e10vq
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10Q
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2006
OR
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o |
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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)
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Louisiana
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72 1020809 |
(State of other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.) |
102 Versailles Boulevard, Lafayette, Louisiana 70501
(Address of principal executive offices, including zip code)
(337) 237-8343
(Registrants telephone number, including area code)
Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES þ NO o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer. Large accelerated filer o Accelerated filer o
Non-accelerated filer þ
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.)
YES o NO þ
As of April 28, 2006, there were 4,944,693 shares of the registrants Common Stock, par value $.10
per share, outstanding.
INDEX TO FORM 10-Q REPORT
2
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
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March 31, |
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December 31, |
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2006 |
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2005 |
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(unaudited) |
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(audited) |
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ASSETS |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
|
$ |
25,815,866 |
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|
$ |
25,973,101 |
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Interest bearing deposits in banks |
|
|
333,280 |
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|
323,901 |
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Federal funds sold |
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|
40,600,000 |
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|
26,140,000 |
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|
|
|
|
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Total cash and cash equivalents |
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|
66,749,146 |
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|
52,437,002 |
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|
|
|
|
|
|
|
|
|
Securities available-for-sale, at fair value (cost of $167,783,243
at March 31, 2006 and $140,993,091 at December 31, 2005) |
|
|
165,411,578 |
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|
139,428,403 |
|
Securities held-to-maturity (estimated fair value of $18,767,953
at March 31, 2006 and $20,151,389 at December 31, 2005) |
|
|
18,367,918 |
|
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|
19,611,230 |
|
Loans, net of allowance for loan losses of $4,651,853
at March 31, 2006 and $4,354,530 at December 31, 2005 |
|
|
446,510,046 |
|
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|
438,439,219 |
|
Other investments |
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|
2,342,840 |
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|
2,011,403 |
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Bank premises and equipment, net |
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|
27,002,626 |
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|
23,606,039 |
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Other real estate owned, net |
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|
68,574 |
|
|
|
97,609 |
|
Accrued interest receivable |
|
|
4,647,239 |
|
|
|
4,919,294 |
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Goodwill |
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|
9,271,432 |
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|
|
9,271,432 |
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Intangibles |
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|
902,958 |
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|
|
985,264 |
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Cash surrender value of life insurance |
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|
3,953,840 |
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|
3,794,510 |
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Other assets |
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3,331,612 |
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4,213,016 |
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Total assets |
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$ |
748,559,809 |
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$ |
698,814,421 |
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LIABILITIES AND STOCKHOLDERS EQUITY |
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Deposits: |
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Non-interest bearing |
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$ |
182,324,320 |
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$ |
177,946,159 |
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Interest bearing |
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492,054,492 |
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446,991,941 |
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Total deposits |
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674,378,812 |
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624,938,100 |
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Securities sold under repurchase
agreements and federal funds purchased |
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|
2,910,823 |
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|
1,731,797 |
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Accrued interest payable |
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|
789,440 |
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936,584 |
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Junior subordinated debenture |
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15,465,000 |
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15,465,000 |
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Other liabilities |
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1,369,981 |
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2,557,372 |
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Total liabilities |
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694,914,056 |
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645,628,853 |
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Commitments and contingencies |
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Stockholders Equity: |
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Common stock, $.10 par value- 10,000,000 shares authorized,
5,016,196 and 5,006,471 issued and 4,949,693 and 4,951,719
outstanding at March 31, 2006 and December 31, 2005,
respectively |
|
|
501,620 |
|
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|
500,647 |
|
Surplus |
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|
41,988,645 |
|
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|
41,910,122 |
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Unearned ESOP shares |
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|
(335,472 |
) |
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(47,194 |
) |
Accumulated other comprehensive income |
|
|
(1,565,299 |
) |
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|
(1,032,694 |
) |
Treasury stock - 66,503 at March 31, 2006 and 54,752 shares at
December 31, 2005, at cost |
|
|
(1,551,094 |
) |
|
|
(1,229,213 |
) |
Retained earnings |
|
|
14,607,353 |
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|
13,083,900 |
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|
|
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Total stockholders equity |
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53,645,753 |
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|
53,185,568 |
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Total liabilities and stockholders equity |
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$ |
748,559,809 |
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|
$ |
698,814,421 |
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|
|
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|
See notes to unaudited consolidated financial statements.
