10-Q

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 March 31, 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

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 May 8, 2019, there were 16,717,021 shares of the registrant’s Common Stock, par value $0.10 per share, outstanding.

Part I – Financial Information		3
	Item 1. Financial Statements	3
	Consolidated Balance Sheets	4
	Consolidated Statements of Operations (unaudited)	5
	Consolidated Statements of Comprehensive Income (Loss) (unaudited)	6
	Consolidated Statement of Shareholders’ Equity (unaudited)	7
	Consolidated Statements of Cash Flows (unaudited)	8
	Notes to Interim Consolidated Financial Statements	9
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation.	29
	Forward-Looking Statements	29
	Critical Accounting Policies	30
	Results of Operations	31
	Balance Sheet Review	35
	Liquidity and Capital	35
	Asset Quality	37
	Non-GAAP Financial Measures	39
	Item 3. Quantitative and Qualitative Disclosures About Market Risk.	40
	Item 4. Controls and Procedures.	41
Part II – Other Information		43
	Item 1. Legal Proceedings.	43
	Item 1A. Risk Factors.	43
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	44
	Item 3. Defaults Upon Senior Securities.	44
	Item 4. Mine Safety Disclosures.	44
	Item 5. Other Information.	44
	Item 6. Exhibits.	44

Part I – Financial Information

Item 1. Financial Statements.

3

MidSouth Bancorp, Inc. and Subsidiaries Consolidated Balance Sheets (dollars in thousands, except share and per share amounts)
	March 31, 2019			December 31, 2018
	(unaudited)			(audited)
Assets
Cash and due from banks	$	28,257		$	27,701
Interest-bearing deposits in banks	212,973			174,909
Federal funds sold	2,200			2,761
Securities available-for-sale, at fair value (cost $434,749 and $443,928)	434,679			437,754
Securities held-to-maturity, (fair value $34,834 and $36,974)	35,107			37,759
Total securities	469,786			475,513
Other investments	17,083			16,614
Loans held for sale	1,511			23,876
Loans	893,650			899,785
Allowance for loan losses	(24,779		)	(17,430		)
Loans, net	868,871			882,355
Bank premises and equipment, net	55,097			55,382
Operating lease right-of-use assets	8,263			—
Goodwill and Intangibles	44,303			44,580
Cash surrender value of life insurance	15,188			15,135
Other real estate	664			1,067
Other assets	21,139			23,505
Total Assets	1,745,335			1,743,398
Liabilities:
Deposits:
Noninterest-bearing	$	418,321		$	383,167
Interest-bearing	1,027,314			1,068,904
Total deposits	1,445,635			1,452,071
Securities sold under agreements to repurchase	11,968			11,220
Operating lease liability	8,203			—
Short-term Federal Home Loan Bank advances	27,500			27,500
Junior subordinated debentures	22,167			22,167
Other liabilities	8,696			8,450
Total liabilities	1,524,169			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, no 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, 16,715,671 and 16,641,017 shares issued and outstanding, respectively	1,671			1,664
Additional paid-in capital	169,244			169,111
Accumulated other comprehensive income (loss)	1,807			(4,035		)
Retained earnings	7,472			14,278
Total shareholders’ equity	221,166			221,990
Total liabilities and shareholders’ equity	$	1,745,335		$	1,743,398

See notes to unaudited consolidated financial statements.

