Company Quick10K Filing
Midsouth Bancorp
Price11.37 EPS-1
Shares17 P/E-14
MCap190 P/FCF7
Net Debt-232 EBIT-8
TEV-42 TEV/EBIT6
TTM 2019-06-30, in MM, except price, ratios
10-Q 2019-06-30 Filed 2019-08-09
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10-K 2018-12-31 Filed 2019-03-18
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8-K 2019-09-18
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8-K 2018-03-01
8-K 2018-02-27
8-K 2018-01-24
8-K 2018-01-02
8-K 2017-12-26

MSL 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements.
Note 1: Basis of Presentation
Note 2: Recent Accounting Pronouncements and Adoption of New Accounting Standards
Note 3: Investment Securities
Note 4: Loans
Note 5: Derivatives
Note 6: Leases
Note 7: Other Comprehensive Income (Loss)
Note 8: Loss per Common Share
Note 9: Fair Value Measurement
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II - Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
EX-31.1 a2019q210qex-311.htm
EX-31.2 a2019q210qex-312.htm
EX-32.1 a2019q210qex-321.htm
EX-32.2 a2019q210qex-322.htm

Midsouth Bancorp Earnings 2019-06-30

Balance SheetIncome StatementCash Flow

10-Q 1 a2019q210q.htm 10-Q Document
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549
 
FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from _____ to _____

COMMISSION FILE NUMBER 1-11826
logoa50.jpg
MIDSOUTH BANCORP, INC.
(Exact name of registrant as specified in its charter)

Louisiana
 
72 –1020809
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)

102 Versailles Boulevard, Lafayette, Louisiana 70501
 (Address of principal executive offices, including zip code)
(337) 237-8343
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common stock, $0.10 par value
MSL
New York Stock Exchange

Indicate by checkmark whether the registrant: (1) has filed all reports required to be filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES   x   NO   ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
YES   x   NO   ☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
☐Large accelerated filer
x Accelerated filer
☐Non-accelerated filer
x Smaller reporting company
☐Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐




Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)
YES   ☐   NO   x

As of August 6, 2019, there were 16,732,149 shares of the registrant’s Common Stock, par value $0.10 per share, outstanding.






Part I – Financial Information
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Part II – Other Information
 
 
Item 1A. Risk Factors.
 
 
 
 
 
Item 6. Exhibits.



Part I – Financial Information
 
Item 1. Financial Statements.

4


MidSouth Bancorp, Inc. and Subsidiaries
Consolidated Balance Sheets
(dollars in thousands, except share and per share amounts)
 
 
June 30, 2019
 
December 31, 2018
 
 
(unaudited)
 
(audited)
Assets
 
 
 
 
Cash and due from banks
 
$
20,175

 
$
27,701

Interest-bearing deposits in banks
 
207,902

 
174,909

Federal funds sold
 
4,375

 
2,761

Securities available-for-sale, at fair value (cost $421,482 and $443,928)
 
425,638

 
437,754

Securities held-to-maturity, (fair value $33,363 and $36,974)
 
33,219

 
37,759

Total securities
 
458,857

 
475,513

Other investments
 
18,261

 
16,614

Loans held for sale
 
10,304

 
23,876

Loans
 
880,037

 
899,785

Allowance for loan losses
 
(28,129
)
 
(17,430
)
Loans, net
 
851,908

 
882,355

Bank premises and equipment, net
 
54,221

 
55,382

Operating lease right-of-use assets
 
7,865

 

Goodwill and Intangibles
 
44,026

 
44,580

Cash surrender value of life insurance
 
15,248

 
15,135

Other real estate
 
387

 
1,067

Other assets
 
21,577

 
23,505

Total Assets
 
1,715,106

 
1,743,398

 
 
 
 
 
Liabilities:
 
 

 
 

Deposits:
 
 

 
 

Noninterest-bearing
 
$
399,619

 
$
383,167

Interest-bearing
 
1,023,770

 
1,068,904

Total deposits
 
1,423,389

 
1,452,071

Securities sold under agreements to repurchase
 
5,456

 
11,220

Operating lease liability
 
7,816

 

Federal Home Loan Bank advances
 
27,500

 
27,500

Junior subordinated debentures
 
22,167

 
22,167

Other liabilities
 
7,786

 
8,450

Total liabilities
 
1,494,114

 
1,521,408

 
 


