MidSouth Bancorp, Inc. Reports Second Quarter 2019 Results

Share Name	Share Symbol	Market	Type
Midsouth Bancorp Inc	NYSE:MSL	NYSE	Common Stock

	Price Change	% Change	Share Price	High Price	Low Price	Open Price	Shares Traded	Last Trade
	0.00	0.00%	11.44				0	01:00:00

Midsouth Bancorp (NYSE:MSL)
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Quarterly Highlights

Reported EPS for the second quarter of 2019 was a loss of $0.22 versus a loss of $0.09 for the second quarter of 2018 primarily due to the impact of a $3.8 million impairment charge for a shared national healthcare credit.
Bank level classified assets to capital were 32% for the second quarter of 2019 compared to 25% in the first quarter of 2019.
FTE net interest margin of 4.00% showed an increase of 11 basis points from first quarter 2019, which included a 13 basis point impact due to the reversal of accrued interest in the first quarter of 2019 for a shared national healthcare credit.
Funding costs of 54 basis points were stable with core deposits comprising a strong 88% of total deposits.
Tangible common equity to tangible assets at June 30, 2019 was 8.1% compared to 8.0% at March 31, 2019.

MidSouth Bancorp, Inc. (“MidSouth”) (NYSE:MSL) today reported a quarterly net loss available to common shareholders of $3.7 million for the second quarter of 2019 compared to net loss available to common shareholders of $1.5 million for the second quarter of 2018 and $6.6 million in net loss available to common shareholders for the first quarter of 2019. The second quarter loss is primarily due to the $3.8 million impairment charge for a shared national healthcare credit with 91% of the loan being fully reserved for and $1.1 million of expense related to the anticipated merger with Hancock Whitney Corporation. MidSouth has two additional pass rated shared national credits with a balance of $12.2 million and $22.0 million committed. The second quarter of 2018 included an after-tax charge of $4.2 million resulting from regulatory remediation costs. Excluding non-operating expenses, a loss of $0.17 per diluted share was reported for the second quarter of 2019 compared to loss per diluted share of $0.40 for the first quarter of 2019 and earnings per diluted share of $0.17 for the second quarter of 2018.

Balance Sheet

Consolidated assets decreased $143.8 million to $1.7 billion at June 30, 2019 from $1.9 billion at June 30, 2018 and essentially unchanged from March 31, 2019. Our stable core deposit base, which excludes time deposits, totaled $1.2 billion at June 30, 2019 and March 31, 2019 and accounted for 87.8% and 87.65% of deposits at June 30, 2019 and March 31, 2019, respectively. Net loans totaled $851.9 million at June 30, 2019, compared to $868.9 million at March 31, 2019 and $1.0 billion at June 30, 2018. Loans held for sale of $10.3 million at June 30, 2019 increased from $1.5 million at March 31, 2019, with an anticipated loan sale of some or all these loans set to close in the 3rd quarter of 2019.

MidSouth’s Tier 1 leverage capital ratio was 11.53% at June 30, 2019, compared to 11.60% at March 31, 2019. Tier 1 risk-based capital and total risk-based capital ratios were 18.23% and 19.50% at June 30, 2019, respectively, essentially unchanged from March 31, 2019. Tier 1 common equity to total risk-weighted assets at June 30, 2019 was 12.37%, compared to 12.48% at March 31, 2019. Tangible common equity totaled $136.0 million at June 30, 2019, unchanged from March 31, 2019. Tangible book value per share at June 30, 2019 remained constant versus the first quarter at $8.13.

Asset Quality

Nonperforming assets totaled $23.7 million at June 30, 2019, a decrease of $239,000 compared to $23.9 million reported at March 31, 2019. Allowance coverage for nonperforming loans increased to 120.79% at June 30, 2019 compared to 106.85% at March 31, 2019. The ALLL/total loans ratio was 3.20% at June 30, 2019 compared to 2.77% at March 31, 2019. The ratio of annualized net charge-offs to total loans increased to 0.64% for the three months ended June 30, 2019 compared to 0.11% at March 31, 2019, which was primarily the result of two commercial loan charge-offs in the second quarter totaling $906,000.

Total nonperforming assets to total loans plus ORE and other assets repossessed were 2.69% at June 30, 2019 compared to 2.68% at March 31, 2019. Loans classified as troubled debt restructurings, totaled $593,000 at June 30, 2019 compared to $713,000 at March 31, 2019. Total classified assets, including ORE, were $55.7 million at June 30, 2019 compared to $44.4 million at March 31, 2019, as downgrades outpaced upgrades, pay downs/pay offs, and scheduled principal amortization during the quarter. The two largest downgrades were in the commercial real estate portfolio totaling $6.5 million or approximately 59% of the total classified downgrades. As a result, the classified assets to capital ratio at MidSouth Bank was 32% at June 30, 2019 versus 25% at March 31, 2019.

