Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - MIDSOUTH BANCORP INC | mslq206302017er-8kex991.htm |
| 8-K - MIDSOUTH BANCORP FORM 8-K - MIDSOUTH BANCORP INC | form8-kxjuly252017.htm |
2Q17 Update
2Q17 Financial Update
Completed $55 million capital raise June 8, 2017
Overallotment exercised July, 2017 of $5.8 million bringing total to $61 million
Quarterly loss of $6.2 million, $0.51 per diluted share
Materially consistent with estimates made in June, 2017 offering
Loan loss provision of $12.5 million, or $0.66 per share
Restructuring charges of $2.4 million (pre-tax), or $0.13 per share after-
tax
Severance and retention - $1.3 million
Branch write-downs $1.0 million
Estimated 3Q17 additional write-downs for branches $1.0 million
Dramatically stronger capital levels post quarterly loss
After capital raise and quarterly loss, Tangible Common Equity/Tangible Assets
increased from 6.8% to 9.2%
Cash at Holding Company of $58 million at June 30, 2017
2
2Q17 Financial Update (cont’d)
Other key operating metrics
Loans declined $31.7 million
Payoff/paydown of $29.3 million of classified relationships
Continued paydown of energy portfolio
Charge-offs of $9.6 million of loans rated as classified at March 31,
2017.
3Q 2017 QTD growth of $19.4 million
Core Deposits remain stable at 90% of deposit mix with low
funding cost of 0.34%
Core Net Interest Margin of 4.09% vs. 4.11% for 1Q17
Core Noninterest Expense of $17.2 million – no change from 1Q17
2Q17 Pre-Tax, Pre-Provision earnings, operating $6.2 million vs.
$5.9 million for 1Q17
3
2Q17 Developments
Completed management transition and reorganization
Completed 3rd party review of loan portfolio
Announced realignment of branch network
Closing of 7 branches and sale of 2 branches
Commenced discussions with regulators regarding repayment of SBLF
Entered into Written Agreement with OCC on July 19, 2017
No new or unanticipated provisions - agreement is consistent with
disclosures made during capital raise
Asset Quality, Risk Management, Strategic Planning, ALLL
No lending or funding restrictions
Implementation of provisions over next 90 days with assistance of
regulatory advisory firm
4
2Q17 Asset Quality Summary
Loan loss reserve/loans 1.99% at 6/30/17
2Q17 Loan Loss Provision of $12.5 million
Total net charge-offs for quarter $12.4 million
Includes $9.4 million of charge-offs on four collateral dependent loans
on non-accrual
Charge-offs on collateral dependent loans – more aggressive approach
consistent with regulatory guidance
Non-performing assets $56.4 million at 6/30/17 vs. $58.9 million at
3/31/17
Classified/Capital (Bank Level) was 72.0% vs. 73.0% at 3/31/17
Energy loans decreased $23.0 million to 16.8% of loans, down from
18.2% at 3/31/17
5
2Q17 Asset Quality (cont’d)
Reconciliation of provision expense, net charge-offs and reserves for 2Q17 versus estimates
in capital raise
6
Actual Original
2Q17 Estimate (1) Difference Explanation
1. Loan Loss Provision
Normal Course Provision (2) 3,788 3,800 (12)
Additional Impairments (3) 5,746 5,200 546 Final impairments based on review of new info
and adjustments to collateral values
Change in Qualitative Factors 2,966 3,000 (34) Charge-offs on collateral dependent loans of
approx $9.4 million increased hist. loss factors
beyond original estimate & decrease in average
Total Loan Loss Provision 12,500 12,000 500 price of oil from 1Q
2. Net Charge-Offs 12,404 3,800 8,604 Charge-offs on collateral dependent loans ($9.4 million)
net of lower than expected June NCO's of $0.8 million
3. Loan Loss Reserve 24,674 32,800 (8,126) Primarily due to charge-offs on collateral dependent loans
% of loans 1.99% 2.60% -0.61%
Notes:
(1) Per Free Writing Prospectus dated 6/8/17 in connection with common equity offering - all estimated amounts based on high end of range
(2) Normal Course Provision represents high estimate of expected loan loss provision absent consideration
of loan loss estimate from loan review and anticipated changes in qualitative factors
(3) Original Estimate for Impairments was based on results of 3rd party loan review (High estimate of $5.2 million).
