Investor Contacts: Jim McLemore, CFA
President & CEO
                               337.237.8343
                               Lorraine Miller, CFA
                               EVP & CFO
337.593.3143

 

logoa37.jpg
MidSouth Bancorp, Inc. Reports Third Quarter Results
Quarterly Highlights

Reported EPS for Q3 2018 was a loss of $0.34 versus a loss of $0.09 for Q2 2018 due to impact of $4.3 million loan loss provision and $5.5 million of remediation expenses.
Diluted operating EPS for Q3 2018 was a loss of $0.08 versus income of $0.17 for Q2 2018.
Bank level classified assets to capital declined sequentially to 45% from 53%
FTE net interest margin decreased 5 bps sequentially to 3.93% due to loan paydowns
Core deposits were 87.7% of $1.5 billion total deposits.
Funding costs remain low at 50 bps, up 5 bps sequentially for a 20 bps Deposit Beta.
Tangible common equity to tangible assets declined 22 bps sequentially to 8.74%, of which 11 bps was the result of a decline in the investment portfolio directly related to recent increases in interest rates.
Bank Secrecy Act/Anti-Money Laundering ("BSA/AML") Consent Order entered into with the Office of the Comptroller of the Currency ("OCC")

LAFAYETTE, LA., October 30, 2018/BUSINESS WIRE/ -- MidSouth Bancorp, Inc. (“MidSouth”) (NYSE:MSL) today reported a quarterly net loss available to common shareholders of $5.7 million for the third quarter of 2018, or $0.34 per common share, compared to net income available to common shareholders of $856,000 reported for the third quarter of 2017, or $0.05 per common share, and a $1.5 million net loss available to common shareholders for the second quarter of 2018, or $0.09 per common share. The third quarter of 2018 included an after-tax charge of $4.3 million for regulatory remediation costs. For comparison purposes, the second quarter of 2018 included an after-tax charge of $15,000 resulting from costs associated with the bulk loan sale and an after-tax charge of $4.2 million for regulatory remediation costs. Excluding these non-operating expenses, diluted earnings for the third quarter of 2018 were a loss of $1.4 million or $0.08 per common share, compared to income of $2.8 million or $0.17 per diluted share for the second quarter of 2018, and income of $2.0 million or $0.12 per diluted share for the third quarter of 2017.


1


Jim McLemore, President and CEO, remarked “ Our reported earnings for the third quarter continue to be heavily impacted by costs to remediate issues resulting from our 2017 Written Agreement with the OCC and other self-identified issues relating to our BSA/AML program. Although remediation costs remain high, we are making very good progress with remediation efforts and expect to see a significant wind down of remediation efforts in the fourth quarter." Additionally, on October 25, 2018 the Bank entered into a Stipulation to the Issuance of a Consent Order with the OCC relating to deficiencies in the Bank's BSA/AML compliance program. Mr. McLemore commented, "In the process of our top-to-bottom review of the Company we self-identified deficiencies in our BSA/AML program which we quickly reported to the appropriate regulatory officials and began aggressively addressing."

Mr. McLemore continued, "The regulatory order does not include fines or a lookback. The order does not affect our ability to conduct day-to-day business to provide customers with service and products they have come to expect from us. We have already begun updating our BSA/AML policies and procedures, established a required Board committee, and recruited a highly qualified BSA/AML officer. Our commitment is to meet the conditions in the order as soon as possible."

Remediation Update

Mr. McLemore noted, “As we indicated last quarter, work initiated over the past year has been substantially completed for 5 of our 6 major focus areas. The final area where continued work will be undertaken for the remainder of 2018 and into early 2019 will be in our BSA/AML program. We are still anticipating total costs of up to $20 million for our remediation efforts in 2018, having incurred approximately $15 million in remediation costs through the end of the third quarter of 2018. We continue to believe these investments will have a very positive return in terms of increasing the value of the franchise through the reduction of risk and through more efficient and effective processes. Just as importantly, we will now be able to focus more of our efforts on measured growth and improved efficiencies."

Balance Sheet

Consolidated assets declined $32.7 million sequentially and $120.8 million year over year to $1.8 billion at September 30, 2018 compared to $1.9 billion at September 30, 2017 and June 30, 2018. The decline for both periods was largely due to significant reductions in problem credits and impacts associated with branch closures in year over year comparisons. Our stable core deposit base, which excludes time deposits, totaled $1.3 billion for both periods ended September 30, 2018 and June 30, 2018, accounting for 87.7% and 88.5% of deposits during these same periods, respectively. Net loans totaled $0.94 billion, $1.0 billion and $1.2 billion at September 30, 2018, June 30, 2018 and September 30, 2017, respectively.

MidSouth’s Tier 1 leverage capital ratio was 12.53% at September 30, 2018, compared to 12.71% at June 30, 2018. Tier 1 risk-based capital and total risk-based capital ratios were 19.09% and 20.35%, respectively, at September 30, 2018, compared to 18.07% and 19.33%, respectively, at June 30, 2018. Tier 1 common equity to total risk-weighted assets at September 30, 2018 was 13.78%, compared to 13.20% at June 30, 2018. Tangible common equity totaled $155.6 million at September 30, 2018, compared to $162.6 million at June 30, 2018. Tangible book value per common share at September 30, 2018 was $9.35 compared to $9.78 at June 30, 2018.