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.

Second Quarter 2019 vs. First Quarter 2019 Earnings Comparison

MidSouth reported a net loss available to common shareholders of $3.7 million for the three months ended June 30, 2019, compared to net loss available to common shareholders of $6.6 million for the three months ended March 31, 2019. Revenues from consolidated operations decreased $982,000 from $23.7 million in the first quarter of 2019 to $22.7 million in the second quarter of 2019, primarily as a result of the first quarter gain on sale of loans of $1.3 million in the first quarter.

The second quarter of 2019 included merger related expenses of $1.1 million. The first quarter of 2019 did not include any merger related expenses. Excluding these non-operating expenses, compared with the first quarter of 2019 noninterest expense decreased $2.2 million in the second quarter of 2019. Between the first and quarters of 2019, salaries and employee benefits expense decreased $761,000, occupancy expenses declined $345,000 and ongoing legal and professional fees declined $719,000, primarily as a result of the completion of remediation efforts.

The provision for loan losses decreased $2.8 million from the first quarter 2019 compared to the second quarter 2019. Excluding the impact of provisioning for the previously mentioned shared national healthcare credit, the provision for loan losses was essentially unchanged on a sequential quarterly basis at $1.0 million.

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 second quarter of 2019 and the first quarter of 2019 based on a dividend rate of 9%. Dividends on the Series C Preferred Stock totaled $90,000 for the three months ended June 30, 2019 and March 31, 2019.

Fully taxable-equivalent (“FTE”) net interest income increased $509,000 from the first quarter 2019 to the second quarter 2019, primarily due to an increase in interest income on other investments and interest bearing deposits with other banks of $314,000 and $220,000, respectively, offset by a decline in tax exempt securities interest income of $120,000 due to recent selling of municipal bonds. Loan yields increased 11 basis points from first quarter levels which were depressed by the reversal of income for a significant shared national healthcare credit. The average yield on investment securities decreased 8 basis points, from 2.86% to 2.78%, due to a continued repositioning of the bond portfolio through the sale of higher yielding municipal and corporate bonds and the timing impact of the sales and reinvestments on average balances. The average yield on total earning assets increased 10 bps for the same period, from 4.41% to 4.51%, respectively. The FTE net interest margin increased 11 bps from 3.89% for the first quarter 2019 to 4.00% for the second quarter of 2019.

Second Quarter 2019 vs. Second Quarter 2018 Earnings Comparison

MidSouth reported a net loss available to common shareholders of $3.7 million for the three months ended June 30, 2019 compared to net loss available to common shareholders of $1.5 million for the three months ended June 30, 2018. Net interest income decreased $1.0 million in quarterly comparison, resulting from a $793,000 decrease in interest income primarily driven by lower loan levels, in addition to a higher interest expense of $216,000 reflecting the impact of higher interest rates. Operating noninterest income decreased $295,000, which excludes $202,000 gains on sales of investments.

Excluding remediation expenses of $5.3 million for the second quarter of 2018 and merger-related expenses of $1.1 million for the second quarter of 2019, noninterest expenses increased $750,000 in quarterly comparison and consisted primarily of a $1.0 million increase in salary and employee benefits costs from the additional staffing necessary in connection with regulatory remediation efforts. The provision for loan losses increased $4.3 million in quarterly comparison, from $440,000 for the three months ended June 30, 2018 to $4.8 million for the three months ended June 30, 2019 resulting primarily from the impairment of the above-mentioned shared healthcare credit. We recorded an income tax benefit of $237,000 for the second quarter of 2018 versus no benefit for the second quarter of 2019.

Interest income on loans decreased $2.3 million between the second quarter 2018 compared with the same quarter 2019 primarily due to a $219.2 million decline in average loans given ongoing efforts to reduce problem loans and slower loan originations due to an internal focus on improving loan portfolio management and loan operations.

Investment securities totaled $458.9 million, or 26.8% of total assets at June 30, 2019, versus $376.7 million, or 20.3% of total assets at June 30, 2018. The investment portfolio had an effective duration of 2.13 years, as measured on a 100 basis point parallel shock in interest rates, and a net unrealized gain of $4.2 million at June 30, 2019. FTE interest income on investments increased $859,000 in prior year quarterly comparison. The average volume of investment securities increased $90.8 million in prior year quarterly comparison, and the average tax equivalent yield on investment securities increased 24 basis points, from 2.54% to 2.78%.

The average yield on all earning assets increased 12 basis points in prior year quarterly comparison, from 4.39% for the second quarter of 2018 to 4.51% for the second quarter of 2019, due to higher yields in the loan and investment portfolios offsetting the change of mix of interest earning assets on a year-over-year basis.