2Q17 Energy Highlights
Energy outstandings down $23 million in 2Q, or 9.9%, to $209 million
16.8% of loans, down from 18.2% at 3/31/17
Direct C&I – 82% of balances, Indirect – 18% (CRE and RRE)
C&I Wtd Average Maturity – 3.1 years
Reserves on C&I energy loans 6.4%; Other energy related 1.0%
Energy reserve stands at 5.4% of energy loans at 6/30/17
Three energy-related C/Os during quarter totaling $6.0 million
Five new energy-related impairments totaling $2.3 million were
identified during 2Q and two impairment charges of $256,000 were
recorded related to an existing impaired loan identified prior to 2Q17
Cycle to date NCO’s - $10.0 million or 3.76% of 12/31/14 energy
loans
7
2Q17 Energy Highlights (cont’d)
Total criticized energy loans 44.7% of total energy loans
vs. 48.1% at 3/31/17
Total criticized down $18.0 million to $93.5 million (down 16.1%)
Seven energy-related rating changes during quarter
2 relationships downgraded to Special Mention (SM) - $1.4 million
4 relationships downgraded to Substandard (SS) - $5.7 Million
1 relationship totaling $195,000 was upgraded to Pass
2 Shared National Credits – $12.9 million or 6.1% of energy loans
Unfunded Commitments – Only 22% of outstanding balances
$46.1 million at 6/30/17 - Utilization rate of 53.4% vs. 56.7% at 3/31/17
A/R – 77% of commitments, Equipment 10%, CRE 8%
A/R customers have lockbox agreements and/or at minimum provide
monthly borrowing base certificates
Houston non-owner occupied CRE - $29.5 million, 2.3% of total loans
8
Energy Portfolio as of 6/30/2017 (*)
*Includes loans where the borrower's ability to repay could be disproportionately impacted by prolonged low oil and gas prices
($’s in Millions)
9
Collateral
Total $’s
(Millions)
% of Energy
Portfolio
# of
Loans
# of
Relationships
Avg $ per
Relationship
Wt'd Avg
Maturity (Yrs)
Accounts Receivables $ 43.4 20.8 % 63 59 $ 0.7 0.2
Barges, Crew Boats, Marine Vessels 51.2 24.5 % 27 20 2.6 5.5
Equipment 69.5 33.3 % 167 83 0.8 3.3
Inventory 2.1 1.0 % 6 6 0.4 1.7
CD/Mkt. Securities 2.3 1.1 % 14 12 0.2 1.2
All Other 3.0 1.4 % 75 66 0.0 0.0
Sub Total C & I $ 171.5 82.1 % 352 246 $ 0.7 3.1
Commercial Real Estate 33.7 16.1 % 66 53 0.6 12.5
Consumer Real Estate 3.3 1.6 % 41 36 0.1 10.7
Other 0.3 0.2 % 20 20 0.0 0.0
Sub Total Non C & I $ 37.3 17.9 % 127 109 $ 0.3 12.3
Total $208.8 100.0 % 479 355 $ 0.6 4.7
Past Due Energy Loans as of 6/30/2017 (*)
*Includes loans where the borrower's ability to repay could be disproportionately impacted by prolonged low oil and gas prices
> 30 days + nonaccruals =
13.56% of energy loans
($’s in Millions)
10
Collateral
Total $’s
(Millions)
% of
Energy
Portfolio
Total Past
Due $’s
(Millions)
% of
Energy
Portfolio
0-29
30-59
60-89
90+
Non-
Accruals
Accounts Receivables $ 43.4 20.8 % $ 5.47 2.6 % $ 4.03 - - - $ 1.44
Barges, Crew Boats, Marine Vessels 51.2 24.5 % 12.07 5.8 % 0.26 - - - 11.80
Equipment 69.5 33.3 % 12.64 6.1 % 0.47 1.00 - - 11.17
Commercial Real Estate 33.7 16.1 % 2.60 1.2 % 0.90 - - - 1.70
Consumer Real Estate 3.3 1.6 % 0.23 0.1 % 0.04 - - - 0.19
Inventory 2.1 1.0 % 0.99 0.5 % - - - - 0.99
CD/Mkt. Securities 2.3 1.1 % 0.51 0.2 % 0.51 - - - -
All Other 3.3 1.6 % 0.23 0.1 % 0.23 - - - 0.01
Total $ 208.8 100.0 % $ 34.74 16.6 % $ 6.44 $ 1.00 $ - $ - $ 27.31
Accruing – Past Due ($ Millions)
Energy Loans by Risk Rating & Loan Type as of 6/30/2017 (*)
($’s in Millions)
*Includes loans where the borrower's ability to repay could be disproportionately impacted by prolonged low oil and gas prices
11
Risk Rating
Rating
# C & I
R/E
Comm
Consumer
Real
Estate
CD/Mkt.