4

MidSouth Bancorp, Inc. and Subsidiaries Consolidated Statements of Operations (unaudited) (dollars in thousands, except per share amounts)
	Three Months Ended March 31,
	2019			2018
Interest income:
Loans, including fees	$	12,987		$	16,015
Securities and other investments:
Taxable	3,071			2,047
Nontaxable	255			316
Interest bearing deposits in other banks	1,132			619
Total interest income	17,445			18,997
Interest expense:
Deposits	1,680			1,238
Securities sold under agreements to repurchase	14			40
Federal Home Loan Bank advances	81			129
Junior subordinated debentures	287			220
Total interest expense	2,062			1,627
Net interest income	15,383			17,370
Provision for loan losses	7,600			—
Net interest income after provision for loan losses	7,783			17,370
Non-interest income:
Service charges on deposits	1,793			2,206
ATM and debit card income	1,925			1,784
Credit card income	520			371
Gain on sale of securities, net	373			—
Gain on sale of loans, net	1,274			—
Other charges and fees	388			468
Total non-interest income	6,273			4,829
Non-interest expenses:
Salaries and employee benefits	9,700			7,719
Occupancy expense	3,307			3,045
ATM and debit card expense	624			576
Data processing	848			665
Regulatory remediation expense	—			3,926
Legal and professional fees	1,883			1,689
Loss on transfer of loans to held for sale	—			875
Other	3,524			3,378
Total non-interest expenses	19,886			21,873
(Loss) Income before income tax benefit	(5,830		)	326
Income tax benefit	—			(34		)
Net (loss) income	(5,830		)	360
Dividends on preferred stock	810			810
Net loss available to common shareholders	$	(6,640	)	$	(450	)
Basic loss per common share	$	(0.40	)	$	(0.03	)
Diluted loss per common share	$	(0.40	)	$	(0.03	)
Weighted average number of shares outstanding:
Basic	16,674			16,495
Diluted	16,674			16,500
Dividends declared per common share	$	0.01		$	0.01

See notes to unaudited consolidated financial statements.

5

MidSouth Bancorp, Inc. and Subsidiaries Consolidated Statements of Comprehensive Income (Loss) (unaudited) (dollars in thousands)
	Three Months Ended March 31,
	2019			2018
Net (loss) income	$	(5,830	)	$	360
Other comprehensive (loss) income, net of tax:
Unrealized gain (loss) on securities available-for-sale:
Unrealized holding gains (losses) arising during the year	6,476			(4,048		)
Less: reclassification adjustment for net gain on sales of securities available-for-sale	(373		)	—
Net change in unrealized gains (loss) on securities available-for-sale	6,103			(4,048		)
Unrealized gain on derivative instruments designated as cash flow hedges:
Unrealized holding gains on derivatives arising during the period	(261		)	309
Net change in unrealized (loss) gain on derivative instruments	(261		)	309
Total other comprehensive income (loss), before tax	5,842			(3,739		)
Income tax effect related to items of other comprehensive income (loss)	—			785
Total other comprehensive income (loss), net of tax	5,842			(2,954		)
Total comprehensive income (loss)	$	12		$	(2,594	)

See notes to unaudited consolidated financial statements.

6

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	—	—		—		—		—			—			(5,830		)	(5,830		)
Dividends on Series B and Series C preferred stock	—	—		—		—		—			—			(810		)	(810		)
Dividends on common stock, $0.01 per share	—	—		—		—		—			—			(166		)	(166		)
Restricted stock grant	—	—		77,704		7		(7		)	—			—			—
Restricted stock forfeitures	—	—		(3,050	)	—		—			—			—			—
Stock compensation expense	—	—		—		—		140			—			—			140
Change in accumulated other comprehensive income	—	—		—		—		—			5,842			—			5,842
Balance – March 31, 2019	121,721	$	40,972	16,715,671		$	1,671	$	169,244		$	1,807		$	7,472		$	221,166

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
Net income	—	—		—		—			—			—			—			360			360
Dividends on Series B and Series C preferred stock	—	—		—		—			—			—			—			(810		)	(810		)
Dividends on common stock, $0.01 per share	—	—		—		—			—			—			—			(165		)	(165		)
Restricted stock grant	—	—		52,278		5			(5		)	—			—			—			—
Restricted stock forfeitures	—	—		(12,375	)	(1		)	1			—			—			—			—
ESOP shares released for allocation	—	—		—		—			—			31			—			—			31
Exercise of stock options	—	—		33,079		3			426			—			—			—			429
ESOP compensation expense	—	—		—		—			10			—			—			—			10
Stock option and restricted stock compensation expense	—	—		—		—			(79		)	—			—			—			(79		)
Change in accumulated other comprehensive income	—	—		—		—			—			—			(2,954		)	—			(2,954		)
Balance – March 31, 2018	121,875	40,987		16,621,811		1,662			168,765			(906		)	(4,782		)	45,111			250,837

