EX-99.1 2 mslq206302017er-8kex991.htm EXHIBIT 99.1 Exhibit

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

 

logoa17.jpg


MidSouth Bancorp, Inc. Reports Second Quarter 2017 Results
and Declares Quarterly Dividends

Quarterly Highlights
•
Completed management transition and reorganization
•
Significantly strengthened balance sheet of the Bank
◦
Completed $55 million capital raise
◦
Tangible Common Equity ratio improves to 9.17% from 6.80% sequentially
◦
Stable Core Deposits account for 90% of deposit mix
•
Realignment of branch network - announced closure of 7 branches and pending sale of 2 branches
•
Quarterly loss of $0.51 per share, driven by $12.5 million loan loss provision and $2.4 million restructuring charges
•
Written agreement entered into with the Office of the Comptroller of the Currency

LAFAYETTE, LA., July 25, 2017/PRNewswire/ -- MidSouth Bancorp, Inc. (“MidSouth”) (NYSE:MSL) today reported a quarterly net loss available to common shareholders of $6.2 million for the second quarter of 2017, compared to net earnings available to common shareholders of $1.7 million reported for the second quarter of 2016 and for the first quarter of 2017. The loss of $6.2 million, or $0.51 per diluted share, for the second quarter of 2017 was primarily due to increased loan loss provisioning to address credit issues as well as charges related to branch sales/closures and the accrual of severance benefits resulting from the termination of an executive pursuant to an employment agreement. Second quarter 2017 net loss included an after-tax charge of $872,000 for severance and retention accruals, an after-tax charge of $371,000 resulting from the write-down of assets held for sale, and a one-time after-tax charge of $302,000 related to discontinued branch projects. Excluding these non-operating expenses, a loss of $0.38 per diluted share was reported for the second quarter of 2017, compared to diluted earnings per common share of $0.15 for the first quarter of 2017 and for the second quarter of 2016.

Jim McLemore, President and CEO, remarked, "The operating loss this quarter is consistent with our disclosures during our June capital raise. These results reflect our previously announced transition plans that include a more aggressive approach to addressing asset quality and the optimization of our branch network.  Despite the quarterly loss, capital and liquidity levels increased significantly over the prior quarter and our balance sheet is stronger than it has been in many years.  Pre-tax, pre-provision operating earnings increased $0.4 million sequentially. As a

1

result of the Bank's enhanced capital position, we have commenced discussions with our regulators to assess the repayment of the $32 million SBLF preferred stock.”

Additionally, on July 19th, 2017, the Bank entered into a formal written agreement with the Office of the Comptroller of the Currency, (the "OCC").  Mr. McLemore commented, “We embrace and accept the provisions of the agreement with the OCC.   The provisions of the agreement are consistent with the disclosures made during our capital raise.  We believe implementing the provisions of the agreement with our realigned management team and strengthened balance sheet will only serve to enhance our efforts to deal effectively with our problem assets and become a better managed and higher performing institution.”  

Energy Lending Update
 
MidSouth Bank defines an energy loan as any loan where the borrower's ability to repay is disproportionately impacted by a prolonged downturn in energy prices. Under this definition, the Bank includes direct Commercial and Industrial (C&I) loans to energy borrowers, as well as Commercial Real Estate (CRE) loans, Residential Real Estate loans and loans to energy-related borrowers where the loan's primary collateral is cash and marketable securities.

Other comments on the Bank's energy lending:
•
Total energy loans, as defined above, decreased $23.0 million during 2Q17 to $208.8 million, or 16.8% of total loans, from 18.2% at March 31, 2017 primarily due to $16.1 million of payoffs during the quarter.
•
Direct C&I energy loans were $171.5 million or 13.8% of total loans and had a weighted average maturity of 3.1 years at June 30, 2017.
•
Energy-related CRE and residential real estate loans were $37.0 million or 3.0% of total loans at June 30, 2017.
•
Total criticized energy-related loans decreased $18.0 million, or 16.1%, during 2Q17 to $93.5 million and represented 44.7% of energy loans at June 30, 2017, versus 48.1% at March 31, 2017.
•
Seven energy loan relationships had rating changes during the quarter.
◦
Two loan relationship totaling $1.4 million were downgraded to Special Mention
◦
Four loan relationships totaling $5.7 million were downgraded to Substandard
◦
One loan relationship totaling $195,000 was upgraded to Pass
•
Three energy-related charge-offs totaled $6.0 million, including $5.6 million of collateral dependent charge-offs on 2 relationships, of which $2.4 million was reserved as of March 31, 2017.
•
Cycle to date net charge-offs totaled $10.0 million, or 3.76% of December 31, 2014 energy loans, which was when the effects of declining oil prices began to surface.
•
Five new energy-related impairments totaling $2.3 million were identified during 2Q17 and three additional impairment charges of $2.6 million were recorded related to existing impaired loans identified prior to 2Q17.
•
The energy reserve as a percentage of total energy loans, as defined, was 5.4% at June 30, 2017. The reserve attributable to C&I energy loans was approximately 6.4%. The reserve on all other energy loans was 1.0%.
•
The Bank has two Shared National Credits (SNCs) totaling $12.9 million in the energy portfolio at June 30, 2017 and both are rated as Substandard.

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•
To date, during the month of July 2017, the Bank has had one rating related change to its energy portfolio:
◦
One credit in the amount of $93,000 was downgraded from Pass to Classified

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.

Balance Sheet

Consolidated assets remained constant at $1.9 billion for the quarters ended June 30, 2017 and 2016 and March 31, 2017. Our stable core deposit base, which excludes time deposits, totaled $1.4 billion at June 30, 2017 and March 31, 2017 and accounted for 90.3% and 90.4% of deposits at June 30, 2017 and March 31, 2017, respectively. Net loans totaled $1.216 billion at June 30, 2017, compared to $1.247 billion at March 31, 2017 and $1.241 billion at June 30, 2016. The $31.8 million reduction in loans during the second quarter demonstrates our accelerated efforts to address nonperforming loans, which resulted in the high level of charge-offs and pay-offs during the quarter.

MidSouth’s Tier 1 leverage capital ratio was 12.66% at June 30, 2017, compared to 10.27% at March 31, 2017. Tier 1 risk-based capital and total risk-based capital ratios were 16.48% and 17.73% at June 30, 2017, compared to 13.14% and 14.40% at March 31, 2017, respectively. Tier 1 common equity to total risk-weighted assets at June 30, 2017 was 12.15%, compared to 8.91% at March 31, 2017. Tangible common equity totaled $174.2 million at June 30, 2017, compared to $128.4 million at March 31, 2017. Tangible book value per share at June 30, 2017 was $10.87 versus $11.28 at March 31, 2017. The changes in regulatory capital levels, tangible common equity and tangible book value per share are primarily attributable to the 4,583,334 shares of common stock issued with the $55.0 million capital raise during the quarter.
  
Asset Quality

Nonperforming assets totaled $56.4 million at June 30, 2017, a decrease of $2.5 million compared to $58.9 million reported at March 31, 2017. The decrease is primarily attributable to the payoffs/paydowns of $15.3 million of non-accrual loans and the charge-off of $9.1 million of non-accrual loans, which included the charge-offs of $6.9 million of collateral-dependent loans that were on non-accrual at March 31, 2017. These decreases were partially offset by $22.7 million of loans placed on non-accrual during the quarter. Allowance coverage for nonperforming loans increased to 44.88% at June 30, 2017, compared to 42.96% at March 31, 2017. The ALLL/total loans ratio was 1.99% at June 30, 2017 and 1.93% at March 31, 2017. Including valuation accounting adjustments on acquired loans, the total valuation accounting adjustment plus ALLL was 2.11% of loans at June 30, 2017. The ratio of annualized net charge-offs to total loans increased to 4.01% for the three months ended June 30, 2017 compared to 0.83% for the three months ended March 31, 2017.