3
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
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Three Months Ended |
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March 31, |
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2006 |
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2005 |
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INTEREST INCOME: |
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Loans, including fees |
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$ |
8,964,364 |
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$ |
7,167,361 |
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Securities |
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|
|
|
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Taxable |
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|
917,341 |
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|
748,027 |
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Nontaxable |
|
|
723,714 |
|
|
|
656,481 |
|
Federal funds sold |
|
|
405,892 |
|
|
|
51,400 |
|
Other interest income |
|
|
24,002 |
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|
|
14,380 |
|
|
|
|
|
|
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TOTAL |
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|
11,035,313 |
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|
8,637,649 |
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INTEREST EXPENSE: |
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|
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Deposits |
|
|
3,303,913 |
|
|
|
1,877,238 |
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Securities sold under repurchase agreements,
federal funds purchased and advances |
|
|
20,032 |
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|
60,651 |
|
Long term debt |
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|
314,149 |
|
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|
274,493 |
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|
|
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|
|
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TOTAL |
|
|
3,638,094 |
|
|
|
2,212,382 |
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|
|
|
|
|
|
|
|
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|
|
|
|
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NET INTEREST INCOME |
|
|
7,397,219 |
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|
|
6,425,267 |
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PROVISION FOR LOAN LOSSES |
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|
320,000 |
|
|
|
314,000 |
|
|
|
|
|
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|
|
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES |
|
|
7,077,219 |
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|
|
6,111,267 |
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|
|
|
|
|
|
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|
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OTHER OPERATING INCOME: |
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|
|
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|
Service charges on deposits |
|
|
1,926,598 |
|
|
|
2,127,714 |
|
Gains on securities, net |
|
|
|
|
|
|
385 |
|
Credit life insurance |
|
|
43,338 |
|
|
|
40,549 |
|
Other charges and fees |
|
|
872,663 |
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|
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1,253,894 |
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|
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|
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TOTAL OTHER INCOME |
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|
2,842,599 |
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3,422,542 |
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|
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OTHER EXPENSES: |
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|
|
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|
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Salaries and employee benefits |
|
|
3,785,751 |
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|
|
3,202,752 |
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Occupancy expense |
|
|
1,486,455 |
|
|
|
1,255,492 |
|
Other |
|
|
2,223,940 |
|
|
|
2,495,039 |
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|
|
|
|
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|
TOTAL OTHER EXPENSES |
|
|
7,496,146 |
|
|
|
6,953,283 |
|
|
|
|
|
|
|
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|
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INCOME BEFORE INCOME TAXES |
|
|
2,423,672 |
|
|
|
2,580,526 |
|
PROVISION FOR INCOME TAXES |
|
|
605,152 |
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|
|
657,103 |
|
|
|
|
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|
|
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|
|
|
|
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NET EARNINGS |
|
$ |
1,818,520 |
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|
$ |
1,923,423 |
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|
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|
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EARNINGS PER SHARE |
|
|
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|
|
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|
Basic |
|
$ |
0.37 |
|
|
$ |
0.39 |
|
|
|
|
|
|
|
|
Diluted |
|
$ |
0.36 |
|
|
$ |
0.38 |
|
|
|
|
|
|
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|
See notes to unaudited consolidated financial statements.
4
MidSouth Bancorp, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
For The Three Months Ended March 31, 2006 and 2005
|
|
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|
|
|
|
|
|
2006 |
|
|
2005 |
|
Net earnings |
|
$ |
1,818,520 |
|
|
$ |
1,923,423 |
|
Other comprehensive loss, net of tax
unrealized losses on securities available-for-sale: |
|
|
|
|
|
|
|
|
Unrealized holding losses arising during the year, net of income
tax benefit of $274,372 and $548,567, respectively |
|
|
(532,605 |
) |
|
|
(1,064,612 |
) |
|
|
|
|
|
|
|
|
|
Less reclassification adjustment for gains included in net income
net of income tax of $-0- and $131, respectively |
|
|
|
|
|
|
(254 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income |
|
|
(532,605 |
) |
|
|
(1,064,866 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
$ |
1,285,915 |
|
|
$ |
858,557 |
|
|
|
|
|
|
|
|
5
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2006
|
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|
|
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|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
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UNREALIZED |
|
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|
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GAINS (LOSSES) |
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COMMON STOCK |
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|
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|
ESOP |
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ON SECURITIES |
|
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TREASURY |
|
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RETAINED |
|
|
|
|
|
|
SHARES |
|
|
AMOUNT |
|
|
SURPLUS |
|
|
OBLIGATION |
|
|
AFS, NET |
|
|
STOCK |
|
|
EARNINGS |
|
|
TOTAL |
|
Balance January 1, 2006 |
|
|
5,006,471 |
|
|
$ |
500,647 |
|
|
$ |
41,910,122 |
|
|
|
($47,194 |
) |
|
|
($1,032,694 |
) |
|
|
($1,229,213 |
) |
|
$ |
13,083,900 |
|
|
$ |
53,185,568 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
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|
Dividends on
common stock, $.06 per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(295,067 |
) |
|
|
(295,067 |
) |
Exercise of stock options |
|
|
9,725 |
|
|
|
973 |
|
|
|
43,784 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44,757 |
|
Tax benefit resulting from
exercise of stock options |
|
|
|
|
|
|
|
|
|
|
34,739 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,739 |
|
Purchase of treasury stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(321,881 |
) |
|
|
|
|
|
|
(321,881 |
) |
Net earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,818,520 |
|
|
|
1,818,520 |
|
Increase in ESOP obligation,
net of repayments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(288,278 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(288,278 |
) |
Net change in unrealized
gains( losses) on securities
available-for-sale, net of taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(532,605 |
) |
|
|
|
|
|
|
|
|
|
|
(532,605 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance March 31, 2006 |
|
|
5,016,196 |
|
|
$ |
501,620 |
|
|
$ |
41,988,645 |
|
|
|
($335,472 |
) |
|
|
($1,565,299 |
) |
|
|
($1,551,094 |
) |
|
$ |
14,607,353 |
|
|
$ |
53,645,753 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2006 |
|
|
2005 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
1,818,520 |
|
|
$ |
1,923,423 |
|
Adjustments to reconcile net income
to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
642,697 |
|
|
|
474,190 |
|
Provision for loan losses |
|
|
320,000 |
|
|
|
314,000 |
|
Deferred income taxes (benefit) |
|
|
(501 |
) |
|
|
140,720 |
|
Amortization of premiums on securities, net |
|
|
185,997 |
|
|
|
35,734 |
|
Gain on sale of securities, net |
|
|
|
|
|
|
345 |
|
Change in accrued interest receivable |
|
|
272,055 |
|
|
|
193,280 |
|
Change in accrued interest payable |
|
|
(147,144 |
) |
|
|
(140,892 |
) |
Other, net |
|
|
143,035 |
|
|
|
1,097,365 |
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
3,234,659 |
|
|
|
4,038,165 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities, net of effect of acquisitions: |
|
|
|
|
|
|
|
|
Proceeds from sales of securities available-for-sale |
|
|
|
|
|
|
9,679,015 |
|
Proceeds from maturities and calls of securities held-to-maturity |
|
|
1,249,650 |
|
|
|
921,954 |
|
Proceeds from maturities and calls of securities available-for-sale |
|
|
8,440,298 |
|
|
|
9,734,290 |
|
Purchases of securities available-for-sale |
|
|
(35,422,672 |
) |
|
|
(10,473,242 |
) |
Purchases of other investments |
|
|
(331,550 |
) |
|
|
|
|
Loan originations, net of repayments |
|
|
(8,739,380 |
) |
|
|
(4,778,383 |
) |
Purchases of premises and equipment |
|
|
(3,956,978 |
) |
|
|
(1,472,179 |
) |
Proceeds from sales of other real estate owned |
|
|
89,077 |
|
|
|
294,201 |
|
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities |
|
|
(38,671,555 |
) |
|
|
3,905,656 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities, net of effect of acquisitions: |
|
|
|
|
|
|
|
|
Change in deposits |
|
|
49,440,712 |
|
|
|
16,832,563 |
|
Change in repurchase agreements |
|
|
1,179,026 |
|
|
|
(38,316 |
) |
Change in federal funds purchased |
|
|
|
|
|
|
(8,500,000 |
) |
Proceeds from FHLB advances |
|
|
|
|
|
|
5,000,000 |
|
Purchase of treasury stock |
|
|
(321,881 |
) |
|
|
(113,179 |
) |
Payment of dividends on common stock |
|
|
(593,574 |
) |
|
|
(534,211 |
) |
Proceeds from exercise of stock options |
|
|
44,757 |
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
49,749,040 |
|
|
|
12,646,857 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
|
14,312,144 |
|
|
|
20,590,678 |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of quarter |
|
|
52,437,002 |
|
|
|
17,396,850 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of quarter |
|
$ |
66,749,146 |
|
|
$ |
37,987,528 |
|
|
|
|
|
|
|
|
See notes to unaudited consolidated financial statements.