Interest expense increased $216,000 in prior year quarterly comparison primarily due to a $256,000 increase in interest expense on deposits and a $23,000 increase in interest expense on junior subordinated debt, which were partially offset by a $63,000 decrease in interest expense on repurchase agreements and FHLB borrowings.

As a result of these changes in volume and yield on earning assets and interest-bearing liabilities, the FTE net interest margin decreased 12 basis points, from 4.12% for the second quarter of 2018 to 4.00% for the second quarter of 2019.

Six Months Ended June 30, 2019 vs Six Months Ended June 30, 2018

MidSouth reported a net loss available to common shareholders of $10.4 million for the six months ended June 30, 2019 compared to net loss available to common shareholders of $1.9 million for six months ended June 30, 2018. Revenues from consolidated operations decreased $993,000 in quarterly comparison, from $47.4 million for the six months ended June 30, 2018 to $46.5 million for the six months ended June 30, 2019.

Excluding remediation expenses of $9.2 million for the first six months of 2018 and merger-related expenses of $1.1 million for the first six months of 2019, noninterest expenses increased $2.7 million in semiannual comparison and consisted primarily of a $3.0 million increase in salary and employee benefits costs from the additional staffing necessary in connection with regulatory remediation efforts. The provision for loan losses increased $11.9 million in prior year comparison, from $440,000 for the six months ended June 30, 2018 to $12.4 million for the six months ended June 30, 2019 due primarily to impairment of the shared healthcare credit. We recorded an income tax benefit of $271,000 for the first six months of 2018 versus no benefit for the first six months of 2019.

Dividends on preferred stock totaled $1.6 million for the six months ended June 30, 2019 and 2018. Dividends on the Series B Preferred Stock were $1.4 million for the six months ended June 30, 2019 and 2018. Dividends on the Series C Preferred Stock totaled $180,000 for the six months ended June 30, 2019 and 2018.

Interest income on loans decreased $5.3 million primarily due to a $238.6 million decline in average loans given ongoing efforts to reduce problem loans and slower loan originations due to an internal focus on improving loan portfolio management and loan operations.

The average volume of investment securities increased $47.5 million in prior year comparison, and the average tax equivalent yield on investment securities increased 37 basis points, from 2.55% to 2.92% at June 30, 2019 .

The average yield on all earning assets increased 12 basis points in prior year comparison, from 4.56% for 2019 to 4.44% for 2019, due to a less favorable mix of earning assets given the decline in loans on a year-over-year basis.

Interest expense increased $652,000 in prior year comparison primarily due to a $698,000 increase in interest expense on deposits and a $91,000 increase in interest expense on junior subordinated debt, which were partially offset by a $137,000 decrease in interest expense on repurchase agreements and FHLB borrowings.

As a result of these changes in volume and yield on earning assets and interest-bearing liabilities, the FTE net interest margin decreased 2 basis points, from 4.04% for the six months of 2018 to 4.02% for the six months of 2019.

About MidSouth Bancorp, Inc.

MidSouth Bancorp, Inc. is a bank holding company headquartered in Lafayette, Louisiana, with assets of $1.7 billion as of June 30, 2019. 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.

Non-GAAP Financial Measures

This press release, including the accompanying financial statement tables, contains financial information determined by methods other than in accordance with generally accepted accounting principles, or GAAP. This financial information includes certain operating performance measures, which exclude charges that are not considered part of recurring operations. Non-GAAP measures in this press release include, but are not limited to, descriptions such as “operating noninterest income,” “operating (loss) earnings per share,” “tangible common equity”, “tangible book value per share,” “operating return on average common equity,” “operating return on average assets,” and “operating efficiency ratio.” In addition, this press release, consistent with SEC Industry Guide 3, presents total revenue, net interest income, net interest margin, "non-operating expenses" and efficiency ratios on a fully taxable equivalent (“FTE”) basis, and ratios on an annualized basis. The FTE basis adjusts for the tax-favored status of net interest income from certain loans and investments using a federal tax rate of 21% for all periods beginning on or after January 1, 2018, as well as state income taxes, where applicable, to increase tax-exempt interest income to a taxable-equivalent basis. MidSouth believes this measure to be the preferred industry measurement of net interest income and it enhances comparability of net interest income arising from taxable and tax-exempt sources.

We use non-GAAP measures because we believe they are useful for evaluating our financial condition and performance over periods of time, as well as in managing and evaluating our business and in discussions about our performance. We also believe these non-GAAP financial measures provide users of our financial information with a meaningful measure for assessing our financial condition as well as comparison to financial results for prior periods. These measures should be viewed in addition to, and not as an alternative to or substitute for, measures determined in accordance with GAAP, and are not necessarily comparable to non-GAAP measures that may be presented by other companies. To the extent applicable, reconciliations of these non-GAAP measures to the most directly comparable measures as reported in accordance with GAAP are included with the accompanying financial statement tables.