 


Shareholders’ equity:
 
 

 
 

Series B Preferred stock, no par value; 5,000,000 shares authorized, 32,000 shares issued and outstanding, respectively
 
32,000

 
32,000

Series C Preferred stock, $10 par value; 100,000 shares authorized, 89,721 and 89,721 shares issued and outstanding, respectively
 
8,972

 
8,972

Common stock, $0.10 par value; 30,000,000 shares authorized, 16,733,569 and 16,641,017 shares issued and outstanding, respectively
 
1,671

 
1,664

Additional paid-in capital
 
169,147

 
169,111

Accumulated other comprehensive income (loss)
 
5,610

 
(4,035
)
Retained earnings
 
3,592

 
14,278

Total shareholders’ equity
 
220,992

 
221,990

Total liabilities and shareholders’ equity
 
$
1,715,106

 
$
1,743,398

 
See notes to unaudited consolidated financial statements.

5


MidSouth Bancorp, Inc. and Subsidiaries
Consolidated Statements of Operations (unaudited)
(dollars in thousands, except per share amounts)
 
 
 
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2019
 
2018
 
2019
 
2018
Interest income:
 
 
 
 
 
 
 
 
Loans, including fees
 
$
13,023

 
$
15,344

 
$
26,010

 
$
31,359

Securities and other investments:
 
 
 
 
 
 
 
 
Taxable
 
3,100

 
2,093

 
6,170

 
4,140

Nontaxable
 
160

 
277

 
416

 
593

Interest bearing deposits in other banks
 
1,663

 
1,025

 
2,795

 
1,644

Total interest income
 
17,946

 
18,739

 
35,391

 
37,736

 
 
 
 
 
 
 
 
 
Interest expense:
 
 

 
 

 
 
 
 
Deposits
 
1,665

 
1,410

 
3,345

 
2,647

Securities sold under agreements to repurchase
 
9

 
25

 
23

 
66

Federal Home Loan Bank advances
 
74

 
120

 
155

 
249

Junior subordinated debentures
 
283

 
259

 
570

 
479

Total interest expense
 
2,031

 
1,814

 
4,093

 
3,441

 
 
 
 
 
 
 
 
 
Net interest income
 
15,915

 
16,925

 
31,298

 
34,295

Provision for loan losses
 
4,759

 
440

 
12,359

 
440

Net interest income after provision for loan losses
 
11,156

 
16,485

 
18,939

 
33,855

 
 
 
 
 
 
 
 
 
Non-interest income:
 
 

 
 

 
 
 
 
Service charges on deposits
 
1,854

 
2,065

 
3,647

 
4,271

ATM and debit card income
 
2,044

 
1,877

 
3,969

 
3,661

Credit card income
 
425

 
381

 
946

 
752

Gain on sale of securities, net
 
202

 

 
575

 

Gain on sale of loans, net
 

 

 
1,274

 

Other charges and fees
 
265

 
559

 
652

 
1,027

Total non-interest income
 
4,790

 
4,882

 
11,063

 
9,711

 
 
 
 
 
 
 
 
 
Non-interest expenses:
 
 

 
 

 
 
 
 
Salaries and employee benefits
 
8,940

 
7,916

 
18,638

 
15,635

Occupancy expense
 
2,962

 
3,193

 
6,269

 
6,238

ATM and debit card expense
 
682

 
648

 
1,306

 
1,224

Data processing
 
853

 
666

 
1,701

 
1,331

Regulatory remediation expense
 

 
5,323

 

 
9,249

Merger-related expense
 
1,149

 

 
1,149

 

Legal and professional fees
 
1,163

 
1,100

 
3,046

 
2,789

Loss on transfer of loans to held for sale
 

 
8

 

 
883

Other
 
3,100

 
3,419

 
6,626

 
6,796

Total non-interest expenses
 
18,849

 
22,273

 
38,735

 
44,145

 
 
 
 
 
 
 
 
 
Loss before income tax benefit
 
(2,903
)
 
(906
)
 
(8,733
)
 
(579
)
Income tax benefit
 

 
(237
)
 

 
(271
)
Net loss
 
(2,903
)
 
(669
)
 
(8,733
)
 
(308
)
Dividends on preferred stock
 
810

 
810

 
1,620

 
1,620

Net loss available to common shareholders
 
$
(3,713
)
 
