Quarterly Highlights
- Reported EPS for the first quarter
of 2019 was a loss of $0.40 versus a loss of $0.03 for the first
quarter of 2018 primarily due to the impact of a $6.6 million
impairment charge for a shared national healthcare credit.
- Bank level classified assets to
capital declined from 29% for the fourth quarter 2018 to 25% for
the first quarter of 2019 due to the successful execution of a
$16.9 million loan sale partially offset by the $6.6 million
impairment mentioned above.
- FTE net interest margin of 3.89%
decreased 46 basis points from fourth quarter 2018 which included
18 basis points of accelerated loan accretion, and 13 basis points
impact due to the reversal of accrued interest in the first quarter
of 2019 for a shared national healthcare credit.
- Funding costs of 55 basis points
remain below market averages with core deposits comprising a strong
88% of Total Deposits.
- Tangible common equity to tangible
assets at March 31, 2019 was 8.0%.
MidSouth Bancorp, Inc. (“MidSouth”) (NYSE: MSL) today reported a
quarterly net loss available to common shareholders of $6.64
million for the three months ended March 31, 2019, compared to net
loss available to common shareholders of $450,000 reported for the
three months ended March 31, 2018 and $23.1 million in net loss
available to common shareholders for the fourth quarter of 2018.
The first quarter loss is primarily due to the $6.6 million
impairment charge for a shared national healthcare credit. MidSouth
has one additional pass rated shared national credit for $10.3
million with a company headquartered in the Acadiana market. The
first quarter of 2018 included after-tax charges of $691,000
resulting from the transfer of loans to held for sale, $3.1 million
for regulatory remediation costs, $115,000 related to branch
closures during the quarter and $70,000 for legal fees related to a
bulk loan sale. The fourth quarter of 2018 included an after-tax
charge of $3.9 million for regulatory remediation costs, a $11.4
million tax-related charge for the establishment of a valuation
allowance to fully reserve against net deferred tax assets given
the company’s cumulative pretax loss position. Excluding 2018
non-operating expenses, a loss of $0.40 per diluted share was
reported for the first quarter of 2019, compared to diluted loss
per common share of $0.73 for the fourth quarter of 2018 and
diluted income per share of $0.21 for the first quarter of
2018.
Balance Sheet
Consolidated assets decreased $112.4 million to $1.7 billion at
March 31, 2019 from $1.9 billion at March 31, 2018 and essentially
unchanged from $1.7 billion at December 31, 2018. Our stable core
deposit base, which excludes time deposits, totaled $1.3 billion at
March 31, 2019 and December 31, 2018 and accounted for 87.5% and
87.6% of deposits at March 31, 2019 and December 31, 2018,
respectively. Net loans totaled $868.9 million at March 31, 2019,
compared to $882.4 million at December 31, 2018 and $1.1 billion at
March 31, 2018. Loans held for sale of $1.5 million at March 31,
2019 declined from $23.9 million at December 31, 2018, due to the
successful execution of a $16.9 million loan sale in the first
quarter of 2019.
MidSouth’s Tier 1 leverage capital ratio was 11.60% at March 31,
2019, compared to 11.45% at December 31, 2018. Tier 1 risk-based
capital and total risk-based capital ratios were 18.22% and 19.49%
at March 31, 2019, respectively, compared to 17.79% and 19.04% at
December 31, 2018, respectively. Tier 1 common equity to total
risk-weighted assets at March 31, 2019 was 12.48%, compared to
12.20% at December 31, 2018. Tangible common equity totaled $135.9
million at March 31, 2019, compared to $136.4 million at December
31, 2018. Tangible book value per share at March 31, 2019 was $8.13
compared to $8.20 at December 31, 2018.
Asset Quality
Nonperforming assets totaled $23.9 million at March 31, 2019, a
decrease of $6.6 million compared to $30.5 million reported at
December 31, 2018. The decrease is primarily attributable to the
sale of $16.9 million of nonperforming loans offset by a $13.2
million increase in non-accrual loans due primarily to a $11.4
million shared national healthcare credit. Allowance coverage for
nonperforming loans decreased to 106.85% at March 31, 2019,
compared to 195.40% at December 31, 2018. The ALLL/total loans
ratio was 2.77% at March 31, 2019 and 1.94% at December 31, 2018.
The ratio of annualized net charge-offs to total loans decreased to
0.11% for the three months ended March 31, 2019 compared to 8.45%
for the three months ended December 31, 2018, primarily as a result
of the charge-offs taken in the fourth quarter due to the impending
bulk loan sale.
Total nonperforming assets, excluding nonperforming loans held
for sale to total loans plus ORE and other assets repossessed was
2.68% at March 31, 2019 compared to 3.39% at December 31, 2018.
Loans classified as troubled debt restructurings, accruing (“TDRs,
accruing”) totaled $713,000 at March 31, 2019 compared to $1.3
million at December 31, 2018. Total classified assets, including
ORE, were $44.4 million at March 31, 2019 compared to $51.2 million
at December 31, 2018. The balance of classified loans decreased as
a result of principal reductions through payoffs and/or pay-downs
and settlements and the completion of problem asset sales of $18.3
million offset by the downgrade of a shared national credit in the
healthcare industry in the amount of $11.4 million. The classified
assets to capital ratio at MidSouth Bank was 25% at March 31, 2019
versus 29% at December 31, 2018.