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 performance and shareholder value. 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 strategic initiatives; costs and expenses associated with our strategic initiatives and regulatory remediation efforts and possible changes in the size and components of the expected costs and charges associated with our strategic initiatives and regulatory remediation efforts; 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 and the consent order with the Office of the Comptroller of the Currency; risk of noncompliance with and further enforcement actions regarding the Bank Secrecy Act and other anti-money laundering statues and regulations; 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 and lease 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 additional enforcement actions or conditions on our operations, require additional regulatory remediation efforts 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; the identified material weaknesses in our internal control over financial reporting; 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; the effect of divestitures that may be required by regulatory authorities due to the proposed merger in certain markets in which MidSouth competes; the outcome of pending or threatened litigation, or of matters before regulatory agencies, whether currently existing or commencing in the future, including litigation related to the merger; changes in the monetary and fiscal policies of the U.S. government, including policies of the U.S. Department of the Treasury and the Federal Reserve Board; and other factors discussed under the heading “Risk Factors” in MidSouth’s Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC on March 18, 2019 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.

MIDSOUTH BANCORP, INC. and SUBSIDIARIES

Condensed Consolidated Financial Information (unaudited)

(in thousands except per share data)

Quarter

Ended

June 30

March 31

December 31

September 30

June 30

EARNINGS DATA

2019

2018

Total interest income

17,946

17,445

19,340

18,436

18,739

Total interest expense

2,031

2,062

2,097

1,970

1,814

Net interest income

15,915

15,383

17,243

16,466

16,925

Provision for loan losses

4,759

7,600

12,000

4,300

440

Non-interest income

4,790

6,273

4,702

5,090

4,882

Non-interest expense

18,849

19,886

24,644

23,527

22,273

(Loss) earnings before income taxes

(2,903

)

(5,830

)

(14,699

)

(6,271

)

(906

)

Income tax (benefit) expense

—

7,610

(1,373

)

(237

)

Net (loss) earnings

(2,903

)

(5,830

)

(22,309

)

(4,898

)

(669

)

Dividends on preferred stock

810

809

810

Net loss available to common shareholders

(3,713

)

(6,640

)

(23,118

)

(5,708

)

(1,479

)

PER COMMON SHARE DATA

Basic loss per share

(0.22

)

(0.40

)

(1.39

)

(0.34

)

(0.09

)

Diluted loss per share

(0.22

)

(0.40

)

(1.39

)

(0.34

)

(0.09

)

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

(0.17

)

(0.40

)

(0.66

)

(0.08

)

0.17

Quarterly dividends per share

0.01

Book value per share at end of period

10.76

10.78

10.88

12.05

12.50

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

8.13

8.20

9.35

9.78

Market price per share at end of period

11.85

11.41

10.60

15.40

13.25

Shares outstanding at period end

16,733,569

16,715,671

16,641,017

16,641,105

16,619,894

Weighted average shares outstanding:

Basic

16,724,143

16,673,818

16,640,174

16,557,664

16,525,571

Diluted

16,724,143

16,673,818

16,640,174

16,557,664

16,525,571

AVERAGE BALANCE SHEET DATA

Total assets

1,728,634

1,742,686

1,791,990

1,830,834

1,860,906

Loans and leases

890,214

904,293

944,545

1,020,834

1,109,371

Total deposits

1,433,935

1,440,961

1,476,211

1,503,528

1,514,321

Total common equity

181,418

182,231

202,796

209,010

210,291

Total tangible common equity(*)

137,258

137,793

158,083

164,020

165,024

Total equity

222,390

223,203

243,768

249,997

251,278

SELECTED RATIOS

Return on average assets, operating(*)(**)

(0.86

(1.52

(2.70

(0.30

0.59

Return on average common equity, operating(*)(**)

(6.09

(14.57

(23.83

(2.60

5.22

Return on average tangible common equity, operating(*)(**)

(8.02

(19.28

(30.57

(3.31

6.65

Efficiency ratio, operating(*)

91.04

99.12

89.37

83.36

77.38

Average loans to average deposits

62.08

62.76

63.98

67.90

73.26

Tier 1 leverage capital ratio

11.53

11.60

11.45

12.53

12.71

CREDIT QUALITY

Allowance for loan and lease losses (ALLL) as a % of total loans

3.20

2.77

1.94

2.54

2.22

Nonperforming assets to tangible equity + ALLL

14.43

14.89

6.44

23.75

32.99

Nonperforming assets to total loans

2.69

2.68

3.39

5.45

7.08

QTD net charge-offs to total loans (**)

0.64

0.11

8.45

1.40

0.87

(**) Annualized

(*) See reconciliation of Non-GAAP financial measures on pages 23-25.

