EX-99.1 2 earnings_release.htm MIDSOUTH BANCORP, INC. 3Q14 EARNINGS RELEASE
Investor Contacts:  Rusty Cloutier
   President & CEO or
   Jim McLemore, CFA
   Sr. EVP & CFO
   337.237.8343


 
MidSouth Bancorp, Inc. Reports Third Quarter 2014 Results and Declares Quarterly Dividends

Quarterly Highlights
·
Diluted operating EPS $0.36 versus $0.27 for 3Q 2013
·
Period end loan growth of $24.2 million or 7.9% annualized
·
Operating return on average tangible common equity of 14.4%
·
Linked quarter operating noninterest expenses flat at $17.0 million
·
Core FTE NIM on linked quarter basis of 4.42% versus 4.39%

LAFAYETTE, LA., October 28, 2014/PRNewswire-FirstCall/ -- MidSouth Bancorp, Inc. ("MidSouth") (NYSE:MSL) today reported quarterly net earnings available to common shareholders of $4.3 million for the third quarter of 2014, compared to net earnings available to common shareholders of $3.1 million reported for the third quarter of 2013 and $3.9 million in net earnings available to common shareholders for the second quarter of 2014.  Diluted earnings for the third quarter of 2014 were $0.37 per common share, compared to $0.27 per common share reported for the third quarter of 2013 and $0.34 per common share reported for the second quarter of 2014.  Third quarter 2014 net earnings included $700,000 of an after-tax gain on the sale of a commercial property held as other real estate ("ORE"), an after-tax charge of $168,000 on the redemption of the Company's Statutory Trust 1 and Capital Securities (TRUPS), and an after-tax charge of $256,000 for losses on disposal of fixed assets incurred in the quarter.  Net earnings for the third and second quarters of 2014 also included after-tax charges for efficiency consultant expenses of $130,000 and $70,000, respectively.  Excluding these non-operating income and expenses, operating earnings per share for the third and second quarters of 2014 was $0.36 and $0.35, respectively.

C. R. Cloutier, President and CEO, commenting on third quarter earnings remarked, "Although there were a number of non-operating income and expense items this quarter, the underlying operating EPS of the Company continues to show significant progress, with continued growth in top line core revenues, good expense control, and stable core margins.  Our focus on efficiency improvements is transitioning from our initial internally generated projects to a second phase working with experienced industry consultants to further enhance our productivity.  We also paid off a high cost TRUPS during the quarter and will see a full quarter benefit from that payoff in the fourth quarter. And while industry conditions remain challenging, I am very encouraged about our team's ability to continue to improve earnings for our shareholders."

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Balance Sheet

Consolidated assets remained constant at $1.9 billion for the quarters ended September 30, 2014 and June 30, 2014.  Our stable core deposit base, which excludes time deposits, totaled $1.3 billion at September 30, 2014 and June 30, 2014 and accounted for 85.7% of deposits compared to 85.5% of deposits, respectively.  Net loans totaled $1.2 billion at September 30, 2014 and June 30, 2014, compared to $1.1 billion at December 31, 2013.  Total loans grew $24.2 million, or 2.0% for the quarter and $110.8 million for the nine months ended September 30, 2014.  The majority of the loan growth during the third quarter was in the commercial real estate and consumer loan portfolios, along with solid growth in the C&I portfolio over the nine months ended September 30, 2014.

MidSouth's Tier 1 leverage capital ratio was 9.56% at September 30, 2014 compared to 9.74% at June 30, 2014.  Tier 1 risk-based capital and total risk-based capital ratios were 12.93% and 13.63% at September 30, 2014, compared to 13.34% and 14.03% at June 30, 2014, respectively.  Tier 1 common equity to total risk-weighted assets at September 30, 2014 was 8.30%.  Tangible common equity totaled $115.3 million at September 30, 2014, compared to $111.4 million at June 30, 2014.  Tangible book value per share at September 30, 2014 was $10.17 versus $9.86 at June 30, 2014.

Asset Quality

Nonperforming assets totaled $12.5 million at September 30, 2014, a decrease of $1.0 million compared to $13.5 million reported at June 30, 2014.  The decrease resulted from a $1.7 million reduction in ORE, which included the sale of a $1.4 million commercial property.  Allowance coverage for nonperforming loans decreased to 121.25% at September 30, 2014 compared to 127.53% at June 30, 2014 due to an $837,000 net increase in loans placed on nonaccrual status during the quarter.  The ALLL/total loans ratio was 0.75% at September 30, 2014 and 0.74% at June 30, 2014.  Including valuation accounting adjustments on acquired loans, the total valuation accounting adjustment plus ALLL was 1.25% of loans at September 30, 2014.  The ratio of annualized net charge-offs to total loans was 0.26% for the three months ended September 30, 2014 compared to 0.29% for the three months ended June 30, 2014.

Total nonperforming assets to total loans plus ORE and other assets repossessed was 0.99% at September 30, 2014 compared to 1.10% at June 30, 2014.  Loans classified as troubled debt restructurings ("TDRs") totaled $416,000 at September 30, 2014 compared to $417,000 at June 30, 2014.  Classified assets, including ORE, increased $1.3 million, or 3.9%, to $34.4 million at September 30, 2014 compared to $33.1 million at June 30, 2014.  The increase resulted primarily from the addition of a $3.1 million CRE loan to classified assets, which was partially offset by a $1.7 million reduction in ORE.

Third Quarter 2014 vs. Third Quarter 2013 Earnings Comparison

Third quarter 2014 net earnings available to common shareholders totaled $4.3 million compared to $3.1 million for the third quarter of 2013.  Revenues from consolidated operations increased $1.6 million in quarterly comparison.  Net interest income increased $441,000 in quarterly comparison, as decreases of $342,000 in loan valuation income and $339,000 in interest income on investment securities were offset primarily by a $963,000 increase in interest income earned on a higher volume of loans. Noninterest income increased $1.2 million in quarterly
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comparison, from $5.0 million for the three months ended September 30, 2013 to $6.2 million for the three months ended September 30, 2014.  The increase in noninterest income resulted primarily from a $1.1 million gain on the sale of a commercial property held as ORE. Additionally, increases of $204,000 in service charges on deposit accounts, $89,000 in ATM/debit card income, and $52,000 in mortgage lending fees were partially offset by decreases in other noninterest income, including a $159,000 decrease in third party investment advisory income.