2



Asset Quality

Nonperforming assets ("NPAs") totaled $52.5 million at September 30, 2018, a decrease of $22.4 million when compared to June 30, 2018. The decrease in non-performing assets was primarily attributed to customer payoffs/ paydowns of $34 million of non-accrual loans in the third quarter. The decrease in nonperforming assets was partially offset by $11.6 million of loans placed on non-accrual during the quarter. Allowance ("ALL") coverage for nonperforming loans increased to 47.49% at September 30, 2018, compared to 31.97% at June 30, 2018. The ALL/total loans ratio was 2.54% at September 30, 2018 and 2.22% at June 30, 2018. The ratio of annualized net charge-offs to total loans increased to 1.40% for the three months ended September 30, 2018 compared to 0.87% for the three months ended June 30, 2018.

Total nonperforming assets to total loans, other real estate owned ("OREO") and other assets repossessed was 5.45% at September 30, 2018 compared to 7.07% at June 30, 2018. Loans classified as accruing troubled debt restructurings, (accruing “TDRs”) totaled $896,000 at September 30, 2018 compared to $1.0 million at June 30, 2018. Total classified assets, including OREO, totaled $91.4 million at September 30, 2018 compared to $105.8 million at June 30, 2018. The classified to capital ratio was 45.1% at September 30, 2018 compared to 52.9% at June 30, 2018.

Mr. McLemore noted, “We made significant progress in the quarter on improving our asset quality. Our Bank Classified to Capital ratio declined to 45% from 53% last quarter and NPAs were reduced by $22 million, or 30% during the third quarter. We took a $4.3 million provision in the third quarter, a significant part of which addressed impairment for a large energy credit. As we've cautioned before, credit costs could very well be choppy and should be evaluated over a longer-term horizon. Overall, we continue to make good progress on asset quality in 2018. Since the Bank's turnaround began in the second quarter of 2017, credit costs have been $32 million versus an initial estimate ranging between $31 million and $50 million and classified to capital has continued to decline, coming in at 72% as of June 30, 2017 and down to 45% at September 30, 2018."

More information on our energy loan portfolio and other information on quarterly results can be found on our website at MidSouthBank.com under Investor Relations/Presentations.



3


Third Quarter 2018 vs. Second Quarter 2018 Earnings Comparison

MidSouth reported a net loss available to common shareholders of $5.7 million for the three months ended September 30, 2018, compared to a net loss available to common shareholders of $1.5 million for the three months ended June 30, 2018. Revenues from consolidated operations decreased $251,000 in sequential-quarter comparison. Net interest income decreased $459,000 in sequential-quarter comparison, resulting from a $303,000 decrease in interest income and a $156,000 increase in interest expense. Operating noninterest income decreased $208,000 in sequential-quarter comparison.

The third quarter of 2018 included non-operating expenses totaling $5.5 million which consisted of $5.5 million of regulatory remediation costs compared to $5.3 million of regulatory remediation costs for the three months ended June 30, 2018. Excluding these non-operating expenses, noninterest expense increased $1.1 million in sequential-quarter comparison due to a $1.4 million increase in legal and professional expenses that was partially offset by a $154,000 decline in salaries and benefits and a $116,000 decline in occupancy expense. The provision for loan losses increased by $3.9 million in sequential-quarter comparison. We recorded an income tax benefit of $1.4 million during the third quarter of 2018 compared to an income tax benefit of $237,000 in the second quarter of 2018.

Dividends on the Series B Preferred Stock issued to the U.S. Treasury as a result of our participation in the Small Business Lending Fund totaled $720,000 for the third quarter of 2018 based on a dividend rate of 9%, unchanged from $720,000 for the second quarter of 2018. Dividends on the Series C Preferred Stock issued with the December 28, 2012 acquisition of PSB Financial Corporation totaled $90,000 for the three months ended September 30, 2018 and June 30, 2018.

Fully taxable-equivalent (“FTE”) net interest income decreased $460,000 in sequential-quarter comparison, primarily due to a decrease of $754,000 in interest income on loans, a $193,000 increase in interest expense on deposits, offset primarily by a $450,000 increase in other interest income. Interest income on loans decreased in sequential-quarter comparison due to a $88.5 million decrease in average loan balances that was partially offset by a 17 bps increase in the average yield on loans. There was a 2 bps increase in the average yield on investment securities in sequential quarters from 2.54% to 2.56% and the average balance of investment securities increased $6.4 million. The average yield on total earning assets increased 1 bps for the same period, from 4.39% to 4.40%, respectively. The FTE net interest margin decreased 4 bps in sequential-quarter comparison, from 3.97% for the second quarter of 2018 to 3.93% for the third quarter of 2018.

4


Third Quarter 2018 vs. Third Quarter 2017 Earnings Comparison

MidSouth reported a net loss available to common shareholders of $5.7 million for the three months ended September 30, 2018, compared to net income available to common shareholders of $856,000 for the three months ended September 30, 2017. Revenues from consolidated operations decreased $2.7 million in quarterly comparison, from $24.3 million for the three months ended September 30, 2017 to $21.6 million for the three months ended September 30, 2018. Net interest income decreased $2.3 million in quarterly comparison, resulting from a $1.9 million decrease in interest income and a $404,000 increase in interest expense. Noninterest income decreased $396,000 in quarterly comparison.

Excluding non-operating expenses of $5.5 million for the third quarter of 2018 and $0.9 million for the third quarter of 2017, noninterest expense increased $1.2 million in quarterly comparison and consisted primarily of a $1.1 million increase in legal and professional expenses, a $187,000 increase in other expenses and $100,000 increase in OREO expense partially offset by a $366,000 reduction in occupancy expenses resulting from branch closures. The provision for loan losses was unchanged in quarterly comparison. A $1.4 million income tax benefit was reported for third quarter 2018, compared to $574,000 income tax expense reported in the third quarter 2017.