More information on our energy loan portfolio and other
information on quarterly results can be found on our website at
MidSouthBank.com under Investor Relations/Presentations.
First Quarter 2019 vs. Fourth Quarter 2018
Earnings Comparison
MidSouth reported a net loss available to common shareholders of
$6.6 million for the three months ended March 31, 2019, compared to
net loss available to common shareholders of $23.1 million for the
three months ended December 31, 2018. Revenues from consolidated
operations decreased $324,000 from $24.0 million in the fourth
quarter of 2018 to $23.7 million in the first quarter 2019,
primarily as a result of the gain on sale of loans of $1.3 million
and gain on sale of securities of $373,000 offset by a decrease in
loan income of $1.5 million.
The first quarter of 2019 did not include any remediation costs.
The fourth quarter of 2018 included a non-recurring charge of $5.0
million of regulatory remediation costs. Excluding these
non-operating expenses, noninterest expense increased $212,000 and
consisted primarily of a continued investment in compliance
staffing and an $805,000 offset due to lower professional fees.
The provision for loan losses decreased $4.4 million from the
fourth quarter 2018 to the first quarter 2019. A $11.4 million
tax-related charge was recorded during the fourth quarter of 2018
associated with the establishment of a valuation reserve against
the net deferred tax assets. Excluding this adjustment, we recorded
income tax expense of $7.6 million for the fourth quarter of 2018,
compared to no income tax expense for the first quarter of
2019.
Dividends on the Series B Preferred Stock issued to the U.S.
Treasury as a result of our participation in the Small Business
Lending Fund totaled $720,000 for the first quarter of 2019 and the
fourth quarter of 2018 based on a dividend rate of 9%. Dividends on
the Series C Preferred Stock issued with the December 28, 2012
acquisition of PSB Financial Corporation totaled $90,000 for the
three months ended March 31, 2019 and December 31, 2018.
Fully taxable-equivalent (“FTE”) net interest income decreased
$1.9 million from the fourth quarter 2018 to the first quarter
2019, primarily due to a decrease in interest income on loans and
interest bearing deposits with other banks of $1.5 million and
$360,000, respectively. Higher loan yields for the fourth quarter
2018 are reflective of management’s recognition of the remaining
PSB loan accretion discounts into income. Excluding these purchase
accounting adjustments, the loan yield decreased 11 bps, from 5.85%
to 5.74% during the same period. The average yield on investment
securities decreased 30 basis points, from 3.16% to 2.86%, due to a
repositioning of the bond portfolio through the sale of higher
yielding municipal and corporate bonds and the timing impact of the
sales and reinvestments on average balances. The average yield on
total earning assets decreased 54 bps for the same period, from
4.87% to 4.41%, respectively. The FTE net interest margin decreased
53 bps from 4.35% for the fourth quarter 2018 to 3.89% for the
first quarter of 2019. Excluding purchase accounting adjustments,
the FTE net interest margin decreased 22 bps, from 4.04% for the
fourth quarter of 2018 to 3.89% for the first quarter of 2019.
First Quarter 2019 vs. First Quarter 2018
Earnings Comparison
MidSouth reported a net loss available to common shareholders of
$6.6 million for the three months ended March 31, 2019, compared to
net loss available to common shareholders of $450,000 for the three
months ended March 31, 2018. Revenues from consolidated operations
decreased $108,000 in quarterly comparison, from $23.8 million for
the three months ended March 31, 2018 to $23.7 million for the
three months ended March 31, 2019. Net interest income decreased
$2.0 million in quarterly comparison, resulting from a $1.6 million
decrease in interest income primarily driven by lower loan levels,
in addition to a higher interest expense of $435,000 reflecting the
impact of higher interest rates. Operating noninterest income
decreased $203,000 which excludes $1.6 million gains on assets
sales including loans and investments.
Excluding remediation expenses of $3.9 million for the first
quarter of 2018, noninterest expenses increased $1.9 million in
quarterly comparison and consisted primarily of a $2.0 million
increase in salaries and employee benefits costs. The provision for
loan losses increased $7.6 million in quarterly comparison, from $0
for the three months ended March 31, 2018 to $7.6 million the three
months ended March 31, 2019. We recorded an income tax benefit of
$34,000 for the first quarter of 2018 versus no benefit for the
first quarter of 2019.
Dividends on preferred stock totaled $810,000 for the three
months ended March 31, 2019 and 2018. Dividends on the Series B
Preferred Stock were $720,000 for the three months ended March 31,
2019 and 2018. Dividends on the Series C Preferred Stock totaled
$90,000 for the three months ended March 31, 2019 and 2018.
Interest income on loans decreased $3.0 million primarily due to
a $255.4 million decline in average loans given ongoing efforts to
reduce problem loans and slower loan originations due to an
internal focus on improving loan portfolio management and loan
operations.