7
MIDSOUTH BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements and notes thereto contain all
adjustments, consisting only of normal recurring adjustments, necessary to present fairly, in
accordance with accounting principles generally accepted in the United States of America, the
financial position of the Company and its subsidiaries as of March 31, 2006 and the results of
their operations and their cash flows for the periods presented. These consolidated financial
statements should be read in conjunction with the annual consolidated financial statements
and the notes thereto included in the Companys 2005 Annual Report and Form 10K.
The results of operations for the three month period ended March 31, 2006 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.
Stock
Compensation In December 2004, the FASB revised SFAS No. 123 (SFAS No. 123
(R)). SFAS 123 (R), Share-Based Payment, requires all share-based payments to
employees, including grants of employee stock options, to be recognized in the financial
statements based on their fair values. SFAS No. 123 (R) is effective for periods beginning
after December 15, 2005. The Company adopted the provisions of SFAS No. 123 (R) on
January 1, 2006. For the three month period ended March 31, 2006, the impact of the
required compensation expense was immaterial to earnings and had no effect on earnings per
share calculations as indicated in the table below:
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
|
|
Ended |
|
|
|
March 31, |
|
|
|
2006 |
|
|
2005 |
|
(in thousands): |
|
|
|
|
|
|
|
|
Net earnings available to
common stockholders
(in thousands): |
|
|
|
|
|
|
|
|
As reported |
|
$ |
1,816 |
|
|
$ |
1,923 |
|
Deduct total stock based
compensation determined
under fair value method |
|
|
|
|
|
|
(15 |
) |
|
|
|
|
|
|
|
Pro forma |
|
$ |
1,816 |
|
|
$ |
1,908 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share: |
|
|
|
|
|
|
|
|
As reported |
|
$ |
0.37 |
|
|
$ |
0.39 |
|
Pro forma |
|
$ |
0.37 |
|
|
$ |
0.39 |
|
Diluted earnings per share: |
|
|
|
|
|
|
|
|
As reported |
|
$ |
0.36 |
|
|
$ |
0.38 |
|
Pro forma |
|
$ |
0.36 |
|
|
$ |
0.37 |
|
8
Recent
Accounting Pronouncements In November 2005, FSP FAS 115-1 and FAS 124-1
The Meaning of Other-Than-Temporary Impairment and Its Application to Certain
Investments was issued. The FSP addressed the determination as to when an investment is
considered impaired, whether that impairment is other-than-temporary, and the measurement
of an impairment loss. It also included accounting considerations subsequent to the
recognition of an other-than-temporary impairment and provides guidance on proper
disclosures regarding unrealized losses that have not been recognized as
other-than-temporary impairments. The adoption of the FSP did not have an effect on earnings
or stockholders equity for the quarter ended March 31, 2006.
2. |
|
Allowance for Loan Losses |
A summary of the activity in the allowance for loan losses is as follows (in thousands)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2006 |
|
|
2005 |
|
(in thousands) |
|
|
|
|
|
|
|
|
Balance at beginning of period |
|
$ |
4,355 |
|
|
$ |
3,851 |
|
Provision for loan losses |
|
|
320 |
|
|
|
314 |
|
Recoveries |
|
|
109 |
|
|
|
32 |
|
Loans charged off |
|
|
(132 |
) |
|
|
(144 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period |
|
$ |
4,652 |
|
|
$ |
4,053 |
|
|
|
|
|
|
|
|
3. |
|
Declaration of Dividends |
On February 10, 2006, the Company declared a $.06 per share quarterly dividend for
holders of record on March 14, 2006.
9
Part 1. Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF
OPERATIONS
MidSouth Bancorp, Inc. (the Company) is a two-bank holding company that conducts substantially
all of its business through its wholly-owned subsidiary banks (the Banks), MidSouth Bank, N. A.,
headquartered in Lafayette, Louisiana and Lamar Bank, headquartered in Beaumont, Texas. Following
is managements discussion of factors that management believes are among those necessary for an
understanding of the Companys financial statements. The discussion should be read in conjunction
with the Companys consolidated financial statements and the notes thereto presented herein and
with the financial statements, the notes thereto and related Managements Discussion & Analysis in
the Companys 10-K for the year ended December 31, 2005.
