MSL Midsouth Bancorp Inc

Quarterly Highlights

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

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

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

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

Remediation Update

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

Balance Sheet

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

MidSouth’s Tier 1 leverage capital ratio was 12.53% at September 30, 2018, compared to 12.71% at June 30, 2018. Tier 1 risk-based capital and total risk-based capital ratios were 19.09% and 20.35%, respectively, at September 30, 2018, compared to 18.07% and 19.33%, respectively, at June 30, 2018. Tier 1 common equity to total risk-weighted assets at September 30, 2018 was 13.78%, compared to 13.20% at June 30, 2018. Tangible common equity totaled $155.6 million at September 30, 2018, compared to $162.6 million at June 30, 2018. Tangible book value per common share at September 30, 2018 was $9.37 compared to $9.78 at June 30, 2018.

Asset Quality

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

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

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

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

Third Quarter 2018 vs. Second Quarter 2018 Earnings Comparison

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

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

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

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

Third Quarter 2018 vs. Third Quarter 2017 Earnings Comparison

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

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

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

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

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

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

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

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

Year-To-Date Earnings Comparison

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

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

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

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

About MidSouth Bancorp, Inc.

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

Forward-Looking Statements

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

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

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

  MIDSOUTH BANCORP, INC. and SUBSIDIARIES Condensed Consolidated Financial Information (unaudited) (in thousands except per share data)                             Quarter Quarter Quarter Quarter Quarter Ended Ended Ended Ended Ended EARNINGS DATA   9/30/2018     6/30/2018     3/31/2018     12/31/2017     9/30/2017   Total interest income $ 18,436 $ 18,739 $ 18,997 $ 20,955 $ 20,379 Total interest expense   1,970     1,814     1,627     1,483     1,566   Net interest income   16,466     16,925     17,370     19,472    

18,813

  FTE net interest income   16,538     16,998     17,454     19,566    

19,008

  Provision for loan losses   4,300     440     0     10,600     4,300   Non-interest income 5,090 4,882 4,829 6,028 5,486 Non-interest expense   23,527     22,273     21,873     25,944     17,759   (Loss) earnings before income taxes (6,271 ) (906 ) 326 (11,044 ) 2,240 Income tax (benefit) expense   (1,373 )   (237 )   (34 )   (540 )   574   Net (loss) earnings (4,898 ) (669 ) 360 (10,504 ) 1,666 Dividends on preferred stock   810     810     810     810     810  

Net (loss) earnings available to common shareholders

$ (5,708 ) $ (1,479 ) $ (450 ) $ (11,314 ) $ 856     PER COMMON SHARE DATA Basic (loss) earnings per share $ (0.34 ) $ (0.09 ) $ (0.03 ) $ (0.69 ) $ 0.05 Diluted (loss) earnings per share (0.34 ) (0.09 ) (0.03 ) (0.69 ) 0.05 Diluted earnings (loss) per share, operating (Non-GAAP)(*) (0.08 ) 0.17 0.21 (0.05 )

0.12

Quarterly dividends per share 0.01 0.01 0.01 0.01 0.01 Book value at end of period 12.05 12.50 12.62 12.87 13.70 Tangible book value at period end (Non-GAAP)(*) 9.37 9.78 9.89 10.11 10.92 Market price at end of period 15.40 13.25 12.65 13.25 12.05 Shares outstanding at period end 16,641,105 16,619,894 16,621,811 16,548,829 16,548,829 Weighted average shares outstanding Basic 16,557,664 16,525,571 16,495,438 16,460,124 16,395,317 Diluted 16,557,664 16,525,571 16,495,438 16,460,124 16,395,740   AVERAGE BALANCE SHEET DATA Total assets $ 1,830,834 $ 1,860,906 $ 1,860,070 $ 1,907,735 $ 1,954,343 Loans and leases 1,020,834 1,109,371 1,159,671 1,238,846 1,254,885 Total deposits 1,503,528 1,514,321 1,495,907 1,513,156 1,546,837 Total common equity 209,010 210,291 214,183 228,386 227,948 Total tangible common equity (Non-GAAP)(*) 164,020 165,024 168,629 182,568 181,851 Total equity 249,997 251,278 255,170 263,373 263,035   SELECTED RATIOS Annualized return on average assets, operating (Non-GAAP)(*) -0.30 % 0.59 % 0.76 % -0.17 % 0.46 % Annualized return on average common equity, operating (Non-GAAP)(*) -2.60 % 5.22 % 6.59 % -1.40 % 3.94 % Annualized return on average tangible common equity, operating (Non-GAAP)(*) -3.31 % 6.65 % 8.37 % -1.75 % 4.94 % Efficiency ratio, operating (Non-GAAP)(*) 83.36 % 77.38 % 75.57 % 69.14 % 66.34 % Average loans to average deposits 67.90 % 73.26 % 77.52 % 81.87 % 81.13 % Tier 1 leverage capital ratio 12.53 % 12.71 % 12.80 % 12.53 % 12.84 %   CREDIT QUALITY Allowance for loan and lease losses (ALLL) as a % of total loans 2.54 % 2.22 % 2.23 % 2.27 % 2.03 % Nonperforming assets to tangible equity + ALLL 23.75 % 32.99 % 36.86 % 24.35 % 21.83 %