Investment securities totaled $469.8 million, or 26.9% of total
assets at March 31, 2019, versus $367.2 million, or 19.8% of total
assets at March 31, 2018. The investment portfolio had an effective
duration of 2.6 years and a net unrealized loss of $70,000 at March
31, 2019. FTE interest income on investments increased $947,000 in
prior year quarterly comparison. The average volume of investment
securities increased $90.0 million in prior year quarterly
comparison, and the average tax equivalent yield on investment
securities increased 32 basis points, from 2.54% to 2.86%.
The average yield on all earning assets decreased 15 basis
points in prior year quarterly comparison, from 4.56% for the first
quarter of 2018 to 4.41% for the first quarter of 2019, due to a
less favorable mix of earning assets given the decline in loans on
a year-over-year basis.
Interest expense increased $435,000 in prior year quarterly
comparison primarily due to a $442,000 increase in interest expense
on deposits and a $67,000 increase in interest expense on junior
subordinated debt, which were partially offset by a $74,000
decrease in interest expense on repurchase agreements and FHLB
borrowings.
As a result of these changes in volume and yield on earning
assets and interest-bearing liabilities, the FTE net interest
margin decreased 23 basis points, from 4.12% for the first quarter
of 2018 to 3.89% for the first quarter of 2019.
About MidSouth Bancorp,
Inc.
MidSouth Bancorp, Inc. is a bank holding company headquartered
in Lafayette, Louisiana, with assets of $1.7 billion as of March
31, 2019. MidSouth Bancorp, Inc. trades on the NYSE under the
symbol “MSL.” Through its wholly owned subsidiary, MidSouth Bank,
N.A., MidSouth offers a full range of banking services to
commercial and retail customers in Louisiana and Texas. MidSouth
Bank currently has 42 locations in Louisiana and Texas and is
connected to a worldwide ATM network that provides customers with
access to more than 55,000 surcharge-free ATMs. Additional
corporate information is available at MidSouthBank.com.
Non-GAAP Financial
Measures
This press release, including the accompanying financial
statement tables, contains financial information determined by
methods other than in accordance with generally accepted accounting
principles, or GAAP. This financial information includes certain
operating performance measures, which exclude charges that are not
considered part of recurring operations. Non-GAAP measures in this
press release include, but are not limited to, descriptions such as
“operating noninterest income,” “operating (loss) earnings per
share,” “tangible common equity,” “tangible book value per share,”
“operating return on average common equity,” “operating return on
average assets,” and “operating efficiency ratio.” In addition,
this press release, consistent with SEC Industry Guide 3, presents
total revenue, net interest income, net interest margin,
“non-operating expenses” and efficiency ratios on a fully taxable
equivalent (“FTE”) basis, and ratios on an annualized basis. The
FTE basis adjusts for the tax-favored status of net interest income
from certain loans and investments using a federal tax rate of 21%
for all periods beginning on or after January 1, 2018, as well as
state income taxes, where applicable, to increase tax-exempt
interest income to a taxable-equivalent basis. MidSouth believes
this measure to be the preferred industry measurement of net
interest income and it enhances comparability of net interest
income arising from taxable and tax-exempt sources.
We use non-GAAP measures because we believe they are useful for
evaluating our financial condition and performance over periods of
time, as well as in managing and evaluating our business and in
discussions about our performance. We also believe these non-GAAP
financial measures provide users of our financial information with
a meaningful measure for assessing our financial condition as well
as comparison to financial results for prior periods. These
measures should be viewed in addition to, and not as an alternative
to or substitute for, measures determined in accordance with GAAP,
and are not necessarily comparable to non-GAAP measures that may be
presented by other companies. To the extent applicable,
reconciliations of these non-GAAP measures to the most directly
comparable measures as reported in accordance with GAAP are
included with the accompanying financial statement tables.
Forward-Looking Statements
Certain statements contained herein are forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933 and Section 21E of the Securities Exchange Act of 1934 and
subject to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, which involve risks and
uncertainties. These statements include, among others,
statements regarding expected future performance and shareholder
value. The words “anticipate,” “believe,” “estimate,”
“expect,” “intend,” “may,” “plan,” “will,” “would,” “could,”
“should,” “guidance,” “potential,” “continue,” “project,”
“forecast,” “confident,” and similar expressions are typically used
to identify forward-looking statements.
These statements are based on assumptions and assessments
made by management in light of their experience and their
perception of historical trends, current conditions, expected
future developments and other factors they believe to be
appropriate. Any forward-looking statements are not
guarantees of our future performance and are subject to risks and
uncertainties and may be affected by various factors that may cause
actual results, developments and business decisions to differ
materially from those in the forward-looking statements.