Dividends on preferred stock totaled $810,000 for the three months ended September 30, 2018 and 2017, respectively. Dividends on the Series B Preferred Stock were $720,000 for the third quarters of 2018 and 2017, respectively. Dividends on the Series C Preferred Stock totaled $90,000 for the three months ended September 30, 2018 and 2017, respectively.

FTE net interest income decreased $2.5 million in prior year quarterly comparison. Interest income on loans decreased $2.7 million due to a decrease in the average balance of loans of $234.1 million in prior year quarterly comparison. The average yield on loans increased 24 bps in prior year quarterly comparison, from 5.48% to 5.72%.

Investment securities totaled $417.5 million, or 22.9% of total assets at September 30, 2018, compared to $410.0 million, or 21.1% of total assets at September 30, 2017. The investment portfolio had an effective duration of 3.59 years and a net unrealized loss of $8.2 million at September 30, 2018. FTE interest income on investments decreased $331,000 in prior year quarterly comparison. The average volume of investment securities decreased $37.4 million in prior year quarterly comparison, and the average tax equivalent yield on investment securities decreased 9 bps, from 2.65% to 2.56%.

The average yield on all earning assets decreased 16 bps in prior year quarterly comparison, from 4.55% for the third quarter of 2017 to 4.39% for the third quarter of 2018.

Interest expense increased $404,000 in prior year quarterly comparison. Increases in interest expense included a $508,000 increase in interest expense on deposits and a $59,000 increase in interest expense on Trust Preferred Securities ("TruPs"), which were partially offset by a $132,000 decrease in interest expense on repurchase agreements.

As a result of these changes in volume and yield on earning assets and interest-bearing liabilities, the FTE net interest margin decreased 27 bps, from 4.20% for the third quarter of 2017 to 3.93% for the third quarter of 2018.

5



Year-To-Date Earnings Comparison

MidSouth reported a net loss available to common shareholders of $7.6 million for the nine months ended September 30, 2018, compared to a net loss available to common shareholders of $3.7 million for the nine months ended September 30, 2017. Revenues from consolidated operations decreased $5.3 million in year-over-year comparison, from $70.9 million for the nine months ended September 30, 2017 to $65.6 million for the nine months ended September 30, 2018. Net interest income decreased $4.4 million in year-over-year comparison, resulting from a $3.5 million decrease in interest income primarily a result of lower loan income and a $868,000 increase in interest expense. Noninterest income decreased $951,000 in year-over-year comparison and consisted primarily of a $909,000 decrease in service charges on deposits accounts.

Excluding non-operating expenses of $15.8 million for the nine months ended Septemer 30, 2018 and $3.8 million for the nine months ended September 30, 2017, noninterest expense decreased $577,000 in year-over-year comparison and consisted primarily of a $1.2 million decrease in salaries and benefits costs and a $1.2 million decrease in occupancy expense, which was partially offset by increases of $2.7 million in legal and professional fees and $235,000 in other expenses. The provision for loan losses decreased $14.9 million in year-over-year comparison, from $19.6 million for the nine months ended September 30, 2017 to $4.7 million for the nine months ended September 30, 2018. A $1.6 million income tax benefit was reported for the first nine months of 2018, compared to an income tax benefit of $2.1 million for the first nine months of 2017.

In year-to-date comparison, FTE net interest income decreased $4.7 million primarily due to a $3.5 million decrease in interest income from total loans as a result of lower average balances of loans of $165 million for the period as problem loans have been sold or reduced and exposure to energy credits has been limited. This more than offset the 22 bps increase in average loan yields from 5.37% to 5.59%. The average volume of investment securities decreased $52.3 million in year-over-year comparison, and the average yield on investment securities decreased from 2.67% to 2.55% for the same period resulting primarily from recent tax law changes that have reduced yields on tax-exempt municipal bonds. The average yield on earning assets decreased from 4.53% at September 30, 2017 to 4.43% at September 30, 2018.

Interest expense increased $868,000 in year-over-year comparison. Increases in interest expense included a $1.2 million increase in interest expense on deposits. This increase was partially offset by a $538,000 decrease in interest expense on repurchase agreements. The average rate paid on interest-bearing liabilities was 0.52% for the nine months ended September 30, 2018, compared to 0.35% for the nine months ended September 30, 2017. The FTE net interest margin decreased from 4.19% for the nine months ended September 30, 2017 to 4.00% for the nine months ended September 30, 2018.


6


About MidSouth Bancorp, Inc.

MidSouth Bancorp, Inc. is a bank holding company headquartered in Lafayette, Louisiana, with total assets of $1.8 billion as of September 30, 2018. MidSouth Bancorp, Inc. trades on the NYSE under the symbol “MSL.” Through its wholly owned subsidiary, MidSouth Bank, N.A., MidSouth offers a full range of banking services to commercial and retail customers in Louisiana and Texas. MidSouth Bank currently has 42 locations in Louisiana and Texas and is connected to a worldwide ATM network that provides customers with access to more than 55,000 surcharge-free ATMs. Additional corporate information is available at MidSouthBank.com.

Forward-Looking Statements

Certain statements contained herein are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, which involve risks and uncertainties. These statements include, among others, statements regarding expected future financial results, the strength of the Company's balance sheet and its positioning to address problem assets and achieve operating efficiencies and the implementation of the provisions of the formal agreement with the OCC. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “will,” “would,” “could,” “should,” “guidance,” “potential,” “continue,” “project,” “forecast,” “confident,” and similar expressions are typically used to identify forward-looking statements.