Total nonperforming assets to total loans plus ORE and other assets repossessed was 4.54% at June 30, 2017 compared to 4.62% at March 31, 2017. Loans classified as troubled debt restructurings, accruing (“TDRs, accruing”) decreased to $1.7 million at June 30, 2017 compared to $2.0 million at March 31, 2017. Classified assets, including ORE, were $148.8 million at June

3

30, 2017 compared to $148.4 million at March 31, 2017. Downgrades to classified assets totaling $39.5 million during the quarter were partially offset by the payoff/paydown of $29.3 million of classified relationships during the second quarter as well as charge-offs of $9.6 million of loans rated as classified at March 31, 2017.

Second Quarter 2017 vs. First Quarter 2017 Earnings Comparison

MidSouth reported a net loss available to common shareholders of $6.2 million for the three months ended June 30, 2017, compared to net earnings available to common shareholders of $1.7 million for the three months ended March 31, 2017. Net interest income increased $180,000 in sequential-quarter comparison. Noninterest income increased $179,000 in sequential-quarter comparison.

The second quarter of 2017 included non-operating expenses totaling $2.4 million which consisted of $1.3 million of severance and retention accruals, a $570,000 write-down on assets held for sale and a $465,000 one-time charge related to discontinued branch projects. Excluding these non-operating expenses, noninterest expense decreased $2,000 in sequential-quarter comparison. Decreases of $579,000 in salaries and benefits costs and $196,000 in occupancy expenses were primarily offset by increases of $551,000 in legal and professional fees and a $187,000 provision for unfunded lines of credit. The increase in legal and professional fees is primarily due to legal costs related to management transition issues and increased outsourcing expenses to enhance risk management. The provision for loan losses increased $9.7 million in sequential-quarter comparison. A $3.2 million income tax benefit was reported for the second quarter of 2017, compared to income tax expense of $589,000 for the first quarter of 2017.

Dividends on the Series B Preferred Stock issued to the Treasury as a result of our participation in the Small Business Lending Fund (“SBLF”) totaled $720,000 for the second quarter of 2017 based on a dividend rate of 9%, unchanged from $720,000 for the first quarter of 2017. Dividends on the Series C Preferred Stock issued with the December 28, 2012 acquisition of PSB Financial Corporation (“PSB”) totaled $91,000 for the three months ended June 30, 2017 and March 31, 2017.

Fully taxable-equivalent (“FTE”) net interest income increased $163,000 in sequential-quarter comparison, primarily due to an increase in interest income on loans of $109,000 as well as a $65,000 increase in interest income on time and interest-bearing deposits in other banks. Interest income on loans increased in sequential-quarter comparison due to an increase in the average yield on loans of 6 basis points, from 5.29% to 5.35%. The average balance of loans decreased $19.8 million in sequential-quarter comparison due to the high level of charge-offs and payoffs. Excluding purchase accounting adjustments, the loan yield increased 3 basis points, from 5.22% to 5.25% during the same period. Interest income on investment securities increased $39,000 in sequential-quarter comparison. The average yield on investment securities increased 3 basis points, from 2.66% to 2.69%, and the average balance of investment securities increased $1.3 million. The average yield on total earning assets increased one basis point for the same period, from 4.51% to 4.52%, respectively. The FTE net interest margin remained unchanged at 4.18% in sequential-quarter comparison. Excluding purchase accounting adjustments, the FTE net interest margin decreased 2 basis points, from 4.11% for the first quarter of 2017 to 4.09% for the second quarter of 2017.

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Second Quarter 2017 vs. Second Quarter 2016 Earnings Comparison

MidSouth reported a net loss available to common shareholders of $6.2 million for the three months ended June 30, 2017, compared to net earnings available to common shareholders of $1.7 million for the three months ended June 30, 2016. Revenues from consolidated operations increased $605,000 in quarterly comparison, from $22.9 million for the three months ended June 30, 2016 to $23.5 million for the three months ended June 30, 2017. Net interest income increased $521,000 in quarterly comparison, resulting from a $636,000 increase in interest income, which was partially offset by a $115,000 increase in interest expense. Noninterest income increased $84,000 in quarterly comparison and consisted primarily of a $98,000 increase in ATM/debit card income and a $44,000 increase in mortgage program fee income. The increases were partially offset by a $55,000 decrease in service charges on deposits accounts.

Excluding non-operating expenses of $2.4 million for the second quarter of 2017, noninterest expenses increased $187,000 in quarterly comparison and consisted primarily of a $500,000 increase in legal and professional fees and a $189,000 increase in data processing costs, which were partially offset by a $239,000 decrease in occupancy expense and a $166,000 decrease in corporate development. A reclass of certain hosted services subscriptions from corporate development into data processing at the beginning of 2017 caused the fluctuations in those two expense categories. The provision for loan losses increased $10.2 million in quarterly comparison, from $2.3 million for the three months ended June 30, 2016 to $12.5 million for the three months ended June 30, 2017. A $3.2 million income tax benefit was reported for the second quarter of 2017, compared to income tax expense of $1.0 million for the second quarter of 2016.

Dividends on preferred stock totaled $811,000 for the three months ended June 30, 2017 and June 30, 2016. Dividends on the Series B Preferred Stock were $720,000 for the second quarter of 2017, unchanged from $720,000 for the second quarter of 2016. Dividends on the Series C Preferred Stock issued with the December 28, 2012 acquisition of PSB Financial Corporation (“PSB”) totaled $91,000 for the three months ended June 30, 2017 and June 30, 2016.

FTE net interest income increased $496,000 in prior year quarterly comparison. Interest income on loans increased $159,000 due to an increase in the average yield on loans of 4 basis points. The average balance of loans decreased $1.7 million in prior year quarterly comparison. Purchase accounting adjustments added 10 basis points to the average yield on loans for the second quarter of 2017 and 9 basis points to the average yield on loans for the second quarter of 2016. Excluding the impact of the purchase accounting adjustments, average loan yields increased 3 basis points in prior year quarterly comparison, from 5.22% to 5.25%.

Investment securities totaled $436.0 million, or 22.4% of total assets at June 30, 2017, versus $440.1 million, or 22.6% of total assets at December 31, 2016. The investment portfolio had an effective duration of 3.0 years and a net unrealized gain of $2.0 million at June 30, 2017. Interest income on investments increased $405,000 in prior year quarterly comparison. The average volume of investment securities increased $33.7 million in prior year quarterly comparison, and the average tax equivalent yield on investment securities increased 17 basis points, from 2.52% to 2.69%.

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The average yield on all earning assets increased 9 basis points in prior year quarterly comparison, from 4.43% for the second quarter of 2016 to 4.52% for the second quarter of 2017. Excluding the impact of purchase accounting adjustments, the average yield on total earning assets increased 9 basis points, from 4.36% to 4.45% for the three-month periods ended June 30, 2016 and 2017, respectively.

Interest expense increased $115,000 in prior year quarterly comparison. Increases in interest expense included a $70,000 increase in interest expense on deposits and a $42,000 increase in interest expense on variable rate junior subordinated debentures. Excluding purchase accounting adjustments on acquired certificates of deposit and FHLB borrowings, the average rate paid on interest-bearing liabilities was 0.51% for the three months ended June 30, 2017 and 0.46% for the three months ended June 30, 2016.

As a result of these changes in volume and yield on earning assets and interest-bearing liabilities, the FTE net interest margin increased 7 basis points, from 4.11% for the second quarter of 2016 to 4.18% for the second quarter of 2017. Excluding purchase accounting adjustments on loans, deposits and FHLB borrowings, the FTE margin increased 7 basis points, from 4.02% for the second quarter of 2016 to 4.09% for the second quarter of 2017.