Factors that might cause such a difference include, among other
matters, changes in interest rates and market prices that could
affect the net interest margin, asset valuation, and expense
levels; changes in local economic and business conditions in the
markets we serve, including, without limitation, changes related to
the oil and gas industries that could adversely affect customers
and their ability to repay borrowings under agreed upon terms,
adversely affect the value of the underlying collateral related to
their borrowings, and reduce demand for loans; increases in
competitive pressure in the banking and financial services
industries; increased competition for deposits and loans which
could affect compositions, rates and terms; changes in the levels
of prepayments received on loans and investment securities that
adversely affect the yield and value of the earning assets; our
ability to successfully implement and manage our strategic
initiatives; costs and expenses associated with our strategic
initiatives and regulatory remediation efforts and possible changes
in the size and components of the expected costs and charges
associated with our strategic initiatives and regulatory
remediation efforts; our ability to realize the anticipated
benefits and cost savings from our strategic initiatives within the
anticipated time frame, if at all; the ability of the Company to
comply with the terms of the formal agreement and the consent order
with the Office of the Comptroller of the Currency; risk of
noncompliance with and further enforcement actions regarding the
Bank Secrecy Act and other anti-money laundering statues and
regulations; credit losses due to loan concentration, particularly
our energy lending and commercial real estate portfolios; a
deviation in actual experience from the underlying assumptions used
to determine and establish our allowance for loan and lease losses
(“ALLL”), which could result in greater than expected loan losses;
the adequacy of the level of our ALLL and the amount of loan loss
provisions required in future periods including the impact of
implementation of the new CECL (current expected credit loss)
methodology; future examinations by our regulatory authorities,
including the possibility that the regulatory authorities may,
among other things, impose additional enforcement actions or
conditions on our operations, require additional regulatory
remediation efforts or require us to increase our allowance for
loan losses or write-down assets; changes in the availability of
funds resulting from reduced liquidity or increased costs; the
timing and impact of future acquisitions or divestitures, the
success or failure of integrating acquired operations, and the
ability to capitalize on growth opportunities upon entering new
markets; the ability to acquire, operate, and maintain effective
and efficient operating systems; the identified material weaknesses
in our internal control over financial reporting; increased asset
levels and changes in the composition of assets that would impact
capital levels and regulatory capital ratios; loss of critical
personnel and the challenge of hiring qualified personnel at
reasonable compensation levels; legislative and regulatory changes,
including the impact of regulations under the Dodd-Frank Wall
Street Reform and Consumer Protection Act of 2010 and other changes
in banking, securities and tax laws and regulations and their
application by our regulators, changes in the scope and cost of
FDIC insurance and other coverage; regulations and restrictions
resulting from our participation in government-sponsored programs
such as the U.S. Treasury’s Small Business Lending Fund, including
potential retroactive changes in such programs; changes in
accounting principles, policies, and guidelines applicable to
financial holding companies and banking; increases in cybersecurity
risk, including potential business disruptions or financial losses;
acts of war, terrorism, cyber intrusion, weather, or other
catastrophic events beyond our control; and other factors discussed
under the heading “Risk Factors” in MidSouth’s Annual Report
on Form 10-K for the year ended December 31, 2018 filed with the
SEC on March 18, 2019 and in its other filings with the
SEC.
MidSouth does not undertake any obligation to publicly update
or revise any of these forward-looking statements, whether to
reflect new information, future events or otherwise, except as
required by law.
MIDSOUTH BANCORP, INC. and
SUBSIDIARIES Condensed Consolidated Financial Information
(unaudited) (in thousands except per share data)
Quarter Quarter
Quarter Quarter
Quarter Ended Ended Ended
Ended Ended EARNINGS DATA
March 31 December 31
September 30 June 30