Nonperforming assets to total loans, other real estate owned and other repossessed assets

5.45 % 7.07 % 7.47 % 4.83 % 4.35 % Annualized QTD net charge-offs to total loans 1.40 % 0.87 % 0.54 % 2.94 % 1.26 %   (*) See reconciliation of Non-GAAP financial measures.   MIDSOUTH BANCORP, INC. and SUBSIDIARIES Condensed Consolidated Balance Sheets (unaudited) (in thousands)                           BALANCE SHEET September 30, June 30, March 31, December 31, September 30,   2018     2018     2018     2017     2017   Assets Cash and cash equivalents $ 302,888   $ 278,776   $ 211,486   $ 152,964   $ 163,123   Securities available-for-sale 352,606 308,937 293,970 309,191 326,222 Securities held-to-maturity   64,893     67,777     73,255     81,052     83,739   Total investment securities   417,499     376,714     367,225     390,243     409,961   Other investments 16,508 14,927 12,896 12,214 12,200 Loans held for sale - - 1,117 15,737 - Total loans 962,743 1,057,963 1,137,255 1,183,426 1,235,969 Allowance for loan losses   (24,450 )   (23,514 )   (25,371 )   (26,888 )   (25,053 ) Loans, net   938,293     1,034,449     1,111,884     1,156,538     1,210,916   Premises and equipment 56,006 56,834 57,848 59,057 64,969 Goodwill and other intangibles 44,856 45,133 45,409 45,686 45,963 Other assets   50,204     52,084     49,890     48,713     39,934   Total assets $ 1,826,254   $ 1,858,917   $ 1,857,755   $ 1,881,152   $ 1,947,066       Liabilities and Shareholders' Equity Non-interest bearing deposits $ 425,696 $ 419,517 $ 427,504 $ 416,547 $ 428,183 Interest-bearing deposits   1,083,433     1,103,503     1,076,433     1,063,142     1,127,752   Total deposits 1,509,129 1,523,020 1,503,937 1,479,689 1,555,935