MIDSOUTH BANCORP, INC. and SUBSIDIARIES

Consolidated Balance Sheets (unaudited)

(in thousands)

June 30,

March 31,

December 31,

September 30,

June 30,

2019

2018

Assets

Cash and cash equivalents

232,452

243,430

205,371

302,888

278,776

Securities available-for-sale

425,638

434,679

437,754

352,606

308,937

Securities held-to-maturity

33,219

35,107

37,759

64,893

67,777

Total investment securities

458,857

469,786

475,513

417,499

376,714

Other investments

18,261

17,083

16,614

16,508

14,927

Loans held for sale

10,304

1,511

23,876

—

Total loans

880,037

893,650

899,785

962,743

1,057,963

Allowance for loan losses

(28,129

)

(24,779

)

(17,430

)

(24,450

)

(23,514

)

Loans, net

851,908

868,871

882,355

938,293

1,034,449

Premises and equipment

54,221

55,097

55,382

56,006

56,834

Lease right of use asset

7,865

8,263

—

Goodwill and other intangibles

44,026

44,303

44,580

44,856

45,133

Deferred Tax Asset

10,932

11,207

11,373

8,452

6,659

Deferred Tax Asset Valuation Allowance

(10,932

)

(11,207

)

(11,373

)

—

Other assets

37,212

36,991

39,707

41,752

45,425

Total assets

1,715,106

1,745,335

1,743,398

1,826,254

1,858,917

Liabilities and Shareholders' Equity

Non-interest bearing deposits

399,619

418,321

383,167

425,696

419,517

Interest-bearing deposits

1,023,770

1,027,314

1,068,904

1,083,433

1,103,503

Total deposits

1,423,389

1,445,635

1,452,071

1,509,129

1,523,020

Securities sold under agreements to repurchase

5,456

11,968

11,220

13,676

14,886

Lease liability

7,816

8,203

—

FHLB advances

27,500

27,506

37,511

Junior subordinated debentures

22,167

Other liabilities

7,786

8,696

8,450

12,325

12,661

Total liabilities

1,494,114

1,524,169

1,521,408

1,584,803

1,610,245

Total shareholders' equity

220,992

221,166

221,990

241,451

248,672

Total liabilities and shareholders' equity

1,715,106

1,745,335

1,743,398

1,826,254

1,858,917

MIDSOUTH BANCORP, INC. and SUBSIDIARIES

Consolidated Statements of Operation (unaudited)

(in thousands except per share data)

Three Months Ended

Six Months

6/30/2019

3/31/2019

6/30/2018

6/30/2019

6/30/2018

Interest income:

Loans, including fees

13,023

12,987

15,344

26,010

31,359

Investment securities

3,260

3,326

2,370

6,586

4,733

Other interest income

1,663

1,132

1,025

2,795

1,644

Total interest income

17,946

17,445

18,739

35,391

37,736

Interest expense:

Deposits

1,665

1,680

1,410

3,345

2,647

Securities sold under agreement to repurchase

FHLB borrowings

120

155

249

Other borrowings

283

287

259

570

479

Total interest expense

2,031

2,062

1,814

4,093

3,441

Net interest income

15,915

15,383

16,925

31,298

34,295

Provision for loan losses

4,759

7,600

440

12,359

440

Net interest income after provision for loan losses

11,156

7,783

16,485

18,939

33,855

Noninterest income:

Service charges on deposit accounts

1,854

1,793

2,065

3,647

4,271

Gain (loss) on securities, net

202

373

—

575

(51

)

Gain on sale of loans, net

—

1,274

—

1,274

—

ATM and debit card income

2,044

1,925

1,877

3,969

3,661

Other charges and fees

690

908

940

1,598

1,830

Total noninterest income

4,790

6,273

4,882

11,063

9,711

Noninterest expense:

Salaries and employee benefits

8,940

9,700

7,916

18,638

15,635

Occupancy expense

2,962

3,307

3,193

6,269

6,238

ATM and debit card

682

624

648

1,306

1,223

Legal and professional fees

1,163

1,883

1,100

3,046

2,789

Remediation expense

—

5,323

—

9,249

Merger-related expense

1,149

—

1,149

—

Other non-interest expense

3,953

4,372

4,093

8,327

9,011

Total noninterest expense

18,849

19,886

22,273

38,735

44,145

Loss before income taxes

(2,903

)

(5,830

)

(906

)

(8,733

)

(579

)

Income tax (benefit)/expense

—

(237

)

—

(271

)

Net loss

(2,903

)

(5,830

)

(669

)

(8,733

)

(308

)

Dividends on preferred stock

810

1,620

Net loss available to common shareholders

(3,713

)

(6,640

)

(1,479

)

(10,353

)

(1,928

)

Loss per common share, diluted

(0.22

)

(0.40

)

(0.09

)

(0.62

)

(0.12

)