These statements are based on assumptions and assessments made by management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate. Any forward-looking statements are not guarantees of our future performance and are subject to risks and uncertainties and may be affected by various factors that may cause actual results, developments and business decisions to differ materially from those in the forward-looking statements. Factors that might cause such a difference include, among other matters, 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 in the markets we serve, including, without limitation, changes related to the oil and gas industries that could adversely affect customers and their ability to repay borrowings under agreed upon terms, adversely affect the value of the underlying collateral related to their borrowings, and reduce demand for loans; increases in competitive pressure in the banking and financial services industries; increased competition for deposits and loans which could affect compositions, 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; our ability to successfully implement and manage our recently announced strategic initiatives; costs and expenses associated with our strategic initiatives and possible changes in the size and components of the expected costs and charges associated with our strategic initiatives; our ability to realize the anticipated benefits and cost savings from our strategic initiatives within the anticipated time frame, if at all; the ability of the Company to comply with the terms of the formal agreement with the Office of the Comptroller of the Currency; credit losses due to loan concentration, particularly our energy lending and commercial real estate portfolios; a deviation in actual experience from the underlying assumptions used to determine and establish our allowance for loan losses (“ALLL”), which could result in greater than expected loan losses; the adequacy of the level of our ALLL and the amount of loan loss provisions required in future periods including the impact of implementation of the new CECL (current expected credit loss) methodology; future examinations by our regulatory authorities, including the possibility that the regulatory authorities may, among other things, impose conditions on our operations or require us to increase our allowance for loan losses or write-down assets; changes in the availability of funds resulting from reduced liquidity or increased costs; the timing and impact of future acquisitions or divestitures, the success or failure of integrating acquired operations, and the ability to capitalize on growth opportunities upon entering new markets; the ability to acquire, operate, and maintain effective and efficient operating systems; increased asset levels and changes in the composition of assets that would impact capital levels and regulatory capital ratios; loss of critical personnel and the challenge of hiring qualified personnel at reasonable compensation levels; legislative and regulatory changes, including the impact of regulations under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and other changes in banking, securities and tax laws and regulations and their application by our regulators, changes in the scope and cost of FDIC insurance and other coverage; regulations and restrictions resulting from our participation in government-sponsored programs such as the U.S. Treasury’s Small Business Lending Fund, including potential retroactive changes in such programs; changes in accounting principles, policies, and guidelines applicable to financial holding companies and banking; increases in cybersecurity risk, including potential business disruptions or financial losses; acts of war, terrorism, cyber intrusion, weather, or other catastrophic events beyond our control; and other factors discussed under the heading “Risk Factors” in MidSouth’s Annual Report on Form 10-K for the year ended December 31, 2017 filed with the SEC on March 16, 2018 and in its other filings with the SEC.

MidSouth does not undertake any obligation to publicly update or revise any of these forward-looking statements, whether to reflect new information, future events or otherwise, except as required by law.

7











MIDSOUTH BANCORP, INC. and SUBSIDIARIES          
Condensed Consolidated Financial Information (unaudited)          
(in thousands except per share data)               
 
 
 
 
 
 
 
 
Three Months Ended
EARNINGS DATA
 
9/30/2018
 
6/30/2018
 
3/31/2018
 
12/31/2017
 
9/30/2017
Total interest income
 
$
18,436

 
$
18,739

 
$
18,997

 
$
20,955

 
$
20,379

Total interest expense
 
1,970

 
1,814

 
1,627

 
1,483

 
1,566

Net interest income
 
16,466

 
16,925

 
17,370

 
19,472

 
18,813

FTE net interest income
 
16,538

 
16,998

 
17,451

 
19,658

 
19,003

Provision for loan losses
 
4,300

 
440

 

 
10,600

 
4,300

Non-interest income
 
5,090

 
4,882

 
4,829

 
6,028

 
5,486

Non-interest expense
 
23,527

 
22,273

 
21,873

 
25,944

 
17,759

Earnings (loss) before income taxes
 
(6,271
)
 
(906
)
 
326

 
(11,044
)
 
2,240

Income tax (benefit) expense
 
(1,373
)
 
(237
)
 
(34
)
 
(540
)
 
574

Net earnings (loss)
 
(4,898
)
 
(669
)
 
360

 
(10,504
)
 
1,666

Dividends on preferred stock
 
810

 
810

 
810

 
810

 
810

Net (loss) earnings available to common shareholders
 
$
(5,708
)
 
$
(1,479
)
 
$
(450
)
 
$
(11,314
)
 
$
856

 
 
 
 
 
 
 
 
 
 
 
PER COMMON SHARE DATA
 
 
 
 
 
 
 
 
 
 
Basic (loss) earnings per share
 
(0.34
)
 
(0.09
)
 
(0.03
)
 
(0.69
)
 
0.05

Diluted (loss) earnings per share
 
(0.34
)
 
(0.09
)
 
(0.03
)
 
(0.69
)
 
0.05

Diluted earnings (loss) per share, operating (Non-GAAP)(*)
 
(0.08
)
 
0.17

 
0.21

 
(0.05
)
 
0.12

Quarterly dividends per share
 
0.01

 
0.01

 
0.01

 
0.01

 
0.01

Book value at end of period
 
12.05

 
12.50

 
12.62

 
12.87

 
13.70

Tangible book value at period end (Non-GAAP)(*)
 