$
(1,479
)
 
$
(10,353
)
 
$
(1,928
)
 
 
 

 
 

 
 
 
 
Basic loss per common share
 
$
(0.22
)
 
$
(0.09
)
 
$
(0.62
)
 
$
(0.12
)
Diluted loss per common share
 
$
(0.22
)
 
$
(0.09
)
 
$
(0.62
)
 
$
(0.12
)
Weighted average number of shares outstanding:
 
 

 
 

 
 
 
 
Basic
 
16,724

 
16,526

 
16,699

 
16,511

Diluted
 
16,724

 
16,529

 
16,699

 
16,514

Dividends declared per common share
 
$
0.01

 
$
0.01

 
$
0.02

 
$
0.02

See notes to unaudited consolidated financial statements.

6


MidSouth Bancorp, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss) (unaudited)
(dollars in thousands)
 
 
 
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2019
 
2018
 
2019
 
2018
Net loss
 
$
(2,903
)
 
$
(669
)
 
$
(8,733
)
 
$
(308
)
Other comprehensive (loss) income, net of tax:
 
 

 
 

 
 

 
 
Unrealized gain (loss) on securities available-for-sale:
 
 
 
 
 
 
 
 
          Unrealized holding gains (losses) arising during the year
 
4,428

 
(873
)
 
10,905

 
(4,922
)
      Less: reclassification adjustment for net gain on sales of securities available- for-sale
 
(202
)
 

 
(575
)
 

Net change in unrealized gains (loss) on securities available-for-sale
 
4,226

 
(873
)
 
10,330

 
(4,922
)
Unrealized (losses) gain on derivative instruments designated as cash flow hedges:
 
 
 
 
 
 
 
 
           Unrealized holding (losses) gains on derivatives arising during the period
 
(423
)
 
89

 
(685
)
 
400

     Net change in unrealized (losses) gain on derivative instruments
 
(423
)
 
89

 
(685
)
 
400

Total other comprehensive income (loss), before tax
 
3,803

 
(784
)
 
9,645

 
(4,522
)
Income tax effect related to items of other comprehensive income (loss)
 

 
165

 

 
950

Total other comprehensive income (loss), net of tax
 
3,803

 
(619
)
 
9,645

 
(3,572
)
Total comprehensive income (loss)
 
$
900

 
$
(1,288
)
 
$
912

 
$
(3,880
)
See notes to unaudited consolidated financial statements.

7


MidSouth Bancorp, Inc. and Subsidiaries
Consolidated Statement of Shareholders’ Equity (unaudited)
(dollars in thousands, except per share amounts)
 
 
Preferred
Stock
 
Common
Stock
 
Additional
Paid-in Capital
 
Accumulated
Other Comprehensive (Loss) Income
 
Retained Earnings
 
 
 
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
Total
Balance - December 31, 2018
 
121,721

 
$
40,972

 
16,641,017

 
$
1,664

 
$
169,111

 
$
(4,035
)
 
$
14,278

 
$
221,990

Net loss
 

 

 

 

 

 

 
(8,733
)
 
(8,733
)
Dividends on Series B and Series C preferred stock
 

 

 

 

 

 

 
(1,620
)
 
(1,620
)
Dividends on common stock, $0.02 per share
 

 

 

 

 

 

 
(333
)
 
(333
)
Restricted stock grant
 

 

 
97,602

 
7

 
(7
)
 

 

 

Restricted stock forfeitures
 

 

 
(5,050
)
 

 

 

 

 

Stock option and restricted stock compensation expense
 

 

 

 

 
43

 

 

 
43

Change in accumulated other comprehensive income
 

 

 

 

 

 
9,645

 

 
9,645

Balance – June 30, 2019
 
121,721

 
$
40,972

 
16,733,569

 
$
1,671

 
$
169,147

 
$
5,610

 
$
3,592

 
$
220,992

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance - March 31, 2019
 
121,721

 
$
40,972

 
16,715,671

 
$
1,671

 
$
169,244

 
$
1,807

 
$
7,472

 
$
221,166

Net earnings
 

 

 

 

 

 

 
(2,903
)
 
(2,903
)
Dividends on Series B and Series C preferred stock
 

 

 

 

 

 

 
(810
)
 
(810
)
Dividends on common stock, $0.01 per share
 

 

 

 

 

 

 
(167
)
 
(167
)
Restricted stock grant
 

 

 
19,898

 

 

 

 

 

Restricted stock forfeitures
 

 

 
(2,000
)
 

 

 

 

 

Stock option and restricted stock compensation expense
 

 

 

 

 
(97
)
 

 

 
(97
)
Change in accumulated other comprehensive income
 

 

 

 

 

 
3,803

 

 
3,803

Balance – June 30, 2019
 
121,721

 
$
40,972

 
16,733,569

 
$
1,671

 
$
169,147

 
$
5,610

 
$
3,592

 
$
220,992

See notes to unaudited consolidated financial statements.