Year-To-Date Earnings Comparison

MidSouth reported a net loss available to common shareholders of $4.5 million for the six months ended June 30, 2017, compared to net earnings available to common shareholders of $3.6 million for the six months ended June 30, 2016. Revenues from consolidated operations increased $844,000 in year-over-year comparison, from $45.7 million for the six months ended June 30, 2016 to $46.6 million for the six months ended June 30, 2017. Net interest income increased $460,000 in year-over-year comparison, resulting from a $620,000 increase in interest income, which was partially offset by a $160,000 increase in interest expense. Noninterest income increased $384,000 in year-over-year comparison and consisted primarily of a $192,000 increase in ATM/debit card income, a $78,000 increase in mortgage program fee income and a $56,000 increase in service charges on deposits accounts.

Excluding non-operating expenses of $2.4 million for the second quarter of 2017, noninterest expenses increased $658,000 in year-over-year comparison and consisted primarily of a $627,000 increase in salaries and benefits costs, a $502,000 increase in legal and professional fees and a $352,000 increase in data processing costs, which were partially offset by decreases of $212,000 in occupancy expense, $190,000 in marketing costs, $185,000 in corporate development and $143,000 in ATM/debit card expense. A reclass of certain hosted services subscriptions from corporate development into data processing at the beginning of 2017 caused the fluctuations in those two expense categories. The provision for loan losses increased $10.2 million in year-over-year comparison, from $5.1 million for the six months ended June 30, 2016 to $15.3 million for the six months ended June 30, 2017, primarily due to the high level of charge-offs and additional impairment charges on nonperforming loans in the second quarter of 2017. A $2.6 million income tax benefit was reported for the first six months of 2017, compared to income tax expense of $2.0 million for the first six months of 2016.


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In year-to-date comparison, FTE net interest income increased $408,000 primarily due to a $618,000 increase in interest income from investment securities. The average volume of investment securities increased $26.4 million in year-over-year comparison, and the average yield on investment securities increased 13 basis points for the same period. Interest income on loans decreased $85,000 in year-over-year comparison. The average volume of loans increased $9.8 million in year-over-year comparison, and the average yield on loans decreased 3 basis points, from 5.36% to 5.33%. The average yield on earning assets increased 6 basis points in year-over-year comparison, from 4.47% at June 30, 2016 to 4.53% at June 30, 2017. The purchase accounting adjustments added 8 basis points to the average yield on loans for the six months ended June 30, 2017 and 13 basis points for the six months ended June 30, 2016. Net of purchase accounting adjustments, the average yield on earning assets increased 9 basis points, from 4.38% at June 30, 2016 to 4.47% at June 30, 2017.

Interest expense increased $160,000 in year-over-year comparison. Increases in interest expense included a $74,000 increase in interest expense on deposits and an $83,000 increase in interest expense on junior subordinated debentures. These increases were partially offset by a $23,000 decrease in interest expense on short-term FHLB advances. The average rate paid on interest-bearing liabilities was 0.47% for the six months ended June 30, 2017, compared to 0.43% for the six months ended June 30, 2016. Net of purchase accounting adjustments, the average rate paid on interest-bearing liabilities increased 4 basis points, from 0.46% for the six months ended June 30, 2016 to 0.50% for the six months ended June 30, 2017. The FTE net interest margin increased 4 basis points, from 4.15% for the six months ended June 30, 2016 to 4.19% for the six months ended June 30, 2017. Net of purchase accounting adjustments, the FTE net interest margin increased 7 basis points, from 4.04% to 4.11% for the six months ended June 30, 2016 and 2017.

Dividends

MidSouth’s Board of Directors announced a cash dividend was declared in the amount of $0.01 per share to be paid on its common stock on October 2, 2017 to shareholders of record as of the close of business on September 15, 2017. The quarterly common stock cash dividend has been reduced to conserve capital as we work to reduce problem assets. 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 October 16, 2017 to shareholders of record as of the close of business on October 2, 2017.

About MidSouth Bancorp, Inc.
 
MidSouth Bancorp, Inc. is a financial holding company headquartered in Lafayette, Louisiana, with assets of $1.9 billion as of June 30, 2017. 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 57 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

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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 the strength of the Company's balance sheet and its positioning to address problem assets and achieve operating efficiencies and the implementation of the provisions of the formal agreement with the OCC.
 
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 in the markets we serve, including, without limitation, changes related to the oil and gas industries that could adversely affect customers and their ability to repay borrowings under agreed upon terms, adversely affect the value of the underlying collateral related to their borrowings, and reduce demand for loans; increases in competitive pressure in the banking and financial services industries; increased competition for deposits and loans which could affect compositions, rates and terms; changes in the levels of prepayments received on loans and investment securities that adversely affect the yield and value of the earning assets; our ability to successfully implement and manage our recently announced strategic initiatives; costs and expenses associated with our strategic initiatives and possible changes in the size and components of the expected costs and charges associated with our strategic initiatives; our ability to realize the anticipated benefits and cost savings from our strategic initiatives within the anticipated time frame, if at all; the ability of our strategic initiatives to adequately address the anticipated concerns of the Office of the Comptroller of the Currency (the “OCC”) in its current examination of us and the ability of the Company to comply with the terms of the formal agreement with the OCC; credit losses due to loan concentration, particularly our energy lending and legacy commercial real estate portfolios; a deviation in actual experience from the underlying assumptions used to determine and establish our allowance for loan losses (“ALLL”), which could result in greater than expected loan losses; the adequacy of the level of our ALLL and the amount of loan loss provisions required in future periods including the impact of implementation of the new CECL (current expected credit loss) methodology; future examinations by our regulatory authorities, including the possibility that the regulatory authorities may, among other things, impose conditions on our operations or require us to increase our allowance for loan losses or write-down assets; changes in the availability of funds resulting from reduced liquidity or increased costs; the timing and impact of future acquisitions or divestitures, the success or failure of integrating acquired operations, and the ability to capitalize on growth opportunities upon entering new markets; the ability to acquire, operate, and maintain effective and efficient operating systems; increased asset levels and changes in the composition of assets that would impact capital levels and regulatory capital ratios; loss of critical personnel and the challenge of hiring qualified personnel at reasonable compensation levels; legislative and regulatory changes, including the impact of regulations under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and other changes in banking, securities and tax laws and regulations and their application by our regulators, changes in the scope and cost of FDIC insurance and other coverage; regulations and restrictions resulting from our participation in government-sponsored programs such as the U.S. Treasury’s Small Business Lending Fund, including potential retroactive changes in such programs; changes in accounting principles, policies, and guidelines applicable to financial holding companies and banking; increases in cybersecurity risk, including potential business disruptions or financial losses; acts of war, terrorism, cyber intrusion, weather, or other catastrophic events beyond our control; and other factors discussed under the heading “Risk Factors” in MidSouth’s Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC on March 16, 2017 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
 
6/30/2017
 
3/31/2017
 
12/31/2016
 
9/30/2016
 
6/30/2016
Total interest income
 
$
19,758

 
$
19,531

 
$
19,694

 
$
19,667

 
$
19,122

Total interest expense
 
1,512

 
1,465

 
1,459

 
1,414

 
1,397

Net interest income
 
18,246

 
18,066

 
18,235

 
18,253

 
17,725

FTE net interest income
 
18,442

 
18,279

 
18,478

 
18,472

 
17,946

Provision for loan losses
 
12,500

 
2,800

 
2,600

 
2,900

 
2,300

Non-interest income
 
5,223

 
5,044

 
5,071

 
5,152

 
5,139

Non-interest expense
 
19,604

 
17,230

 
17,636

 
17,114

 
17,041

Earnings (loss) before income taxes
 
(8,635
)
 