9.35

 
9.78

 
9.89

 
10.11

 
10.92

Market price at end of period
 
15.40

 
13.25

 
12.65

 
13.25

 
12.05

Shares outstanding at period end
 
16,641,105

 
16,619,894

 
16,621,811

 
16,548,829

 
16,548,829

Weighted average shares outstanding
 
 
 
 
 
 
 
 
 
 
Basic
 
16,557,664

 
16,525,571

 
16,495,438

 
16,460,124

 
16,395,317

Diluted
 
16,557,664

 
16,525,571

 
16,495,438

 
16,460,124

 
16,395,740

 
 
 
 
 
 
 
 
 
 
 
AVERAGE BALANCE SHEET DATA
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
1,830,834

 
$
1,860,906

 
$
1,860,070

 
$
1,907,735

 
$
1,954,343

Loans and leases
 
1,020,834

 
1,109,371

 
1,159,671

 
1,238,846

 
1,254,885

Total deposits
 
1,503,528

 
1,514,321

 
1,495,907

 
1,513,156

 
1,546,837

Total common equity
 
209,010

 
210,291

 
214,183

 
228,386

 
227,948

Total tangible common equity (Non-GAAP)(*)
 
164,020

 
165,024

 
168,629

 
182,568

 
181,851

Total equity
 
249,997

 
251,278

 
255,170

 
269,373

 
269,035

 
 
 
 
 
 
 
 
 
 
 
SELECTED RATIOS
 
 
 
 
 
 
 
 
 
 
Annualized return on average assets, operating (Non-GAAP)(*)
 
(0.30
)%
 
0.59
%
 
0.76
%
 
(0.17
)%
 
0.41
%
Annualized return on average common equity, operating (Non-GAAP)(*)
 
(2.60
)%
 
5.22
%
 
6.59
%
 
(1.40
)%
 
3.51
%
Annualized return on average tangible common equity, operating (Non-GAAP)(*)
 
(3.31
)%
 
6.65
%
 
8.37
%
 
(1.75
)%
 
4.40
%
Efficiency ratio, operating (Non-GAAP)(*)
 
83.36
 %
 
77.38
%
 
75.57
%
 
69.14
 %
 
66.24
%
Average loans to average deposits
 
67.90
 %
 
73.26
%
 
77.52
%
 
81.87
 %
 
81.13
%
Tier 1 leverage capital ratio
 
12.53
 %
 
12.71
%
 
12.80
%
 
12.53
 %
 
12.84
%
 
 
 
 
 
 
 
 
 
 
 
CREDIT QUALITY
 
 
 
 
 
 
 
 
 
 
Allowance for loan and lease losses (ALLL) as a % of total loans
 
2.54
 %
 
2.22
%
 
2.23
%
 
2.27
 %
 
2.03
%
Nonperforming assets to tangible equity + ALLL
 
23.75
 %
 
32.99
%
 
36.86
%
 
24.35
 %
 
21.83
%
Nonperforming assets to total loans, other real estate owned and other repossessed assets
 
5.45
 %
 
7.07
%
 
7.47
%
 
4.83
 %
 
4.35
%
Annualized QTD net charge-offs to total loans
 
1.40
 %
 
0.87
%
 
0.54
%
 
2.94
 %
 
1.26
%
 
 
 
 
 
 
 
 
 
 
 
(*) See reconciliation of Non-GAAP financial measures.

8



MIDSOUTH BANCORP, INC. and SUBSIDIARIES          
Condensed Consolidated Balance Sheets (unaudited)       
(in thousands)               
 
 
 
 
 
 
 
 
 
 
 
BALANCE SHEET
 
September 30,
 
June 30,
 
March 31,
 
December 31,
 
September 30,
 
 
2018
 
2018
 
2018
 
2017
 
2017
Assets
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
302,888

 
$
278,776

 
$
211,486

 
$
152,964

 
$
163,123

Securities available-for-sale
 
352,606

 
308,937

 
293,970

 
309,191

 
326,222

Securities held-to-maturity
 
64,893

 
67,777

 
73,255

 
81,052

 
83,739

Total investment securities
 
417,499

 
376,714

 
367,225

 
390,243

 
409,961

Other investments
 
16,508

 
14,927

 
12,896

 
12,214

 
12,200

Loans held for sale
 

 

 
1,117

 
15,737

 

Total loans
 
962,743

 
1,057,963

 
1,137,255

 
1,183,426

 
1,235,969

Allowance for loan losses
 
(24,450
)
 
(23,514
)
 
(25,371
)
 
(26,888
)
 
(25,053
)
Loans, net
 
938,293

 
1,034,449

 
1,111,884

 
1,156,538

 
1,210,916

Premises and equipment
 
56,006

 
56,834

 
57,848

 
59,057

 
64,969

Goodwill and other intangibles
 
44,856

 
45,133

 
45,409

 
45,686

 
45,963

Other assets
 
50,204

 
52,084

 
49,890

 
48,713

 
39,934

Total assets
 
$
1,826,254

 
$
1,858,917

 
$
1,857,755

 
$
1,881,152

 
$
1,947,066

 
 
 

 
 

 
 

 
 

 
 

Liabilities and Shareholders' Equity
 
 
 
 
 
 
 
 
 
 
Non-interest bearing deposits
 
$
425,696

 
$
427,504

 
$
416,547

 
$
428,183

 
$
428,419

Interest-bearing deposits
 
1,083,433

 
1,076,433

 
1,063,142

 
1,127,752

 
1,107,801

Total deposits
 
1,509,129

 
1,503,937

 
1,479,689

 
1,555,935

 
1,536,220

 
 
 
 
 
 