7

MidSouth Bancorp, Inc. and Subsidiaries Consolidated Statements of Cash Flows (unaudited) (dollars in thousands)
	For the Three Months Ended March 31,
	2019			2018
Cash flows from operating activities:
Net (loss) income	$	(5,830	)	$	360
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation	1,956			2,072
Provision for loan losses	7,600			—
Deferred tax expense	—			1,614
ESOP and stock-based compensation expense	140			(51		)
Net gain on sale of investment securities	(373		)	—
Gain on sale of loans held for sale	(1,274		)	—
Proceeds from sale of loans held for sale	19,273			14,514
Net loss (gain) on sale of other real estate owned	24			(1		)
Net write down of other real estate owned	27			48
Loss on transfer of loans to held for sale	—			875
Net loss on sale/disposal of premises and equipment	135			55
Change in other assets	(5,940		)	(1,831		)
Change in other liabilities	8,177			2,063
Net cash provided by operating activities	23,915			19,718
Cash flows from investing activities:
Proceeds from maturities and calls of securities available-for-sale	13,374			12,272
Proceeds from maturities and calls of securities held-to-maturity	2,619			7,583
Proceeds from sale of securities available-for-sale	32,352			410
Purchases of securities available-for-sale	(36,763		)	(2,000		)
Purchases of other investments	(469		)	(682		)
Net change in loans	10,250			44,026
Purchases of premises and equipment	(1,186		)	(275		)
Proceeds from sale of premises and equipment	279			224
Proceeds from sale of other real estate owned	352			151
Net cash provided by investing activities	20,808			61,709
Cash flows from financing activities:
Change in deposits	(6,436		)	24,248
Change in securities sold under agreements to repurchase	748			(34,107		)
Borrowings from FHLB	55,000			82,500
Repayments to FHLB	(55,000		)	(95,000		)
Proceeds from exercise of stock options	—			429
Payment of dividends on preferred stock	(810		)	(810		)
Payment of dividends on common stock	(166		)	(165		)
Net cash used by financing activities	(6,664		)	(22,905		)
Net increase in cash and cash equivalents	38,059			58,522
Cash and cash equivalents, beginning of period	205,371			152,964
Cash and cash equivalents, end of period	$	243,430		$	211,486
Supplemental cash flow information:
Interest paid	$	2,073		$	1,654
Noncash investing and financing activities:
Transfer of loans to held for sale	—			221

 See notes to unaudited consolidated financial statements.

8

MidSouth Bancorp, Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements

September 30, 2018

(Unaudited)

9

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-month period ended March 31, 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 income 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.

10

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.

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.

11

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
March 31, 2019
U.S. Agencies	$	2,868	$	109	$	—	$	2,977
State, county, and municipal securities	28,492		352		187		28,657
Mortgage-backed securities	385,321		2,757		2,820		385,258
Corporate debt securities	18,068		280		561		17,787
	$	434,749	$	3,498	$	3,568	$	434,679
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
March 31, 2019
State, county, and municipal securities	$	1,662	$	2	$	5	$	1,659
Mortgage-backed securities	33,445		104		374		33,175
	$	35,107	$	106	$	379	$	34,834
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

12

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
March 31, 2019
Due after one year through five years	$	6,389	$	5,888
Due after five years through ten years	24,097		24,505
Due after ten years	18,942		19,028
Mortgage-backed securities¹	385,321		385,258
	$	434,749	$	434,679
Held-to-maturity:
Due in one year or less	$	451	$	451
Due after one year through five years	1,211		1,208
Mortgage-backed securities¹	33,445		33,175
	$	35,107	$	34,834

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
March 31, 2019
State, county, and municipal securities	$	—	$	—	$	11,647	$	187	$	11,647	$	187
Mortgage-backed securities	—		—		169,319		2,820		169,319		2,820
Corporate debt securities	2,029		561		—		—		2,029		561
	$	2,029	$	561	$	180,966	$	3,007	$	182,995	$	3,568
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

13

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
March 31, 2019
State, county, and municipal securities	$	—	$	—	$	819	$	5	$	819	$	5
Mortgage-backed securities	—		—		18,778		374		18,778		374
	$	—	$	—	$	19,597	$	379	$	19,597	$	379
December 31, 2018
State, county, and municipal securities	$	—	$	—	$	1,703	$	10	$	1,703	$	10
Mortgage-backed securities	—		—		35,006		776		35,006		776
	$	—	$	—	$	36,709	$	786	$	36,709	$	786