Securities sold under agreements to repurchase

13,676 14,886 33,026 67,133 54,875 Short-term FHLB advances 27,500 27,500 27,500 40,000 12,500 Long-term FHLB advances 6 10,011 10,016 10,021 25,110 Junior subordinated debentures 22,167 22,167 22,167 22,167 22,167 Other liabilities   12,325     12,661     10,272     8,127     8,836   Total liabilities   1,584,803     1,610,245     1,606,918     1,627,137     1,679,423   Total shareholders' equity   241,451     248,672     250,837     254,015     267,643   Total liabilities and shareholders' equity $ 1,826,254   $ 1,858,917   $ 1,857,755   $ 1,881,152   $ 1,947,066                         MIDSOUTH BANCORP, INC. and SUBSIDIARIES Condensed Consolidated Income Statements (unaudited) (in thousands except per share data)                       EARNINGS STATEMENT Three Months Ended Nine Months Ended   9/30/2018     6/30/2018     9/30/2017     9/30/2018     9/30/2017     Interest income: Loans, including fees $ 14,547 $ 15,251 $ 17,064 $ 45,702 $ 49,941 Investment securities 2,429 2,370 2,639 7,162 8,163 Accretion of purchase accounting adjustments 43 93 265 246 741 Other interest income   1,417     1,025     411     3,061     823   Total interest income   18,436     18,739     20,379     56,171     59,668     Interest expense: Deposits 1,602 1,410 1,094 4,249 3,002 Borrowings 102 150 350 427 1,177 Junior subordinated debentures 271 259 212 750 632 Accretion of purchase accounting adjustments   (5 )   (5 )   (90 )   (15 )   (268 ) Total interest expense   1,970     1,814     1,566     5,411     4,543     Net interest income 16,466 16,925 18,813 50,760 55,125 Provision for loan losses   4,300     440     4,300     4,740     19,600   Net interest income after provision for loan losses   12,166     16,485     14,513     46,020     35,525     Noninterest income: Service charges on deposit accounts 2,159 2,065 2,463 6,430 7,339 ATM and debit card income 1,796 1,877 1,687 5,457 5,156 Mortgage lending 29 66 155 187 465 Gain on securities, net (non-operating)(*) - - 338 - 347 Gain/(loss) on equity securities not trading, net (16 ) (51 ) - (66 ) - Gain on sale of branches (non-operating)(*) - - - - - Other charges and fees   1,122     925     843     2,794     2,446   Total non-interest income   5,090     4,882     5,486     14,802     15,753     Noninterest expense: Salaries and employee benefits 7,762 7,916 7,849 23,398 24,648 Occupancy expense 3,077 3,193 3,443 9,315 10,494 ATM and debit card 653 648 654 1,876 2,088 Legal and professional fees 2,543 1,100 1,404 5,425 2,726 FDIC premiums 360 507 448 1,296 1,275 Marketing 344 281 302 820 844 Corporate development 274 248 189 759 758 Data processing 730 666 640 2,061 1,928 Printing and supplies 153 133 81 409 399 Expenses on ORE, net 115 138 15 329 186 Amortization of core deposit intangibles 277 276 277 830 830 Other non-interest expense   7,239     7,167     2,457     21,155     8,417   Total non-interest expense   23,527     22,273     17,759     67,673     54,593   (Loss) earnings before income taxes (6,271 ) (906 ) 2,240 (6,851 ) (3,315 ) Income tax (benefit) expense   (1,373 )   (237 )   574     (1,644 )   (2,058 ) Net (loss) earnings (4,898 ) (669 ) 1,666 (5,207 ) (1,257 ) Dividends on preferred stock   810     810     810     2,430     2,432   Net (loss) earnings available to common shareholders $ (5,708 ) $ (1,479 ) $ 856   $ (7,637 ) $ (3,689 )   (Loss) earnings per common share, diluted $ (0.34 ) $ (0.09 ) $

0.05

 

$

(0.46

) $

(0.28

)

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

0.12

  $

0.29

 

$

(0.12

)

  (*) See reconciliation of Non-GAAP financial measures.     MIDSOUTH BANCORP, INC. and SUBSIDIARIES Composition of Loans and Deposits and Asset Quality Data (unaudited) (in thousands)                         COMPOSITION OF LOANS September 30, June 30, March 31, December 31, September 30,   2018     2018     2018     2017     2017   Commercial, financial, and agricultural $ 294,971 $ 354,944 $ 401,048 $ 435,207 $ 447,482 Real estate - construction 90,444 98,108 94,679 90,287 90,088 Real estate - commercial 394,416 414,526 438,779 448,406 473,046 Real estate - residential 136,151 141,104 145,671 146,751 155,676 Consumer and other 46,169 48,649 56,386 62,043 68,917 Lease financing receivable   592     632     692     732     760     Total loans $ 962,743   $ 1,057,963   $ 1,137,255   $ 1,183,426   $ 1,235,969     COMPOSITION OF DEPOSITS September 30, June 30, March 31, December 31, September 30,   2018     2018     2018     2017     2017   Noninterest bearing $ 425,696 $ 419,517 $ 427,504 $ 416,547 $ 428,183 NOW & other 442,487 461,726 459,394 434,646 461,740 Money market/savings 454,867 466,711 441,801 446,215 473,023 Time deposits of less than $100,000 162,175 111,758 113,665 116,309 120,685 Time deposits of $100,000 or more   23,904     63,308     61,573     65,972     72,304     Total deposits $ 1,509,129   $ 1,523,020   $ 1,503,937   $ 1,479,689   $ 1,555,935     ASSET QUALITY DATA September 30, June 30, March 31, December 31, September 30,   2018     2018     2018     2017     2017   Nonaccrual loans $ 51,476 $ 73,538 $ 82,275 $ 49,278 $ 51,289 Loans past due 90 days and over   7     3     1     728     402   Total nonperforming loans 51,483 73,541 82,276 50,006 51,691 Nonperforming loans held for sale - - 808 5,067 - Other real estate 1,022 1,365 1,803 2,001 1,931 Other repossessed assets   -     -     194     192     234   Total nonperforming assets $ 52,505   $ 74,906   $ 85,081   $ 57,266   $ 53,856     Troubled debt restructurings, accruing $ 896   $ 1,010   $ 1,153   $ 1,360   $ 1,557       Nonperforming assets to total assets 2.88 % 4.03 % 4.58 % 3.04 % 2.77 %

