93 |
% |
Total
loans6
|
|
|
596,903 |
|
|
|
31,119 |
|
|
|
6.97 |
% |
|
|
568,510 |
|
|
|
34,310 |
|
|
|
8.06 |
% |
Total
earning assets
|
|
|
845,850 |
|
|
|
39,161 |
|
|
|
6.19 |
% |
|
|
832,478 |
|
|
|
43,091 |
|
|
|
6.91 |
% |
Allowance
for loan losses
|
|
|
(7,627 |
) |
|
|
|
|
|
|
|
|
|
|
(5,841 |
) |
|
|
|
|
|
|
|
|
Nonearning
assets
|
|
|
89,599 |
|
|
|
|
|
|
|
|
|
|
|
89,723 |
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$ |
927,822 |
|
|
|
|
|
|
|
|
|
|
$ |
916,360 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and stockholders’ equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW,
money market, and savings
|
|
$ |
434,076 |
|
|
$ |
3,483 |
|
|
|
1.07 |
% |
|
$ |
462,974 |
|
|
$ |
6,535 |
|
|
|
1.89 |
% |
Time
deposits
|
|
|
141,342 |
|
|
|
2,745 |
|
|
|
2.60 |
% |
|
|
142,178 |
|
|
|
4,489 |
|
|
|
4.22 |
% |
Total
interest bearing deposits
|
|
|
575,418 |
|
|
|
6,228 |
|
|
|
1.45 |
% |
|
|
605,152 |
|
|
|
11,024 |
|
|
|
2.43 |
% |
Securities
sold under repurchase agreements
|
|
|
41,085 |
|
|
|
775 |
|
|
|
2.52 |
% |
|
|
32,896 |
|
|
|
587 |
|
|
|
2.38 |
% |
Federal
funds purchased
|
|
|
770 |
|
|
|
5 |
|
|
|
0.86 |
% |
|
|
1,941 |
|
|
|
41 |
|
|
|
2.78 |
% |
Other
borrowings
|
|
|
6,183 |
|
|
|
23 |
|
|
|
0.50 |
% |
|
|
1,528 |
|
|
|
34 |
|
|
|
2.97. |
% |
Junior
subordinated debentures
|
|
|
15,465 |
|
|
|
777 |
|
|
|
6.63 |
% |
|
|
15,465 |
|
|
|
919 |
|
|
|
7.81 |
% |
Total
interest bearing liabilities
|
|
|
638,921 |
|
|
|
7,808 |
|
|
|
1.63 |
% |
|
|
656,982 |
|
|
|
12,605 |
|
|
|
2.56 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand
deposits
|
|
|
187,710 |
|
|
|
|
|
|
|
|
|
|
|
182,546 |
|
|
|
|
|
|
|
|
|
Other
liabilities
|
|
|
5,574 |
|
|
|
|
|
|
|
|
|
|
|
5,304 |
|
|
|
|
|
|
|
|
|
Stockholders’
equity
|
|
|
95,617 |
|
|
|
|
|
|
|
|
|
|
|
71,528 |
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity
|
|
$ |
927,822 |
|
|
|
|
|
|
|
|
|
|
$ |
916,360 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income and net interest spread
|
|
|
|
|
|
$ |
31,353 |
|
|
|
4.56 |
% |
|
|
|
|
|
$ |
30,486 |
|
|
|
4.35 |
% |
Net
yield on interest earning assets
|
|
|
|
|
|
|
|
|
|
|
4.96 |
% |
|
|
|
|
|
|
|
|
|
|
4.89 |
% |
4 Securities classified as
available-for-sale are included in average balances. Interest income
figures reflect interest earned on such securities.
5 Interest income of $1,372,000 for 2009
and $1,317,000 for 2008 is added to interest earned on tax-exempt obligations to
reflect tax equivalent yields using a 34% tax rate.