At March 31, 2019, the Company had 66 securities in an unrealized loss position. Management evaluates whether unrealized losses on securities represent impairment that is other than temporary on a quarterly basis. For debt securities, the Company considers its intent to sell or hold the securities and if it is more likely than not the Company will be required to sell the securities.  If such impairment is identified, based upon the intent to sell or the more likely than not threshold, the carrying amount of the security is reduced to fair value with a charge to earnings. Upon the result of the aforementioned review, management then reviews for potential other than temporary impairment based upon other qualitative factors.  In making this evaluation, management considers changes in market rates relative to those available when the security was acquired, changes in market expectations about the timing of cash flows from securities that can be prepaid, performance of the debt security, and changes in the market’s perception of the issuer’s financial health and the security’s credit quality. If determined that a debt security has incurred other than temporary impairment, then the amount of the credit related impairment is determined.  For equity securities, management reviews the near term prospects of the issuer, the nature and cause of the unrealized loss, the severity and duration of the impairments and other factors when determining if an unrealized loss is other than temporary. If a credit loss is evident, the amount of the credit loss is charged to earnings and the non-credit related impairment is recognized through other comprehensive income. At March 31, 2019, there was no intent to sell any of the securities in an unrealized loss position, and it is more likely than not the Company will not be required to sell these securities. Furthermore, the present value of cash flows expected to be collected exceeded the Company's amortized cost basis of the investment securities; therefore, these securities are not deemed to be other than temporarily impaired.

Proceeds from sales of available-for-sale securities as of March 31, 2019 and 2018 were $32.4 million and $410,000, respectively. Gross gains and losses on sales of available-for-sale securities for the three months ended March 31, 2019 were $375,000 and $2,000, respectively. There were not any gains or losses recognized on the sales of available-for-sale securities for the three months ended March 31, 2018.

The composition of investment securities reflects the strategy of management to maintain an appropriate level of liquidity while providing a relatively stable source of revenue. The securities portfolio may at times be used to mitigate interest rate risk associated with other areas of the balance sheet while also providing a means for the investment of available funds, providing liquidity and supplying investment securities that are required to be pledged as collateral against specific deposits and for other purposes. Securities with an aggregate carrying value of $110.9 million at March 31, 2019 and $162.5 million at December 31, 2018 were pledged to secure public funds on deposit and for other purposes required or permitted by law.

14

NOTE 4: LOANS

The loan portfolio consisted of the following (in thousands):

	March 31, 2019			December 31, 2018
Commercial, financial and agricultural	$	255,410		$	267,340
Real estate – construction	89,723			87,506
Real estate – commercial	376,523			368,449
Real estate – residential	130,700			132,435
Consumer and other	40,784			43,506
Lease financing receivable	510			549
Total loans	893,650			899,785
Allowance for loan and lease losses	(24,779		)	(17,430		)
Total loans, net	$	868,871		$	882,355

The Company monitors loan concentrations and evaluates individual customer and aggregate industry leverage, profitability, risk rating distributions, and liquidity for each major standard industry classification segment.  At March 31, 2019, one industry segment concentration, the oil and gas industry, constituted more than 10% of the loan portfolio.  The Company’s exposure in the oil and gas industry, including related service and manufacturing industries, totaled approximately $106.8 million, or 12.0% of total loans, with $3.7 million in nonaccrual oil and gas loans. 

Allowance for Loan Losses

The allowance for loan losses is a valuation account available to absorb probable losses on loans. All losses are charged to the allowance for loan losses when the loss actually occurs or when a determination is made that a loss is likely to occur. Recoveries are credited to the allowance for loan losses at the time of recovery.  Quarterly, the probable level of losses in the existing portfolio is estimated through consideration of various quantitative and qualitative factors. As such, some of the factors considered in determining provisions include estimated losses relative to specific credits; known deterioration in concentrations of credit; historical loss experience; trends in nonperforming assets; volume, maturity and composition of the loan portfolio; off–balance sheet credit risk; lending policies and control systems; national and local economic conditions; the experience, ability and depth of lending management; and the results of examinations of the loan portfolio by regulatory agencies and others. Based on these estimates, the allowance for loan losses is increased by charges to earnings and decreased by charge‑offs (net of recoveries).