3,080

 
3,070

 
3,391

 
3,523

Income tax expense (benefit)
 
(3,221
)
 
589

 
871

 
993

 
1,030

Net earnings (loss)
 
(5,414
)
 
2,491

 
2,199

 
2,398

 
2,493

Dividends on preferred stock
 
811

 
811

 
812

 
811

 
811

Net earnings (loss) available to common shareholders
 
$
(6,225
)
 
$
1,680

 
$
1,387

 
$
1,587

 
$
1,682

 
 
 
 
 
 
 
 
 
 
 
PER COMMON SHARE DATA
 
 
 
 
 
 
 
 
 
 
Basic earnings (loss) per share
 
(0.51
)
 
0.15

 
0.12

 
0.14

 
0.15

Diluted earnings (loss) per share
 
(0.51
)
 
0.15

 
0.12

 
0.14

 
0.15

Diluted earnings (loss) per share, operating (Non-GAAP)(*)
 
(0.38
)
 
0.15

 
0.12

 
0.14

 
0.15

Quarterly dividends per share
 
0.09

 
0.09

 
0.09

 
0.09

 
0.09

Book value at end of period
 
13.76

 
15.37

 
15.25

 
15.58

 
15.56

Tangible book value at period end (Non-GAAP)(*)
 
10.87

 
11.28

 
11.13

 
11.44

 
11.40

Market price at end of period
 
11.75

 
15.30

 
13.60

 
10.40

 
10.04

Shares outstanding at period end
 
16,026,355

 
11,383,914

 
11,362,716

 
11,362,716

 
11,362,705

Weighted average shares outstanding
 
 
 
 
 
 
 
 
 
 
Basic
 
12,227,456

 
11,264,394

 
11,271,948

 
11,262,282

 
11,255,042

Diluted
 
12,237,299

 
11,282,491

 
11,273,302

 
11,262,710

 
11,255,178

 
 
 
 
 
 
 
 
 
 
 
AVERAGE BALANCE SHEET DATA
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
1,926,408

 
$
1,932,818

 
$
1,960,436

 
$
1,927,351

 
$
1,921,004

Loans and leases
 
1,254,402

 
1,274,213

 
1,277,555

 
1,268,270

 
1,256,133

Total deposits
 
1,551,498

 
1,569,188

 
1,591,814

 
1,562,193

 
1,562,680

Total common equity
 
187,762

 
174,785

 
176,747

 
177,866

 
175,994

Total tangible common equity (Non-GAAP)(*)
 
141,389

 
128,124

 
129,821

 
130,662

 
128,516

Total equity
 
228,871

 
215,895

 
217,857

 
218,976

 
217,112

 
 
 
 
 
 
 
 
 
 
 
SELECTED RATIOS
 
 
 
 
 
 
 
 
 
 
Annualized return on average assets, operating (Non-GAAP)(*)
 
(0.97
)%
 
0.35
%
 
0.28
%
 
0.33
%
 
0.35
%
Annualized return on average common equity, operating (Non-GAAP)(*)
 
(10.00
)%
 
3.89
%
 
3.12
%
 
3.55
%
 
3.81
%
Annualized return on average tangible common equity, operating (Non-GAAP)(*)
 
(13.28
)%
 
5.31
%
 
4.25
%
 
4.83
%
 
5.22
%
Pre-tax, pre-provision annualized return on average assets, operating (Non-GAAP)(*)
 
1.30
 %
 
1.23
%
 
1.15
%
 
1.30
%
 
1.21
%
Efficiency ratio, operating (Non-GAAP)(*)
 
73.11
 %
 
74.51
%
 
75.67
%
 
73.04
%
 
74.49
%
Average loans to average deposits
 
80.85
 %
 
81.20
%
 
80.26
%
 
81.19
%
 
80.38
%
Taxable-equivalent net interest margin
 
4.18
 %
 
4.18
%
 
4.09
%
 
4.17
%
 
4.11
%
Tier 1 leverage capital ratio
 
12.66
 %
 
10.27
%
 
10.11
%
 
10.27
%
 
10.25
%
 
 
 
 
 
 
 
 
 
 
 
CREDIT QUALITY
 
 
 
 
 
 
 
 
 
 
Allowance for loan and lease losses (ALLL) as a % of total loans
 
1.99
 %
 
1.93
%
 
1.90
%
 
1.83
%
 
1.69
%
Nonperforming assets to tangible equity + ALLL
 
23.50
 %
 
30.34
%
 
33.88
%
 
32.98
%
 
32.77
%
Nonperforming assets to total loans, other real estate owned and other repossessed assets
 
4.54
 %
 
4.62
%
 
5.06
%
 
5.03
%
 
4.97
%
Annualized QTD net charge-offs to total loans
 
4.01
 %
 
0.83
%
 
0.46
%
 
0.32
%
 
0.40
%
 
 
 
 
 
 
 
 
 
 
 
(*) See reconciliation of Non-GAAP financial measures on pages 16-18.

9

MIDSOUTH BANCORP, INC. and SUBSIDIARIES          
Condensed Consolidated Balance Sheets (unaudited)       
(in thousands)               
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BALANCE SHEET
 
June 30,
 
March 31,
 
December 31,
 
September 30,
 
June 30,
 
 
2017
 
2017
 
2016
 
2016
 
2016
Assets
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
131,437

 
$
78,471

 
$
82,228

 
$
126,667

 
$
98,535

Securities available-for-sale
 
348,580

 
357,803

 
341,873

 
316,145

 
318,239

Securities held-to-maturity
 
87,462

 
91,242

 
98,211

 
103,412

 
109,420

Total investment securities
 
436,042

 
449,045

 
440,084

 
419,557

 
427,659

Other investments
 
11,666

 
11,362

 
11,355

 
11,339

 
11,036

Total loans
 
1,240,253

 
1,272,000

 
1,284,082

 
1,272,800

 
1,262,389

Allowance for loan losses
 
(24,674
)
 
(24,578
)
 
(24,372
)
 
(23,268
)
 
(21,378
)
Loans, net
 
1,215,579

 
1,247,422

 
1,259,710

 
1,249,532

 
1,241,011

Premises and equipment
 
65,739

 
68,216

 
68,954

 
69,778

 
68,468

Goodwill and other intangibles
 
46,239

 
46,516

 
46,792

 
47,069

 
47,346

Other assets
 
38,867

 
33,907

 
34,217

 
29,978

 
28,469

Total assets
 
$
1,945,569

 
$
1,934,939

 
$
1,943,340

 
$
1,953,920

 
$
1,922,524

 
 
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and Shareholders' Equity
 
 
 
 
 
 
 
 
 
 
Non-interest bearing deposits
 
$
428,419

 
$
426,998

 
$
414,921

 
$
403,301

 
$
383,797

Interest-bearing deposits
 
1,107,801

 
1,145,946

 
1,164,509

 
1,181,906

 
1,176,269

Total deposits
 
1,536,220

 
1,572,944

 
1,579,430

 
1,585,207

 
1,560,066

Securities sold under agreements to repurchase
 
90,799

 
89,807

 
94,461

 
95,210

 
85,786

Long-term FHLB advances
 
25,211

 
25,318

 
25,424

 
25,531

 
25,638

Junior subordinated debentures
 
22,167

 
22,167

 
22,167

 
22,167

 
22,167

Other liabilities
 
9,602

 
8,641

 
7,482

 
7,679

 
10,926

Total liabilities
 
1,683,999

 
1,718,877

 
1,728,964

 
1,735,794

 
1,704,583

Total shareholders' equity
 
261,570

 
216,062

 
214,376

 
218,126

 
217,941

Total liabilities and shareholders' equity
 
$
1,945,569

 
$
1,934,939

 
$
1,943,340

 
$
1,953,920

 
$
1,922,524



10

MIDSOUTH BANCORP, INC. and SUBSIDIARIES
 
 
 