Forward Looking Statements
The Private Securities Litigation Act of 1995 provides a safe harbor for disclosure of information
about a companys anticipated future financial performance. This act protects a company from
unwarranted litigation if actual results differ from management expectations. This managements
discussion and analysis reflects managements current views and estimates of future economic
circumstances, industry conditions, the Companys performance and financial results based on
reasonable assumptions. A number of factors and uncertainties could cause actual results to differ
materially from the anticipated results and expectations expressed in the discussion. These
factors and uncertainties include, but are not limited to:
|
|
changes in interest rates and market prices that could affect the net interest margin,
asset valuation, and expense levels; |
|
|
|
changes in local economic and business conditions that could adversely affect customers
and their ability to repay borrowings under agreed upon terms and/or adversely affect the value of
the underlying collateral related to the borrowings; |
|
|
|
increased competition for deposits and loans which could affect rates and terms; |
|
|
|
changes in the levels of prepayments received on loans and investment securities that
adversely affect the yield and value of the earning assets; |
|
|
|
a deviation in actual experience from the underlying assumptions used to determine and
establish the Allowance for Loan Losses (ALL); |
|
|
|
changes in the availability of funds resulting from reduced liquidity or increased costs; |
|
|
|
the timing and impact of future acquisitions, the success or failure of integrating
operations, and the ability to capitalize on growth opportunities upon entering new markets; |
|
|
|
the ability to acquire, operate and maintain effective and efficient operating systems; |
|
|
|
increased asset levels and changes in the composition of assets which 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 applicable to financial holding companies and banking; |
|
|
|
and acts of terrorism, weather, or other events beyond the Companys control. |
10
Critical Accounting Policies
Certain critical accounting policies affect the more significant judgments and estimates used in
the preparation of the consolidated financial statements. The Companys significant accounting
policies are described in the notes to the consolidated financial statements included in Form 10-K
for the year ended December 31, 2005. 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 Companys 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 Companys estimates would be updated and additional provisions for loan losses may be required.
See Asset Quality. Another of the Companys critical accounting policies relates to its
goodwill and intangible assets. Goodwill represents the excess of the purchase price over the fair
value of net assets acquired. In accordance with SFAS No. 142, Goodwill and Other Intangible
Assets, goodwill is not amortized, but is 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.
Results of Operations
First quarter 2006 earnings totaled $1,818,520, a decrease of $104,903 from the $1,923,423 earned
in the first quarter of 2005. Basic earnings per share were $.37 for the quarter ended March 31,
2006, compared to $.39 per share reported for the first quarter of 2005. Diluted earnings per
share were $.36 for the first quarter of 2006 compared to $.38 per share for the first quarter of
2005.
Earnings decreased in the first quarter of 2006 in comparison to the first quarter of 2005
primarily due to the net after-tax effect of non-recurring non-interest income from a $538,000
distribution received from PULSE EFT Association in the first quarter of 2005, partially offset by
a $102,000 write-down on a branch facility in the same quarter, producing a net after-tax effect of
approximately $288,000. Net of the $288,000, first quarter 2006 earnings improved by $183,097 in
quarterly comparison despite increased expenses related to five new retail branch offices added in
the past eight months.
Return on average equity was 13.74% for the first quarter of 2006 compared to 15.79% for the first
quarter of 2005. Net of the $288,000 after-tax effect of non-recurring items, the first quarter
2006 return on average equity of 13.74% reflected improvement over an adjusted return on average
equity for the first quarter of 2005 of 13.43%. The leverage capital ratio was 8.48% at March 31,
2006 compared to 8.96% at March 31, 2005.
Net interest income totaled $7,397,219 for the first quarter of 2006, up 15.1% from the $6,425,267
reported for the first quarter of 2005. Net interest income increased primarily due to a $93.1
million or 16.7% increase in the average volume of earning assets in quarterly comparison. The
impact of
11
increased interest income earnings from the higher volume of earning assets was partially
offset by a $58.7 million or 14.3% increase in the volume of interest-bearing deposits coupled with a 100 basis
point increase in the average cost of interest-bearing deposits between the two quarters compared.
Total consolidated assets increased $49.8 million or 7.1%, from $698.8 million at December 31, 2005
to $748.6 million at March 31, 2006. Total loans grew $8.4 million or 1.9%, from $442.8 million at
December 31, 2005 to $451.2 million at March 31, 2006, primarily in commercial and real estate
credits. Total deposits grew $49.5 million or 7.9%, from $624.9 million at December 31, 2005 to
$674.4 million at March 31, 2006. Of the $49.4 million growth in deposits, $45 million was in
interest bearing deposits, primarily in Platinum money market and checking accounts. The Platinum
money market and checking accounts offer competitive rates of interest that adjust to changes in
market rates. Additionally, the core non-interest bearing deposits have continued to grow and
approximate 27% of total deposits at March 31, 2006. The strong deposit growth in the first
quarter of 2006 is attributed to new retail branch offices and to increased government and
corporate spending due to rebuilding efforts in the Companys markets.
Nonperforming assets, including loans 90 days or more past due, totaled $1.9 million at March 31,
2006 compared to $1.4 million at March 31, 2005 and $3.4 million at December 31, 2005. The
increase of $.5 million in the first quarter of 2006 as compared to the first quarter of 2005
resulted primarily from an increase in loans past due 90 days and over, partially offset by
decreases in other real estate owned and other foreclosed assets in quarterly comparison.
As a percentage of total assets, nonperforming assets increased to .26% at March 31, 2006, up from
.22% at March 31, 2005 and down from .49% at December 31, 2005. Charge-off volume decreased with
net charge-offs to total loans at .01% compared to .03% and .11% for the same periods,
respectively. The improvement in nonperforming assets from December 31, 2005 to March 31, 2006
resulted primarily from the repayment of two past due government-guaranteed loans totaling $1.1
million which were past due 90 days or more.
Earnings Analysis
Net Interest Income
The primary source of earnings for the Company is the difference between interest earned on loans
and investments (earning assets) and interest paid on deposits and other liabilities
(interest-bearing liabilities). Changes in the volume and mix of earning assets and
interest-bearing liabilities combined with changes in market rates of interest greatly affect net
interest income.