The allowance is composed of general reserves and specific reserves.  General reserves are determined by applying loss percentages to segments of the portfolio.  The loss percentages are based on each segment’s historical loss experience, generally over the past three to five years, and adjustment factors derived from conditions in the Company’s internal and external environment.  All loans considered to be impaired are evaluated on an individual basis to determine specific reserve allocations in accordance with GAAP.  Loans for which specific reserves are provided are excluded from the calculation of general reserves.

The Company has an internal loan review department that is independent of the lending function to challenge and corroborate the loan grade assigned by the lender and to provide additional analysis in determining the adequacy of the allowance for loan losses. Additionally, the Company utilizes the services of a third party to supplement its loan review efforts.

15

A rollforward of the activity within the allowance for loan losses by loan type and recorded investment in loans as of and for the three months ended March 31, 2019 and 2018 is as follows (in thousands):

	March 31, 2019
	Commercial, Financial & Agricultural			Real Estate - Construction		Real Estate- Commercial			Real Estate - Residential			Consumer and other			Lease financing receivable			Total
Allowance for loan losses:
Beginning balance	$	10,633		$	140	$	4,913		$	1,156		$	585		$	3		$	17,430
Charge-offs	(293		)	—					—			(91		)	—			(384		)
Recoveries	82			—		25			1			25			—			133
Provision	8,431			271		(560		)	(504		)	(35		)	(3		)	7,600
Ending balance	$	18,853		$	411	$	4,378		$	653		$	484		$	—		$	24,779
Ending balance: individually evaluated for impairment	$	8,040		$	—	$	75		$	—		$	—		$	—		$	8,115
Ending balance: collectively evaluated for impairment	$	10,813		$	411	$	4,303		$	653		$	484		$	—		$	16,664
Loans:
Ending balance	$	255,410		$	89,723	$	376,523		$	130,700		$	40,784		$	510		$	893,650
Ending balance: individually evaluated for impairment	$	16,938		$	323	$	4,412		$	—		$	—		$	—		$	21,673
Ending balance: collectively evaluated for impairment	$	238,472		$	89,400	$	372,111		$	130,700		$	40,784		$	510		$	871,977

	March 31, 2018
	Commercial, Financial & Agricultural			Real Estate - Construction			Real Estate- Commercial			Real Estate - Residential			Consumer and other			Lease financing receivable		Total
Allowance for loan losses:
Beginning balance	$	20,577		$	596		$	3,918		$	837		$	957		$	3	$	26,888
Charge-offs	(1,524		)	(2		)	(86		)	(3		)	(221		)	—		(1,836		)
Recoveries	276			—			6			1			36			—		319
Provision	(264		)	159			(105		)	64			146			—		—
Ending balance	$	19,065		$	753		$	3,733		$	899		$	918		$	3	$	25,371
Ending balance: individually evaluated for impairment	$	5,968		$	94		$	76		$	20		$	6		$	—	$	6,164
Ending balance: collectively evaluated for impairment	$	13,097		$	659		$	3,657		$	879		$	912		$	3	$	19,207
Loans:
Ending balance	$	401,048		$	94,679		$	444,277		$	145,671		$	50,888		$	692	$	1,137,255
Ending balance: individually evaluated for impairment	$	55,092		$	192		$	26,005		$	2,088		$	50		$	—	$	83,427
Ending balance: collectively evaluated for impairment	$	345,956		$	94,487		$	418,272		$	143,583		$	50,838		$	692	$	1,053,828

16

Non-Accrual and Past Due Loans

Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due.  Loans are placed on non-accrual status when, in management’s opinion, the probability of collection of interest is deemed insufficient to warrant further accrual.  For loans placed on non-accrual status, the accrual of interest is discontinued and subsequent payments received are applied to the principal balance.  Interest income is recorded after principal has been satisfied and as payments are received.  Non-accrual loans may be returned to accrual status if all principal and interest amounts contractually owed are reasonably assured of repayment within a reasonable period and there is a period of at least six months to one year of repayment performance by the borrower depending on the contractual payment terms.