March 31 Total interest income $ 17,445 $ 19,340 $
18,436 $ 18,739 $ 18,997 Total interest expense 2,062
2,097 1,970 1,814
1,627 Net interest income 15,383
17,243 16,466 16,925
17,370 Provision for loan losses
7,600 12,000 4,300
440 — Non-interest income 6,273 4,702
5,090 4,882 4,829 Non-interest expense 19,886
24,644 23,527 22,273
21,873 (Loss) earnings before income taxes
(5,830 ) (14,699 ) (6,271 ) (906 ) 326 Income tax (benefit) expense
— 7,610 (1,373 )
(237 ) (34 ) Net (loss) earnings (5,830 ) (22,309 )
(4,898 ) (669 ) 360 Dividends on preferred stock 810
809 810 810
810 Net loss available to common shareholders
$ (6,640 ) $ (23,118 ) $ (5,708 ) $
(1,479 ) $ (450 )
PER COMMON SHARE DATA
Basic loss per share (0.40 ) (1.39 ) (0.34 ) (0.09 ) (0.03 )
Diluted loss per share (0.40 ) (1.39 ) (0.34 ) (0.09 ) — Diluted
(loss) earnings per share, operating (Non-GAAP)(*) (0.40 ) (0.66 )
(0.08 ) 0.17 0.21 Quarterly dividends per share 0.01 0.01 0.01 0.01
0.01 Book value per share at end of period 10.78 10.88 12.05 12.50
12.62 Tangible book value per share at period end (Non-GAAP)(*)
8.13 8.20 9.35 9.78 9.89 Market price per share at end of period
11.41 10.60 15.40 13.25 12.65 Shares outstanding at period end
16,715,671 16,641,017 16,641,105 16,619,894 16,621,811 Weighted
average shares outstanding: Basic 16,673,818 16,640,174 16,557,664
16,525,571 16,495,438 Diluted 16,673,818 16,640,174 16,557,664
16,525,571 16,495,438
AVERAGE BALANCE SHEET DATA Total
assets $ 1,742,686 $ 1,791,990 $ 1,830,834 $ 1,860,906 $ 1,860,070
Loans and leases 904,293 944,545 1,020,834 1,109,371 1,159,671
Total deposits 1,440,961 1,476,211 1,503,528 1,514,321 1,495,907
Total common equity 182,231 202,796 209,010 210,291 214,183 Total
tangible common equity(*) 137,793 158,083 164,020 165,024 168,629
Total equity 223,203 243,768 249,997 251,278 255,170
SELECTED
RATIOS Return on average assets, operating(*)(**) (1.52 )%
(2.70 )% (0.30 )% 0.59 % 0.76 % Return on average common equity,
operating(*)(**) (14.57 )% (23.83 )% (2.60 )% 5.22 % 6.59 % Return
on average tangible common equity, operating(*)(**) (19.28 )%
(30.57 )% (3.31 )% 6.65 % 8.37 % Efficiency ratio, operating(*)
91.83 % 89.35 % 83.36 % 77.38 % 75.57 % Average loans to average
deposits 62.76 % 63.98 % 67.90 % 73.26 % 77.52 % Tier 1 leverage
capital ratio 11.60 % 11.45 % 12.53 % 12.71 % 12.80 %
CREDIT
QUALITY Allowance for loan and lease losses (ALLL) as a % of
total loans 2.77 % 1.94 % 2.54 % 2.22 % 2.23 % Nonperforming assets
to tangible equity + ALLL 14.89 % 6.44 % 23.75 % 32.99 % 36.86 %
Nonperforming assets to total loans, other real estate owned and
other repossessed assets 2.67 % 1.12 % 5.45 % 7.07 % 7.47 % QTD net
charge-offs to total loans (**) 0.11 % 8.45 % 1.40 % 0.87 % 0.54 %
(**) Annualized (*) See reconciliation of Non-GAAP financial
measures on pages 18-20.
MIDSOUTH BANCORP, INC. and SUBSIDIARIES Consolidated
Balance Sheets (unaudited) (in thousands)
March 31,
December 31, September 30, June 30,
March 31, 2019 2018 2018
2018 2018 Assets Cash and cash equivalents $
243,430 $ 205,371 $ 302,888 $ 278,776 $ 211,486 Securities
available-for-sale 434,679 437,754 352,606 308,937 293,970
Securities held-to-maturity 35,107 37,759 64,893
67,777 73,255 Total investment securities
469,786 475,513 417,499 376,714 367,225
Other investments 17,083 16,614 16,508 14,927 12,896 Loans
held for sale 1,511 23,876 — — 1,117 Total loans 893,650 899,785
962,743 1,057,963 1,137,255 Allowance for loan losses (24,779 )
(17,430 ) (24,450 ) (23,514 ) (25,371 ) Loans, net 868,871
882,355 938,293 1,034,449 1,111,884
Premises and equipment 55,097 55,382 56,006 56,834 57,848 Lease
right of use asset 8,263 — — — — Goodwill and other intangibles
44,303 44,580 44,856 45,133 45,409 Deferred Tax Asset 11,207 11,373
8,452 6,659 4,854 Deferred Tax Asset Valuation Allowance (11,207 )
(11,373 ) — — — Other assets 36,991 39,707 41,752
45,425 45,036 Total assets $ 1,745,335
$ 1,743,398 $ 1,826,254 $ 1,858,917 $
1,857,755
Liabilities and Shareholders' Equity
Non-interest bearing deposits $ 418,321 $ 383,167 $ 425,696 $
419,517 $ 427,504 Interest-bearing deposits 1,027,314
1,068,904 1,083,433 1,103,503 1,076,433
Total deposits 1,445,635 1,452,071 1,509,129 1,523,020 1,503,937
Securities sold under agreements to repurchase 11,968 11,220 13,676
14,886 33,026 Lease liability 8,203 — — — — FHLB advances 27,500
27,500 27,506 37,511 37,516 Junior subordinated debentures 22,167
22,167 22,167 22,167 22,167 Other liabilities 8,696 8,450
12,325 12,661 10,272 Total liabilities
1,524,169 1,521,408 1,584,803 1,610,245
1,606,918 Total shareholders' equity 221,166 221,990
241,451 248,672 250,837 Total
liabilities and shareholders' equity $ 1,745,335 $ 1,743,398
$ 1,826,254 $ 1,858,917 $ 1,857,755
MIDSOUTH BANCORP, INC.