Excluding non-operating expenses of $852,000, third quarter 2014 noninterest expenses decreased $1.5 million compared to third quarter 2013 and primarily consisted of decreases of $353,000 in salaries and benefits costs, $343,000 in marketing expenses, $166,000 in expenses on ORE and other repossessed assets, and $119,000 in courier expense, combined with smaller decreases in several other noninterest expense categories. The provision for loan losses increased $725,000, and income tax expense increased $614,000 in quarterly comparison.

Dividends paid on the Series B Preferred Stock issued to the Treasury as a result of our participation in the Small Business Lending Fund ("SBLF") totaled $80,000 for the third quarter of 2014 based on a dividend rate of 1.00%.  The dividend rate is set at 1.00% through February 25, 2016.  The Series C Preferred Stock issued with the December 28, 2012 acquisition of PSB Financial Corporation ("PSB") paid dividends totaling $94,000 for the three months ended September 30, 2014.

Fully taxable-equivalent ("FTE") net interest income totaled $19.9 million and $19.5 million for the quarters ended September 30, 2014 and 2013, respectively.  The FTE net interest income increased $370,000 in prior year quarterly comparison primarily due to a $621,000 increase in interest income on loans despite a $342,000 reduction in purchase accounting adjustments on acquired loans.  The increased interest income on loans resulted from a $109.1 million increase in the average volume of loans in quarterly comparison. The average yield on loans decreased 36 basis points, from 6.24% to 5.88%.  The purchase accounting adjustments added 22 basis points to the average yield on loans for the third quarter of 2014 and 39 basis points to the average yield on loans for the third quarter of 2013.  Net of the impact of the purchase accounting adjustments, average loan yields declined 19 basis points in prior year quarterly comparison, from 5.85% to 5.66%.  Loan yields have declined primarily as the result of a sustained low interest rate environment.

Investment securities totaled $433.4 million, or 22.9% of total assets at September 30, 2014, versus $517.8 million, or 27.8% of total assets at September 30, 2013.  The investment portfolio had an effective duration of 2.9 years and a net unrealized gain of $3.8 million at September 30, 2014.  The average volume of investment securities decreased $82.0 million in prior year quarterly comparison.  The average tax equivalent yield on investment securities increased 11 basis points, from 2.59% to 2.70%.  The $82.0 million decrease in the average volume of investment securities was used to fund loan growth during the same period.

The average yield on all earning assets decreased 3 basis points in prior year quarterly comparison, from 4.99% for the third quarter of 2013 to 4.96% for the third quarter of 2014.  Net of the impact of purchase accounting adjustments, the average yield on total earning assets increased 6 basis points, from 4.74% to 4.80% for the three month periods ended September 30, 2013 and 2014, respectively, due to a favorable shift in earning assets from investment securities to loans.
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The impact to interest expense of a $4.2 million increase in the average volume of interest-bearing liabilities was offset by a 5 basis point decrease in the average rate paid on interest-bearing liabilities, from 0.51% at September 30, 2013 to 0.46% at September 30, 2014.  Net of purchase accounting adjustments on acquired certificates of deposit and FHLB borrowings, the average rate paid on interest-bearing liabilities was 0.58% for the third quarter of 2013 and declined to 0.51% for the third quarter of 2014.

As a result of these changes in volume and yield on earning assets and interest bearing liabilities, the FTE net interest margin increased 1 basis point, from 4.60% for the third quarter of 2013 to 4.61% for the third quarter of 2014.  Net of purchase accounting adjustments on loans, deposits and FHLB borrowings, the FTE margin increased 12 basis points, from 4.30% for the third quarter of 2013 to 4.42% for the third quarter of 2014.

Third Quarter 2014 vs. Second Quarter 2014 Earnings Comparison

In sequential-quarter comparison, net earnings available to common shareholders increased $352,000 primarily due to a $399,000 increase in net interest income driven by third quarter loan growth.  Excluding the $1.1 million gain on the sale of a commercial property held as ORE, noninterest income decreased $144,000 in sequential-quarter comparison as $182,000 in annual safe deposit box rental income and a $128,000 gain on sale of securities recorded in the second quarter of 2014 were partially offset by third quarter 2014 increases of $112,000 in mortgage lending fees and $108,000 in service charges on deposit accounts.

Third quarter noninterest expenses included a charge of $258,000 on the redemption of the Company's Statutory Trust 1 and Capital Securities (TRUPS) and a charge of $394,000 for losses on disposal of fixed assets incurred in the quarter.  Additionally, noninterest expenses in the third and second quarters of 2014 included efficiency consultant expenses of $200,000 and $107,000, respectively.  Excluding these non-operating expenses, noninterest expense remained relatively constant and primarily included a decrease of $201,000 in salaries and benefits costs that offset increases primarily consisting of $145,000 in occupancy expenses and $86,000 in ATM and debit card processing fees.

FTE net interest income increased $397,000 in sequential-quarter comparison primarily due to an increase of $26.3 million in the average volume of loans.  The average yield on loans decreased 3 basis points, from 5.91% for the second quarter of 2014 to 5.88% for the third quarter of 2014.  Net of purchase accounting adjustments, the loan yield declined 2 basis points, from 5.68% to 5.66% during the same period.  The average yield on total earning assets increased 3 basis points for the same period, from 4.93% to 4.96%, respectively due to the increased volume of loans.  Average interest bearing liabilities declined $16.8 million, as a $24.5 million decrease in the average volume of interest bearing deposits was partially offset by an $8.3 million average increase in overnight repurchase agreements.  As a result of these changes in volume and yield on earning assets and interest bearing liabilities, the FTE net interest margin increased 3 basis points, from 4.58% to 4.61%.  Net of purchase accounting adjustments, the FTE net interest margin also increased 3 basis points, from 4.39% for the second quarter of 2014 to 4.42% for the third quarter of 2014.
 