The Companys net interest margin on a taxable-equivalent basis, which is net income as a
percentage of average earning assets, was 4.80% at March 31, 2006, down 7 basis points from 4.87%
at March 31, 2005. Tables 1 and 2 analyze the changes in taxable-equivalent net interest income
for the two quarters ended March 31, 2006 and 2005.
Average earning assets increased $93.1 million or 16.7%, from $557.2 million in 2005 to $650.3
million in 2006. The average yield on earning assets improved 59 basis points, from 6.48% at March
31, 2005 to 7.07% at March 31, 2006, but the mix of average earning assets shifted from
12
70% in average loans to total average earning assets in the first quarter of 2005 to 68% in the first
quarter of 2006. The shift occurred as strong deposit growth exceeded loan funding and excess
deposit dollars were invested in short term investments and federal funds sold.
The impact of the change in asset mix was offset by an increase in loan yields of 75 basis points,
from 7.45% in March 2005 to 8.20% in March 2006, and a 31 basis point increase in the average
taxable-equivalent yield on investment securities, from 4.32% in March 2005 to 4.63% in March 2006.
The average volume of investment securities increased $11.0 million, from $158.3 million at March
31, 2005 to $169.3 million at March 31, 2006. The average volume of federal funds sold increased
$28.5 million, from $8.8 million in March 2005 to $37.3 million at March 2006, primarily due to
strong deposit growth.
The Companys strong core deposit mix reflected improvement in the average volume of non-interest
bearing deposits from $126.7 million or 23% of average total deposits at March 31, 2005 to $173.7
million or 27% of average total deposits at March 31, 2006. The average volume of NOW and Money
Market and Savings deposits increased $59.6 million and remained consistent at 54% of average total
deposits between the two quarters compared. The average volume of Certificates of Deposit (CDs)
decreased $.9 million, from $121.9 million at March 31, 2005 to $121.0 million at March 31, 2006
and represented 23% of total deposits at March 31, 2005 compared to 19% at March 31, 2006. Most of
the Companys deposit growth was in its Platinum Money Market and Platinum Checking accounts, which
offer a competitive yield that adjusts weekly to market rates and support the Companys retail
strategy of developing long-term banking relationships with depositors. The competitive yield on
the Platinum accounts contributed greatly to the 100 basis point increase in the average rate paid
on total interest-bearing deposits between the two quarters compared. The average yield on all
interest-bearing deposits increased from 1.86% at March 31, 2005 to 2.86% at March 31, 2006.
The average rate paid on the Companys junior subordinated debentures increased 104 basis points
from first quarter 2005 to first quarter 2006 due to increases in the floating rate paid on the
$8.2 million of such debentures issued in the third quarter of 2004 to partially fund the Lamar
acquisition. The debentures carry a floating rate equal to the 3-month LIBOR plus 2.50%,
adjustable and payable quarterly. The rate at March 31, 2006 was 7.43%. The debentures mature on
September 20, 2034 and, under certain circumstances, are subject to repayment on September 20, 2009
or thereafter. In February 2001, the Company issued $7,217,000 of junior subordinated debentures.
The debentures carry a fixed interest rate of 10.20% and mature on February 22, 2031.
The impact of the changes in yield and volume of the earning assets and interest-bearing
liabilities discussed above resulted in an increase of $1.0 million to taxable-equivalent net
interest income from March 31, 2005 to March 31, 2006.
13
Table 1 Consolidated Average Balances, Interest and Rates
Taxable-equivalent basis (2)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Three Months Ended |
|
|
|
March 31, 2006 |
|
|
March 31, 2005 |
|
|
|
Average |
|
|
|
|
|
|
Average |
|
|
Average |
|
|
|
|
|
|
Average |
|
|
|
Volume |
|
|
Interest |
|
|
Yield/Rate |
|
|
Volume |
|
|
Interest |
|
|
Yield/Rate |
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Securities (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable |
|
$ |
85,638 |
|
|
$ |
917 |
|
|
|
4.28 |
% |
|
$ |
80,133 |
|
|
$ |
730 |
|
|
|
3.69 |
% |
Tax Exempt (2) |
|
|
81,630 |
|
|
|
1,020 |
|
|
|
4.99 |
% |
|
|
75,549 |
|
|
|
923 |
|
|
|
4.96 |
% |
Equity Securities |
|
|
2,025 |
|
|
|
24 |
|
|
|
4.74 |
% |
|
|
2,614 |
|
|
|
33 |
|
|
|
5.10 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments |
|
|
169,293 |
|
|
|
1,961 |
|
|
|
4.63 |
% |
|
|
158,296 |
|
|
|
1,686 |
|
|
|
4.32 |
% |
Federal Funds Sold and Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased Under Agreements to Resell |
|
|
37,349 |
|
|
|
406 |
|
|
|
4.41 |
% |
|
|
8,776 |
|
|
|
51 |
|
|
|
2.38 |
% |
Loans (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and Real Estate |
|
|
349,123 |
|
|
|
7,029 |
|
|
|
8.17 |
% |
|
|
308,079 |
|
|
|
5,530 |
|
|
|
7.28 |
% |
Installment |
|
|
94,487 |
|
|
|
1,935 |
|
|
|
8.31 |
% |
|
|
82,019 |
|
|
|
1,637 |
|
|
|