Operating (loss) income per common share, diluted on pages 18-20 (Non-GAAP)(*)

(0.17

)

(0.40

)

0.17

(0.62

)

(0.12

)

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

MIDSOUTH BANCORP, INC. and SUBSIDIARIES

Loans, Deposits and Asset Quality (unaudited)

(in thousands)

COMPOSITION OF LOANS

June 30,

2019

March 31,

2019

December 31,

2018

September 30,

2018

June 30,

2018

Commercial, financial, and agricultural

226,871

255,410

267,340

294,971

354,944

Real estate - construction

77,482

89,723

89,621

90,444

98,108

Real estate - commercial

409,694

376,523

368,449

394,416

414,526

Real estate - residential

126,043

130,700

130,320

136,151

141,104

Consumer and other

39,476

40,784

43,506

46,169

48,649

Lease financing receivable

471

510

549

592

632

Total loans

880,037

893,650

899,785

962,743

1,057,963

COMPOSITION OF DEPOSITS

June 30,

2019

March 31,

2019

December 31,

2018

September 30,

2018

June 30,

2018

Noninterest bearing

399,619

418,321

383,167

425,696

419,517

NOW & other

403,026

410,792

400,625

442,487

461,726

Money market/savings

446,795

436,317

488,181

454,867

466,711

Time deposits of less than $100,000

121,399

121,460

121,703

125,363

111,758

Time deposits of $100,000 or more

52,550

58,745

58,395

60,716

63,308

Total deposits

1,423,389

1,445,635

1,452,071

1,509,129

1,523,020

ASSET QUALITY DATA

June 30,

2019

March 31,

2019

December 31,

2018

September 30,

2018

June 30,

2018

Nonaccrual loans

23,287

23,191

8,920

51,476

73,538

Loans past due 90 days and over and accruing

—

Total nonperforming loans

23,287

23,191

8,920

51,483

73,541

Nonperforming loans held for sale

—

20,441

—

Other real estate

387

664

1,067

1,022

1,365

Other repossessed assets

—

Total nonperforming assets

23,682

23,921

30,483

52,505

74,906

Troubled debt restructurings, accruing

593

713

1,334

896

1,010

Nonperforming assets to total assets

1.38

1.37

1.75

2.88

4.03

Nonperforming assets to total loans

2.69

2.68

3.39

5.45

7.08

ALLL to nonperforming loans

120.79

106.85

195.4

47.49

31.97

ALLL to total loans

3.20

2.77

1.94

2.54

2.22

Quarter-to-date charge-offs

1,558

384

19,277

4,339

2,801

Quarter-to-date recoveries

150

133

258

974

505

Quarter-to-date net charge-offs

1,408

251

19,019

3,365

2,296

Annualized QTD net charge-offs to total loans

0.64

0.11

8.45

1.40

0.87

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

June 30,

2019

December 31,

2018

Total equity

220,992

221,990

Less preferred equity

40,972

Total common equity

180,020

181,018

Less goodwill

42,171

Less intangibles

1,855

2,409

Tangible common equity

135,994

136,438

Total assets

1,715,106

1,743,398

Less goodwill

42,171

Less intangibles

1,855

2,409

Tangible assets

1,671,080

1,698,818

Tangible common equity to tangible assets

8.14

8.03

REGULATORY CAPITAL

Common equity tier 1 capital

132,053

137,991

Tier 1 capital

194,524

201,130

Total capital

208,053

215,310

Regulatory capital ratios:

Common equity tier 1 capital ratio

12.37

12.20

Tier 1 risk-based capital ratio

18.23

17.79

Total risk-based capital ratio

19.50

19.04

Tier 1 leverage ratio

11.53

11.45

MIDSOUTH BANCORP, INC. and SUBSIDIARIES

Quarterly Yield Analysis (unaudited)

(in thousands)

Three Months Ended

YIELD ANALYSIS

June 30, 2019

March 31, 2019

December 31, 2018

September 30, 2018

June 30, 2018

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

Investment securities (1)

Taxable

452,396

3,100

2.74

436,549

3,071

2.81

375,467

2,950

3.14

347,205

2,156

2.48

340,080

2,093

2.46

Tax-exempt (2)