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Year-Over-Year Earnings Comparison

In year-over-year comparison, net earnings available to common shareholders totaled $14.9 million at September 30, 2014, an increase of $5.4 million compared to $9.5 million at September 30, 2013.  The $5.4 million included $3.0 million of executive life insurance proceeds and a $1.1 million gain on sale of ORE recorded in noninterest income for the nine months ended September 30, 2014.  Excluding these non-operating income items and non-operating expenses of $394,000 in loss on disposal of fixed assets, a $258,000 loss on redemption of Trust Preferred Securities, $360,000 in efficiency consultant expenses, and $189,000 of expenses related to the loss of an executive officer, operating earnings totaled $12.0 million at September 30, 2014.  Net of $214,000 of net merger and conversion related expenses associated with the PSB acquisition in the first quarter of 2013, operating earnings totaled $9.6 million at September 30, 2013.  The net increase of $2.4 million in operating earnings in year-over-year comparison resulted primarily from a $0.9 million increase in noninterest income and a $2.5 million decrease in noninterest expense, which were partially offset by a $1.3 million increase in tax expense.

Excluding non-operating income, increases in noninterest income consisted primarily of $591,000 in service charges on deposit accounts and $662,000 in ATM and debit card income.  Excluding the non-operating expenses in 2014 and 2013, decreases in noninterest expense included $678,000 in marketing expenses, $356,000 in the cost of printing and supplies, $278,000 in courier expense, $259,000 in corporate development, travel and training costs, and $159,000 in check fraud losses.  The decreased expenses were partially offset by a $498,000 increase in ATM/debit card expense and an increase of $187,000 in salaries and benefit costs, primarily due to an increase in group health insurance expense.

A reduction in the dividend rate paid on the Series B preferred stock issued in connection with SBLF resulted in a $628,000 decrease in dividends on preferred stock in year-over-year comparison.

In year-to-date comparison, FTE net interest income remained relatively flat due to a $2.7 million decrease in purchase accounting adjustments.  Of the $2.7 million, a $2.4 million decrease impacted interest income on loans for the nine months ended September 30, 2014 and resulted in a decrease in the average yield on loans, from 6.54% at September 30, 2013 to 5.99% at September 30, 2014.  The average yield on earning assets decreased in year-to-date comparison, from 5.11% at September 30, 2013 to 4.97% at September 30, 2014.  The purchase accounting adjustments added 64 basis points to the average yield on loans for the first nine months of 2013 and 29 basis points for the first nine months of 2014.  Net of purchase accounting adjustments, the average yield on earning assets increased 7 basis points, from 4.70% at September 30, 2013 to 4.77% at September 30, 2014.

Interest expense decreased $474,000 in year-over-year comparison primarily due to a decrease in the average rate paid on interest-bearing liabilities.  The average rate paid on interest-bearing liabilities decreased 6 basis points, from 0.53% at September 30, 2013 to 0.47% at September 30, 2014.  Net of purchase accounting adjustments, the average rate paid on interest-bearing liabilities decreased 10 basis points, from 0.62% at September 30, 2013 to 0.52% at September 30, 2014.  The FTE net interest margin decreased 9 basis points, from 4.71% for the nine months ended September 30, 2013 to 4.62% for the nine months ended September 30, 2014.  Net of purchase accounting adjustments, the FTE net interest margin increased 14 basis points, from 4.24% to 4.38% for the nine months ended September 30, 2013 and 2014, respectively, due to a
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 favorable shift in earning assets from investment securities to loans.

Other Events

On October 31, 2014, MidSouth will close two banking centers, bringing the total to three centers closed during 2014.  Customers will continue to have access to an ATM at the two centers scheduled to close and full service access at all other MidSouth banking centers.
 
Dividends

MidSouth's Board of Directors announced a cash dividend was declared in the amount of $0.09 per share to be paid on its common stock on January 2, 2015 to shareholders of record as of the close of business on December 15, 2014.  Additionally, a quarterly cash dividend of 1.00% per preferred share on its 4.00% Non-Cumulative Perpetual Convertible Preferred Stock, Series C was declared payable on January 15, 2015 to shareholders of record as of the close of business on January 2, 2015.  MidSouth's Series C Preferred Stock is quoted on the OTC Bulletin Board ("OTCBB") under the ticker symbol MSLXP.

About MidSouth Bancorp, Inc.

MidSouth Bancorp, Inc. is a financial holding company headquartered in Lafayette, Louisiana, with assets of $1.9 billion as of September 30, 2014. MidSouth Bancorp, Inc. trades on the NYSE under the symbol "MSL." MidSouth's Series C Preferred Stock is quoted on the OTC Bulletin Board ("OTCBB") under the ticker symbol MSLXP.  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 60 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, the expected impacts of future expansion plans and future operating results.  Actual results may differ materially from the results anticipated in these 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, 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; the timing and ability to reach any agreement to restructure nonaccrual loans;  increased competition for deposits and loans which could affect compositions, rates and terms; 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; loss of critical personnel and the challenge of hiring qualified personnel at reasonable compensation levels; legislative and regulatory changes, including 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; and other factors discussed under the heading "Risk Factors" in MidSouth's Annual Report on Form 10-K for the year ended December 31, 2013 filed with the SEC on March 14, 2014 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.

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MIDSOUTH BANCORP, INC. and SUBSIDIARIES
 
Condensed Consolidated Financial Information (unaudited)
 
(in thousands except per share data)
 
 
  
   
   
   
 
 
  
Quarter
    
Quarter
    
Quarter
    
Quarter
    
Quarter
  
 
  
Ended
    
Ended
    
Ended
    
Ended
    
Ended
  
EARNINGS DATA
  
9/30/2014
    
6/30/2014
    
3/31/2014
    
12/31/2013
    
9/30/2013
  
     Total interest income
  
$
21,016
    
$
20,595
    
$
20,399
    
$
21,014
    
$
20,704
  
     Total interest expense
    
1,504
      
1,482
      
1,504
      
1,575
      
1,633
  
          Net interest income
    
19,512
      
19,113
      
18,895
      
19,439
      
19,071
  
     FTE net interest income
    
19,856
      
19,459
      
19,261
      
19,834
      
19,486
  
     Provision for loan losses
    
1,175
      
1,200
      
550
      
800
      
450
  
     Non-interest income
    
6,194
      
5,261
      
7,917
      
4,896
      
4,988
  
     Non-interest expense
    
17,857
      
17,123
      
17,702
      
18,427
      
18,481
  
          Earnings before income taxes
    
6,674
      
6,051
      
8,560
      
5,108
      
5,128
  
     Income tax expense
    
2,202
      
1,935
      
1,702
      
1,563
      
1,588
  
          Net earnings
    
4,472
      
4,116
      
6,858
      
3,545
      
3,540
  
     Dividends on preferred stock
    
174
      
170
      
180
      
180
      
468
  
          Net earnings available to common shareholders
  
$
4,298
    
$
3,946
    
$
6,678
    
$
3,365
    
$
3,072
  
 
                                        