 
 
 
 
 
 
 
 
Condensed Consolidated Income Statements (unaudited)
 
 
 
 
 
 
 
 
 
 
(in thousands except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percent Change
 
 
 
 
 
 
EARNINGS STATEMENT
 
Three Months Ended
 
2Q17 vs. 1Q17
 
2Q17 vs. 2Q16
 
Six Months Ended
 
Percent
 
 
6/30/2017
 
3/31/2017
 
6/30/2016
 
 
 
6/30/2017
 
6/30/2016
 
Change
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans, including fees
 
$
16,440

 
$
16,437

 
$
16,332

 
—
 %
 
0.7
 %
 
$
32,877

 
$
32,736

 
0.4
 %
Investment securities
 
2,790

 
2,734

 
2,360

 
2.0
 %
 
18.2
 %
 
5,524

 
4,854

 
13.8
 %
Accretion of purchase accounting adjustments
 
291

 
185

 
240

 
57.3
 %
 
21.3
 %
 
476

 
702

 
(32.2
)%
Other interest income
 
237

 
175

 
190

 
35.4
 %
 
24.7
 %
 
412

 
377

 
9.3
 %
Total interest income
 
19,758

 
19,531

 
19,122

 
1.2
 %
 
3.3
 %
 
39,289

 
38,669

 
1.6
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deposits
 
973

 
935

 
914

 
4.1
 %
 
6.5
 %
 
1,908

 
1,834

 
4.0
 %
Borrowings
 
416

 
411

 
414

 
1.2
 %
 
0.5
 %
 
827

 
850

 
(2.7
)%
Junior subordinated debentures
 
212

 
208

 
170

 
1.9
 %
 
24.7
 %
 
420

 
337

 
24.6
 %
Accretion of purchase accounting adjustments
 
(89
)
 
(89
)
 
(101
)
 
—
 %
 
(11.9
)%
 
(178
)
 
(204
)
 
(12.7
)%
Total interest expense
 
1,512

 
1,465

 
1,397

 
3.2
 %
 
8.2
 %
 
2,977

 
2,817

 
5.7
 %
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
Net interest income
 
18,246

 
18,066

 
17,725

 
1.0
 %
 
2.9
 %
 
36,312

 
35,852

 
1.3
 %
Provision for loan losses
 
12,500

 
2,800

 
2,300

 
346.4
 %
 
443.5
 %
 
15,300

 
5,100

 
200.0
 %
Net interest income after provision for loan losses
 
5,746

 
15,266

 
15,425

 
(62.4
)%
 
(62.7
)%
 
21,012

 
30,752

 
(31.7
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noninterest income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Service charges on deposit accounts
 
2,396

 
2,480

 
2,451

 
(3.4
)%
 
(2.2
)%
 
4,876

 
4,820

 
1.2
 %
ATM and debit card income
 
1,766

 
1,703

 
1,668

 
3.7
 %
 
5.9
 %
 
3,469

 
3,277

 
5.9
 %
Gain on securities, net (non-operating)(*)
 
3

 
6

 
20

 
(50.0
)%
 
(85.0
)%
 
9

 
20

 
(55.0
)%
Mortgage lending
 
167

 
143

 
123

 
16.8
 %
 
35.8
 %
 
310

 
232

 
33.6
 %
Other charges and fees
 
891

 
712

 
877

 
25.1
 %
 
1.6
 %
 
1,603

 
1,534

 
4.5
 %
Total non-interest income
 
5,223

 
5,044

 
5,139

 
3.5
 %
 
1.6
 %
 
10,267

 
9,883

 
3.9
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noninterest expense:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Salaries and employee benefits
 
8,110

 
8,689

 
8,182

 
(6.7
)%
 
(0.9
)%
 
16,799

 
16,172

 
3.9
 %
Occupancy expense
 
3,428

 
3,624

 
3,667

 
(5.4
)%
 
(6.5
)%
 
7,052

 
7,264

 
(2.9
)%
ATM and debit card
 
713

 
721

 
792

 
(1.1
)%
 
(10.0
)%
 
1,434

 
1,577

 
(9.1
)%
Legal and professional fees
 
936

 
385

 
436

 
143.1
 %
 
114.7
 %
 
1,321

 
819

 
61.3
 %
FDIC premiums
 
430

 
397

 
420

 
8.3
 %
 
2.4
 %
 
827

 
849

 
(2.6
)%
Marketing
 
262

 
280

 
351

 
(6.4
)%
 
(25.4
)%
 
542

 
732

 
(26.0
)%
Corporate development
 
253

 
316

 
419

 
(19.9
)%
 
(39.6
)%
 
569

 
754

 
(24.5
)%
Data processing
 
667

 
621

 
478

 
7.4
 %
 
39.5
 %
 
1,288

 
936

 
37.6
 %
Printing and supplies
 
135

 
183

 
223

 
(26.2
)%
 
(39.5
)%
 
318

 
411

 
(22.6
)%
Expenses on ORE, net
 
92

 
79

 
36

 
16.5
 %
 
155.6
 %
 
171

 
230

 
(25.7
)%
Amortization of core deposit intangibles
 
276

 
277

 
276

 
(0.4
)%
 
—
 %
 
553

 
553

 
—
 %
Severance and retention accruals (non-operating)(*)
 
1,341

 
—

 
—

 
—
 %
 
—
 %
 
1,341

 
—

 
—
 %
One-time charge related to discontinued branch projects (non-operating)(*)
 
465

 
—

 
—

 
—
 %
 
—
 %
 
465

 
—

 
—
 %
Write-down of assets held for sale (non-operating) (*)
 
570

 
—

 
—

 
—
 %
 
—
 %
 
570

 
—

 
—
 %
Other non-interest expense
 
1,926

 
1,658

 
1,761

 
16.2
 %
 
9.4
 %
 
3,584

 
3,503

 
2.3
 %
Total non-interest expense
 
19,604

 
17,230

 
17,041

 
13.8
 %
 
15.0
 %
 
36,834

 
33,800

 
9.0
 %
Earnings (loss) before income taxes
 
(8,635
)
 
3,080

 
3,523

 
(380.4
)%
 
(345.1
)%
 
(5,555
)
 
6,835

 
(181.3
)%
Income tax expense (benefit)
 
(3,221
)
 
589

 
1,030

 
(646.9
)%
 
(412.7
)%
 
(2,632
)
 
1,993

 
(232.1
)%
Net earnings (loss)
 
(5,414
)
 
2,491

 
2,493

 
(317.3
)%
 
(317.2
)%
 
(2,923
)
 
4,842

 
(160.4
)%
Dividends on preferred stock
 
811

 
811

 
811

 
—
 %
 
—
 %
 
1,622

 
1,238

 
31.0
 %
Net earnings available to common shareholders
 
$
(6,225
)
 
$
1,680

 
$
1,682

 
(470.5
)%
 
(470.1
)%
 
$
(4,545
)
 
$
3,604

 
(226.1
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings (loss) per common share, diluted
 
$
(0.51
)
 
$
0.15

 
$
0.15

 
(440.0
)%
 
(440.0
)%
 
$
(0.39
)
 
$
0.32

 
(221.9
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating earnings (loss) per common share, diluted (Non-GAAP)(*)
 
$
(0.38
)
 
$
0.15

 
$
0.15

 
(353.3
)%
 
(353.3
)%
 
$
(0.26
)
 
$
0.32

 
(181.3
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(*) See reconciliation of Non-GAAP financial measures on pages 16-18.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note: Prior period information presented above has been adjusted to reflect a reclass of certain credit card income from interest income to other non-interest income as well as certain wire fee income from other non-interest income into service charges on deposit accounts.
 