22,368

203

3.63

38,424

323

3.36

43,010

355

3.30

43,151

345

3.20

43,858

351

3.20

Total investment securities

474,764

3,303

2.78

474,973

3,394

2.86

418,477

3,305

3.16

390,356

2,501

2.56

383,938

2,444

2.54

Federal funds sold

4,370

2.75

5,493

2.33

5,878

2.25

7,250

1.77

5,008

1.63

Interest bearing deposits in other banks

209,254

1,224

2.34

185,418

1,004

2.17

208,001

1,364

2.62

250,349

1,279

2.04

201,281

912

1.79

Other investments

17,629

409

9.28

16,936

2.24

16,573

177

4.27

15,640

106

2.71

14,924

2.45

Loans

890,214

13,023

5.85

904,293

12,987

5.74

944,546

14,536

6.16

1,020,834

14,590

5.72

1,109,371

15,344

5.55

Total interest earning assets

1,596,231

17,989

4.51

1,587,113

17,512

4.41

1,593,475

19,415

4.87

1,684,429

18,508

4.40

1,714,522

18,812

4.39

Non-interest earning assets

132,403

155,573

198,515

146,405

146,384

Total assets

1,728,634

1,742,686

1,791,990

1,830,834

1,860,906

Interest-bearing liabilities:

Deposits

1,032,778

1,665

0.64

1,042,918

1,680

0.64

1,066,322

1,670

0.63

1,083,404

1,602

0.59

1,087,746

1,409

0.52

Repurchase agreements

7,356

0.44

12,069

0.46

13,031

0.52

14,641

0.44

26,230

0.39

FHLB advances

27,500

1.08

27,500

1.18

27,500

135

1.96

29,139

1.11

37,514

120

1.28

Junior subordinated debentures

22,167

283

5.11

22,167

287

5.18

22,167

275

4.96

22,167

271

4.89

22,167

260

4.63

Total interest bearing liabilities

1,089,801

2,030

0.75

1,104,654

2,062

0.75

1,129,020

2,097

0.74

1,149,351

1,970

0.69

1,173,657

1,814

0.62

Non-interest bearing liabilities

416,443

414,829

419,202

431,486

435,971

Shareholders' equity

222,390

223,203

243,768

249,997

251,278

Total liabilities and shareholders' equity

1,728,634

1,742,686

1,791,990

1,830,834

1,860,906

Net interest income (TE) and spread

15,959

3.76

15,450

3.66

17,318

4.13

16,538

3.71

16,998

3.77

Net interest margin

4.00

3.89

3.93

3.97

4.12

(1) Securities classified as available-for-sale are included in average balances. Interest income figures reflect interest earned on such securities. (2)Reflects taxable-equivalent adjustments using the federal statutory rate of 21% in adjusting interest on tax-exempt securities to a fully taxable basis. The taxable equivalent adjustments included above are $43,000 for 2Q19, $68,000 for 1Q19, $75,000 for 4Q18, $72,000 for 3Q18, and $74,000 for 2Q18 for the quarter ended. (3) Interest income includes loan fees of $588,000 for 2Q19, $632,000 for 1Q19, $832,000 for 4Q18, $686,000 for 3Q18, and $1.1 million for 2Q18 for the quarter ended. Nonaccrual loans are included in average balances and income on such loans is recognized on a cash basis

MIDSOUTH BANCORP, INC. and SUBSIDIARIES

Yearly Yield Analysis (unaudited)

(in thousands)

YIELD ANALYSIS

Six Months Ended

June 30, 2019

June 30, 2018

Tax

Average

Equivalent

Yield/

Average

Equivalent

Yield/

Balance

Interest

Rate

Balance

Interest

Rate

Investment securities (1)

Taxable

409,653

5,755

2.81

336,221

4,140

2.46

Tax-exempt (2)

21,240

526

4.95

47,186

746

3.16

Total investment securities

430,893

6,281

2.92

383,407

4,886

2.55

Federal funds sold

4,928

2.48

4,993

1.56

Time and interest bearing deposits in other banks

191,497

2,229

2.33

167,299

1,426

1.70

Other investments

17,284

505

5.84

14,853

179

2.41

Loans (3)

895,806

26,010

5.81

1,134,382

31,359

5.53

Total interest earning assets

1,540,408

35,086

4.56

1,704,934

37,889

4.44

Non-interest earning assets

193,947

155,556

Total assets

1,734,355

1,860,490

Interest-bearing liabilities:

Deposits

1,037,056

3,345

0.65

1,079,660

2,647

0.49

Repurchase agreements

9,699

0.47

33,134

0.40

FHLB advances

27,500

155

1.13

38,124

249

1.31

Junior subordinated debentures

22,167

570

5.14

22,167

479

4.32

Total interest bearing liabilities

1,096,422

4,093

0.75

1,173,085

3,441

0.59

Non-interest bearing liabilities

415,997

434,192

Shareholders' equity

221,936

253,213

Total liabilities and shareholders' equity

1,734,355

1,860,490

Net interest income (TE) and spread

30,993

3.81

34,448

3.85

Net interest margin

4.02

4.04

(1) Securities classified as available-for-sale are included in average balances. Interest income figures reflect interest earned on such securities. (2)Reflects taxable-equivalent adjustments using the federal statutory rate of 21% in adjusting interest on tax-exempt securities to a fully taxable basis. The taxable equivalent adjustments included above are $110,000 for 2019 and $152,000 for 2018. (3) Interest income includes loan fees of $1.1 million for 2019 and $2,073,000 for 2018. Nonaccrual loans are included in average balances and income on such loans is recognized on a cash basis.