PER COMMON SHARE DATA
                                        
     Basic earnings per share
  
$
0.38
    
$
0.35
    
$
0.59
    
$
0.30
    
$
0.27
  
     Diluted earnings per share
    
0.37
      
0.34
      
0.57
      
0.29
      
0.27
  
     Diluted earnings per share, operating (Non-GAAP)(*)
    
0.36
      
0.35
      
0.33
      
0.29
      
0.27
  
     Quarterly dividends per share
    
0.09
      
0.09
      
0.08
      
0.08
      
0.08
  
     Book value at end of period
    
14.52
      
14.25
      
13.92
      
13.21
      
13.12
  
     Tangible book value at period end (Non-GAAP)(*)
    
10.17
      
9.86
      
9.51
      
8.76
      
8.61
  
     Market price at end of period
    
18.70
      
19.89
      
16.83
      
17.86
      
15.50
  
     Shares outstanding at period end
    
11,487,078
      
11,296,147
      
11,281,647
      
11,256,712
      
11,253,216
  
     Weighted average shares outstanding
                                        
        Basic
    
11,313,879
      
11,288,045
      
11,258,374
      
11,255,670
      
11,253,216
  
        Diluted
    
11,954,811
      
11,922,525
      
11,878,660
      
11,886,433
      
11,868,851
  
 
                                        
AVERAGE BALANCE SHEET DATA
                                        
     Total assets
  
$
1,892,609
    
$
1,887,726
    
$
1,859,212
    
$
1,862,962
    
$
1,863,090
  
     Loans and leases
    
1,232,196
      
1,205,930
      
1,147,010
      
1,141,829
      
1,123,086
  
     Total deposits
    
1,525,059
      
1,532,910
      
1,527,353
      
1,515,673
      
1,521,146
  
     Total common equity
    
163,855
      
159,766
      
153,012
      
149,489
      
146,182
  
     Total tangible common equity (Non-GAAP)(*)
    
114,438
      
110,075
      
103,036
      
98,941
      
95,363
  
     Total equity
    
205,291
      
201,257
      
194,980
      
191,486
      
188,179
  
 
                                        
SELECTED RATIOS
                                        
     Annualized return on average assets, operating (Non-GAAP)(*)
    
0.87
%
    
0.85
%
    
0.84
%
    
0.72
%
    
0.65
%
     Annualized return on average common equity, operating (Non-GAAP)(*)
    
10.05
%
    
10.08
%
    
10.26
%
    
8.93
%
    
8.34
%
     Annualized return on average tangible common equity, operating (Non- GAAP)(*)
    
14.39
%
    
14.63
%
    
15.24
%
    
13.49
%
    
12.78
%
     Average loans to average deposits
    
80.80
%
    
78.67
%
    
75.10
%
    
75.33
%
    
73.83
%
     Taxable-equivalent net interest margin
    
4.61
%
    
4.58
%
    
4.66
%
    
4.69
%
    
4.60
%
     Tier 1 leverage capital ratio
    
9.56
%
    
9.81
%
    
9.71
%
    
9.35
%
    
9.17
%
 
                                        
CREDIT QUALITY
                                        
     Allowance for loan losses (ALLL) as a % of total loans
    
0.75
%
    
0.74
%
    
0.74
%
    
0.77
%
    
0.76
%
     Nonperforming assets to tangible equity + ALLL
    
7.50
%
    
8.34
%
    
8.16
%
    
8.02
%
    
8.94
%
     Nonperforming assets to total loans, other real estate
                                        
          owned and other repossessed assets
    
0.99
%
    
1.10
%
    
1.08
%
    
1.05
%
    
1.15
%
     Annualized QTD net charge-offs to total loans
    
0.26
%
    
0.29
%
    
0.19
%
    
0.24
%
    
0.11
%
 
                                        
(*) See reconciliation of Non-GAAP financial measures on page 12.
  
 
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MIDSOUTH BANCORP, INC. and SUBSIDIARIES
 
Condensed Consolidated Financial Information (unaudited)
 
(in thousands)
 
 
  
   
   
   
   
 
 
  
   
   
 
BALANCE SHEET
  
September 30,
    
June 30,
    
March 31,
    
December 31,
    
September 30,
  
 
  
2014
    
2014
    
2014
    
2013
    
2013
  
Assets
  
   
   
   
   
 
Cash and cash equivalents
  
$
54,215
    
$
63,935
    
$
64,503
    
$
59,731
    
$
43,434
  
Securities available-for-sale
    
288,397
      
301,028
      
331,488
      
341,665
      
358,675
  
Securities held-to-maturity
    
145,030
      
148,927
      
152,162
      
155,523
      
159,141
  
     Total investment securities
    
433,427
      
449,955
      
483,650
      
497,188
      
517,816
  
Other investments
    
12,091
      
12,090
      
11,530
      
11,526
      
10,951
  
Total loans
    
1,248,373
      
1,224,182
      
1,184,189
      
1,137,554
      
1,145,023
  
Allowance for loan losses
    
(9,425
)
    
(9,075
)
    
(8,765
)
    
(8,779
)
    
(8,667
)
     Loans, net
    
1,238,948
      
1,215,107
      
1,175,424
      
1,128,775
      
1,136,356
  
Premises and equipment
    
71,115
      
71,787
      
72,500
      
72,343
      
70,147
  
Goodwill and other intangibles
    
49,282
      
49,559
      
49,835
      
50,112
      
50,703
  
Other assets
    
32,682
      
33,845
      
31,483
      
31,485
      
33,400
  
     Total assets
  
$
1,891,760
    
$
1,896,278
    
$
1,888,925
    
$
1,851,160
    
$
1,862,807
  
 
                                        
 
                                        