8



MidSouth Bancorp, Inc. and Subsidiaries
Consolidated Statement of Shareholders’ Equity (unaudited)
(dollars in thousands, except per share amounts)
 
 
Preferred
Stock
 
Common
Stock
 
Additional
Paid-in Capital
 
Unearned
ESOP Shares
 
Accumulated
Other Comprehensive Loss
 
Retained Earnings
 
 
 
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
 
Total
Balance - December 31, 2017
 
121,875

 
$
40,987

 
16,548,829

 
$
1,655

 
$
168,412

 
$
(937
)
 
$
(1,828
)
 
$
45,726

 
$
254,015

Cumulative-effect adjustment due to the adoption of ASU 2016-01
 

 

 

 

 

 

 
31

 
(31
)
 

Net loss
 

 

 

 

 

 

 

 
(308
)
 
(308
)
Dividends on Series B and Series C preferred stock
 

 

 

 

 

 

 

 
(1,621
)
 
(1,621
)
Dividends on common stock, $0.02 per share
 

 

 

 

 

 

 

 
(330
)
 
(330
)
Restricted stock grant
 

 

 
66,335

 
7

 
(7
)
 

 

 

 

Restricted stock forfeitures
 

 

 
(37,775
)
 
(4
)
 
4

 

 

 

 

ESOP shares released for allocation
 

 

 

 

 

 
61

 

 

 
61

Exercise of stock options
 

 

 
42,505

 
4

 
547

 

 

 

 
551

ESOP compensation expense
 

 

 

 

 
20

 

 

 

 
20

Stock option and restricted stock compensation expense
 

 

 

 

 
(113
)
 

 

 

 
(113
)
Change in accumulated other comprehensive income
 

 

 

 

 

 

 
(3,603
)
 

 
(3,603
)
Balance – June 30, 2018
 
121,875

 
$
40,987

 
16,619,894

 
$
1,662

 
$
168,863

 
$
(876
)
 
$
(5,400
)
 
$
43,436

 
$
248,672

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance - March 31, 2018
 
121,875

 
$
40,987

 
16,621,811

 
$
1,662

 
$
168,765

 
$
(906
)
 
$
(4,782
)
 
$
45,111

 
$
250,837

Cumulative-effect adjustment due to the adoption of ASU 2016-01
 

 

 

 

 

 

 
31

 
(31
)
 

Net loss
 

 

 

 

 

 

 

 
(669
)
 
(669
)
Dividends on Series B and Series C preferred stock
 

 

 

 

 

 

 

 
(810
)
 
(810
)
Dividends on common stock, $0.01 per share
 

 

 

 

 

 

 

 
(165
)
 
(165
)
Restricted stock grant
 

 

 
14,057

 
2

 
(2
)
 

 

 

 

Restricted stock forfeitures
 

 

 
(25,400
)
 
(3
)
 
3

 

 

 

 

ESOP shares released for allocation
 

 

 

 

 

 
30

 

 

 
30

Exercise of stock options
 

 

 
9,426

 
1

 
121

 

 

 

 
122

ESOP compensation expense
 

 

 

 

 
10

 

 

 

 
10

Stock option and restricted stock compensation expense
 

 

 

 

 
(34
)
 

 

 

 
(34
)
Change in accumulated other comprehensive income
 

 

 

 

 

 

 
(649
)
 

 
(649
)
Balance – June 30, 2018
 
121,875

 
$
40,987

 
16,619,894

 
$
1,662

 
$
168,863

 
$
(876
)
 
$
(5,400
)
 
$
43,436

 
$
248,672

See notes to unaudited consolidated financial statements.