An age analysis of past due loans (including both accruing and non-accruing loans) is as follows (in thousands):

	March 31, 2019
	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current		Total Loans		Loans >90 Days Past Due and Still Accruing
Commercial, financial and agricultural	$	1,658	$	62	$	3,630	$	5,350	$	250,060	$	255,410	$	—
Real estate – construction	4,332		128		117		4,577		85,146		89,723		—
Real estate – commercial	984		—		1,394		2,378		374,145		376,523		—
Real estate – residential	213		427		1,194		1,834		128,866		130,700		—
Consumer and other	85		27		29		141		40,643		40,784		—
Lease financing receivable	—		—		—		—		510		510		—
	$	7,272	$	644	$	6,364	$	14,280	$	879,370	$	893,650	$	—
	December 31, 2018
	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current		Total Loans		Loans >90 Days Past Due and Still Accruing
Commercial, financial and agricultural	$	385	$	902	$	2,173	$	3,460	$	263,880	$	267,340	$	—
Real estate – construction	47		—		117		164		87,342		87,506		—
Real estate – commercial	435		—		771		1,206		367,243		368,449		—
Real estate – residential	695		31		1,407		2,133		130,302		132,435		—
Consumer and other	176		28		56		260		43,246		43,506		—
Lease financing receivable	—		—		—		—		549		549		—
	$	1,738	$	961	$	4,524	$	7,223	$	892,562	$	899,785	$	—

17

Non-accrual loans are as follows (in thousands):

	March 31, 2019		December 31, 2018
Commercial, financial, and agricultural	$	16,629	$	3,599
Real estate - construction	351		278
Real estate - commercial	4,462		2,977
Real estate - residential	1,720		2,008
Consumer and other	29		58
	$	23,191	$	8,920

Impaired Loans

Loans are considered impaired when, based upon current information, it is probable the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. All loans classified as special mention, substandard, or doubtful, based on credit risk rating factors, are reviewed to determine whether impairment testing is appropriate.  All loan relationships with an outstanding commitment balance above a specified threshold are evaluated for potential impairment. All loan relationships with an outstanding commitment balance below the specified threshold are assigned an allowance allocation percentage that is determined by management and adjusted periodically based on certain factors. An allowance for each impaired loan is calculated based on the present value of expected future cash flows discounted at the loan’s effective interest rate or at the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent.  All impaired loans are reviewed, at a minimum, on a quarterly basis.  Existing valuations are reviewed to determine if additional discounts or new appraisals are required.  After this review, when comparing the resulting collateral valuation to the outstanding loan balance, if the discounted collateral value exceeds the loan balance, no specific allocation is reserved. 

The following table presents loans that are individually evaluated for impairment (in thousands). Interest income recognized represents interest on accruing loans modified in a troubled debt restructuring (TDR).

	March 31, 2019						December 31, 2018
	Recorded Investment(1)		Unpaid Principal Balance		Related Allowance (1)		Recorded Investment (1)		Unpaid Principal Balance		Related Allowance (1)
With no related allowance recorded:
Commercial, financial, and agricultural	$	3,299	$	4,988	$	—	$	2,924	$	3,011	$	—
Real estate - construction	323		323		—		117		117		—
Real estate - commercial	4,281		5,439		—		3,395		3,395		—
Real estate - residential	—		—		—		—				—
Consumer and other	—		—		—		—		—		—
Subtotal:	7,903		10,750		—		6,436		6,523		—
With an allowance recorded:
Commercial, financial, and agricultural	13,639		13,781		8,040		1,025		1,025		470
Real estate - construction	—		—		—		131		131		4
Real estate - commercial	131		131		75		—		—		—
Real estate - residential	—		—		—		—		—		—
Consumer and other	—		—		—		—		—		—
Subtotal:	13,770		13,912		8,115		1,156		1,156		474
Total impaired loans	21,673		24,662		8,115		7,592		7,679		474

⁽¹⁾Troubled debt restructuring totaling $2.8 million and $1.3 million are included in the recorded investment of impaired loans as of March 31, 2019 and December 31, 2018.

18

The average balances of impaired loans and income recognized on impaired loans while they were considered impaired are presented below for the periods indicated (in thousands). 