 
 
 
 
 

11

MIDSOUTH BANCORP, INC. and SUBSIDIARIES          
Composition of Loans and Deposits and Asset Quality Data (unaudited)       
(in thousands)               
 
 
 
 
COMPOSITION OF LOANS
 
June 30,
 
March 31,
 
Jun 17 vs Mar 17
 
December 31,
 
September 30,
 
June 30,
 
Jun 17 vs Jun 16
 
2017
 
2017
 
% Change
 
2016
 
2016
 
2016
 
% Change
Commercial, financial, and agricultural
 
$
451,767

 
$
469,815

 
(3.8
)%
 
$
459,574

 
$
463,031

 
$
456,264

 
(1.0
)%
Lease financing receivable
 
866

 
969

 
(10.6
)%
 
1,095

 
1,449

 
1,641

 
(47.2
)%
Real estate - construction
 
98,695

 
100,248

 
(1.5
)%
 
100,959

 
96,365

 
96,331

 
2.5
 %
Real estate - commercial
 
461,064

 
464,859

 
(0.8
)%
 
481,155

 
464,853

 
463,142

 
(0.4
)%
Real estate - residential
 
156,394

 
159,426

 
(1.9
)%
 
157,872

 
155,653

 
148,379

 
5.4
 %
Installment loans to individuals
 
70,031

 
75,258

 
(6.9
)%
 
82,660

 
88,537

 
94,522

 
(25.9
)%
Other
 
1,436

 
1,425

 
0.8
 %
 
767

 
2,912

 
2,110

 
(31.9
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total loans
 
$
1,240,253

 
$
1,272,000

 
(2.5
)%
 
$
1,284,082

 
$
1,272,800

 
$
1,262,389

 
(1.8
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
COMPOSITION OF DEPOSITS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
June 30,
 
March 31,
 
Jun 17 vs Mar 17
 
December 31,
 
September 30,
 
June 30,
 
Jun 17 vs Jun 16
 
 
2017
 
2017
 
% Change
 
2016
 
2016
 
2016
 
% Change
Noninterest bearing
 
$
428,419

 
$
426,998

 
0.3
 %
 
$
414,921

 
$
403,301

 
$
383,798

 
11.6
 %
NOW & other
 
465,505

 
489,789

 
(5.0
)%
 
472,484

 
465,850

 
467,987

 
(0.5
)%
Money market/savings
 
493,232

 
505,669

 
(2.5
)%
 
539,815

 
557,068

 
544,256

 
(9.4
)%
Time deposits of less than $100,000
 
75,196

 
75,579

 
(0.5
)%
 
75,940

 
78,785

 
80,158

 
(6.2
)%
Time deposits of $100,000 or more
 
73,868

 
74,909

 
(1.4
)%
 
76,270

 
80,203

 
83,867

 
(11.9
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total deposits
 
$
1,536,220

 
$
1,572,944

 
(2.3
)%
 
$
1,579,430

 
$
1,585,207

 
$
1,560,066

 
(1.5
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ASSET QUALITY DATA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
June 30,
 
March 31,
 
 
 
December 31,
 
September 30,
 
June 30,
 
 
 
 
2017
 
2017
 
 
 
2016
 
2016
 
2016
 
 
Nonaccrual loans
 
$
54,810

 
$
56,443

 
 
 
$
62,580

 
$
60,522

 
$
59,865

 
 
Loans past due 90 days and over
 
165

 
775

 
 
 
268

 
968

 
56

 
 
Total nonperforming loans
 
54,975

 
57,218

 
 
 
62,848

 
61,490

 
59,921

 
 
Other real estate
 
1,387

 
1,643

 
 
 
2,175

 
2,317

 
2,735

 
 
Other repossessed assets
 
36

 
30

 
 
 
16

 
283

 
263

 
 
Total nonperforming assets
 
$
56,398

 
$
58,891

 
 
 
$
65,039

 
$
64,090

 
$
62,919

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Troubled debt restructurings, accruing
 
$
1,653

 
$
1,995

 
 
 
$
152

 
$
153

 
$
154

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nonperforming assets to total assets
 
2.90
%
 
3.04
%
 
 
 
3.35
%
 
3.28
%
 
3.27
%
 
 
Nonperforming assets to total loans + ORE + other repossessed assets
 
4.54
%
 
4.62
%
 
 
 
5.06
%
 
5.03
%
 
4.97
%
 
 
ALLL to nonperforming loans
 
44.88
%
 
42.96
%
 
 
 
38.78
%
 
37.84
%
 
35.68
%
 
 
ALLL to total loans
 
1.99
%
 
1.93
%
 
 
 
1.90
%
 
1.83
%
 
1.69
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter-to-date charge-offs
 
$
12,659

 
$
2,906

 
 
 
$
1,835

 
$
1,161

 
$
1,425

 
 
Quarter-to-date recoveries
 
255

 
312

 
 
 
339

 
151

 
156

 
 
Quarter-to-date net charge-offs
 
$
12,404

 
$
2,594

 
 
 
$
1,496

 
$
1,010

 
$
1,269

 
 
Annualized QTD net charge-offs to total loans
 
4.01
%
 
0.83
%
 
 
 
0.46
%
 
0.32
%
 
0.40
%
 
 


12

MIDSOUTH BANCORP, INC. and SUBSIDIARIES             
 
 
 
 
 
 
Loan Portfolio - Quarterly Roll Forward (unaudited)
 
 
 
 
 
 
(in thousands)    
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
June 30,
 
March 31,
 
June 30,
 
 
2017
 
2017
 
2016
LOAN ACTIVITY
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans originated
 
$
72,316

 
$
63,141

 
$
92,444

Repayments
 
(116,885
)
 
(72,179
)
 
(65,381
)
Increases on renewals
 
2,531

 
3,940

 
3,465

Change in lines of credit
 
9,151

 
(4,798
)
 
(18,586
)
Change in allowance for loan losses
 
(96
)
 
(206
)
 
(1,031
)
Other
 
1,140

 
(2,186
)
 
398

Net change in loans
 
$
(31,843
)
 
$
(12,288
)
 
$
11,309



13

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, 2017
 
June 30, 2016
 
 
 
 
 
Total equity
 
$
261,570

 
$
217,941

Less preferred equity
 
41,092

 
41,110

Total common equity
 
220,478

 
176,831

Less goodwill
 
42,171

 
42,171

Less intangibles
 
4,068

 
5,175

Tangible common equity
 
$
174,239

 
$
129,485

 
 
 
 
 
Total assets
 
$
1,945,569

 
$
1,922,524

Less goodwill
 
42,171

 
42,171

Less intangibles
 
4,068

 
5,175

Tangible assets
 
$
1,899,330

 
$
1,875,178

 
 
 
 
 
Tangible common equity to tangible assets
 
9.17
%
 
6.91
%
 
 
 
 
 
REGULATORY CAPITAL
 
 
 
 
 
 
 
 
 
Common equity tier 1 capital
 
$
175,827

 
$
129,516

Tier 1 capital
 
238,418

 
192,125

Total capital
 
256,589

 
210,444

 
 
 
 
 
Regulatory capital ratios:
 
 
 