9


MidSouth Bancorp, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (unaudited)
(dollars in thousands)
 
 
For the Six Months Ended June 30,
 
 
2019
 
2018
Cash flows from operating activities:
 
 
 
 
Net loss
 
$
(8,733
)
 
$
(308
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 

 
 
Depreciation
 
3,772

 
4,165

Provision for loan losses
 
12,359

 
440

Deferred tax expense
 

 
8

ESOP and stock-based compensation expense
 
43

 
(44
)
Net gain on sale of investment securities
 
(575
)
 

Gain on sale of loans held for sale
 
(1,274
)
 

Proceeds from sale of loans held for sale
 
20,656

 
15,623

Net loss on sale of other real estate owned
 
37

 
1

Net write down of other real estate owned
 
116

 
146

Loss on transfer of loans to held for sale
 

 
883

Net loss on sale/disposal of premises and equipment
 
191

 
67

Change in other assets
 
(6,735
)
 
(2,523
)
Change in other liabilities
 
7,152

 
4,402

Net cash provided by operating activities
 
27,009

 
22,860

 
 
 
 
 
Cash flows from investing activities:
 
 

 
 

Proceeds from maturities and calls of securities available-for-sale
 
32,759

 
24,297

Proceeds from maturities and calls of securities held-to-maturity
 
4,504

 
12,875

Proceeds from sale of securities available-for-sale
 
56,286

 
410

Purchases of securities available-for-sale
 
(67,114
)
 
(32,532
)
Purchases of other investments
 
(1,647
)
 
(703
)
Net change in loans
 
12,278

 
121,129

Purchases of premises and equipment
 
(1,303
)
 
(693
)
Proceeds from sale of premises and equipment
 
181

 
481

Proceeds from sale of other real estate owned
 
527

 
504

Net cash provided by investing activities
 
36,471

 
125,768

 
 
 
 
 
Cash flows from financing activities:
 
 

 
 

Change in deposits
 
(28,682
)
 
43,331

Change in securities sold under agreements to repurchase
 
(5,764
)
 
(52,247
)
Borrowings from FHLB
 
110,000

 
165,000

Repayments to FHLB
 
(110,000
)
 
(177,500
)
Proceeds from exercise of stock options
 

 
551

Payment of dividends on preferred stock
 
(1,620
)
 
(1,621
)
Payment of dividends on common stock
 
(333
)
 
(330
)
Net cash used by financing activities
 
(36,399
)
 
(22,816
)
 
 
 
 
 
Net increase in cash and cash equivalents
 
27,081

 
125,812

Cash and cash equivalents, beginning of period
 
205,371

 
152,964

Cash and cash equivalents, end of period
 
$
232,452

 
$
278,776

 
 
 
 
 
Supplemental cash flow information:
 
 

 
 

Interest paid
 
$
4,065

 
$
3,482

Noncash investing and financing activities:
 
 

 
 

Transfer of loans to held for sale
 
5,810

 
221

 See notes to unaudited consolidated financial statements.

10


MidSouth Bancorp, Inc. and Subsidiaries
Notes to Interim Consolidated Financial Statements


June 30, 2019
(Unaudited)


11


NOTE 1: BASIS OF PRESENTATION

Overview

MidSouth Bancorp (the "Company" or "we") is a bank holding company whose business is primarily conducted through its wholly-owned banking subsidiary, MidSouth Bank (the "Bank"). We operate a full-service banking business and offer a broad range of commercial and retail banking products to our customers.

The accompanying unaudited consolidated financial statements for the Company have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information. Accordingly, the financial statements do not include all of the information and footnotes required by GAAP for complete financial statement presentation. The interim consolidated financial statements included herein are unaudited, but reflect all adjustments, consisting of normal and recurring items, which, in the opinion of management, are necessary for fair presentation of the consolidated financial position and result of operations for the interim period presented. All significant intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the three and six-month period ended June 30, 2019 are not necessarily indicative of the results expected for the full year. These financial statements should be read in conjunction with the financial statements and notes thereto and the report of our independent registered public accounting firm included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

Certain amounts have been reclassified to conform with current period presentation. The reclassifications had no effect on net loss or shareholders' equity as previously reported.