8.09 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Loans |
|
|
443,610 |
|
|
|
8,964 |
|
|
|
8.20 |
% |
|
|
390,098 |
|
|
|
7,167 |
|
|
|
7.45 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Earning Assets |
|
|
650,252 |
|
|
|
11,331 |
|
|
|
7.07 |
% |
|
|
557,170 |
|
|
|
8,904 |
|
|
|
6.48 |
% |
|
Allowance for Loan Losses |
|
|
(4,358 |
) |
|
|
|
|
|
|
|
|
|
|
(3,819 |
) |
|
|
|
|
|
|
|
|
Nonearning Assets |
|
|
71,265 |
|
|
|
|
|
|
|
|
|
|
|
62,258 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
717,159 |
|
|
|
|
|
|
|
|
|
|
$ |
615,609 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW, Money Market, and Savings |
|
$ |
347,759 |
|
|
$ |
2,336 |
|
|
|
2.72 |
% |
|
$ |
288,208 |
|
|
$ |
1,227 |
|
|
|
1.73 |
% |
Time Deposits |
|
|
120,998 |
|
|
|
968 |
|
|
|
3.25 |
% |
|
|
121,875 |
|
|
|
650 |
|
|
|
2.16 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Interest Bearing Deposits |
|
|
468,757 |
|
|
|
3,304 |
|
|
|
2.86 |
% |
|
|
410,083 |
|
|
|
1,877 |
|
|
|
1.86 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Funds Purchased, Securities Sold
Under Agreements to Repurchase |
|
|
2,038 |
|
|
|
20 |
|
|
|
3.99 |
% |
|
|
7,205 |
|
|
|
42 |
|
|
|
2.34 |
% |
Junior Subordinated Debentures |
|
|
15,465 |
|
|
|
314 |
|
|
|
8.24 |
% |
|
|
15,465 |
|
|
|
274 |
|
|
|
7.20 |
% |
Federal Home Loan Bank Advances |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,833 |
|
|
|
19 |
|
|
|
2.73 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Interest Bearing Liabilities |
|
|
486,260 |
|
|
|
3,638 |
|
|
|
3.03 |
% |
|
|
435,586 |
|
|
|
2,212 |
|
|
|
2.06 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand Deposits |
|
|
173,612 |
|
|
|
|
|
|
|
|
|
|
|
126,664 |
|
|
|
|
|
|
|
|
|
Other Liabilities |
|
|
3,581 |
|
|
|
|
|
|
|
|
|
|
|
3,979 |
|
|
|
|
|
|
|
|
|
Stockholders Equity |
|
|
53,706 |
|
|
|
|
|
|
|
|
|
|
|
49,380 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Stockholders Equity |
|
$ |
717,159 |
|
|
|
|
|
|
|
|
|
|
$ |
615,609 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET TAXABLE-EQUIVALENT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTEREST INCOME AND SPREAD |
|
|
|
|
|
$ |
7,693 |
|
|
|
4.03 |
% |
|
|
|
|
|
$ |
6,692 |
|
|
|
4.42 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET TAXABLE-EQUIVALENT YIELD ON EARNING ASSETS |
|
|
|
|
|
|
|
|
|
|
4.80 |
% |
|
|
|
|
|
|
|
|
|
|
4.87 |
% |
|
|
|
(1) |
|
Securities classified as available-for-sale are included in average balances
and interest income figures reflect interest earned on such securities. |
|
(2) |
|
Interest income of $295,521 for 2006 and $266,645 for 2005 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 $661,310 for 2006 and $617,938
for 2005. Nonaccrual loans are included in average balances
and income on such loans is recognized on a cash basis. |
14
Table 2 Changes in Taxable-Equivalent Net Interest Income
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, 2006 compared to March 31, 2005 |
|
|
|
Total |
|
|
Change |
|
|
|
Increase |
|
|
Attributable to |
|
|
|
(Decrease) |
|
|
Volume |
|
|
Rates |
|
|
|
|
Taxable-equivalent interest earned on: |
|
|
|
|
|
|
|
|
|
|
|
|
Investment Securities
Taxable |
|
$ |
187 |
|
|
$ |
45 |
|
|
$ |
142 |
|
Tax Exempt |
|
|
97 |
|
|
|
77 |
|
|
|
20 |
|
Equity Securities |
|
|
(9 |
) |
|
|
(7 |
) |
|
|
(2 |
) |
Federal Funds Sold and Securities |
|
|
|
|
|
|
|
|
|
|
|
|
Purchased Under Agreement to Resell |
|
|
355 |
|
|
|
281 |
|
|
|
74 |
|
Loans, including fees |
|
|
1,797 |
|
|
|
1,038 |
|
|
|
759 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
2,427 |
|
|
|
1,434 |
|
|
|
993 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Paid On: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest Bearing Deposits |
|
|
1,427 |
|
|
|
299 |
|
|
|
1,128 |
|
Federal Funds Purchased and Securities
Sold Under Agreement to Repurchase |
|
|
(22 |
) |
|
|
(660 |
) |
|
|
638 |
|
Federal Home Loan Bank Advances |
|
|
(19 |
) |
|
|
(19 |
) |
|
|
|
|
Junior Subordinated Debentures |
|
|
40 |
|
|
|
|
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
1,426 |
|
|
|
(380 |
) |
|
|
1,806 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable-equivalent net interest income |
|
$ |
1,001 |
|
|
$ |
1,814 |
|
|
|
($813 |
) |
|
|
|
|
|
|
|
|
|
NOTE: |
|
Changes due to both volume and rate has generally been allocated to volume
and rate changes in proportion to the relationship of the absolute dollar amounts
to the changes in each. |
15
Non-interest Income
Excluding Securities Transactions
The Companys primary source of non-interest income is services charges and fees on deposit
accounts, which include insufficient funds (NSF) fees. Income from service charges on deposit
accounts decreased $201,116 from March 2005 to March 2006 primarily due a decrease in NSF fees
attributed to higher average balances in demand deposit accounts and lower NSF activity. Income
from other charges and fees decreased $381,231 for the three months ended March 31, 2006 as
compared to March 31, 2005 primarily due to the $538,000 PULSE distribution included in the 2005
income from other charges and fees and partially offset by a $125,890 increase in debit card and
ATM fee income.