 
Common equity tier 1 capital ratio
 
12.15
%
 
8.86
%
Tier 1 risk-based capital ratio
 
16.48
%
 
13.14
%
Total risk-based capital ratio
 
17.73
%
 
14.39
%
Tier 1 leverage ratio
 
12.66
%
 
10.25
%


14

MIDSOUTH BANCORP, INC. and SUBSIDIARIES             
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarterly Yield Analysis (unaudited)   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(in thousands)    
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
YIELD ANALYSIS
 
Three Months Ended
 
Three Months Ended
 
Three Months Ended
 
Three Months Ended
 
Three Months Ended  
 
June 30, 2017
 
March 31, 2017
 
December 31, 2016
 
September 30, 2016
 
June 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
 
$
387,441

 
$
2,416

 
2.49
%
 
$
382,105

 
$
2,327

 
2.44
%
 
$
348,673

 
$
1,965

 
2.25
%
 
$
354,770

 
$
1,983

 
2.24
%
 
$
349,433

 
$
1,940

 
2.22
%
Tax-exempt securities
 
56,622

 
570

 
4.03
%
 
60,618

 
620

 
4.09
%
 
66,549

 
705

 
4.24
%
 
60,544

 
635

 
4.20
%
 
60,972

 
641

 
4.21
%
Total investment securities
 
444,063

 
2,986

 
2.69
%
 
442,723

 
2,947

 
2.66
%
 
415,222

 
2,670

 
2.57
%
 
415,314

 
2,618

 
2.52
%
 
410,405

 
2,581

 
2.52
%
Federal funds sold
 
3,573

 
9

 
1.00
%
 
3,571

 
6

 
0.67
%
 
3,261

 
5

 
0.60
%
 
2,703

 
3

 
0.43
%
 
3,655

 
3

 
0.32
%
Time and interest bearing deposits in other banks
 
55,331

 
150

 
1.07
%
 
41,785

 
85

 
0.81
%
 
90,527

 
125

 
0.54
%
 
64,444

 
83

 
0.50
%
 
76,042

 
97

 
0.50
%
Other investments
 
11,493

 
78

 
2.71
%
 
11,355

 
84

 
2.96
%
 
11,342

 
78

 
2.75
%
 
11,253

 
95

 
3.38
%
 
11,232

 
90

 
3.21
%
Loans
 
1,254,402

 
16,731

 
5.35
%
 
1,274,213

 
16,622

 
5.29
%
 
1,277,555

 
17,059

 
5.31
%
 
1,268,270

 
17,087

 
5.36
%
 
1,256,133

 
16,572

 
5.31
%
Total interest earning assets
 
1,768,862

 
19,954

 
4.52
%
 
1,773,647

 
19,744

 
4.51
%
 
1,797,907

 
19,937

 
4.41
%
 
1,761,984

 
19,886

 
4.49
%
 
1,757,467

 
19,343

 
4.43
%
Non-interest earning assets
 
157,546

 
 
 
 
 
159,171

 
 
 
 
 
162,529

 
 
 
 
 
165,367

 
 
 
 
 
163,537

 
 
 
 
Total assets
 
$
1,926,408

 
 
 
 
 
$
1,932,818

 
 
 
 
 
$
1,960,436

 
 
 
 
 
$
1,927,351

 
 
 
 
 
$
1,921,004

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deposits
 
$
1,125,482

 
$
973

 
0.35
%
 
$
1,155,407

 
$
935

 
0.33
%
 
$
1,179,174

 
$
929

 
0.31
%
 
$
1,170,660

 
$
915

 
0.31
%
 
$
1,176,387

 
$
903

 
0.31
%
Repurchase agreements
 
90,807

 
236

 
1.04
%
 
92,571

 
234

 
1.03
%
 
94,609

 
241

 
1.01
%
 
88,560

 
236

 
1.06
%
 
85,479

 
233

 
1.10
%
Federal funds purchased
 
—

 
—

 
—
%
 
—

 
—

 
—
%
 
—

 
—

 
—
%
 
—

 
—

 
—
%
 
2

 
—

 
—
%
Long-term FHLB advances
 
25,260

 
91

 
1.43
%
 
25,370

 
88

 
1.39
%
 
25,474

 
92

 
1.41
%
 
25,581

 
93

 
1.42
%
 
25,687

 
91

 
1.40
%
Junior subordinated debentures
 
22,167

 
212

 
3.78
%
 
22,167

 
208

 
3.75
%
 
22,167

 
197

 
3.48
%
 
22,167

 
170

 
3.00
%
 
22,167

 
170

 
3.03
%
Total interest bearing liabilities
 
1,263,716

 
1,512

 
0.48
%
 
1,295,515

 
1,465

 
0.46
%
 
1,321,424

 
1,459

 
0.44
%
 
1,306,968

 
1,414

 
0.43
%
 
1,309,722

 
1,397

 
0.43
%
Non-interest bearing liabilities
 
433,821

 
 
 
 
 
421,408

 
 
 
 
 
421,155

 
 
 
 
 
401,407

 
 
 
 
 
394,170

 
 
 
 
Shareholders' equity
 
228,871

 
 
 
 
 
215,895

 
 
 
 
 
217,857

 
 
 
 
 
218,976

 
 
 
 
 
217,112

 
 
 
 
Total liabilities and shareholders' equity
 
$
1,926,408

 
 
 
 
 
$
1,932,818

 
 
 
 
 
$
1,960,436

 
 
 
 
 
$
1,927,351

 
 
 
 
 
$
1,921,004

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income (TE) and spread
 
$
18,442

 
4.04
%
 
 
 
$
18,279

 
4.05
%
 
 
 
$
18,478

 
3.97
%
 
 
 
$
18,472

 
4.06
%
 
 
 
$
17,946

 
4.00
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest margin
 
 
 
4.18
%
 
 
 
 
 
4.18
%
 
 
 
 
 
4.09
%
 
 
 
 
 
4.17
%
 
 
 
 
 
4.11
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Core net interest margin (Non-GAAP)(*)
 
 
 
4.09
%
 
 
 
 
 
4.11
%
 
 
 
 
 
3.98
%
 
 
 
 
 
4.05
%
 
 
 
 
 
4.02
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(*) See reconciliation of Non-GAAP financial measures on pages 16-18.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note: Prior period information presented above has been adjusted to reflect a reclass of certain credit card income from interest income to non-interest income.


15

MIDSOUTH BANCORP, INC. and SUBSIDIARIES             
Reconciliation of Non-GAAP Financial Measures (unaudited)
(in thousands except per share data)    
 
 
 
 
 
 
 
 
 
 
 
     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. We are providing disclosure of the reconciliation of these non-GAAP financial measures to the most comparable GAAP financial measures. "Tangible common equity" is defined as total common equity reduced by intangible assets. "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. "Pre-tax, pre-provision annualized return on average assets, operating" is defined as pre-tax, pre-provision earnings adjusted for specified one-time items divided by average 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. The GAAP-based efficiency ratio is measured as noninterest expense as a percentage of net interest income plus noninterest income. The non-GAAP efficiency ratio excludes specified one-time items in addition to securities gains and losses and gains and losses on the sale/valuation of other real estate owned and other assets repossessed.
     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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
June 30,
 
March 31,
 
December 31,
 
September 30,
 
June 30,
 
 
2017
 
2017
 
2016
 
2016
 
2016
Average Balance Sheet Data
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total average assets
A
$
1,926,408

 
$
1,932,818

 
$
1,960,436

 
$
1,927,351

 
$
1,921,004

 
 
 
 
 
 
 
 
 
 