 
 
 
 
 
Securities sold under agreements to repurchase
 
13,676

 
33,026

 
67,133

 
54,875

 
90,799

Short-term FHLB advances
 
27,500

 
27,500

 
40,000

 
12,500

 

Long-term FHLB advances
 
6

 
10,016

 
10,021

 
25,110

 
25,211

Junior subordinated debentures
 
22,167

 
22,167

 
22,167

 
22,167

 
22,167

Other liabilities
 
12,325

 
10,272

 
8,127

 
8,836

 
9,602

Total liabilities
 
1,584,803

 
1,606,918

 
1,627,137

 
1,679,423

 
1,683,999

Total shareholders' equity
 
$
241,451

 
$
250,837

 
$
254,015

 
$
267,643

 
$
261,570

Total liabilities and shareholders' equity
 
$
1,826,254

 
$
1,857,755

 
$
1,881,152

 
$
1,947,066

 
$
1,945,569


9


MIDSOUTH BANCORP, INC. and SUBSIDIARIES
 
 
 
 
 
 
 
 
 
 
Condensed Consolidated Income Statements (unaudited)
 
 
 
 
 
 
 
 
 
(in thousands except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EARNINGS STATEMENT
 
Three Months Ended
 
Nine Months Ended
 
 
 
9/30/2018
 
6/30/2018
 
3/31/2018
 
12/31/2017
 
9/30/2017
 
9/30/2018
 
9/30/2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans, including fees
 
$
14,547

 
$
15,251

 
$
15,905

 
$
17,731

 
$
17,064

 
$
45,702

 
$
49,941

 
Investment securities
 
2,429

 
2,370

 
2,363

 
2,515

 
2,639

 
7,162

 
8,163

 
Accretion income
 
43

 
93

 
110

 
295

 
265

 
246

 
741

 
Other interest income
 
1,417

 
1,025

 
619

 
414

 
411

 
3,061

 
823

 
Total interest income
 
18,436

 
18,739

 
18,997

 
20,955

 
20,379

 
56,171

 
59,668

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deposits
 
1,602

 
1,410

 
1,238

 
$
1,097

 
1,094

 
4,249

 
3,002

 
Borrowings
 
102

 
150

 
174

 
277

 
350

 
427

 
1,177

 
Junior subordinated debentures
 
271

 
259

 
220

 
198

 
212

 
750

 
632

 
Accretion income
 
(5
)
 
(5
)
 
(5
)
 
(89
)
 
(90
)
 
(15
)
 
(268
)
 
Total interest expense
 
1,970

 
1,814

 
1,627

 
1,483

 
1,566

 
5,411

 
4,543

 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
Net interest income
 
16,466

 
16,925

 
17,370

 
19,472

 
18,813

 
50,760

 
55,125

 
Provision for loan losses
 
4,300

 
440

 

 
10,600

 
4,300

 
4,740

 
19,600

 
Net interest income after provision for loan losses
 
12,166

 
16,485

 
17,370

 
8,872

 
14,513

 
46,020

 
35,525

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noninterest income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Service charges on deposit accounts
 
2,159

 
2,065

 
2,206

 
2,385

 
2,463

 
6,430

 
7,339

 
Other service charges
 
1,796

 
1,877

 
1,784

 
1,756

 
1,687

 
5,457

 
5,156

 
Mortgage lending
 
29

 
66

 
92

 
162

 
155

 
187

 
465

 
Other noninterest income
 
1,106

 
874

 
747

 
1,725

 
1,181

 
2,728

 
2,793

 
Total noninterest income
 
5,090

 
4,882

 
4,829

 
6,028

 
5,486

 
14,802

 
15,753

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noninterest expense:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Salaries and employee benefits
 
7,762

 
7,916

 
7,719

 
7,729

 
7,849

 
23,398

 
24,648

 
Occupancy expense
 
3,077

 
3,193

 
3,045

 
3,357

 
3,443

 
9,315

 
10,494

 
ATM and debit card
 
653

 
648

 
576

 
633

 
654

 
1,876

 
2,088

 
Legal and professional
 
2,543

 
1,100

 
1,689

 
1,449

 
1,404

 
5,298

 
2,726

 
FDIC premiums
 
360

 
507

 
430

 
297

 
448

 
1,296

 
1,275

 
Marketing
 
344

 
281

 
195

 
353

 
302

 
820

 
844

 
Corporate development
 
274

 
248

 
237

 
258

 
189

 
759

 
758

 
Data processing
 
730

 
666

 
665

 
712

 
640

 
2,061

 
1,928

 
Printing and supplies
 
153

 
133

 
123

 
110

 
81

 
409

 
399

 
Expenses on OREO, net
 
115

 
138

 
76

 
331

 
15

 
329

 
186

 
Amortization of core deposit intangibles
 
277

 
276

 
277

 
276

 
277

 
830

 
830

 
Other non-interest expense
 
7,239

 
7,167

 
6,761

 
10,439

 
2,457

 
21,282

 
8,417

 
Total noninterest expense
 
23,527

 
22,273

 
21,793

 
25,944

 
17,759

 
67,673

 
54,593

 
Earnings (loss) before income taxes
 
(6,271
)
 
(906
)
 
406

 
(11,044
)
 
2,240

 
(6,851
)
 
(3,315
)
 
Income tax (benefit)/expense
 
(1,373
)
 
(237
)
 
(34
)
 
(540
)
 
574

 
(1,644
)
 
(2,058
)
 
Net (loss) earnings
 
(4,898
)
 
(669
)
 