6 Interest income includes loan fees of
$2,334,000 for 2009 and $2,865,000 for 2008. Nonaccrual loans are
included in average balances and income on such loans is recognized on a cash
basis.
|
|
Table
3
Changes
in Taxable-Equivalent Net Interest Income
(in
thousands)
|
|
|
|
Three
Months Ended
September
30, 2009 compared to September 30,
2008
|
|
|
|
Total
Increase
|
|
|
Change
Attributable
To
|
|
|
|
|
|
|
|
|
|
|
|
Taxable-equivalent
earned on:
|
|
|
|
|
|
|
|
|
|
Investment
securities
|
|
|
|
|
|
|
|
|
|
Taxable
|
|
$ |
(284 |
) |
|
$ |
(94 |
) |
|
$ |
(190 |
) |
Tax
exempt
|
|
|
(40 |
) |
|
|
(40 |
) |
|
|
- |
|
Other
investments
|
|
|
(5 |
) |
|
|
13 |
|
|
|
(18 |
) |
Federal
funds sold
|
|
|
(39 |
) |
|
|
31 |
|
|
|
(70 |
) |
Time
deposits in other banks
|
|
|
(106 |
) |
|
|
(32 |
) |
|
|
(74 |
) |
Loans,
including fees
|
|
|
(675 |
) |
|
|
404 |
|
|
|
(1,079 |
) |
Total
|
|
|
(1,149 |
) |
|
|
282 |
|
|
|
(1,431 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
paid on:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
bearing deposits
|
|
|
(1,002 |
) |
|
|
(11 |
) |
|
|
(991 |
) |
Securities
sold under repurchase agreements
|
|
|
93 |
|
|
|
68 |
|
|
|
25 |
|
Federal
funds purchased
|
|
|
(40 |
) |
|
|
(40 |
) |
|
|
- |
|
Other
borrowings
|
|
|
(16 |
) |
|
|
(16 |
) |
|
|
- |
|
Junior
subordinated debentures
|
|
|
(48 |
) |
|
|
- |
|
|
|
(48 |
) |
Total
|
|
|
(1,013 |
) |
|
|
1 |
|
|
|
(1,014 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable-equivalent
net interest income
|
|
$ |
(136 |
) |
|
$ |
281 |
|
|
$ |
(417 |
) |
|
|
|
|
Table
4
Changes
in Taxable-Equivalent Net Interest Income
(in
thousands)
|
|
|
|
Nine
Months Ended
September
30, 2009 compared to September 30, 2008
|
|
|
|
Total
Increase
|
|
|
Change
Attributable
To
|
|
|
|
|
|
|
|
|
|
|
|
Taxable-equivalent
earned on:
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable
|
|
$ |
(136 |
) |
|
$ |
126 |
|
|
$ |
(262 |
) |
Tax
exempt
|
|
|
196 |
|
|
|
227 |
|
|
|
(31 |
) |
Other
investments
|
|
|
(36 |
) |
|
|
(16 |
) |
|
|
(20 |
) |
Federal
funds sold
|
|
|
(628 |
) |
|
|
(234 |
) |
|
|
(394 |
) |
Time
deposits in other banks
|
|
|
(135 |
) |
|
|
(63 |
) |
|
|
(72 |
) |
Loans,
including fees
|
|
|
(3,191 |
) |
|
|
1,649 |
|
|
|
(4,840 |
) |
Total
|
|
|
(3,930 |
) |
|
|
1,689 |
|
|
|
(5,619 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
paid on:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
bearing deposits
|
|
|
(4,796 |
) |
|
|
(517 |
) |
|
|
(4,279 |
) |
Securities
sold under repurchase agreements
|
|
|
188 |
|
|
|
152 |
|
|
|
36 |
|
Federal
funds purchased
|
|
|
(36 |
) |
|
|
(17 |
) |
|
|
(19 |
) |
Other
borrowings
|
|
|
(11 |
) |
|
|
35 |
|
|
|
(46 |
) |
Junior
subordinated debentures
|
|
|
(142 |
) |
|
|
- |
|
|
|
(142 |
) |
Total
|
|
|
(4,797 |
) |
|
|
(347 |
) |
|
|
(4,450 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable-equivalent
net interest income
|
|
$ |
867 |
|
|
$ |
2,036 |
|
|
$ |
(1,169 |
) |
Note: In
Tables 3 and 4, 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 third quarter of 2009 totaled $3,972,000, or 0.2% below the
$3,981,000 earned in the third quarter of 2008 and 3.0% above the $3,858,000
earned in the second quarter of 2009. In prior-year quarterly
comparison, a $43,000 increase in ATM and debit card fee income offset a $25,000
decrease in service charges on deposit accounts, including NSF fee income, and
decreases in other non-interest income categories.