Securities Other
2Q17
Total
2Q17 %
of Energy
Portfolio
1Q17
Total
1Q17 %
of
Energy
Portfolio
Prime 1 - - - $ 0.7 - $ 0.7 0.4 % $ 1.2 0.5%
Excellent 2 0.0 0.1 - 1.0 - 1.1 0.5 % 0.9 0.4%
Above Average 3 26.9 1.9 0.1 - 0.0 28.9 13.8 % 33.1 14.3%
Satisfactory 4 60.9 19.3 2.4 0.5 1.4 84.6 40.5 % 85.0 36.7%
Total Pass Rated $ 87.9 $ 21.3 $ 2.4 $ 2.3 $ 1.4 $ 115.3 55.2 % $ 120.2 51.9%
Other Assets
Special Mention 5 2.7 - 0.6 - - 3.3 1.6 % 6.3 2.7%
Substandard 6 78.6 11.2 0.4 - 0.0 90.2 43.2 % 105.2 45.4%
Doubtful 7 0.0 - - - - 0.0 0.0 % 0.0 0.0%
Total $ 169.2 $ 32.4 $ 3.5 $ 2.3 $ 1.4 $ 208.8 100.0 % $ 231.8 100.0%
Energy Loans by Risk Rating & Collateral as of 6/30/2017 (*)
($’s in Millions)
*Includes loans where the borrower's ability to repay could be disproportionately impacted by prolonged low oil and gas prices
12
Collateral
Pass
Other Assets
Special
Mention
Substandard
Doubtful
2Q17
Total
2Q17 % of
Energy
Portfolio
1Q17
Total
1Q17 % of
Energy
Portfolio
Accounts Receivables $ 18.8 $ 1.1 $ 23.5 - $ 43.4 20.8% $ 51.7 22.3%
Barges, Crew Boats, Marine Vessels 21.6 - 29.6 - 51.2 24.5 % 61.1 26.3%
Equipment 44.3 0.8 24.4 - 69.5 33.3 % 73.0 31.5%
Commercial Real Estate 22.5 - 11.2 - 33.7 16.1 % 34.9 15.1%
Real Estate 2.3 0.6 0.4 - 3.3 1.6 % 3.4 1.5%
Inventory 0.4 0.8 1.0 - 2.1 1.0 % 2.0 0.9%
CD Secured 2.3 - - - 2.3 1.1 % 2.2 0.9%
All Other 3.2 0.0 0.0 0.0 3.3 1.6 % 3.5 1.5%
Total $ 115.3 $ 3.3 $ 90.2 $ 0.0 $ 208.8 100.0 % $ 231.8 100.0%
Energy Loans by Type of Facility as of 6/30/2017 (*)
* Includes loans where the borrower's ability to repay could be disproportionately impacted by prolonged low oil and gas prices
13
Facility Type
Bal 06.30.17
($'s in Millions)
% of
Energy
Portfolio
Bal 03.31.17
($'s in Millions)
% of
Energy
Portfolio
Net Change
2Q17
Closed-End LOC $ 146.1 70.0 % $ 158.5 68.4 % - $12.4
Revolving LOC 57.1 27.3 % 68.2 29.4 % - 11.1
Other 5.7 2.7 % 5.1 2.2 % 0.5
Total $ 208.8 100.0 % $ 231.8 100.0 % - $ 23.0
Energy Loans Unfunded Commitment as of 6/30/2017 (*)
* Includes loans where the borrower's ability to repay could be disproportionately impacted by prolonged low oil and gas prices
Combined utilization rate (including straight lines of credit) was 53.4% compared to
56.7% at 03/31/2017.
Revolving Lines of Credit ($’s in Millions)
14
Collateral
Original Line
Amount
Current
Balance
Unfunded
Amount
Accounts Receivables $ 77.6 $ 42.3 $ 35.3
Barges, Crew Boats, Marine Vessels 0.3 0.3 -
Equipment 16.4 11.6 4.8
Commercial Real Estate 4.4 0.5 3.9
Real Estate 0.4 0.4 0.0
Inventory 0.8 0.8 -
CD Secured 1.8 0.7 1.1
All Other 1.5 0.6 0.9
Total $ 103.2 $ 57.1 $ 46.1
Reconciliation of Non-GAAP Measures
15
6/30/2017 3/31/2017
Tangible Common Equity to Tangible Assets
Total equity 261,570$ 216,062$
Less preferred equity 41,092 41,110
Total common equity 220,478$ 174,952$
Less intangible assets 46,239 46,516
Tangible common equity A 174,239$ 128,436$
Total assets 1,945,569$ 1,934,939$
Less intangible assets 46,239 46,516
Tangible assets B 1,899,330$ 1,888,423$
Tangible common equity to tangible assets A/B 9.2% 6.8%
Core Net Interest Margin
Net interest income (FTE) 18,442$ 18,279$
Less purchase accounting adjustments (380) (274)
Net interest income, net of purchase accounting adjustments C 18,062$ 18,005$
Total average earnings assets 1,768,862$ 1,773,647$
Add average balance of loan valuation discount 1,720 1,964
Average earnings assets, excluding loan valuation discount D 1,770,582$ 1,775,611$
Core net interest margin C/D 4.09% 4.11%
Core Noninterest expense
Total noninterest expense 19,604$ 17,230$
Severance and retention accruals (1,341) -
One-time charge related to discontinued branch projects (465) -
Write-down of assets held for sale (570) -
Total core noninterest expense 17,228$ 17,230$
Pre-tax, Pre-provision Earnings, Operating
Earnings (loss) before income taxes (8,635)$ 3,080$
Severance and retention accruals 1,341 -
One-time charge related to discontinued branch projects 465 -
Write-down of assets held for sale 570 -
Net gain on sale of securities (3) (6)
Provision for loan losses 12,500 2,800
Pre-tax, pre-provision earnings, operating 6,238$ 5,874$
For the Quarter Ended