440

 
(10,504
)
 
1,666

 
(5,207
)
 
(1,257
)
 
Dividends on preferred stock
 
810

 
810

 
810

 
810

 
810

 
2,430

 
2,432

 
Net (loss) earnings available to common shareholders
 
$
(5,708
)
 
$
(1,479
)
 
$
(370
)
 
$
(11,314
)
 
$
856

 
$
(7,637
)
 
$
(3,689
)
 
 
 
 
 
 
 
 
 


 

 
 
 
 
 
(Loss) earnings per common share, diluted
 
$
(0.34
)
 
$
(0.09
)
 
$
(0.03
)
 
$
(0.69
)
 
$
0.05

 
$
(0.46
)
 
$
(0.28
)
 
 
 
 
 
 
 
 
 


 

 
 
 
 
 
Operating (loss) earnings per common share, diluted (Non-GAAP)(*)
 
$
(0.08
)
 
$
0.17

 
$
0.21

 
$
(0.05
)
 
$
0.12

 
$
0.29

 
$
(0.12
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(*) See reconciliation of Non-GAAP financial measures.
 
 
 
 
 

10


 
 
 
 
 
September 30,
 
June 30,
 
 
March 31,
 
December 30,
 
September 30,
 
COMPOSITION OF LOANS
 
2018
 
2018
 
 
2018
 
2017
 
2017
 
Commercial, financial, and agricultural
 
$
294,971

 
$
354,944

 
 
$
401,048

 
$
435,207

 
$
447,482

 
Real estate - construction
 
90,444

 
98,108

 
 
94,679

 
90,287

 
90,088

 
Real estate - commercial
 
394,416

 
414,526

 
 
438,779

 
448,406

 
473,046

 
Real estate - residential
 
136,151

 
141,104

 
 
145,671

 
146,751

 
155,676

 
Consumer and other
 
46,169

 
48,649

 
 
56,386

 
62,043

 
68,917

 
Lease financing receivable
 
592

 
632

 
 
692

 
732

 
760

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total loans
 
$
962,743

 
$
1,057,963

 
 
$
1,137,255

 
$
1,183,426

 
$
1,235,969

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
September 30,
 
June 31,
 
 
March 31,
 
December 31,
 
September 30,
 
COMPOSITION OF DEPOSITS
 
2018
 
2018
 
 
2018
 
2017
 
2017
 
Noninterest bearing
 
$
425,696

 
$
419,577

 
 
$
427,504

 
$
416,547

 
$
428,183

 
NOW & other
 
442,487

 
461,726

 
 
459,394

 
434,646

 
461,740

 
Money market/savings
 
454,867

 
466,711

 
 
441,801

 
446,215

 
473,023

 
Time deposits of less than $100,000
 
162,175

 
111,758

 
 
113,665

 
116,309

 
120,685

 
Time deposits of $100,000 or more
 
23,904

 
63,308

 
 
61,573

 
65,972

 
72,304

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total deposits
 
$
1,509,129

 
$
1,523,080

 
 
$
1,503,937

 
$
1,479,689

 
$
1,555,935

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
September 30,
 
June 30,
 
 
March 31,
 
December 31,
 
September 30,
 
ASSET QUALITY DATA
 
2018
 
2018
 
 
2018
 
2017
 
2017
 
Nonaccrual loans
 
$
51,476

 
$
73,538

 
 
$
82,275

 
$
49,278

 
$
51,289

 
Loans past due 90 days and over
 
7

 
3

 
 
1

 
728

 
402

 
Total nonperforming loans
 
51,483

 
73,541

 
 
82,276

 
50,006

 
51,691

 
Nonperforming loans held for sale
 

 

 
 
808

 
5,067

 

 
Other real estate
 
1,022

 
1,365

 
 
1,803

 
2,001

 
1,931

 
Other repossessed assets
 

 

 
 
194

 
192

 
234

 
Total nonperforming assets
 
$
52,505

 
$
74,906

 
 
$
85,081

 
$
57,266

 
$
53,856

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Troubled debt restructurings, accruing
 
$
896

 
$
1,010

 
 
$
1,153

 
$
1,360

 
$
1,557

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nonperforming assets to total assets
 
2.88
%
 
4.03
%
 
 
4.58
%
 
3.04
%
 
2.77
%
 
Nonperforming assets to total loans + ORE + other repossessed assets
 
5.45
%
 
7.07
%
 
 
7.47
%
 
4.83
%
 
4.35
%
 
ALLL to nonperforming loans
 
47.49
%
 
31.97
%
 
 
30.84
%
 
53.77
%
 
48.47
%
 
ALLL to total loans
 
2.54
%
 
2.22
%
 
 
2.23
%
 
2.27
%
 
2.03
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter-to-date charge-offs
 
4,339

 
2,801

 
 
1,836

 
8,931

 
4,381

 
Quarter-to-date recoveries
 
974

 
505

 
 
319

 
166

 
460

 
Quarter-to-date net charge-offs
 
3,365

 
2,296

 
 
1,517

 
8,765

 
3,921

 
Annualized QTD net charge-offs to total loans
 
1.40
%
 
0.87
%
 
 
0.54
%
 
2.94
%
 
1.26
%
 


11


MIDSOUTH BANCORP, INC. and SUBSIDIARIES             
 
 
 
 
Tangible Common Equity to Tangible Assets and Regulatory Ratios (unaudited)
 
 
 
 
(in thousands)    
 
 
 
 
 
 
 
 
 
COMPUTATION OF TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS
 
September 30,
 
September 30,
 
 
2018
 
2017
Total equity
 
$
241,451

 
$
267,643

Less:
 