In
year-to-date comparison, non-interest income decreased $13,000, from $11,373,000
at September 30, 2008 to $11,360,000 at September 30, 2009. A
$348,000 increase in ATM and debit card fee income was offset by decreases in
other non-interest income categories, primarily income from a third-party
investment advisory firm ($106,000), mortgage processing fees ($52,000), and a
one-time payment received from VISA during the first quarter of 2008
($131,000). 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. Income from service charges on deposit accounts remained
flat in year-to-date comparison.
Non-interest
Expenses
Non-interest
expense increased $91,000 in prior-year quarterly comparison, primarily due to
increases of $155,000 in FDIC premiums, $110,000 in salaries and benefits costs,
$57,000 in provisions for unfunded loan commitments, and $56,000 in expenses on
other real estate owned and other assets
repossessed. Additionally, Visa credit card and merchant
program expense increased $35,000, recruiting expense increased $38,000, and
credit reporting expense increased $22,000. Increased non-interest
expenses were partially offset by a $378,000 decrease in marketing
costs.
In
year-to-date comparison, non-interest expense increased $1.1 million, as
increases of $1,017,000 in FDIC premiums (including a special assessment),
$635,000 in occupancy expense and $485,000 in salary and benefit costs exceeded
expense reductions in other categories. Expense reductions were
recorded primarily in marketing costs ($737,000), data processing expenses
($223,000) and in education, travel and corporate development expenses
($198,000). The decrease recorded in year-to-date comparison of data
processing expenses resulted from conversion costs associated with the merger of
our Texas bank charter into our Louisiana MidSouth Bank, N.A. charter in March
of 2008.
Analysis
of Statement of Condition
The
Company’s total assets ended the third quarter of 2009 at $947.8 million, a 1.2%
increase over the $936.8 million in total assets recorded at December 31,
2008. Deposits increased $5.4 million, totaling $772.1 million as of
September 30, 2009, compared to $766.7 million on December 31,
2008. Total loans were $588.6 million, a decrease of $20.4 million,
or 3.3%, over the $609.0 million reported as of December 31,
2008. Loans decreased as commercial customers used cash flows to pay
down debt and continued economic concerns stemmed loan production in both
commercial and retail credits.
In the
deposit portfolio, interest-bearing deposits increased $24.2 million in the
first nine months of 2009, as non-interest-bearing deposits decreased $18.8
million. The increase in interest-bearing deposits resulted from a
$34.5 million increase in money market and NOW accounts, offset by a $10.3
million decrease in certificates of deposit (“CD’s”). The decrease in
the CD portfolio occurred as higher yielding promotional CD’s were offered
lowered rates at renewal. Retail repurchase agreements, included in
securities sold under agreements to repurchase, increased $30.4 million, as a
few of the Company’s commercial deposit relationships with higher account
balances were attracted by the competitive rate offered on the product and the
additional collateral to secure their deposits.
Securities
available-for-sale totaled $218.8 million at September 30, 2009, down $7.1
million from $225.9 million at December 31, 2008. The portfolio of securities
held-to-maturity decreased $3.3 million, from $6.5 million at December 31, 2008
to $3.2 million at September 30, 2009. Both portfolios were affected
by maturities and calls during the first nine months of
2009. The securities available-for-sale portfolio was positively
impacted by a $5.1 million improvement in the unrealized gain in market value,
from an unrealized gain of $2.7 million at December 31, 2008 to an unrealized
gain of $7.8 million at September 30, 2009.
The
composition of the Company’s loan portfolio is reflected in Table 5
below.