Proposed Merger with Hancock Whitney Corporation

On April 30, 2019, the Company entered into a definitive agreement ("Merger Agreement") with Hancock Whitney Corporation ("Hancock Whitney"), whereby MidSouth will merge into Hancock Whitney in a stock-for-stock transaction. The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, the Company will merge with and into Hancock Whitney, with Hancock Whitney continuing as the surviving corporation. Immediately following the completion of the merger, the Bank will merge with and into Hancock Whitney Corporation's wholly-owned bank subsidiary, Hancock Whitney Bank, with Hancock Whitney Bank continuing as the surviving bank. Subject to the terms and conditions of the Merger Agreement, if the merger is completed, Company shareholders will receive 0.2952 shares of Hancock Whitney Corporation common stock, par value $3.33 per share, for each share of Company common stock, par value $0.10 per share, they hold immediately prior to the merger, plus cash in lieu of fractional shares.

 


12


NOTE 2: RECENT ACCOUNTING PRONOUNCEMENTS AND ADOPTION OF NEW ACCOUNTING STANDARDS

Accounting Standards Adopted in 2019
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842). This guidance was further modified in July 2018 by ASU No. 2018-10, Codification Improvements to Topic 842 Leases and ASU No. 2018-11, Leases (Topic 842): Targeted Improvements. These updates require a lessee to recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election not to recognize lease assets and lease liabilities. For public entities, these updates are effective for fiscal years beginning after December 15, 2018, with the option to transition with a modified retrospective application to prior periods presented or to apply the guidance as of the adoption date without restating prior periods. The Company adopted the standard on January 1, 2019 without restating prior periods, and recorded a $8.7 million right of use asset and corresponding lease liability as a result of including leases on the consolidated balance sheet. The adopted guidance did not have an effect on Company's consolidated statement of operations or statement of shareholders' equity.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This guidance was further modified in November 2018 by ASU No. 2018–19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses. The new guidance replaces the incurred loss impairment methodology in current GAAP with an expected credit loss methodology and requires consideration of a broader range of information to determine credit loss estimates. Financial assets measured at amortized cost will be presented at the net amount expected to be collected by using an allowance for credit losses. Purchased credit impaired loans will receive an allowance account at the acquisition date that represents a component of the purchase price allocation. Credit losses relating to available-for-sale debt securities will be recorded through an allowance for credit losses, with such allowance limited to the amount by which fair value is below amortized cost. Application of this update will primarily be on a modified retrospective approach, although the guidance for debt securities for which an other-than-temporary impairment has been recognized before the effective date and for loans previously covered by ASC 310-30, Receivables - Loans and Debt Securities Acquired with Deteriorated Credit Quality will be applied on a prospective basis. For public entities, this update is effective for fiscal years beginning after December 15, 2019. Upon adoption, the Company expects that the allowance for credit losses will be higher given the change to estimated losses for the estimated life of the financial asset, however management is still in the process of determining the potential magnitude of the increase. Management has formed a steering committee and has completed a gap assessment that became the basis for a full project plan. In addition, management has selected a vendor model and begun the implementation phase of the project plan. The Company is implementing a new software program to ensure it is prepared for implementation by the effective date. At the FASB's July 17, 2019, public meeting, the FASB tentatively decided to delay the effective dates for Small Reporting Companies as defined by the Securities and Exchange Commission. This decision is subject to public comment and a final determination. As such, the Company expects that it could be eligible to delay implementation until January 2023.

In June 2018, the FASB issued ASU No. 2018-08, Not for Profit Entities (Topic 958): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made. This update clarifies the guidance about whether a transfer of assets (or the reduction, settlement or cancellation of liabilities) is a contribution or an exchange transaction. In addition, the guidance clarifies the determination of whether a transaction is conditional. For public entities, this update is effective for contributions made in fiscal years beginning after December 15, 2018. The Company does not expect the new guidance to have a material impact on the consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The update removes disclosures that are no longer considered cost beneficial, modifies certain requirements of disclosures, and adds disclosure requirements identified as relevant. For public entities, this guidance is effective for fiscal years ending after December 15, 2019 and, depending on the provision, requires either prospective or retrospective application to prior periods presented. The Company does not expect the new guidance to have a material impact on the consolidated financial statements.

In October 2018, the FASB issued ASU No. 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes. This update permits the OIS rate, based on SOFR, as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815. The Company does not expect the new guidance to have a material impact on the consolidated financial statements.