and SUBSIDIARIES Consolidated Statements of Operation
(unaudited) (in thousands except per share data)
Three Months Ended 3/31/2019
12/31/2018 9/30/2018 6/30/2018
3/31/2018 Interest income: Loans, including fees $ 12,987 $
14,536 $ 14,590 $ 15,344 $ 16,015 Investment securities 3,326 3,230
2,429 2,370 2,363 Other interest income 1,132 1,574
1,417 1,025 619 Total interest income 17,445
19,340 18,436 18,739 18,997
Interest expense: Deposits 1,680 1,669 1,602 1,410 1,238 Securities
sold under agreement to repurchase 14 17 16 25 40 FHLB borrowings
81 136 81 120 129 Other borrowings 287 275 271
259 220 Total interest expense 2,062 2,097
1,970 1,814 1,627 Net interest income
15,383 17,243 16,466 16,925 17,370 Provision for loan losses 7,600
12,000 4,300 440 — Net interest
income after provision for loan losses 7,783 5,243
12,166 16,485 17,370 Noninterest income:
Service charges on deposit accounts 1,793 1,414 2,159 2,065 2,206
Gain (loss) on securities, net 373 (49 ) — — — Gain on sale of
loans, net 1,274 — — — — ATM and debit card income 1,925 2,624
1,796 1,877 1,784 Other charges and fees 908 713
1,135 940 839 Total noninterest income 6,273
4,702 5,090 4,882 4,829
Noninterest expense: Salaries and employee benefits 9,700 8,895
7,762 7,916 7,719 Occupancy expense 3,307 3,186 3,077 3,193 3,045
ATM and debit card 624 678 653 648 576 Legal and professional fees
1,883 3,457 2,543 1,100 1,689 Remediation expense — 4,970 5,502
5,323 3,926 Other non-interest expense 4,372 3,458
3,990 4,093 4,918 Total noninterest expense
19,886 24,644 23,527 22,273 21,873
Earnings (loss) before income taxes (5,830 ) (14,699 )
(6,271 ) (906 ) 326 Income tax (benefit)/expense — 7,610
(1,373 ) (237 ) (34 ) Net (loss) earnings (5,830 ) (22,309 )
(4,898 ) (669 ) 360 Dividends on preferred stock 810 809
810 810 810 Net (loss) earnings
available to common shareholders $ (6,640 ) $ (23,118 ) $ (5,708 )
$ (1,479 ) $ (450 ) (Loss) earnings per common share, diluted $
(0.40 ) $ (1.39 ) $ (0.34 ) $ (0.09 ) $ (0.03 ) Operating (loss)
earnings per common share, diluted on pages 18-20 (Non-GAAP)(*) $
(0.40 ) $ (0.73 ) $ (0.08 ) $ 0.17 $ 0.21 (*) See
reconciliation of Non-GAAP financial measures.
MIDSOUTH BANCORP, INC. and SUBSIDIARIES
Loans, Deposits and Asset Quality (unaudited) (in
thousands) COMPOSITION OF LOANS
March 31,
2019
December 31,
2018
September 30,
2018
June 30,
2018
March 31,
2018
Commercial, financial, and agricultural $ 255,410 $ 267,340 $
294,971 $ 354,944 $ 401,048 Real estate - construction 89,723
89,621 90,444 98,108 94,679 Real estate - commercial 376,523
368,449 394,416 414,526 438,779 Real estate - residential 130,700
130,320 136,151 141,104 145,671 Consumer and other 40,784 43,506
46,169 48,649 56,386 Lease financing receivable 510 549
592 632 692 Total loans $ 893,650
$ 899,785 $ 962,743 $ 1,057,963 $
1,137,255
COMPOSITION OF DEPOSITS
March 31,
2019
December 31,
2018
September 30,
2018
June 30,
2018
March 31,
2018
Noninterest bearing 418,321 $ 383,167 $ 425,696 $ 419,517 $ 427,504
NOW & other 410,792 400,625 442,487 461,726 459,394 Money
market/savings 436,317 488,181 454,867 466,711 441,801 Time
deposits of less than $100,000 121,460 121,703 125,363 111,758
113,665 Time deposits of $100,000 or more 58,745 58,395
60,716 63,308 61,573 Total deposits $
1,445,635 $ 1,452,071 $ 1,509,129 $ 1,523,020
$ 1,503,937
ASSET QUALITY DATA
March 31,
2019
December 31,
2018
September 30,
2018
June 30,
2018
March 31,
2018
Nonaccrual loans $ 23,191 $ 8,920 $ 51,476 $ 73,538 $ 82,275 Loans
past due 90 days and over and accruing — — 7 3
1 Total nonperforming loans 23,191 8,920 51,483
73,541 82,276 Nonperforming loans held for sale — 20,441 — — 808
Other real estate 664 1,067 1,022 1,365 1,803 Other repossessed
assets 66 55 — — 194 Total
nonperforming assets $ 23,921 $ 30,483 $ 52,505 $ 74,906 $ 85,081
Troubled debt restructurings, accruing $ 713 $ 1,334
$ 896 $ 1,010 $ 1,153 Nonperforming assets to
total assets 1.37 % 1.75 % 2.88 % 4.03 % 4.58 % Nonperforming