Liabilities and Shareholders' Equity
                                        
Non-interest bearing deposits
  
$
396,263
    
$
389,734
    
$
379,576
    
$
383,257
    
$
380,048
  
Interest-bearing deposits
    
1,124,581
      
1,135,688
      
1,168,354
      
1,135,546
      
1,126,078
  
   Total deposits
    
1,520,844
      
1,525,422
      
1,547,930
      
1,518,803
      
1,506,126
  
Securities sold under agreements to
                                        
    repurchase and other short term
                                        
    borrowings
    
70,964
      
67,574
      
51,995
      
53,916
      
77,809
  
Short-term FHLB advances
    
35,000
      
35,000
      
25,000
      
25,000
      
25,000
  
Other borrowings
    
26,384
      
26,990
      
27,347
      
27,703
      
28,059
  
Junior subordinated debentures
    
22,167
      
29,384
      
29,384
      
29,384
      
29,384
  
Other liabilities
    
10,387
      
9,492
      
8,632
      
5,605
      
6,800
  
     Total liabilities
    
1,685,746
      
1,693,862
      
1,690,288
      
1,660,411
      
1,673,178
  
Total shareholders' equity
    
206,014
      
202,416
      
198,637
      
190,749
      
189,629
  
     Total liabilities and shareholders' equity
  
$
1,891,760
    
$
1,896,278
    
$
1,888,925
    
$
1,851,160
    
$
1,862,807
  
 
                                        
 
-8-
 
  
MIDSOUTH BANCORP, INC. and SUBSIDIARIES  
Condensed Consolidated Financial Information (unaudited)
 
(in thousands except per share data)
 
 
  
   
   
   
   
 
 
  
   
   
 
EARNINGS STATEMENT
  
Three Months Ended
  
 
  
9/30/2014
    
6/30/2014
    
3/31/2014
    
12/31/2013
    
9/30/2013
  
 
  
   
   
   
   
 
Interest income:
  
   
   
   
   
 
Loans, including fees
  
$
17,670
    
$
17,183
    
$
16,395
    
$
16,727
    
$
16,707
  
Investment securities
    
2,617
      
2,725
      
2,829
      
2,876
      
2,956
  
Accretion of purchase accounting adjustments
    
603
      
586
      
1,088
      
1,323
      
945
  
Other interest income
    
126
      
101
      
87
      
88
      
96
  
Total interest income
    
21,016
      
20,595
      
20,399
      
21,014
      
20,704
  
 
                                        
Interest expense:
                                        
Deposits
    
915
      
926
      
950
      
1,017
      
1,114
  
Borrowings
    
409
      
395
      
377
      
411
      
414
  
Junior subordinated debentures
    
327
      
320
      
347
      
339
      
335
  
Accretion of purchase accounting adjustments
    
(147
)
    
(159
)
    
(170
)
    
(192
)
    
(230
)
Total interest expense
    
1,504
      
1,482
      
1,504
      
1,575
      
1,633
  
 
                                        
Net interest income
    
19,512
      
19,113
      
18,895
      
19,439
      
19,071
  
Provision for loan losses
    
1,175
      
1,200
      
550
      
800
      
450
  
Net interest income after provision for loan losses
    
18,337
      
17,913
      
18,345
      
18,639
      
18,621
  
 
                                        
Noninterest income:
                                        
Service charges on deposit accounts
    
2,556
      
2,448
      
2,380
      
2,431
      
2,352
  
ATM and debit card income
    
1,808
      
1,853
      
1,714
      
1,687
      
1,719
  
Gain on securities, net
    
-
      
128
      
-
      
5
      
25
  
Gain on sale of ORE (non-operating)(*)
    
1,077
      
-
      
-
      
-
      
-
  
Mortgage lending
    
161
      
49
      
49
      
82
      
109
  
Executive officer life insurance proceeds (non-operating)(*)
    
-
      
-
      
3,000
      
-
      
-
  
Other charges and fees
    
592
      
783
      
774
      
691
      
783
  
Total non-interest income
    
6,194
      
5,261
      
7,917
      
4,896
      
4,988
  
 
                                        
Noninterest expense:
                                        
Salaries and employee benefits
    
8,287
      
8,488
      
8,674
      
8,781
      
8,640
  
Occupancy expense
    
3,834
      
3,689
      
3,791
      
3,916
      
3,874
  
ATM and debit card
    
793
      
707
      
690
      
707
      
661
  
Legal and professional fees
    
342
      
326
      
288
      
506
      
303
  
FDIC premiums
    
269
      
251
      
262
      
282
      
265
  
Marketing
    
396
      
366
      
303
      
545
      
739
  
Corporate development
    
342
      
331
      
366
      
347
      
349
  
Data processing
    
503
      
483
      
492
      
473
      
482
  
Printing and supplies
    
279
      
275
      
280
      
304
      
321
  
Expenses on ORE and other assets repossessed
    
122
      
172
      
228
      
201
      
288
  
Amortization of core deposit intangibles
    
277
      
276
      
277
      
276
      
277
  
Loss on disposal of fixed assets (non-operating)(*)
    
394
      
-
      
-
      
-
      
-
  
Loss on redemption of Trust Preferred Securities (non-operating)(*)
    
258
      
-
      
-
      
-
      
-
  
Efficiency consultant expenses (non-operating)(*)
    
200
      
107
      
53
      
-
      
-
  
Expenses related to death of executive officer (non-operating)(*)
    
-
      
-
      
189
      
-
      
-
  
Other non-interest expense
    
1,561
      
1,652
      
1,809
      
2,089
      
2,282
  
Total non-interest expense
    
17,857
      
17,123
      
17,702
      
18,427
      
18,481
  
Earnings before income taxes
    
6,674
      
6,051
      
8,560
      
5,108
      
5,128
  
Income tax expense
    
2,202
      
1,935
      
1,702
      
1,563
      
1,588
  
Net earnings
    
4,472
      
4,116
      
6,858
      
3,545
      
3,540
  
Dividends on preferred stock
    
174
      
170
      
180
      
180
      
468
  
Net earnings available to common shareholders
  
$
4,298
    
$
3,946
    
$
6,678
    
$
3,365
    
$
3,072
  
 
                                        
Earnings per common share, diluted
  
$
0.37
    
$
0.34
    
$
0.57
    
$
0.29
    
$
0.27
  
 
                                        
Operating earnings per common share, diluted (Non-GAAP)(*)
  
$
0.36
    
$
0.35
    
$
0.33
    
$
0.29
    
$
0.27
  
 
                                        
(*) See reconciliation of Non-GAAP financial measures on page 12.
  