Table
5
Composition
of Loans
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial,
financial, and agricultural
|
|
$ |
196,436 |
|
|
$ |
210,058 |
|
Lease
financing receivable
|
|
|
7,112 |
|
|
|
8,058 |
|
Real
estate – mortgage
|
|
|
264,242 |
|
|
|
234,588 |
|
Real
estate – construction
|
|
|
37,403 |
|
|
|
65,327 |
|
Installment
loans to individuals
|
|
|
82,138 |
|
|
|
89,901 |
|
Other
|
|
|
1,258 |
|
|
|
1,023 |
|
Total loans
|
|
$ |
588,589 |
|
|
$ |
608,955 |
|
Within
the $264.2 million real estate mortgage portfolio at September 30, 2009, $176.8
million represented loans secured primarily by commercial real estate, 69.9% of
which was owner-occupied. Real estate mortgage loans secured by 1-4
family residential properties totaled $71.0 million, 79.0% of which represented
loans secured by first liens. Within the $37.4 million real estate construction
portfolio, 80.9% represented commercial construction and land development and
19.1% 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 September 30, 2009.
Off-Balance
Sheet Arrangements
In the
normal course of operations, the Company engages in a variety of financial
transactions that, in accordance with U.S. generally accepted accounting
principles, are not recorded in the financial statements. These
transactions involve, to varying degrees, elements of credit, interest rate, and
liquidity risk. Such transactions are used primarily to manage
customers’ requests for funding and take the form of loan commitments, letters
of credit and lines of credit.
For the
period ended September 30, 2009, we did not engage in any off-balance sheet
transactions reasonably likely to have a material impact on our financial
condition, results of operations or cash flows.
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 Federal Home Loan Bank of Dallas, Texas
(“FHLB–Dallas”). As of September 30, 2009, the Company had no
borrowings with the FRB or the FHLB-Dallas. The Company has $21.8
million in borrowing capacity at the FRB Discount Window and has the ability to
post additional collateral of approximately $97.5 million if necessary to meet
liquidity needs. Additionally, the Company transferred $25.1 million
in loan collateral from the FHLB-Dallas for pledging under a Borrower-in-Custody
(“BIC”) line with the FRB. Under existing agreements with the
FHLB-Dallas, the Company’s borrowing capacity totaled $131.8 million at
September 30, 2009. An additional unsecured borrowing line totaling
$26.1 million is available to the Company through a primary correspondent
bank. The unsecured line has been renewed and increased 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.
Currently,
dividends from the Bank primarily provide liquidity for the parent
company. Dividends from the Bank totaled $1,750,000 for the nine
months ended September 30, 2009 and $4,000,000 for the year ended December 31,
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. Additionally, dividends to the parent company cannot
exceed a total of the Bank’s current year and prior two years’ earnings, net of
dividends paid the parent company in those years. In addition, the
Company believes that it has access to the capital markets to support its
capital requirement 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 September 30, 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 September 30,
2009, the Company’s leverage ratio was 10.62%, Tier 1 capital to risk-weighted
assets was 14.65% and total capital to risk-weighted assets was
15.87%. The Bank had a leverage capital ratio of 10.12% at September
30, 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 6
summarizes the Company's nonperforming assets for the quarters ending September
30, 2009 and 2008, and December 31, 2008.
Table
6
Nonperforming
Assets and Loans Past Due 90 Days or More and Still Accruing
(in
thousands)
|
|
|
|
September
30,
|
|
|
December
31,
|
|
|
September
30,
|
|
Nonaccrual
loans
|
|
$ |
15,520 |
|
|
$ |
9,355 |
|
|
$ |
8,112 |
|
Loans
past due 90 days and over and still accruing
|
|
|
1,600 |
|
|
|
1,005 |
|
|
|
1,189 |
|
Total
nonperforming loans
|
|
|
17,120 |
|
|
|
10,360 |
|
|
|
9,301 |
|
Other
real estate owned
|
|
|
758 |
|
|
|
329 |
|
|
|
643 |
|
Other
foreclosed assets
|
|
|
89 |
|
|
|
306 |
|
|
|
453 |
|
Total nonperforming
assets
|
|
$ |
17,967 |
|
|
$ |
10,995 |
|
|
$ |
10,397 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming
assets to total assets
|
|
|
1.90 |
% |
|
|
1.17 |
% |
|
|
1.13 |
% |