Nonperforming assets to total loans + ORE + other repossessed assets

5.45 % 7.07 % 7.47 % 4.83 % 4.35 % ALLL to nonperforming loans 47.49 % 31.97 % 30.84 % 53.77 % 48.47 % ALLL to total loans 2.54 % 2.22 % 2.23 % 2.27 % 2.03 %   Quarter-to-date charge-offs $ 4,339 $ 2,801 $ 1,836 $ 8,931 $ 4,381 Quarter-to-date recoveries   974     505     319     166     460   Quarter-to-date net charge-offs $ 3,365   $ 2,296   $ 1,517   $ 8,765   $ 3,921   Annualized QTD net charge-offs to total loans 1.40 % 0.87 % 0.54 % 2.94 % 1.26 %   MIDSOUTH BANCORP, INC. and SUBSIDIARIES Tangible Common Equity to Tangible Assets and Regulatory Ratios (unaudited) (in thousands)         COMPUTATION OF TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS September 30, September 30,   2018     2017   Total equity $ 241,451 $ 267,643 Less preferred equity   40,972     40,987   Total common equity 200,479 226,656 Less goodwill 42,171 42,171 Less intangibles   2,685     3,792   Tangible common equity $ 155,623   $ 180,693     Total assets $ 1,826,254 $ 1,947,066 Less goodwill 42,171 42,171 Less intangibles   2,685     3,792   Tangible assets $ 1,781,398   $ 1,901,103     Tangible common equity to tangible assets 8.74 % 9.50 %   REGULATORY CAPITAL   Common equity tier 1 capital $ 162,025 $ 182,768 Tier 1 capital 224,496 245,254 Total capital 239,324 263,365   Regulatory capital ratios: Common equity tier 1 capital ratio 13.78 % 12.68 % Tier 1 risk-based capital ratio 19.09 % 17.01 % Total risk-based capital ratio 20.35 % 18.27 % Tier 1 leverage ratio 12.53 % 12.84 %   MIDSOUTH BANCORP, INC. and SUBSIDIARIES Quarterly Yield Analysis (unaudited) (in thousands)                                                             YIELD ANALYSIS Three Months Ended Three Months Ended Three Months Ended Three Months Ended Three Months Ended September 30, 2018 June 30, 2018 March 31, 2018 December 31, 2017 September 30, 2017   Tax Tax Tax Tax Tax Average Equivalent Yield/ Average Equivalent Yield/ Average Equivalent Yield/ Average Equivalent Yield/ Average Equivalent Yield/ Balance Interest   Rate   Balance Interest   Rate   Balance Interest   Rate   Balance Interest   Rate   Balance Interest   Rate   Taxable securities $ 347,205 $ 2,156 2.48 % $ 340,080 $ 2,093 2.46 % $ 334,419 $ 2,047 2.45 % $ 348,267 $ 2,161 2.48 % $ 372,648 $ 2,276 2.44 % Tax-exempt securities(*)   43,151   345 3.20 %   43,858   351 3.20 %   50,550   400 3.17 %   53,998   448 3.32 %   55,129  

558

4.05

% Total investment securities 390,356   2,501 2.56 % 383,938   2,444 2.54 % 384,969   2,447 2.54 % 402,265   2,609 2.59 % 427,777  

2,834

2.65

% Federal funds sold 7,250 32 1.77 % 5,008 21 1.63 % 4,978 18 1.45 % 4,441 15 1.32 % 4,319 13 1.18 %

Time and interest bearing deposits in other banks

250,349 1,279 2.04 % 201,281 912 1.79 % 132,940 514 1.55 % 94,394 314 1.30 % 94,675 305 1.26 % Other investments 15,640 106 2.71 % 14,924 91 2.45 % 12,721 87 2.74 % 12,201 85 2.79 % 12,098 93 3.07 % Loans   1,020,834   14,590 5.72 %   1,109,371   15,344 5.55 %   1,159,671   16,015 5.60 %   1,238,846   18,026 5.77 %   1,254,885   17,329 5.48 % Total interest earning assets 1,684,429   18,508 4.40 % 1,714,522   18,812 4.39 % 1,695,279   19,081 4.56 % 1,752,147   21,049 4.81 % 1,793,754  