 
-9-
  
MIDSOUTH BANCORP, INC. and SUBSIDIARIES
 
Condensed Consolidated Financial Information (unaudited)
 
(in thousands)
 
   
   
 
COMPOSITION OF LOANS
  
September 30,
    
Percent
    
June 30,
    
March 31,
    
December 31,
    
September 30,
    
Percent
  
 
2014
    
of Total
    
2014
    
2014
    
2013
    
2013
    
of Total
  
Commercial, financial, and agricultural
  
$
452,065
      
36.21
%
  
$
454,310
    
$
435,523
    
$
403,976
    
$
423,073
      
36.95
%
Lease financing receivable
    
5,285
      
0.42
%
    
4,750
      
5,102
      
5,542
      
5,340
      
0.47
%
Real estate - construction
    
86,315
      
6.91
%
    
86,238
      
78,988
      
82,691
      
76,213
      
6.66
%
Real estate - commercial
    
430,930
      
34.52
%
    
413,565
      
408,546
      
397,135
      
401,080
      
35.03
%
Real estate - residential
    
153,915
      
12.33
%
    
153,082
      
150,551
      
146,841
      
142,431
      
12.44
%
Installment loans to individuals
    
116,340
      
9.32
%
    
108,581
      
101,869
      
97,459
      
94,722
      
8.27
%
Other
    
3,523
      
0.28
%
    
3,656
      
3,610
      
3,910
      
2,164
      
0.19
%
 
                                                        
Total loans
  
$
1,248,373
            
$
1,224,182
    
$
1,184,189
    
$
1,137,554
    
$
1,145,023
          
 
                                                        
COMPOSITION OF DEPOSITS
                                                        
 
September 30,
    
Percent
    
June 30,
    
March 31,
    
December 31,
    
September 30,
    
Percent
  
 
    
2014
    
of Total
      
2014
      
2014
      
2013
      
2013
    
of Total
  
Noninterest bearing
  
$
396,263
      
26.06
%
  
$
389,734
    
$
379,576
    
$
383,257
    
$
380,048
      
25.23
%
NOW & Other
    
447,403
      
29.42
%
    
443,287
      
456,127
      
429,279
      
412,873
      
27.41
%
Money Market/Savings
    
460,100
      
30.25
%
    
470,731
      
482,143
      
465,748
      
463,621
      
30.78
%
Time Deposits of less than $100,000
    
101,373
      
6.67
%
    
104,423
      
108,306
      
112,782
      
116,118
      
7.71
%
Time Deposits of $100,000 or more
    
115,705
      
7.61
%
    
117,247
      
121,778
      
127,737
      
133,466
      
8.86
%
 
                                                        
Total deposits
  
$
1,520,844
            
$
1,525,422
    
$
1,547,930
    
$
1,518,803
    
$
1,506,126
          
 
                                                        
ASSET QUALITY DATA
                                                        
 
September 30,
            
June 30,
    
March 31,
    
December 31,
    
September 30,
          
 
    
2014
              
2014
      
2014
      
2013
      
2013
          
Nonaccrual loans
  
$
7,750
            
$
6,913
    
$
6,025
    
$
5,099
    
$
5,760
          
Loans past due 90 days and over
    
23
              
203
      
251
      
178
      
744
          
Total nonperforming loans
    
7,773
              
7,116
      
6,276
      
5,277
      
6,504
          
Other real estate
    
4,663
              
6,314
      
6,525
      
6,687
      
6,672
          
Other repossessed assets
    
19
              
81
      
56
      
20
      
18
          
Total nonperforming assets
  
$
12,455
            
$
13,511
    
$
12,857
    
$
11,984
    
$
13,194
          
 
                                                        
Troubled debt restructurings
  
$
416
            
$
417
    
$
1,579
    
$
412
    
$
419
          
 
                                                        
 
                                                        
Nonperforming assets to total assets
    
0.66
%
            
0.71
%
    
0.68
%
    
0.65
%
    
0.71
%
        
Nonperforming assets to total loans +
                                                        
ORE + other repossessed assets
    
0.99
%
            
1.10
%
    
1.08
%
    
1.05
%
    
1.15
%
        
ALLL to nonperforming loans
    
121.25
%
            
127.53
%
    
139.66
%
    
166.36
%
    
133.26
%
        
ALLL to total loans
    
0.75
%
            
0.74
%
    
0.74
%
    
0.77
%
    
0.76
%
        
 
                                                        
Quarter-to-date charge-offs
  
$
1,253
            
$
990
    
$
688
    
$
740
    
$
375
          
Quarter-to-date recoveries
    
428
              
100
      
124
      
53
      
61
          
Quarter-to-date net charge-offs
  
$
825
            
$
890
    
$
564
    
$
687
    
$
314
          
Annualized QTD net charge-offs to total loans
    
0.26
%
            
0.29
%
    
0.19
%
    
0.24
%
    
0.11
%
        
 
                                                        
 
-10-
 
    
   
   
   
   
   
   
   
   
 
MIDSOUTH BANCORP, INC. and SUBSIDIARIES 
Condensed Consolidated Financial Information (unaudited)
   
   
   
   
   
   
   
   
   
 
(in thousands)   
 
  
   
   
   
   
 
YIELD ANALYSIS
  
Three Months Ended
    
Three Months Ended
   
Three Months Ended
   
Three Months Ended
   
Three Months Ended
 
 
September 30, 2014
    
June 30, 2014
    
March 31, 2014
    
December 31, 2013
    
September 30, 2013
  
 
  
   
   
   
   
   
   
   
   
   
   
   
   
   
   
 
 
  
   
