MidSouth Bancorp, Inc. Reports First Quarter 2019 Results

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%.

LAFAYETTE, La.–(BUSINESS WIRE)–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.

Contacts

Jim McLemore, CFA
President & CEO
337.237.8343

Lorraine Miller, CFA
EVP & CFO
337.593.3143

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