20,574

4.59

% Non-interest earning assets   146,405   146,384   164,791   155,588   160,589 Total assets $ 1,830,834 $ 1,860,906 $ 1,860,070 $ 1,907,735 $ 1,954,343   Interest-bearing liabilities: Deposits $ 1,083,404 $ 1,602 0.59 % $ 1,087,746 $ 1,409 0.52 % $ 1,071,484 $ 1,238 0.47 % $ 1,085,349 $ 1,097 0.40 % $ 1,118,593 $ 1,094 0.39 % Repurchase agreements 14,641 16 0.44 % 26,230 25 0.39 % 40,115 40 0.40 % 54,799 66 0.48 % 75,654 149 0.78 % FHLB advances 29,139 81 1.11 % 37,514 120 1.28 % 38,741 129 1.33 % 40,281 122 1.21 % 31,677 111 1.40 % Junior subordinated debentures   22,167   271 4.89 %   22,167   260 4.63 %   22,167   220 3.97 %   22,167   198 3.50 %   22,167   212 3.74 % Total interest bearing liabilities 1,149,351   1,970 0.69 % 1,173,657   1,814 0.62 % 1,172,507   1,627 0.57 % 1,202,596   1,483 0.49 % 1,248,091   1,566 0.50 % Non-interest bearing liabilities 431,486 435,971 447,460 435,766 437,217 Shareholders' equity   249,997   251,278   255,170   269,373   269,035

 

Total liabilities and shareholders' equity

$ 1,830,834 $ 1,860,906 $ 1,875,137 $ 1,907,735 $ 1,954,343   Net interest income (TE) and spread $ 16,538 3.71 % $ 16,998 3.77 % $ 17,454 3.99 % $ 19,566 4.32 % $

19,008

4.09

%   Net interest margin 3.93 % 3.97 % 4.12 % 4.47 %

4.24

%    

(*) Reflects taxable equivalent adjustments using the federal statutory tax rate of 21% and 35% (3Q17) in adjusting interest on tax-exempt securities to a fully taxable basis. The taxable equivalent adjustments included above amount to $72,477 for 3Q18, $73,709 for 2Q18, $83,934 for 1Q18, $94,123 for 4Q17 and $155,567 for 3Q17.

                              MIDSOUTH BANCORP, INC. and SUBSIDIARIES Reconciliation of Non-GAAP Financial Measures (unaudited) (in thousands except per share data)       Three Months Ended September 30, June 30, March 31, December 31, September 30,   2018   2018   2018   2017   2017 TANGIBLE BOOK VALUE PER COMMON SHARE   Total shareholders' equity $ 241,451 $ 248,672 $ 250,837 $ 254,015 $ 267,643 Less: Preferred common shareholders' equity   40,972   40,987   40,987   40,987   40,987 Total common shareholders' equity $ 200,479 $ 207,685 $ 209,850 $ 213,028 $ 226,656   Less: Goodwill 42,171 42,171 42,171 42,171 42,171 Other intangible assets   2,685   2,962   3,238   3,515   3,792 Total tangible common shareholders' equity $ 155,623 $ 162,552 $ 164,441 $ 167,342 $ 180,693   Period end number of shares 16,614,105 16,619,894 16,621,811 16,548,829 16,548,829 Book value per share (period end) $ 12.07 $ 12.50 $ 12.62 $ 12.87 $ 13.70 Tangible book value per share (period end) $ 9.37 $ 9.78 $ 9.89 $ 10.11 $ 10.92                           MIDSOUTH BANCORP, INC. and SUBSIDIARIES Reconciliation of Non-GAAP Financial Measures (unaudited) (continued) (in thousands except per share data)           Three Months Ended   Nine Months Ended September 30, June 30, March 31, December 31, September 30, September 30, September 30, Adjusted Net Income 2018 2018 2018 2017 2017 2018 2017   (dollars in thousands except per share data) Net (loss) income available to common shareholders' $ (5,708 ) $ (1,479 ) $ (450 ) $ (11,314 ) $ 856 $ (7,637 ) $ (3,689 ) Adjustment items: Regulatory remediation costs 5,502 5,323 3,926 1,772 856 14,658 - Loans to held for sale expense 4 20 963 6,819 - 979 570 Severance and retention expenses - - - 171 - - 1,341 Branch closure expenses - - 145 - 903 - 1,368 Tax effect of adjustments   (1,156 )     (1,122 )     (1,057 )     (1,840 )     (616 )     (3,284 )     (1,148 ) After tax adjustment items 4,350 4,221 3,977 6,922 1,143 12,353 2,131  