assets to total loans 2.68 % 3.39 % 5.45 % 7.07 % 7.47 % ALLL to
nonperforming loans 106.85 % 195.4 % 47.49 % 31.97 % 30.84 % ALLL
to total loans 2.77 % 1.94 % 2.54 % 2.22 % 2.23 % Quarter-to-date
charge-offs 384 19,277 4,339 2,801 1,836 Quarter-to-date recoveries
133 258 974 505 319
Quarter-to-date net charge-offs 251 19,019 3,365
2,296 1,517 Annualized QTD net charge-offs to
total loans 0.11 % 8.45 % 1.40 % 0.87 % 0.54 %
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
March 31,
2019
December 31,
2018
Total equity $ 221,166 $ 221,990 Less preferred equity
40,972 40,972 Total common equity 180,194 181,018
Less goodwill 42,171 42,171 Less intangibles 2,132 2,409
Tangible common equity $ 135,891 $ 136,438
Total assets $ 1,745,335 $ 1,743,398 Less goodwill 42,171
42,171 Less intangibles 2,132 2,409 Tangible assets $
1,701,032 $ 1,698,818 Tangible common equity
to tangible assets 7.99 % 8.03 %
REGULATORY CAPITAL
Common equity tier 1 capital $ 135,696 $ 137,991 Tier 1
capital 198,167 201,130 Total capital 211,905 215,310
Regulatory capital ratios: Common equity tier 1 capital
ratio 12.48 % 12.20 % Tier 1 risk-based capital ratio 18.22 % 17.79
% Total risk-based capital ratio 19.49 % 19.04 % Tier 1 leverage
ratio 11.60 % 11.45 %
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 March 31,
2019 December 31, 2018 September 30, 2018 June
30, 2018 March 31, 2018
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
$ 436,549 $ 3,071 2.81 % $ 375,467 $ 2,950 3.14 % $ 347,205 $ 2,156
2.48 % $ 340,080 $ 2,093 2.46 % $ 334,419 $ 2,047 2.45 % Tax-exempt
securities (*) 38,424 323 3.36 % 43,010 355 3.30 % 43,151 345 3.20
% 43,858 351 3.20 % 50,550 400 3.17 % Total investment securities
474,973 3,394 2.86 % 418,477 3,305 3.16 % 390,356 2,501 2.56 %
383,938 2,444 2.54 % 384,969 2,447 2.54 % Federal funds sold 5,493
32 2.33 % 5,878 33 2.25 % 7,250 32 1.77 % 5,008 21 1.63 % 4,978 18
1.45 % Interest bearing deposits in other banks 185,418 1,004 2.17
% 208,001 1,364 2.62 % 250,349 1,279 2.04 % 201,281 912 1.79 %
132,940 514 1.55 % Other investments 16,936 95 2.24 % 16,573 177
4.27 % 15,640 106 2.71 % 14,924 91 2.45 % 12,721 87 2.74 % Loans
904,293 12,987 5.74 % 944,546 14,536 6.16 % 1,020,834 14,590 5.72 %
1,109,371 15,344 5.55 % 1,159,671 16,015 5.60 % Total interest
earning assets 1,587,113 17,512 4.41 % 1,593,475 19,415 4.87 %
1,684,429 18,508 4.40 % 1,714,522 18,812 4.39 % 1,695,279 19,081
4.56 % Non-interest earning assets 155,573 198,515 146,405 146,384
164,791 Total assets $ 1,742,686 $ 1,791,990 $ 1,830,834 $
1,860,906 $ 1,860,070 Interest-bearing liabilities: Deposits $
1,042,918 $ 1,680 0.64 % $ 1,066,322 $ 1,670 0.63 % $ 1,083,404 $
1,602 0.59 % $ 1,087,746 $ 1,409 0.52 % $ 1,056,417 $ 1,238 0.47 %
Repurchase agreements 12,069 14 0.46 % 13,031 17 0.52 % 14,641 16
0.44 % 26,230 25 0.39 % 40,115 40 0.40 % FHLB advances 27,500 81
1.18 % 27,500 135 1.96 % 29,139 81 1.11 % 37,514 120 1.28 % 38,741
129 1.33 % Junior subordinated debentures 22,167 287 5.18 % 22,167
275 4.96 % 22,167 271 4.89 % 22,167 260 4.63 % 22,167 220 3.97 %
Total interest bearing liabilities 1,104,654 2,062 0.75 % 1,129,020
2,097 0.74 % 1,149,351 1,970 0.69 % 1,173,657 1,814 0.62 %
1,157,440 1,627 0.57 % Non-interest bearing liabilities 414,829
419,202 431,486 435,971 447,460 Shareholders' equity 223,203
243,768 249,997 251,278 255,170 Total liabilities and shareholders'
equity 1,742,686 1,791,990 1,830,834 1,860,906 1,860,070 Net
interest income (TE) and spread $ 15,450 3.66 % $ 17,318 4.13 % $
16,538 3.71 % $ 16,998 3.77 % $ 17,454 3.99 % Net interest margin
3.89 % 4.35 % 3.93 % 3.97 % 4.12 % (*) Reflects taxable equivalent
adjustments using the federal statutory tax rate of 21% in
adjusting interest on tax-exempt securities to a fully taxable
basis. The taxable equivalent adjustments included above amount to
$68,000 for 1Q19, $75,000 for 4Q18 $72,000 for 3Q18, $74,000 for
2Q18, and $84,000 for 1Q18.