Securities Transactions
The Company had no securities transactions and recorded no gains or losses on sales of securities
for the first quarter of 2006. During the first quarter of 2005, both MidSouth Bank and Lamar Bank
sold mutual funds held in the securities portfolios. MidSouth Bank sold a $1.0 million mutual fund
at a loss of $30,706 and Lamar Bank sold $8.3 million in a GNMA mutual fund for a gain of $31,091.
Non-interest Expense
Non-interest expense increased $542,863 from first quarter 2005 to first quarter 2006, primarily in
salaries and employee benefit costs and occupancy expenses related to the new retail branches added
in 2005. Salaries and benefit costs increased $582,999 between the two quarters compared due to
increase of 45 in full-time equivalent employees, from 294 at March 31, 2005 to 339 at March 31,
2006. Occupancy expenses increased $230,963 between the two quarters compared due to the added
branches. The increases in salaries and benefit costs and occupancy expenses were partially offset
by decreases of $59,937 in legal and professional fees, $58,744 in data processing expenses and
$51,294 in amortization of intangibles, combined with the added expense in 2005 of the $102,000
write-down on a branch facility.
Analysis of Statement of Condition
Consolidated assets totaled $748.6 million at March 31, 2006, up $49.8 million from $698.8 million
at December 31, 2005. The increase resulted primarily from growth in deposits of $49.4 million of
which $4.4 million was in non-interest bearing balances. As stated under Results of Operations,
the growth is attributed to new retail branch offices and to increased government and corporate
spending due to rebuilding efforts in the Companys markets. Additionally, the competitive market
rates paid on the Companys Platinum accounts have contributed to deposit growth.
Cash flows from the increase in deposits funded $8.4 million in loan growth for the first quarter
of 2006, which was below projections, but is expected to improve with recent hires, new retail
16
branches and good loan demand in the Companys markets. Cash flows from the deposit growth also
funded a $26.0 million increase in investment securities available-for-sale during the first
quarter of 2006. The Company invested primarily in tax-free municipal securities and in short-term
agencies that offered some yield improvement over the rate earned on federal funds sold. The
Company ended the first quarter of 2006 with a strong federal funds sold position of $40.6 million
at March 31, 2006.
Bank premises and equipment increased $3.4 million for the first quarter of 2006 and reflects the
Companys continued branch expansion.
Liquidity
Liquidity is the availability of funds to meet contractual obligations as they become due and to
fund operations. The Banks primary liquidity needs involve their 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 Banks. 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 Banks core deposits are their 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 Banks. The Banks also have significant borrowing capacity with
the FHLB of Dallas, Texas and borrowing lines with other correspondent banks.
At the parent company level, cash is needed primarily to meet interest payments on the junior
subordinated debentures and pay dividends on common stock. An $8.2 million issuance of junior
subordinated debentures was completed on September 20, 2004, the proceeds of which were partially
used to fund the Lamar Bancshares merger. The parent company previously issued $7.2 million in
junior subordinated debentures in February 2001. Dividends from the Banks primarily provide
liquidity for the parent company. As a publicly traded company, the parent company also has the
ability to issue additional trust preferred and other securities instruments to provide funds as
needed for operations and future growth.
Capital
The Company and the Banks 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 institutions assets. At March 31, 2006, the Company and the Banks were in compliance with
statutory minimum capital requirements and were 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. The Companys
17
leverage
ratio was 8.48%, Tier 1 capital to risk-weighted assets was 11.29% and total capital to
risk-weighted assets was 12.17% at the end of the first quarter of 2006.
Asset Quality
Credit Risk Management
The Company manages its credit risk by observing written, board approved policies which govern all
underwriting activities. The risk management program requires that each individual loan officer
review his or her portfolio on a quarterly basis and assign recommended credit ratings on each
loan. These efforts are supplemented by independent reviews performed by the loan review officer
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 Loans Past Due 90 Days and Over
The following table summarizes the Companys nonperforming assets and loans past due 90 days and
over for the quarters ending March 31, 2006 and 2005 and for the year-ended December 31, 2005.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
|
|
Period Ended |
|
Ended |
|
|
Mar. 31, |
|
Mar. 31, |
|
Dec. 31, |
|
|
2006 |
|
2005 |
|
2005 |
|
|
|
Nonaccrual loans |
|
$ |
672 |
|
|
$ |
596 |
|
|
$ |
660 |
|
Loans past due 90
days and over |
|
|
1,127 |
|
|
|
276 |
|
|
|
2,511 |
|
Total nonperforming loans |
|
|
1,799 |
|
|
|
872 |
|
|
|
3,171 |
|
Other real estate owned |
|
|
68 |
|
|
|
246 |
|
|
|
98 |
|
Other foreclosed assets |
|
|
54 |
|
|
|
235 |
|
|
|
176 |
|
|
|
|
Total nonperforming assets |
|
$ |
1,921 |
|
|
$ |
1,353 |
|
|
$ |
3,445 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming assets to
total assets |
|
|
0.26 |
% |
|
|
0.22 |
% |
|
|
0.49 |
% |
Nonperforming assets to
total loans + OREO + other
foreclosed assets |
|
|
0.43 |
% |
|
|
0.35 |
% |
|
|
0.78 |
% |
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
|
|
Period Ended |
|
Ended |
|
|
Mar. 31, |
|
Mar. 31, |
|
Dec. 31, |
|
|
2006 |
|
2005 |
|
2005 |
ALL to nonperforming assets |
|
|
242.16 |
% |
|
|
299.56 |
% |
|
|
126.42 |
% |
ALL to nonperforming loans |
|
|
258.59 |
% |
|
|
464.79 |
% |
|
|
137.34 |
% |
ALL to total loans |
|
|
1.03 |
% |
|
|
1.04 |
% |
|
|
.98 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-to-date charge-offs |
|
$ |
132 |
|
|
$ |
144 |
|
|
$ |
702 |
|
Year-to-date recoveries |
|
|
(109 |
) |
|
|
(32 |
) |
|
|
(226 |
) |
|
|
|
Year-to-date net charge-offs |
|
$ |
23 |
|
|
|
112 |
|
|
$ |
476 |
|
|
|
|
Net YTD charge-offs to total loans |
|
|
0.01 |
% |
|
|
0.03 |
% |
|
|
0.11 |
% |
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 $4,651,853 in the allowance as of March 31,
2006 is sufficient to cover probable losses in nonperforming assets and 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 generally accepted accounting principles, 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 and due to inflation. The impact of
inflation is reflected in the increased cost of the Companys 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 Companys 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.