 


Preferred equity
 
40,972

 
40,987

Total common equity
 
200,479

 
226,656

Less:
 
 
 
 
Goodwill
 
42,171

 
42,171

Other intangible assets
 
2,685

 
3,792

Total tangible common equity
 
$
155,623

 
$
180,693

 
 
 
 
 
Total assets
 
$
1,826,254

 
$
1,947,066

Less:
 
 
 
 
Goodwill
 
42,171

 
42,171

Other intangible assets
 
2,685

 
3,792

Total tangible assets
 
$
1,781,398

 
$
1,901,103

 
 
 
 
 
Tangible common equity to tangible assets
 
8.74
%
 
9.50
%
 
 
 
 
 
REGULATORY CAPITAL
 
 
 
 
 
 
 
 
 
Common equity tier 1 capital
 
$
162,025

 
$
182,768

Tier 1 capital
 
224,496

 
245,254

Total capital
 
239,324

 
263,365

 
 
 
 
 
Regulatory capital ratios:
 
 
 
 
Common equity tier 1 capital ratio
 
13.78
%
 
12.68
%
Tier 1 risk-based capital ratio
 
19.09
%
 
17.01
%
Total risk-based capital ratio
 
20.35
%
 
18.27
%
Tier 1 leverage ratio
 
12.53
%
 
12.84
%


12


MIDSOUTH BANCORP, INC. and SUBSIDIARIES             
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarterly Yield Analysis (unaudited)   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(in thousands)    
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
YIELD ANALYSIS
 
Three Months Ended
 
Three Months Ended  
 
Three Months Ended  
 
Three Months Ended  
 
Three Months Ended  
 
September 30, 2018
 
June 30, 2018
 
March 31, 2018
 
December 31, 2017
 
September 30, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tax
 
 
 
 
 
Tax
 
 
 
 
 
Tax
 
 
 
 
 
Tax
 
 
 
 
 
Tax
 
 
 
 
Average
 
Equivalent
 
Yield/
 
Average
 
Equivalent
 
Yield/
 
Average
 
Equivalent
 
Yield/
 
Average
 
Equivalent
 
Yield/
 
Average
 
Equivalent
 
Yield/
 
 
Balance
 
Interest
 
Rate
 
Balance
 
Interest
 
Rate
 
Balance
 
Interest
 
Rate
 
Balance
 
Interest
 
Rate
 
Balance
 
Interest
 
Rate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Taxable securities
 
$
347,205

 
$
2,156

 
2.48
%
 
$
340,080

 
$
2,093

 
2.46
%
 
$
334,419

 
$
2,047

 
2.45
%
 
$
348,267

 
$
2,161

 
2.48
%
 
$
372,648

 
$
2,276

 
2.44
%
Tax-exempt securities(*)
 
43,151

 
345

 
3.20
%
 
43,858

 
351

 
3.20
%
 
50,550

 
400

 
3.17
%
 
53,998

 
448

 
3.32
%
 
55,129

 
558

 
4.05
%
Total investment securities
 
390,356

 
2,501

 
2.56
%
 
383,938

 
2,444

 
2.54
%
 
384,969

 
2,447

 
2.54
%
 
402,265

 
2,609

 
2.59
%
 
427,777

 
2,834

 
2.65
%
Federal funds sold
 
7,250

 
32

 
1.77
%
 
5,008

 
21

 
1.63
%
 
4,978

 
18

 
1.45
%
 
4,441

 
15

 
1.32
%
 
4,319

 
13

 
1.18
%
Interest bearing deposits in other banks
 
250,349

 
1,279

 
2.04
%
 
201,281

 
912

 
1.79
%
 
132,940

 
514

 
1.55
%
 
94,394

 
314

 
1.30
%
 
94,675

 
305

 
1.26
%
Other investments
 
15,640

 
106

 
2.71
%
 
14,924

 
91

 
2.45
%
 
12,721

 
87

 
2.74
%
 
12,201

 
85

 
2.79
%
 
12,098

 
93

 
3.07
%
Loans
 
1,020,834

 
14,590

 
5.72
%
 
1,109,371

 
15,344

 
5.55
%
 
1,159,671

 
16,015

 
5.60
%
 
1,238,846

 
18,026

 
5.77
%
 
1,254,885

 
17,329

 
5.48
%
Total interest earning assets
 
1,684,429

 
18,508

 
4.40
%
 
1,714,522

 
18,812

 
4.39
%
 
1,695,279

 
19,081

 
4.56
%
 
1,752,147

 
21,049

 
4.81
%
 
1,793,754

 
20,574

 
4.59
%
Non-interest earning assets
 
146,405

 
 
 
 
 
146,384

 
 
 
 
 
164,791

 
 
 
 
 
155,588

 
 
 
 
 
160,589

 
 
 
 
Total assets
 
$
1,830,834

 
 
 
 
 
$
1,860,906

 
 
 
 
 
$
1,860,070

 
 
 
 
 
$
1,907,735

 
 
 
 
 
$
1,954,343

 
 
 
 
Interest-bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deposits
 
$
1,083,404

 
$
1,602

 
0.59
%
 
$
1,087,746

 
$
1,409

 
0.52
%
 
$
1,071,484

 
$
1,238

 
0.47
%
 
$
1,085,349

 
$
1,097

 
0.40
%
 
$
1,118,593

 
$
1,094

 
0.39
%
Repurchase agreements
 
14,641

 
16

 
0.44
%
 
26,230

 
25

 
0.39
%