MIDSOUTH BANCORP, INC. and SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures (unaudited)
(in thousands except per share data)
Three Months Ended
March 31,
2019
December 31,
2018
September 30,
2018
June 30,
2018
March 31,
2018
Tangible common equity and tangible book value per share
Total shareholders' equity $ 221,166 $ 221,990 $ 241,451 $
248,672 $ 250,837 Less: Preferred common shareholders' equity
40,972 40,972 40,972 40,987 40,987 Total common equity 180,194
181,018 200,479 207,685 209,850 Less: Goodwill $ 42,171 $
42,171 $ 42,171 $ 42,171 $ 42,171 Other intangible assets $ 2,132
$ 2,409 $ 2,685 $ 2,962 $ 3,238 Total tangible common
equity $ 135,891 $ 136,438 $ 155,623 $ 162,552 $
164,441 Period end number of shares $ 16,715,671 $
16,641,017 $ 16,641,105 $ 16,619,894 $ 16,621,811 Book value per
share (period end) $ 10.78 $ 10.88 $ 12.05 $ 12.50 $ 12.62 Tangible
book value per share (period end) $ 8.13 $ 8.20 $ 9.35 $ 9.78 $
9.89
MIDSOUTH BANCORP,
INC. and SUBSIDIARIES Reconciliation of Non-GAAP Financial
Measures (unaudited) (continued) (in thousands except per
share data) Operating
(loss) earnings per share
March 31,
2019
December 31,
2018
September 30,
2018
June 30,
2018
March 31,
2018
Net loss available to common shareholders' $ (6,640 ) $ (23,118 ) $
(5,708 ) $ (1,479 ) $ (450 ) Adjustment items: Regulatory
remediation costs — 4,970 5,502 5,323 3,926 Loans held for sale
expense — — 4 20 963 Branch closure expenses — — — — 145 Discount
accretion acceleration — (726 ) — — — Tax effect of adjustments —
(891 ) (1,156 )
(1,122 ) (1,057 ) After tax adjustment items — 3,353
4,350 4,221 3,977 Tax expense adjustment item: Attributable to
valuation allowance on deferred tax — 7,685 —
— — Adjusted net (loss) income $ (6,640 )
$ (12,080 ) $ (1,358 ) $ 2,742
$ 3,527 Weighted average number
of shares - diluted 16,673,818 16,640,174 16,557,664 16,525,571
16,495,438 Net (loss) earnings per diluted share $ (0.40 ) $ (1.39
) $ (0.34 ) $ (0.09 ) $ (0.03 ) Operating net (loss) earnings per
diluted share $ (0.40 ) $ (0.73 ) $ (0.08 ) $ 0.17 $ 0.21
Operating ratios Return on average assets (1.52 )% (5.16 )% (1.25
)% (0.32 )% (0.10 )% Effect of adjustment items — % 2.46 % 0.95 %
0.91 % 0.86 % Operating return on average assets (1.52 )% (2.70 )%
(0.30 )% 0.59 % 0.76 % Return on average common equity
(14.57 )% (45.60 )% (10.92 )% (2.81 )% (0.84 )% Effect of
adjustment items — % 21.77 % 8.32 % 8.03 % 7.43 % Operating return
on average common equity (14.57 )% (23.83 )% (2.60 )% 5.22 % 6.59 %
Return on average tangible common equity (19.28 )% (58.50 )%
(13.92 )% (3.58 )% (1.07 )% Effect of adjustment items — % 27.93 %
10.61 % 10.23 % 9.44 % Operating return on average tangible common
equity (19.28 )% (30.57 )% (3.31 )% 6.65 % 8.37 %
MIDSOUTH BANCORP, INC. and
SUBSIDIARIES Reconciliation of Non-GAAP Financial Measures
(unaudited) (continued) (in thousands except per share
data)
Three Months Ended
OPERATING EFFICIENCY RATIO (TE)
March 31,
2019
December 31,
2018
September 30,
2018
June 30,
2018
March 31,
2018
Operating noninterest expense Total Noninterest Expense $
19,886 $ 24,644 $ 23,527 $ 22,273 $ 21,873 Adjustment items:
Regulatory remediation costs — $ (4,970 ) $ (5,502 ) $ (5,323 ) $
(3,926 ) Loans held for sale expense — — 4 (20 ) (963 ) Branch
closure expenses — — — — (145 )
Operating noninterest expense $ 19,886 $ 19,674 $
18,029 $ 16,930 $ 16,839
Operating
efficiency ratio Net interest income (TE) 15,436 17,318 16,538
16,998 17,454 Noninterest income 6,273 4,702 5,090
4,882 4,829 Total Revenue (TE) 21,709
22,020 21,628 21,880 22,283 Adjustment
items Gain on sale of securities 373 — — — — Gain on sale of loans
1,274 — — — — Adjusted total
revenue (TE) 20,062 22,020 21,628 21,880
22,283 Efficiency ratio 91.83 % 112.30 % 109.14 %
102.14 % 98.53 % Operating efficiency ratio 99.12 % 89.35 % 83.36 %
77.38 % 75.57 %
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Jim McLemore, CFAPresident & CEO337.237.8343
Lorraine Miller, CFAEVP & CFO337.593.3143
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