MIDSOUTH BANCORP, INC. and SUBSIDIARIES

Reconciliation of Non-GAAP Financial Measures (unaudited)

(in thousands except per share data)

Three Months Ended

June 30,

2019

March 31,

2019

December 31,

2018

September 30,

2018

June 30,

2018

Tangible common equity and tangible book value per share

Total shareholders' equity

220,992

221,166

221,990

241,451

248,672

Less:

Preferred common shareholders' equity

40,972

40,987

Total common equity

180,020

180,194

181,018

200,479

207,685

Less:

Goodwill

42,171

Other intangible assets

1,855

2,132

2,409

2,685

2,962

Total tangible common equity

135,994

135,891

136,438

155,623

162,552

Period end number of shares

16,733,569

16,715,671

16,641,017

16,641,105

16,619,894

Book value per share (period end)

10.76

10.78

10.88

12.05

12.5

Tangible book value per share (period end)

8.13

8.20

9.35

9.78

MIDSOUTH BANCORP, INC. and SUBSIDIARIES

Reconciliation of Non-GAAP Financial Measures (unaudited) (continued)

(in thousands except per share data)

Operating (loss) earnings per share

June 30, 2019

March 31, 2019

December 31, 2018

September 30, 2018

June 30, 2018

Net loss available to common shareholders'

(3,713

)

(6,640

)

(23,118

)

(5,708

)

(1,479

)

Adjustment items:

Merger-related expenses

1,149

—

Regulatory remediation costs

—

4,970

5,502

5,323

Loans held for sale expense

—

Discount accretion acceleration

—

(726

)

—

Tax effect of adjustments

(241

)

—

(891

)

(1,156

)

(1,122

)

After tax adjustment items

908

—

3,353

4,350

4,221

Tax expense adjustment item:

Attributable to valuation allowance on deferred tax

—

7,685

—

Adjusted net (loss) income

(2,805

)

(6,640

)

(12,080

)

(1,358

)

2,742

Weighted average number of shares - diluted

16,724,143

16,673,818

16,640,174

16,557,664

16,525,571

Net loss per diluted share

(0.22

)

(0.40

)

(1.39

)

(0.34

)

(0.09

)

Operating net (loss) earnings per diluted share

(0.17

)

(0.40

)

(0.73

)

(0.08

)

0.17

Operating ratios

Return on average assets

(0.86

(1.52

(5.16

(1.25

(0.32

Effect of adjustment items

0.21

—

2.46

0.95

0.91

Operating return on average assets

(0.65

(1.52

(2.70

(0.30

0.59

Return on average common equity

(8.07

(14.57

(45.60

(10.92

(2.81

Effect of adjustment items

1.97

—

21.77

8.32

8.03

Operating return on average common equity

(6.09

(14.57

(23.83

(2.60

5.22

Return on average tangible common equity

(10.61

(19.28

(58.50

(13.92

(3.58

Effect of adjustment items

2.60

—

27.93

10.61

10.23

Operating return on average tangible common equity

(8.02

(19.28

(30.57

(3.31

6.65

MIDSOUTH BANCORP, INC. and SUBSIDIARIES

Reconciliation of Non-GAAP Financial Measures (unaudited) (continued)

(in thousands except per share data)

Three Months Ended

OPERATING EFFICIENCY RATIO (TE)

June 30,

2019

March 31,

2019

December 31,

2018

September 30,

2018

June 30,

2018

Operating noninterest expense

Total Noninterest Expense

18,849

19,886

24,644

23,527

22,273

Adjustment items:

Merger-related expenses

(1,149

)

—

Regulatory remediation costs

—

(4,970

)

(5,502

)

(5,323

)

Loans held for sale expense

—

(20

)

Operating noninterest expense

17,700

19,886

19,674

18,029

16,930

Operating efficiency ratio

Net interest income (TE)

15,959

15,436

17,318

16,538

16,998

Noninterest income

4,790

6,273

4,702

5,090

4,882

Total Revenue (TE)

20,749

21,709

22,020

21,628

21,880

Adjustment items

Gain on sale of securities

202

373

—

Gain on sale of loans

—

1,274

—

Adjusted total revenue (TE)

20,547

20,062

22,020

21,628

21,880

Efficiency ratio

91.04

91.83

112.30

109.14

102.14

Operating efficiency ratio

86.14

99.12

89.35

83.36

77.38

View source version on businesswire.com: https://www.businesswire.com/news/home/20190725005857/en/

Investor Contacts: Jim McLemore, CFA President & CEO 337.237.8343

Lorraine Miller, CFA EVP & CFO 337.593.3143

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