Nonperforming
assets to total loans + OREO + other foreclosed assets
|
|
|
3.05 |
% |
|
|
1.80 |
% |
|
|
1.79 |
% |
ALL
to nonperforming loans
|
|
|
46.82 |
% |
|
|
73.22 |
% |
|
|
67.41 |
% |
ALL
to total loans
|
|
|
1.36 |
% |
|
|
1.25 |
% |
|
|
1.08 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
YTD
charge-offs
|
|
$ |
3,871 |
|
|
$ |
2,624 |
|
|
$ |
1,873 |
|
YTD
recoveries
|
|
|
(200 |
) |
|
|
(192 |
) |
|
|
(125 |
) |
YTD
net charge-offs
|
|
$ |
3,671 |
|
|
$ |
2,432 |
|
|
$ |
1,748 |
|
Annualized
net charge-offs to total loans
|
|
|
.83 |
% |
|
|
.40 |
% |
|
|
.61 |
% |
Nonaccrual
loans totaled $15.5 million as of September 30, 2009, compared to $9.4 million
as of December 31, 2008 and $8.1 million at September 30, 2008. Of
the $15.5 million at September 30, 2009, $12.6 million, or 81.3%, represented
two large commercial real estate loan relationships in the Baton Rouge
market. Loans totaling approximately $588,000 were placed on
nonaccrual during the third quarter of 2009, many of which were smaller consumer
credits. Loans past due 90 days or more totaled $1.6 million at
September 30, 2009, an increase of $595,000 over the $1.0 million reported for
December 31, 2008 and an increase of $411,000 from the $1.2 million at September
30, 2008. Total nonperforming assets to total assets were 1.90% for
the third quarter of 2009, compared to 1.17% for the fourth quarter of 2008 and
1.13% for the third quarter of 2008.
With
respect to the $12.6 million in the two large commercial real estate loan
relationships in Baton Rouge that are nonaccrual, $4.2 million is related to a
national participation loan. In the third quarter of 2009, an
additional $400,000 was charged off on the loan, bringing the total charged off
in 2009 to $1.5 million. The loan will be a long term work-out based
on actions taken by the lead bank. The second loan relationship is a
$8.4 million commercial real estate loan in the Baton Rouge market for
construction of a condominium complex. As part of a work-out plan,
the units are now being leased as apartments, with 67% of the units under lease
agreements.
Allowance
coverage for nonperforming loans was 46.82% at September 30, 2009, compared to
73.22% at December 31, 2008 and 67.41% at September 30,
2008. Excluding the effect of the two large commercial real estate
loan relationships in the Baton Rouge market, including their related specific
reserves, allowance coverage for nonperforming loans was 213.23% at September
30, 2009, 298.12% at December 31, 2008, and 277.22% at September 30,
2008. Annualized year-to-date net charge-offs were 0.83% of total
loans for the third quarter of 2009 compared to 0.40% for the fourth quarter of
2008 and 0.61% for the third quarter of 2008. The ALL/total loans
ratio was 1.36% at September 30, 2009, 1.25% at December 31, 2008 and 1.08% at
September 30, 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 $8.0 million in the allowance as
of September 30, 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.
Item 3. Quantitative and Qualitative Disclosures About Market
Risk.
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 on Form 10-K for the year ended December 31, 2008.
Item 4. Controls and Procedures.
The
Company’s Chief Executive Officer (principal executive officer) and Chief
Financial Officer (principal 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.
During
the third quarter of 2009, there were no significant changes in the Company’s
internal controls over financial reporting that have materially affected, or is
reasonably likely to materially 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.
None.
Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds.
The
company did not repurchase any equity securities during the quarter ended
September 30, 2009.
The
Company is currently prohibited from repurchasing its common shares due to its
participation in the Capital Purchase Plan with the Treasury.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security
Holders.
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
**
|
(b) Reports
Filed on Form 8-K
None
*
|
Filed
herewith.
|
**
|
Furnished
herewith.
|
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 9, 2009
|
|
|
/s/
C. R. Cloutier
|
|
C.
R. Cloutier, President /CEO
|
|
(Principal
Executive Officer)
|
|
/s/
James R. McLemore
|
|
James
R. McLemore, CFO
|
|
(Principal
Financial Officer)
|
|
/s/
Teri S. Stelly
|
|
Teri
S. Stelly, Controller
(Principal
Accounting Officer)
|