Tax expense attributable to remeasurement of deferred tax assets and liabilities at reduced federal corporate tax rate

- - - 3,595 - - -   Adjusted net income $ (1,358 )   $ 2,742     $ 3,527     $ (797 )   $ 1,999     $ 4,716     $ (1,558 )   Weighted average number of shares - diluted 16,557,793 16,525,571 16,495,438 16,460,124 16,395,740 16,530,852 13,314,469 Net income per diluted share $ (0.34 ) $ (0.09 ) $ (0.03 ) $ (0.69 ) $ 0.05 $ (0.46 ) $ (0.28 ) Adjusted net income per diluted share $ (0.08 ) $ 0.17 $ 0.21 $ (0.05 ) $ 0.12 $ 0.29 $ (0.12 )   Average assets $ 1,830,834 $ 1,860,906 $ 1,860,070 $ 1,907,735 $ 1,954,343 $ 1,850,496 $ 1,936,930 Return on average assets -1.25 % -0.32 % -0.10 % -2.37 % 0.18 % -1.65 % -0.76 % Adjusted return on average assets -0.30 % 0.59 % 0.76 % -0.17 % 0.41 % 1.02 % -0.32 %   Average common equity $ 209,010 $ 210,291 $ 214,183 $ 228,386 $ 227,948 $ 249,934 $ 194,373 Average tangible common equity $ 164,020 $ 165,024 $ 168,629 $ 182,568 $ 181,851 $ 204,666 $ 147,998 Adjusted return on average common equity -2.60 % 5.22 % 6.59 % -1.40 % 3.51 % 2.52 % -1.07 % Adjusted return on average tangible common equity -3.31 % 6.65 % 8.37 % -1.75 % 4.40 % 3.07 % -1.40 %                                              

MIDSOUTH BANCORP, INC. and SUBSIDIARIES

                            Reconciliation of Non-GAAP Financial Measures (unaudited) (continued) (in thousands except per share data)   Three Months Ended September 30, June 30, March 31, December 31, September 30, ADJUSTED EFFICIENCY RATIO (TE)   2018     2018     2018     2017     2017     Adjusted Noninterest Expense Total Noninterest Expense $ 23,527 $ 22,273 $ 21,873 $ 25,944 $ 17,759 Adjustment items: Regulatory remediation costs (5,502 ) (5,323 ) (3,926 ) (1,772 ) (856 ) Loans to held for sale expense 4 (20 ) (963 ) (6,819 ) $ - Severance and retention expenses $ - $ - $ - (171 ) $ - Branch closure expenses $ -   $ -     (145 ) $ -     (903 ) Adjusted noninterest expense $ 18,029   $ 16,930   $ 16,839   $ 17,182   $ 16,000     Total Revenue Net interest income $ 16,466 $ 16,925 $ 17,370 $ 19,472 $ 18,813 Noninterest income   5,090     4,882     4,829     6,028     5,486   Total Revenue $ 21,556   $ 21,807   $ 22,199   $ 25,500   $ 24,299     Adjusted Total Revenue Net interest income (TE) $ 16,538 $ 16,998 $ 17,454 $ 19,566 $

19,008

Noninterest income $ 5,090   $ 4,882   $ 4,829   $ 6,028   $ 5,486   Total Revenue (TE) $ 21,628   $ 21,880  

 

$ 22,283  

 

$ 25,594  

 

$

24,494

  Adjustment items Gain on sale of securities $ - $ - $ - $ - $ (338 ) Gain on sale of branches $ -   $ -   $ -   $ (744 ) $ -   Adjusted total revenue (TE) $ 21,628   $ 21,880   $ 22,283   $ 24,850   $

24,156

    Efficiency Ratio (GAAP) 109.14 % 102.14 % 98.53 % 101.74 % 73.09 % Efficiency Ratio (non-GAAP) 83.36 % 77.38 % 75.57 % 69.14 %

66.24

%

View source version on businesswire.com: https://www.businesswire.com/news/home/20181030006219/en/

MidSouth Bancorp, Inc.Jim McLemore, CFA, 337-237-8343President & CEOorLorraine Miller, CFA, 337-593-3143EVP & CFO