13


NOTE 3: INVESTMENT SECURITIES
 
The amortized cost and fair value of available-for-sale investment securities are as follows (in thousands):
 
 
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Value
June 30, 2019
 
 
 
 
 
 
 
 
U.S. Agencies
 
$
2,867

 
$
175

 
$

 
$
3,042

State, county, and municipal securities
 
12,233

 
500

 

 
12,733

Mortgage-backed securities
 
395,814

 
4,965

 
700

 
400,079

Corporate debt securities
 
10,568

 
202

 
986

 
9,784

 
 
$
421,482

 
$
5,842

 
$
1,686

 
$
425,638

 
 
 
 
 
 
 
 
 
December 31, 2018
 
 
 
 
 
 
 
 
U.S. Agencies
 
$
3,016

 
$
56

 
$

 
$
3,072

State, county, and municipal securities
 
44,639

 
214

 
765

 
44,088

Mortgage-backed securities
 
370,706

 
1,092

 
5,921

 
365,877

  Corporate debt securities
 
25,567

 
433

 
1,283

 
24,717

 
 
$
443,928

 
$
1,795

 
$
7,969

 
$
437,754


The amortized cost and fair value of held-to-maturity investment securities are as follows (in thousands):
 
 
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Value
June 30, 2019
 
 
 
 
 
 
 
 
State, county, and municipal securities
 
$
1,659

 
$
4

 
$
1

 
$
1,662

Mortgage-backed securities
 
31,560

 
281

 
140

 
31,701

 
 
$
33,219

 
$
285

 
$
141

 
$
33,363

 
 
 
 
 
 
 
 
 
December 31, 2018
 
 
 
 
 
 
 
 
State, county, and municipal securities
 
$
1,977

 
$
1

 
$
10

 
$
1,968

Mortgage-backed securities
 
35,782

 

 
776

 
$
35,006

 
 
$
37,759

 
$
1

 
$
786

 
$
36,974





















14


The amortized cost and fair value of available-for-sale and held-to-maturity securities by contractual maturity are shown below (in thousands):  
 
 
Amortized
Cost
 
Fair
Value
June 30, 2019
 
 
 
 
Due after one year through five years
 
$
3,300

 
$
2,333

Due after five years through ten years
 
13,236

 
13,622

Due after ten years
 
9,132

 
9,604

Mortgage-backed securities¹
 
395,814

 
400,079

 
 
$
421,482

 
$
425,638

 
 
 
 
 
Held-to-maturity:
 
 
 
 
Due in one year or less
 
$
766

 
$
767

Due after one year through five years
 
893

 
895

Mortgage-backed securities¹
 
31,560

 
31,701

 
 
$
33,219

 
$
33,363

¹Actual maturities may differ from contractual maturities as borrowers may prepay obligations without prepayment penalties.

The following summarizes the fair value of securities available-for-sale in an unrealized loss position as of the dates indicated (in thousands):
 
 
 
Less than 12 Months
 
12 Months or More
 
Total
 
 
Fair
Value
 
Unrealized
 Loss
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
June 30, 2019
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt securities
 
$
604

 
$
986

 
$

 
$

 
$
604

 
$
986

Mortgage-backed securities
 

 

 
101,623

 
700

 
101,623

 
700

 
 
$
604

 
$
986

 
$
101,623

 
$
700

 
$
102,227

 
$
1,686

December 31, 2018
 


 


 


 


 


 


State, county, and municipal securities
 
$
2,573

 
$
11

 
$
19,539

 
$
754

 
$
22,112

 
$
765

Mortgage-backed securities
 
25,706

 
34

 
197,036

 
5,887

 
222,742

 
5,921

Corporate debt securities
 
3,307

 
1,283

 

 

 
3,307

 
1,283

 
 
$
31,586

 
$
1,328

 
$
216,575

 
$
6,641

 
$
248,161

 
$
7,969












15


The following summarizes the fair value of securities held-to-maturity in an unrealized loss position as of the dates indicated (in thousands):
 
 
Less than 12 Months
 
12 Months or More
 
Total
 
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized Loss
 
Fair
Value
 
Unrealized
Loss
June 30, 2019
 
 
 
 
 
 
 
 
 
 
 
 
State, county, and municipal securities
 
$

 
$

 
$
470

 
$
1

 
$
470

 
$
1

Mortgage-backed securities
 

 

 
10,093

 
140

 
10,093

 
140

 
 
$

 
$

 
$
10,563

 
$
141

 
$
10,563

 
$
141

 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2018