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
  
$
351,645
    
$
1,965
      
2.24
%
  
$
379,124
    
$
2,064
      
2.18
%
  
$
397,642
    
$
2,136
      
2.15
%
  
$
409,561
    
$
2,128
      
2.08
%
  
$
418,964
    
$
2,171
      
2.07
%
Tax-exempt securities
    
86,528
      
996
      
4.60
%
    
87,964
      
1,007
      
4.58
%
    
91,792
      
1,059
      
4.61
%
    
98,648
      
1,143
      
4.63
%
    
101,226
      
1,200
      
4.74
%
Total investment securities
    
438,173
      
2,961
      
2.70
%
    
467,088
      
3,071
      
2.63
%
    
489,434
      
3,195
      
2.61
%
    
508,209
      
3,271
      
2.57
%
    
520,190
      
3,371
      
2.59
%
Federal funds sold
    
3,143
      
2
      
0.25
%
    
2,260
      
1
      
0.18
%
    
2,921
      
1
      
0.14
%
    
2,535
      
1
      
0.15
%
    
2,180
      
1
      
0.18
%
Time and interest bearing deposits in
                                                                                                                        
other banks
    
22,922
      
15
      
0.26
%
    
16,789
      
11
      
0.26
%
    
25,891
      
16
      
0.25
%
    
14,546
      
9
      
0.24
%
    
22,519
      
15
      
0.26
%
Other investments
    
12,090
      
109
      
3.61
%
    
11,679
      
89
      
3.05
%
    
11,527
      
70
      
2.43
%
    
11,263
      
78
      
2.77
%
    
10,948
      
80
      
2.92
%
Loans
    
1,232,196
      
18,273
      
5.88
%
    
1,205,930
      
17,769
      
5.91
%
    
1,147,010
      
17,483
      
6.18
%
    
1,141,829
      
18,050
      
6.27
%
    
1,123,086
      
17,652
      
6.24
%
Total interest earning assets
    
1,708,524
      
21,360
      
4.96
%
    
1,703,746
      
20,941
      
4.93
%
    
1,676,783
      
20,765
      
5.02
%
    
1,678,382
      
21,409
      
5.06
%
    
1,678,923
      
21,119
      
4.99
%
Non-interest earning assets
    
184,085
                      
183,980
                      
182,429
                      
184,580
                      
184,167
                  
Total assets
  
$
1,892,609
                    
$
1,887,726
                    
$
1,859,212
                    
$
1,862,962
                    
$
1,863,090
                  
 
                                                                                                                        
Interest-bearing liabilities:
                                                                                                                        
Deposits
  
$
1,132,132
    
$
859
      
0.30
%
  
$
1,156,638
    
$
858
      
0.30
%
  
$
1,155,011
    
$
871
      
0.31
%
  
$
1,126,742
    
$
917
      
0.32
%
  
$
1,133,126
    
$
976
      
0.34
%
Repurchase agreements
    
70,587
      
210
      
1.18
%
    
62,322
      
199
      
1.28
%
    
48,413
      
180
      
1.51
%
    
67,022
      
207
      
1.23
%
    
64,274
      
204
      
1.26
%
Federal funds purchased
    
70
      
-
      
0.00
%
    
679
      
1
      
0.58
%
    
168
      
-
      
0.00
%
    
747
      
1
      
0.52
%
    
354
      
-
      
0.00
%
Short-term borrowings
    
28,913
      
13
      
0.18
%
    
25,110
      
9
      
0.14
%
    
25,000
      
10
      
0.16
%
    
23,913
      
9
      
0.15
%
    
25,000
      
11
      
0.17
%
Notes payable
    
26,640
      
95
      
1.40
%
    
27,218
      
95
      
1.38
%
    
27,577
      
96
      
1.39
%
    
27,922
      
101
      
1.42
%
    
28,301
      
107
      
1.48
%
Junior subordinated debentures
    
26,247
      
327
      
4.88
%
    
29,384
      
320
      
4.31
%
    
29,384
      
347
      
4.72
%
    
29,384
      
339
      
4.51
%
    
29,384
      
335
      
4.46
%
Total interest bearing liabilities
    
1,284,589
      
1,504
      
0.46
%
    
1,301,351
      
1,482
      
0.46
%
    
1,285,553
      
1,504
      
0.47
%
    
1,275,730
      
1,575
      
0.49
%
    
1,280,439
      
1,633
      
0.51
%
Non-interest bearing liabilities
    
402,729
                      
385,118
                      
378,679
                      
395,746
                      
394,472
                  
Shareholders' equity
    
205,291
                      
201,257
                      
194,980
                      
191,486
                      
188,179
                  
Total liabilities and  shareholders'
                                                                                                                        
equity
  
$
1,892,609
                    
$
1,887,726
                    
$
1,859,212
                    
$
1,862,962
                    
$
1,863,090
                  
 
                                                                                                                        
Net interest income (TE) and spread
    
$
19,856
      
4.50
%
          
$
19,459
      
4.47
%
          
$
19,261
      
4.55
%
          
$
19,834
      
4.57
%
          
$
19,486
      
4.48
%
 
                                                                                                                        
Net interest margin
              
4.61
%
                    
4.58
%
                    
4.66
%
                    
4.69
%
                    
4.60
%
 
                                                                                                                        
Core net interest margin (Non-GAAP)(*)
                    
4.42
%
                    
4.39
%
                    
4.33
%
                    
4.31
%
                    
4.30
%
 
                                                                                                                        
 
                                                                                                                        
(*) See reconciliation of Non-GAAP financial measures on page 12.
                                                                        
 
-11-
 
  
   
   
   
   
   
   
   
   
   
 
MIDSOUTH BANCORP, INC. and SUBSIDIARIES
 
Reconciliation of Non-GAAP Financial Measures (unaudited)
  
(in thousands except per share data)
 
 
  
   
   
   
   
   
   
   
   
   
 
 
  
   
Three Months Ended
  
 
  
   
September 30,
    
   
June 30,
    
   
March 31,
    
   
December 31,
    
   
September 30,
  
Per Common Share Data
  
   
2014
    
   
2014
    
   
2014
    
   
2013
    
   
2013
  
 
  
   
   
   
   
   
   
   
   
   
 
Book value per common share
  
   
$
14.52
    
   
$
14.25
    
   
$
13.92
    
   
$
13.21
    
   
$
13.12
  
Effect of intangible assets per share
  
     
4.35
    
     
4.39
    
     
4.41
    
     
4.45
    
     
4.51
  
Tangible book value per common share
  
   
$
10.17
    
   
$
9.86
    
   
$
9.51
    
   
$
8.76
    
   
$
8.61
  
 
  
           
           
           
           