Part I. Item 3. Qualitative and Quantitative 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
Companys interest rate risk position in compliance with policy approved by the Board of Directors.
19
There have been no significant changes from the information regarding market risk disclosed under
the heading Interest Rate Sensitivity in the Companys Annual Report for the year ended December
31, 2005.
Part I. Item 4. Controls and Procedures
The Companys Chief Executive Officer and Chief Financial Officer have evaluated the
effectiveness of the disclosure controls and procedures (as such term is defined in Rules 13a-14(c)
and 15d-14(c) under the Securities Exchange Act of 1934, as amended (the Exchange Act). As of
the end of the period covered by this Quarterly Report on Form 10-Q (the Evaluation Date), the
principal executive officer and principal financial officer have concluded that such disclosure
controls and procedures are effective to ensure that information required to be disclosed by the
Company in reports that it submits under the Exchange Act is recorded, processed, summarized, and
reported within the time periods specified in the Securities and Exchange Commission rules and
forms.
During the first quarter of 2006, there were no significant changes in the Companys internal
controls over financial reporting that has materially affected, or is reasonably likely to affect,
the Companys internal control over financial reporting.
Part II. Other Information
Item 1. Legal Proceedings
The Banks have 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 Companys consolidated financial position, results of operations, or cash flows.
Item 1.A. Risk Factors None
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table provides information with respect to purchases made by or on behalf of the
Company or any affiliated purchaser, as defined in Securities Exchange Act Rule 10b-8(a)(3), of
equity securities during the first quarter ended March 31, 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number of |
|
Maximum Number |
|
|
Total Number |
|
|
|
|
|
Shares Purchased |
|
of Shares That May |
|
|
of Shares |
|
Average Price Paid |
|
as Part of a Publicly |
|
Yet be Purchased |
|
|
Purchased |
|
per Share |
|
Announced Plan1 |
|
Under the Plan1 |
January 2006 |
|
|
6,635 |
|
|
$ |
27.40 |
|
|
|
6,635 |
|
|
|
174,347 |
|
February 2006 |
|
|
5,116 |
|
|
$ |
27.38 |
|
|
|
5,116 |
|
|
|
169,231 |
|
March 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
169,231 |
|
20
1 Under a share repurchase program approved by the Companys Board of Directors on November
13, 2002, the Company can repurchase up to 5% of its common stock outstanding through open market
or privately negotiated transactions. The repurchase program does not have an expiration date.
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
|
|
|
Exhibit Number |
|
Document Description |
3.1
|
|
Amended and Restated Articles of Incorporation of MidSouth Bancorp, Inc. is included as
Exhibit 3.1 to MidSouths Report on Form 10-K for the year ended December 31, 1993 and is
incorporated herein by reference. |
|
|
|
3.2
|
|
Articles of Amendment to Amended and Restated Articles of Incorporation dated July 19, 1995
are included as Exhibit 4.2 to
MidSouths Registration Statement on Form S-8 filed September 20, 1995 and
are incorporated herein by reference. |
|
|
|
3.3
|
|
Amended and Restated By-laws adopted by the Board of Directors on
April 12, 1995 are included as Exhibit 3.2 to Amendment No. 1 to
MidSouths Registration Statement on Form S-4/A (Reg. No. 33-58499) filed on
June 1, 1995. |
|
|
|
11
|
|
Computation of earnings per share |
|
|
|
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 |
21
|
|
|
Exihibit Number |
|
Document Description |
32.2
|
|
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
(b) Reports Filed on Form 8-K
A press release regarding MidSouths earnings for the quarter ended December 31, 2005 was
attached as Exhibit 99.1 to the Form 8-K filed on January 27, 2006.
22
Signatures
In accordance with the requirements of the Exchange Act, the registrant caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
|
|
|
|
|
MidSouth Bancorp, Inc. |
|
|
(Registrant) |
|
|
|
Date: May 12, 2006 |
|
|
|
|
/s/ C. R. Cloutier |
|
|
|
|
|
C. R. Cloutier, President /CEO |
|
|
|
|
|
/s/ Karen L. Hail |
|
|
|
|
|
Karen L. Hail, Senior Executive Vice President/CFO |
|
|
|
|
|
/s/ Teri S. Stelly |
|
|
|
|
|
Teri S. Stelly, SVP/Chief Accounting Officer |
23
Exhibit Index
|
|
|
|
|
Document Description |
3.1
|
|
Amended and Restated Articles of Incorporation of MidSouth Bancorp, Inc. is included as
Exhibit 3.1 to MidSouths Report on Form 10-K for the year ended December 31, 1993 and is
incorporated herein by reference. |
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3.2
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Articles of Amendment to Amended and Restated Articles of Incorporation dated July 19, 1995
are included as Exhibit 4.2 to
MidSouths Registration Statement on Form S-8 filed September 20, 1995 and are
incorporated herein by reference. |
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3.3
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Amended and Restated By-laws adopted by the Board of Directors on
April 12, 1995 are included as Exhibit 3.2 to Amendment No. 1 to
MidSouths Registration Statement on Form S-4/A (Reg. No. 33-58499) filed on June 1, 1995. |
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11
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Computation of earnings per share |
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31.1
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Certification pursuant to Exchange Act Rules 13(a) 14(a) |
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31.2
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Certification pursuant to Exchange Act Rules 13(a) 14(a) |
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32.1
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Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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32.2
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Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |