UNITED STATES SECURITIES AND EXCHANGE COMMISSION

FORM 10Q

COMMISSION FILE NUMBER 1-11826

MIDSOUTH BANCORP, INC.

102 Versailles Boulevard, Lafayette, Louisiana
70501
(337) 237-8343

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X]   NO [  ]

Check whether the issuer is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act.) YES [  ]   NO [X]

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date.

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INDEX TO FORM 10-Q REPORT

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MIDSOUTH BANCORP, INC. AND SUBSIDIARIES

See notes to unaudited consolidated financial statements.

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MIDSOUTH BANCORP, INC. AND SUBSIDIARIES

See notes to unaudited consolidated financial statements.

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MIDSOUTH BANCORP, INC. AND SUBSIDIARIES

See notes to unaudited consolidated financial statements.

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MIDSOUTH BANCORP, INC. AND SUBSIDIARIES

See notes to unaudited consolidated financial statements.

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MIDSOUTH BANCORP, INC. AND SUBSIDIARIES

1.		STATEMENT BY MANAGEMENT CONCERNING UNAUDITED FINANCIAL INFORMATION
		The accompanying unaudited consolidated financial statements and notes thereto contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly, in accordance with accounting principles generally accepted in the United States of America, the financial position of MidSouth Bancorp, Inc. (“MidSouth”) and its subsidiaries as of September 30, 2004 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 MidSouth’s 2003 annual report and Form 10KSB.
		The results of operations for the three and nine month periods ended September 30, 2004 are not necessarily indicative of the results to be expected for the entire year.
		MidSouth applies Accounting Practices Board (APB) Opinion No. 25 and related interpretations in accounting for its stock options. Accordingly, no compensation cost has been recognized. MidSouth has adopted the disclosure-only option under SFAS No. 123. Had compensation costs for MidSouth’s stock options been determined based on the fair value at the grant date, consistent with the method under SFAS No. 123, MidSouth’s net income and earnings per share would have been as indicated below:

2.		ALLOWANCE FOR LOAN AND LOSSES
		An analysis of the activity in the allowance for loan losses is as follows:

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3.		COMPREHENSIVE INCOME
		Comprehensive income includes net income and other comprehensive income (losses) which, in the case of MidSouth, only includes unrealized gains and losses on securities available-for-sale. Following is a summary of MidSouth’s comprehensive income for the three and nine month periods ended September 30, 2004 and 2003.

4.		ACQUISITION
		On October 1, 2004, MidSouth completed a merger with, and acquired all of the outstanding common stock of, Lamar Bancshares, Inc. in a transaction to be accounted under the purchase accounting method in accordance with accounting principles generally accepted by the United States of America. MidSouth paid $10.8 million in cash and issued 369,304 shares (based on a market value of MidSouth stock of $30.91 per share) of its stock valued at $11.4 million. MidSouth also incurred approximately $171,000 in acquisition costs. In connection with the merger, MidSouth issued $8 million of junior subordinated preferred stock on September 20, 2004 in order to fund a portion of the acquisition.
		The following table summarizes the estimated fair values, in thousands, of the assets acquired and liabilities assumed on October 1, 2004:

Cash and cash equivalents		$	5,417
Securities			21,149
Loans			80,800
Premises and equipment			5,857
Core deposit intangible			2,250
Goodwill			7,945
Other assets			4,296
Total assets acquired			127,714
Deposits			96,731
Other liabilities			8,709
Total liabilities assumed			105,440
Net assets acquired		$	22,274

MidSouth is in the process of obtaining third party valuations of the premises and equipment, core deposit intangibles and certain other assets. Therefore, the purchase price and its allocation are subject to adjustment.

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Item 2.

This review should be read in conjunction with MidSouth Bancorp Inc.’s (“MidSouth”) consolidated financial statements and accompanying notes contained herein, as well as with MidSouth’s 2003 annual consolidated financial statements, the notes thereto and the related Management’s Discussion and Analysis contained in MidSouth’s Annual Report on Form 10KSB for the year ended December 31, 2003.

Forward Looking Statements

The Private Securities Litigation Act of 1995 provides a safe harbor for disclosure of information about a company’s anticipated future financial performance. This act protects a company from unwarranted litigation if actual results differ from management expectations. This management’s discussion and analysis reflects management’s current views and estimates of future economic circumstances, industry conditions, MidSouth’s performance and financial results based on reasonable assumptions. A number of factors and uncertainties could cause actual results to differ 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 MidSouth’s control.

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Recent Developments

On October 1, 2004, MidSouth completed a merger with Lamar Bancshares of Beaumont, Texas to merge the two holding companies. The Company’s banks, MidSouth Bank and Lamar Bank will continue to operate as separate subsidiaries under MidSouth Bancorp, Inc. At closing, Lamar Bank had assets of approximately $115 million and six banking offices serving southwest Texas. Lafayette-based MidSouth Bank, with assets of approximately $506 million, will continue to serve the Louisiana market.

On October 14, 2004, MidSouth announced a five-for-four (25%) stock split on its common stock to holders of record as of October 29, 2004 payable on November 30, 2004. The Board of Directors also announced that it would continue its quarterly dividend at $.06 per share and awarded an additional $.06 Special Dividend to be paid on its common stock on January 4, 2005 to holders of record as of December 15, 2004. This will result in a total of $.12 per share to be paid to shareholders on January 4, 2005.

Overview

Third quarter 2004 net income totaled $1,954,000, a 12.6% increase over the $1,735,000 for the third quarter of 2003 and up 12% over second quarter 2004 net income of $1,745,000. Basic earnings per share were $.61 for the quarter ended September 30, 2004, up from the $.55 per share for the third quarter of 2003, and the $.55 per share in the second quarter of 2004. Diluted earnings per share were $.59 for the third quarter of 2004 compared to $.52 per share for the third quarter of 2003 and $.52 per share for the second quarter of 2004.

Earnings for the nine months ended September 30, 2004 were $5,360,000, which is a $692,000 or 14.8% increase over the $4,668,000 in earnings for the nine months ended September 30, 2003. Basic earnings per share were $1.68 for the first nine months of 2004 versus $1.47 for the first nine months of 2003. Diluted earnings per share were $1.61 and $1.41, respectively.

Net income increased $219,000 in the third quarter of 2004 compared to the third quarter of 2003, primarily due to increases in both net interest income of $271,000 and non-interest income of $386,000, including $120,000 in gains on sales of securities. These increases were partially offset by a $430,000 increase in non-interest expenses. The increased net interest income resulted from a $546,000 or 9% increase in interest income, partially offset by a $275,000 or 24% increase in interest expense on deposits. The improvement in interest income resulted from a 15% increase in average earning assets for the third quarter of 2004 compared to the third quarter of 2003. Interest expense increased due to a $43.1 million or 15% increase in the average volume of interest-bearing deposits, resulting primarily from the addition of approximately $45 million in interest-bearing deposits added through a deposit campaign from March 2004 through May 2004. Non-interest income, excluding gains on sales of securities, increased primarily due to a $396,000 increase in fees and service charges resulting from a higher volume of demand deposit accounts. Non-interest expense increased in quarterly comparison primarily due to a

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$244,000 increase in salaries and benefit costs.

Gains on sales of securities totaled $130,000 for the third quarter of 2004, an increase of $120,000 over the $10,000 in gains reported for the third quarter of 2003. The increase resulted almost entirely from the sale of a correspondent bank’s common stock back to the issuing bank in July of 2004. MidSouth no longer utilized any services with the bank and therefore liquidated its stock position. The $128,000 gain on sale of the common stock brought year-to-date gains on sales of securities to $132,000 at September 30, 2004 compared to $98,000 at September 30, 2003. Sales of $6.5 million in available-for-sale securities in 2003 netted MidSouth the $98,000 gain and allowed improvement of the overall yield on the securities sold as they neared maturity.

Compared to the prior quarter ending June 30, 2004, third quarter 2004 net income increased $209,000 or 12%. In comparing the two quarters, net interest income increased $310,000 and non-interest income increased $323,000. The increase in non-interest income resulted from the $128,000 gain on sale of securities and a $215,000 increase in fees and service charges on deposit accounts. An increase in the provision for loan losses of $60,000 partially offset the increase in earnings over prior quarter and resulted from a reduction in the Allowance for Loan Losses (“ALL”) at Financial Services of the South (“FSS”), MidSouth’s finance company subsidiary during the second quarter of 2004. The ALL was lowered at the finance company due to the minimal amount of loans remaining for liquidation. Increased non-interest expenses in salaries and benefits ($161,000), legal and professional fees ($50,000), and marketing expenses ($63,000) partially offset the quarterly improvement in net interest and non-interest income.

For the nine months ended September 30, 2004 compared to 2003, net income increased $692,000 or 15%. Net interest income improved $1,048,000 or 7% due to increased interest income on a higher volume of earning assets partially offset by an increase in interest expense on deposits. Increases of $779,000 in fees and service charges on deposit accounts and $120,000 in ATM/Debit card income was partially offset by a $254,000 decrease in other non-interest income categories, primarily Visa merchant income ($193,000) and mortgage loan processing fees ($140,000). In the third quarter of 2003, MidSouth outsourced its Visa merchant processing to First Data Corporation. The resulting reduction in Visa merchant income is offset by a $179,000 decrease in Visa merchant processing expenses that resulted from the processing change and is reflected in the change in other non-interest expense in year-to-date comparison. Salaries and employee benefits increased $456,000 and occupancy expenses increased $155,000, offsetting the decrease in Visa merchant processing expenses.

Highlights for the Quarter Ended September 30, 2004

• Return on average equity was 22.46% for the third quarter of 2004 compared to 21.90% for the third quarter of 2003. The leverage capital ratio was 9.66% at September 30, 2004 compared to 8.51% at September 30, 2003 due to the issuance of $8 million in additional junior subordinated debentures in September 2004.

• Net income for 2004 is up 12.6% in quarterly comparison and 14.8% in year-to-date comparison over 2003 net income.

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• Total loans grew $47.2 million or 19%, from $246.9 million at September 30, 2003 to $294.1 million at September 30, 2004, primarily in commercial loans.

• Nonperforming assets, including loans 90 days or more past due, as a percentage of total assets decreased from .34% at September 30, 2003 to .17% at September 30, 2004. Year-to-date net charge-offs to total loans remained constant at .17% for both periods.

• Total consolidated assets increased $82.4 million or 19.6%, from $419.9 million at the end of the third quarter of 2003 to $502.2 million at the end of the third quarter of 2004. Total deposits increased $69.7 million or 18.6%, from $374.1 million at September 30, 2003 to $443.8 million at September 30, 2004. The increase resulted primarily from approximately $50 million in deposits resulting from a deposit growth campaign that began in March 2004. The campaign introduced MidSouth’s new Platinum Money Market account for both retail and commercial customers. Of the $50 million in deposits resulting from the campaign, approximately $34 million was deposited into the Platinum Money Market and other savings accounts at an average rate of 2.05%.

• MidSouth continued to work on expansion plans for the Louisiana market during the third quarter of 2004, with the new facility on Moss Street completed and property purchased to build a full service facility in Houma. Additionally, MidSouth announced that it will also open a new location on Johnston Street in the heart of Lafayette and will construct an office in the Town Square of the traditional neighborhood development of River Ranch, bringing the total number of offices in its home base to nine. In the Texas market, MidSouth plans to build new Lamar Bank offices in Conroe and College Station, Texas, and plans to continue expansion in the north Houston and Woodlands area.

Earnings Analysis

Net Interest Income

The primary source of earnings for MidSouth is net interest income, which is the difference between interest earned on loans and investments and interest paid on deposits and other liabilities. Changes in the volume and mix of earning assets and interest-bearing liabilities combined with changes in market rates of interest greatly affect net interest income. The tables provided following this discussion of net interest income analyze the changes in taxable-equivalent net interest income for the two quarters and nine months ended September 30, 2004 and 2003.

Average earning assets increased 15%, or $59.8 million from $393.9 million for the three months ended September 30, 2003 to $453.7 million for the three months ended September 30, 2004, funded by deposits acquired through a deposit campaign. The mix of average earning assets remained relatively constant in quarterly comparison. Loans represented 62% of average earning assets in the third quarter of 2003 compared to 63% in the third quarter of 2004. Average loans increased $39.8 million, from $245.0 million in the third quarter of 2003 to $284.8 million in the third quarter of 2004. The average yield on loans decreased 78 basis points in quarterly comparison, from 8.37% to 7.59% at September 30, 2004. Loan yields declined due to lower offering rates and rate adjustments on maturing loans and other credits with scheduled repricing.

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Approximately 45% of MidSouth’s loan portfolio earns a variable rate, with 29% adjusting with changes in the prime rate and another 16% adjusting on a scheduled repricing date. Approximately 55% of the loan portfolio earns a fixed rate of interest, the majority of which matures within three years. The mix of variable and fixed rate loans provides some protection to changes in market rates of interest. The impact of the decline in yield over the twelve months ended September 30, 2004 was offset by the $39.8 million average volume increase in the loan portfolio, resulting in a $269,267 increase in interest income on loans in quarterly comparison.

Average investment securities increased $18.4 million, from $136.4 million at September 30, 2003 to $154.8 million at September 30, 2004. The investment portfolio represented 37% of average earning assets as of September 30, 2004, down slightly from 38% in 2003. The average taxable-equivalent yield on investments increased 48 basis points, from 3.62% in the third quarter of 2003 to 4.10% in the third quarter of 2004. Yields were lower in the third quarter 2003 primarily due to short-term, lower yielding investment securities purchased during the third quarter of 2003 with funds received through a public fund deposit contract. Federal funds sold volume increased $1.6 million and yields increased 47 basis points, from .86% to 1.33%, primarily due to a 50 basis points increase in the federal funds rate during the third quarter of 2004. Increased volume combined with higher yields resulted in an increase in taxable-equivalent interest income on securities and federal funds sold of $360,875 in quarterly comparison.

The average volume of interest-bearing deposits increased $43.1 million and resulted in a $267,307 increase in interest expense for the quarter ended September 30, 2004 compared to the quarter ended September 30, 2003. The average rate paid on all interest-bearing deposits increased 15 basis points, from 1.31% at September 30, 2003 to 1.46% at September 30, 2004. The increase resulted primarily from growth in the Platinum Money Market product introduced during the deposit campaign in March 2004 with an introductory rate that averaged 2.05%. The average yield on interest-bearing checking and money market accounts, exclusive of certificates of deposit, increased 44 basis points, from .78% at September 30, 2003 to 1.22% at September 30, 2004. Average noninterest-bearing deposits as a percentage of average total deposits remained constant at 23% for both quarters ending September 30, 2004 and 2003.

The net taxable-equivalent yield on average earning assets decreased 38 basis points, from 5.32% for the quarter ended September 30, 2003 to 4.94% for the quarter ended September 30, 2004. A review of the changes in volume and yields of average earning asset and interest-bearing liabilities between the two nine month periods ended September 30, 2003 and 2004 reflected results similar to the quarterly comparison. The net taxable-equivalent yield on average earning assets for the nine months ended September 30, 2004 decreased 48 basis points, from 5.48% at September 30, 2003 to 5.00% at September 30, 2004.

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Consolidated Average Balances, Interest and Rates
Taxable-equivalent basis (2)
(in thousands)

(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 $256,405 for 2004 and $172,482 for 2003 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 $532,840 for 2004 and $567,778 for 2003. Nonaccrual loans are included in average balances and income on such loans is recognized on a cash basis.

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Changes in Taxable-Equivalent Net Interest Income
(in thousands)

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Consolidated Average Balances, Interest and Rates
Taxable-equivalent basis (2)
(in thousands)

(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 $712,336 for 2004 and $617,614 for 2003 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 $1,466,509 for 2004 and $1,444,424 for 2003. Nonaccrual loans are included in average balances and income on such loans is recognized on a cash basis.

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Changes in Taxable-Equivalent Net Interest Income
(in thousands)

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Non-interest Income

MidSouth’s primary source of non-interest income, service charges on deposit accounts, increased $395,999 or 29% for the three months ended and $778,936 or 20% for the nine months ended September 30, 2004 as compared to the same period in 2003. The increase resulted primarily from an increase in insufficient funds (“NSF”) fees due to an increase in the number of checking accounts and a decrease in fees netted against NSF income which were paid to a software provider. The NSF per item processing fee did not increase and is on the lower end of fees charged by competitors in MidSouth’s markets.

Other non-interest income from charges and fees decreased $129,903 in quarterly comparison and $198,108 in year-to-date comparison, primarily due to decreases of $66,024 for the quarter and $192,656 for the year in Visa merchant income. In the third quarter of 2003, MidSouth outsourced its Visa merchant processing to First Data Corporation. The resulting reduction in Visa merchant income was almost entirely offset by decreases of $62,496 for the quarter and $179,357 for the year in Visa merchant processing expenses that resulted from the processing change. Further comparison reflected quarterly and year-to-date decreases in fee income from third party mortgage origination fees and third party investment advisory services that were partially offset by increases in ATM and debit card income. Fee income from third party mortgage originations decreased due to a lower volume of refinancings. In 2003, the third party investment advisory service had offered a new investment product that stimulated sales and increased income for the three and nine months ended September 30, 2003.

Gains on sales of securities totaled $130,000 for the third quarter of 2004, an increase of $120,000 over the $10,000 in gains reported for the third quarter of 2003. The increase resulted almost entirely from the sale of a correspondent bank’s common stock back to the issuing bank in July of 2004. MidSouth no longer utilized any services with the bank and therefore liquidated its stock position. The $128,000 gain on sale of the common stock brought year-to-date gains on sales of securities to $132,000 at September 30, 2004 compared to $98,000 at September 30, 2003. Sales of $6.5 million in available-for-sale securities in 2003 netted MidSouth the $98,000 gain and allowed improvement of the overall yield on the securities sold as they neared maturity.

Non-interest Expense

Non-interest expense increased $430,243 or 10% and $646,697 or 5% for the three months and nine months ended September 30, 2004 compared to the three and nine months ended September 30, 2003, respectively. Quarterly and year-to-date increases occurred primarily in the categories of salaries and employee benefits, occupancy expenses, marketing expenses and legal fees.

Salaries increased primarily due to an increase in the number of full-time equivalent (“FTE”) employees by 15, from 218 in September 2003 to 233 in September 2004. New positions included additional staff in the call center and retail operations to support MidSouth’s retail stores and enhance customer service. Occupancy expenses increased primarily due to increases in lease expense, ad valorem taxes and bank auto expenses. Costs associated with a deposit incentive contest held during the second quarter of 2004 increased marketing expenses.

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Analysis of Statement of Condition

MidSouth ended the third quarter of 2004 with consolidated assets of $502.2 million, an increase of $69.5 million or 16% from the $432.7 million reported for December 31, 2003. Deposits increased $69.3 million or 19%, from $374.4 million at December 31, 2003 to $443.7 million at September 30, 2004. During the months of March, April and May of 2004, MidSouth held a deposit campaign that resulted in approximately $50 million in new deposits. The campaign introduced MidSouth’s new Platinum Money Market account for both retail and commercial customers, paying an average rate of 2.05%. Significant commercial deposits received during the third quarter of 2003 also contributed to the increase in total deposits.

Net loans increased $32.0 million from $259.1 million at December 31, 2003 to $291.1 at September 30, 2004. The majority of the $32.0 million growth in net loans was funded during the second and third quarters of 2004 and was primarily commercial and real estate credits. Securities available-for-sale increased $16.9 million in the nine months ended September 30, 2004, as purchases of $47.5 million in securities available-for-sale were partially offset by maturities and calls totaling $29.6 million. Net unrealized gains in the securities available-for-sale portfolio, net of unrealized losses and tax effect, were $803,381 at September 30, 2004 compared to a net unrealized gain of $891,374 at December 31, 2003. These amounts result from interest rate fluctuations and do not represent permanent adjustments of value. Moreover, classification of securities as available-for-sale does not necessarily indicate that the securities will be sold prior to maturity.

MidSouth had no overnight or short-term borrowings from the Federal Home Loan Bank (“FHLB”) at September 30, 2004. Overnight and short-term borrowings from the FHLB totaling $12.5 million at December 31, 2003 were paid out during the first quarter of 2004.

Liquidity

Liquidity is the availability of funds to meet contractual obligations as they become due and to fund operations. The Bank’s primary liquidity needs involve its ability to accommodate customers’ demands for deposit withdrawals as well as their requests for credit. Liquidity is deemed adequate when sufficient cash to meet these needs can be promptly raised at a reasonable cost to the Bank.

Liquidity is provided primarily by three sources: a stable base of funding sources, an adequate level of assets that can be readily converted into cash, and borrowing lines with correspondent banks. MidSouth’s core deposits are its most stable and important source of funding. Further, the low variability of the core deposit base lessens the need for liquidity. Cash deposits at other banks, federal funds sold and principal payments

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received on loans and mortgage-backed securities provide additional primary sources of asset liquidity for the Bank. Cash flows from other investment securities provide an additional source of liquidity. MidSouth also has 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 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 $7,000,000 in junior subordinated debentures in February 2001. Interest-bearing balances remaining from the proceeds of the issuance of the debentures and dividends from the Bank provide liquidity for the parent company. As a publicly traded company, MidSouth also has the ability to issue additional trust preferred and other securities instruments to provide funds as needed for operations and future growth of the company.

Capital

MidSouth’s leverage ratio was 9.66% at September 30, 2004 compared to 8.85% at December 31, 2003, primarily due to the additional trust preferred securities that qualified as Tier 1 capital. Accordingly, risk-weighted capital ratios also increased, resulting in Tier 1 capital to risk-weighted assets of 14.08% and total capital to risk-weighted assets of 15.91% at the end of the third quarter of 2004. At year-end 2003, Tier 1 capital to risk-weighted assets was 12.82% and total capital to risk-weighted assets was 13.78%. In November of 2002, MidSouth announced a repurchase program in which the Board of Directors approved the repurchase of up to 5% of the outstanding shares of MidSouth’s common stock. During the nine months ended September 30, 2004, MidSouth repurchased 20,182 shares of its common stock at a total cost of $660,984.

Asset Quality

Credit Risk Management

MidSouth 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. 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. At September 30, 2004, MidSouth had no industry segment concentrations that aggregated more than 10% of the loan portfolio.

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Nonperforming Assets

The following table summarizes MidSouth’s nonperforming assets for the quarters ending September 30, 2004 and 2003 and June 30, 2004 and for the year ended December 31, 2003.