         
Diluted earnings per share
  
   
$
0.37
    
   
$
0.34
    
   
$
0.57
    
   
$
0.29
    
   
$
0.27
  
Effect of efficiency consultant expenses, after-tax
  
     
0.01
    
     
0.01
    
     
-
    
     
-
    
     
-
  
Effect of loss on disposal of fixed assets, after-tax
  
     
0.02
      
 
      
-
      
 
      
-
      
 
      
-
      
 
      
-
  
Effect of loss on redemption of Trust Preferred Securities, after-tax
  
     
0.02
      
 
      
-
      
 
      
-
      
 
      
-
      
 
      
-
  
Effect of gain on sale of other real estate, after-tax
  
     
(0.06
)
    
 
      
-
      
 
      
-
      
 
      
-
      
 
      
-
  
Executive officer life insurance proceeds, net of related expenses, after-tax
  
     
-
              
-
              
(0.24
)
            
-
              
-
  
Diluted earnings per share, operating
  
   
$
0.36
            
$
0.35
            
$
0.33
            
$
0.29
            
$
0.27
  
 
  
                                                                         
 
  
   
Three Months Ended
  
 
  
   
September 30,
            
June 30,
            
March 31,
            
December 31,
            
September 30,
  
 
  
     
2014
              
2014
              
2014
              
2013
              
2013
  
Average Balance Sheet Data
  
                                                                         
 
  
                                                                         
Total average assets
      
A
  
$
1,892,609
            
$
1,887,726
            
$
1,859,212
            
$
1,862,962
            
$
1,863,090
  
 
                                                                                
Total equity
          
$
205,291
            
$
201,257
            
$
194,980
            
$
191,486
            
$
188,179
  
Less preferred equity
            
41,436
              
41,491
              
41,968
              
41,997
              
41,997
  
Total common equity
      
B
  
$
163,855
            
$
159,766
            
$
153,012
            
$
149,489
            
$
146,182
  
Less intangible assets
            
49,417
              
49,691
              
49,976
              
50,548
              
50,819
  
Tangible common equity
      
C
  
$
114,438
            
$
110,075
            
$
103,036
            
$
98,941
            
$
95,363
  
 
                                                                                
 
                                                                                
 
          
Three Months Ended
  
 
          
September 30,
            
June 30,
            
March 31,
            
December 31,
            
September 30,
  
Core Net Interest Margin
            
2014
              
2014
              
2014
              
2013
              
2013
  
 
                                                                                
Net interest income (TE)
          
$
19,856
            
$
19,459
            
$
19,261
            
$
19,834
            
$
19,486
  
Less purchase accounting adjustments
            
(750
)
            
(745
)
            
(1,258
)
            
(1,515
)
            
(1,175
)
Net interest income, net of purchase accounting adjustments
      
D
  
$
19,106
            
$
18,714
            
$
18,003
            
$
18,319
            
$
18,311
  
 
                                                                                
Total average earnings assets
          
$
1,708,524
            
$
1,703,746
            
$
1,676,783
            
$
1,678,382
            
$
1,678,923
  
Add average balance of loan valuation discount
            
6,498
              
7,013
              
7,915
              
9,347
              
10,323
  
Average earnings assets, excluding loan valuation discount
      
E
  
$
1,715,022
            
$
1,710,759
            
$
1,684,698
            
$
1,687,729
            
$
1,689,246
  
 
                                                                                
Core net interest margin
    
D/
E
    
4.42
%
            
4.39
%
            
4.33
%
            
4.31
%
            
4.30
%
 
                                                                                
 
                                                                                
 
          
Three Months Ended
  
 
          
September 30,
            
June 30,
            
March 31,
            
December 31,
            
September 30,
  
Return Ratios
            
2014
              
2014
              
2014
              
2013
              
2013
  
 
                                                                                
Net earnings available to common shareholders
          
$
4,298
            
$
3,946
            
$
6,678
            
$
3,365
            
$
3,072
  
Efficiency consultant expenses, after-tax
            
130
              
70
              
34
              
-
              
-
  
Loss on disposal of fixed assets, after-tax
            
256
              
-
      
 
      
-
      
 
      
-
      
 
      
-
  
Loss on redemption of Trust Preferred Securities, after-tax
            
168
              
-
      
 
      
-
      
 
      
-
      
 
      
-
  
Gain on sale of other real estate, after-tax
            
(700
)
            
-
      
 
      
-
      
 
      
-
      
 
      
-
  
Executive officer life insurance proceeds, net of related expenses, after-tax
            
-
              
-
              
(2,840
)
            
-
              
-
  
Net earnings available to common shareholders, operating
      
F
  
$
4,152
            
$
4,016
            
$
3,872
            
$
3,365
            
$
3,072
  
 
                                                                                
Annualized return on average assets, operating
    
F/
A
    
0.87
%
            
0.85
%
            
0.84
%
            
0.72
%
            
0.65
%
Annualized return on average common equity, operating
    
F/
B
    
10.05
%
            
10.08
%
            
10.26
%
            
8.93
%
            
8.34
%
Annualized return on average tangible common equity, operating
    
F/
C
    
14.39
%
            
14.63
%
            
15.24
%
            
13.49
%
            
12.78
%
 
                                                                                
 
                                                                                
Certain financial information included in the earnings release and the associated Condensed Consolidated Financial Information (unaudited) is determined by methods other than in accordance with GAAP. The non-GAAP financial measure above is calculated by using "tangible common equity," which is defined as total common equity reduced by intangible assets. "Tangible book value per common share" is defined as tangible common equity divided by total common shares outstanding. "Diluted earnings per share, operating" is defined as net earnings available to common shareholders adjusted for specified one-time items divided by diluted weighted-average shares. "Core net interest margin" is defined as reported net interest margin less purchase accounting adjustments. "Annualized return on average assets, operating" is defined as net earnings available to common shareholders adjusted for specified one-time items divided by average assets. "Annualized return on average common equity, operating" is defined as net earnings available to common shareholders adjusted for specified one-time items divided by average common equity. "Annualized return on average tangible common equity, operating" is defined as net earnings available to common shareholders adjusted for specified one-time items divided by average tangible common equity.
 
  
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 results should not be viewed as a substitute for results determined in accordance with GAAP, and are not necessarily comparable to non-GAAP performance measures that other companies may use.
  
 
 

 
-12-