 
Total equity
 
$
228,871

 
$
215,895

 
$
217,857

 
$
218,976

 
$
217,112

Less preferred equity
 
41,109

 
41,110

 
41,110

 
41,110

 
41,118

Total common equity
B
$
187,762

 
$
174,785

 
$
176,747

 
$
177,866

 
$
175,994

Less intangible assets
 
46,373

 
46,661

 
46,926

 
47,204

 
47,478

Tangible common equity
C
$
141,389

 
$
128,124

 
$
129,821

 
$
130,662

 
$
128,516



16

MIDSOUTH BANCORP, INC. and SUBSIDIARIES             
Reconciliation of Non-GAAP Financial Measures (unaudited) (continued)
(in thousands except per share data)    
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
June 30,
 
March 31,
 
December 31,
 
September 30,
 
June 30,
Core Net Interest Margin
 
2017
 
2017
 
2016
 
2016
 
2016
 
 
 
 
 
 
 
 
 
 
 
Net interest income (TE)
 
$
18,442

 
$
18,279

 
$
18,478

 
$
18,472

 
$
17,946

Less purchase accounting adjustments
 
(380
)
 
(274
)
 
(458
)
 
(493
)
 
(341
)
Core net interest income, net of purchase accounting adjustments
D
$
18,062

 
$
18,005

 
$
18,020

 
$
17,979

 
$
17,605

 
 
 
 
 
 
 
 
 
 
 
Total average earnings assets
 
$
1,768,862

 
$
1,773,647

 
$
1,797,907

 
$
1,761,984

 
$
1,757,467

Add average balance of loan valuation discount
 
1,720

 
1,964

 
2,316

 
2,634

 
2,931

Average earnings assets, excluding loan valuation discount
E
$
1,770,582

 
$
1,775,611

 
$
1,800,223

 
$
1,764,618

 
$
1,760,398

 
 
 
 
 
 
 
 
 
 
 
Core net interest margin
D/E
4.09
 %
 
4.11
%
 
3.98
%
 
4.05
%
 
4.02
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
June 30,
 
March 31,
 
December 31,
 
September 30,
 
June 30,
Return Ratios
 
2017
 
2017
 
2016
 
2016
 
2016
 
 
 
 
 
 
 
 
 
 
 
Net earnings (loss) available to common shareholders
 
$
(6,225
)
 
$
1,680

 
$
1,387

 
$
1,587

 
$
1,682

Severance and retention accruals, after-tax
 
872

 
—

 
—

 
—

 
—

One-time charge related to discontinued branch projects, after-tax
 
302

 
—

 
—

 
—

 
—

Write-down of assets held for sale, after-tax
 
371

 
—

 
—

 
—

 
—

Net gain on sale of securities, after-tax
 
(2
)
 
(4
)
 
—

 
—

 
(13
)
Net earnings (loss) available to common shareholders, operating
F
$
(4,682
)
 
$
1,676

 
$
1,387

 
$
1,587

 
$
1,669

 
 
 
 
 
 
 
 
 
 
 
Earnings (loss) before income taxes
 
$
(8,635
)
 
$
3,080

 
$
3,070

 
$
3,391

 
$
3,523

Severance and retention accruals
 
1,341

 
—

 
—

 
—

 
—

One-time charge related to discontinued branch projects
 
465

 
—

 
—

 
—

 
—

Write-down of assets held for sale
 
570

 
—

 
—

 
—

 
—

Net gain on sale of securities
 
(3
)
 
(6
)
 
—

 
—

 
(20
)
Provision for loan losses
 
12,500

 
2,800

 
2,600

 
2,900

 
2,300

   Pre-tax, pre-provision earnings, operating
G
$
6,238

 
$
5,874

 
$
5,670

 
$
6,291

 
$
5,803

 
 
 
 
 
 
 
 
 
 
 
Annualized return on average assets, operating
F/A
(0.97
)%
 
0.35
%
 
0.28
%
 
0.33
%
 
0.35
%
Annualized return on average common equity, operating
F/B
(10.00
)%
 
3.89
%
 
3.12
%
 
3.55
%
 
3.81
%
Annualized return on average tangible common equity, operating
F/C
(13.28
)%
 
5.31
%
 
4.25
%
 
4.83
%
 
5.22
%
Pre-tax, pre-provision annualized return on average assets, operating
G/A
1.30
 %
 
1.23
%
 
1.15
%
 
1.30
%
 
1.21
%

17

MIDSOUTH BANCORP, INC. and SUBSIDIARIES             
 
 
 
 
Reconciliation of Non-GAAP Financial Measures (unaudited) (continued)
 
 
 
 
(in thousands except per share data)    
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
March 31,
 
December 31,
 
September 30,
 
June 30,
 
June 30,
 
June 30,
Per Common Share Data
 
2017
 
2017
 
2016
 
2016
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted earnings (loss) per share
 
$
(0.51
)
 
$
0.15

 
$
0.12

 
$
0.14

 
$
0.15

 
$
(0.39
)
 
$
0.32

Effect of severance and retention accruals
 
0.08

 
—

 
—

 
—

 
—

 
0.08

 
—

Effect of one-time charge related to discontinued branch projects
 
0.02

 
—

 
—

 
—

 
—

 
0.02

 
—

Effect of write-down of assets held for sale
 
0.03

 
—

 
—

 
—

 
—

 
0.03

 
—

Diluted earnings (loss) per share, operating
 
$
(0.38
)
 
$
0.15

 
$
0.12

 
$
0.14

 
$
0.15

 
$
(0.26
)
 
$
0.32

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Book value per common share
 
$
13.76

 
$
15.37

 
$
15.25

 
$
15.58

 
$
15.56

 
 
 
 
Effect of intangible assets per share
 
2.89

 
4.09

 
4.12

 
4.14

 
4.16

 
 
 
 
Tangible book value per common share
 
$
10.87

 
$
11.28

 
$
11.13

 
$
11.44

 
$
11.40

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
 
 
 
 
June 30,
 
March 31,
 
December 31,
 
September 30,
 
June 30,
 
 
 
 
Efficiency Ratio
 
2017
 
2017
 
2016
 
2016
 
2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income
 
$
18,246

 
$
18,066

 
$
18,235

 
$
18,253

 
$
17,725

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noninterest income
 
$
5,223

 
$
5,044

 
$
5,071

 
$
5,152

 
$
5,139

 
 
 
 
Net gain on sale of securities
 
(3
)
 
(6
)
 
—

 
—

 
(20
)
 
 
 
 
Noninterest income (non-GAAP)
 
$
5,220

 
$
5,038

 
$
5,071

 
$
5,152

 
$
5,119

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenue
H
$
23,469

 
$
23,110

 
$
23,306

 
$
23,405

 
$
22,864

 
 
 
 
Total revenue (non-GAAP)
I
$
23,466

 
$
23,104

 
$
23,306

 
$
23,405

 
$
22,844

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noninterest expense
J
$
19,604

 
$
17,230

 
$
17,636

 
$
17,114

 
$
17,041

 
 
 
 
Severance and retention accruals
 
(1,341
)
 
—

 
—

 
—

 
—

 
 
 
 
One-time charge related to discontinued branch projects
 
(465
)
 
—

 
—

 
—

 
—

 
 
 
 
Write-down of assets held for sale
 
(570
)
 
—

 
—

 
—

 
—

 
 
 
 
Net (loss) gain on sale/valuation of other real estate owned
 
(72
)
 
(15
)
 
—

 
(19
)
 
(24
)
 
 
 
 
Noninterest expense (non-GAAP)
K
$
17,156

 
$
17,215

 
$
17,636

 
$
17,095

 
$
17,017

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Efficiency ratio (GAAP)
J/H
83.53
%
 
74.56
%
 
75.67
%
 
73.12
%
 
74.53
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Efficiency ratio (non-GAAP)
K/I
73.11
%
 
74.51
%
 
75.67
%
 
73.04
%
 
74.49
%
 
 
 
 


18