	March 31, 2019		March 31, 2018
	Average Recorded Investment	Interest Income Recognized During Impairment	Average Recorded Investment	Interest Income Recognized During Impairment
Commercial, financial, and agricultural	17,430	12	46,935	18
Real estate - construction	336	—	129	—
Real estate - commercial	6,729	—	18,567	—
Real estate - residential	—	—	1,353	—
Consumer and other	—	—	—	—
Total	24,495	12	66,984	18

Credit Quality

The Company manages credit risk by observing written underwriting standards and the lending policy established by the Board of Directors and management to govern all lending activities.  The risk management program requires that each individual loan officer review his or her portfolio on a quarterly basis and assign recommended credit ratings on each loan.  These efforts are supplemented by independent reviews performed by a loan review officer and other validations performed by the internal audit department.  The results of the reviews are reported directly to the Credit Risk Committee of the Board of Directors.

Loans are categorized into risk categories based on relevant information about the ability of borrowers to serve their debt, such as: current financial information, historical payment experience, credit documentation, public information, current economic trends, and other factors. Loans are analyzed individually and classified according to their credit risk. This analysis is performed on a continuous basis. The following definitions are used for risk ratings:

Special Mention: Weakness exists that could cause future impairment, including the deterioration of financial ratios, past due status, and questionable management capabilities. Collateral values generally afford adequate coverage but may not be immediately marketable.

Substandard: Specific and well-defined weaknesses exist that may include poor liquidity and deterioration of financial ratios. Currently the borrower maintains the capacity to service the debt. The loan may be past due and related deposit accounts experiencing overdrafts. Immediate corrective action is necessary.

Doubtful: Specific weaknesses characterized as Substandard exist that are severe enough to make collection in full unlikely. There is no reliable secondary source of full repayment. Loans classified as Doubtful will usually be placed on non-accrual status. The probability of some loss is extremely high but because of certain important and reasonably specific factors, the amount of loss cannot be determined.

Loans not meeting the criteria above that are analyzed individually as part of the above-described process are considered to be Pass rated loans.

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The following tables present the classes of loans by risk rating (in thousands):

			Special
	Pass		Mention		Substandard		Doubtful		Total
March 31, 2019
Commercial, financial and agricultural	$	224,476	$	10,871	$	20,063	$	—	$	255,410
Real estate – construction	84,869		4,428		426		—		89,723
Real estate – commercial	338,994		19,156		18,373		—		376,523
Real estate – residential	124,742		1,911		4,047		—		130,700
Consumer and other	40,725		1		58		—		40,784
Lease financing receivable	510		—		—		—		510
Total loans	$	814,316	$	36,367	$	42,967	$	—	$	893,650
December 31, 2018
Commercial, financial and agricultural	$	240,232	$	20,259	$	6,849	$	—	$	267,340
Real estate – construction	83,240		3,910		356		—		87,506
Real estate – commercial	329,213		23,475		15,761		—		368,449
Real estate – residential	125,984		1,955		4,496		—		132,435
Consumer and other	43,416		5		85		—		43,506
Lease financing receivable	549		—		—		—		549
Total loans	$	822,634	$	49,604	$	27,547	$	—	$	899,785

Troubled Debt Restructurings

A TDR is a restructuring of a debt made by the Company to a debtor for economic or legal reasons related to the debtor’s financial difficulties that it would not otherwise consider. The Company grants the concession in an attempt to protect as much of its investment as possible.

The following tables present information about TDRs that were modified during the periods presented by portfolio segment (in thousands):

	Three months ended
	March 31, 2019			March 31, 2018
	Number of loans	Pre-modification recorded investment		Number of loans	Pre-modification recorded investment
Commercial, financial and agricultural (1)	3	$	1,983	—	$	—

⁽¹⁾ The pre-modification and post-modification recorded investment amount represent the recorded investment on the date of the loan modification. Since the modification of these loans were payment modifications, not principal reductions, the pre-modification and post-modification recorded investment amount is the same.

During the three months ended ending March 31, 2019 and 2018, TDRs that had a payment default during the twelve-month periods and that were modified within the previous 12 months was $713,000 and $0, respectively. The Company defines a payment default as any loan that is greater than 30 days past due or was past due greater than 30 days at any point during the reporting period, or since the date of modification, whichever is shorter.

A troubled debt restructuring by definition is an impaired loan, as such all TDRs that meet the dollar threshold are reviewed for specific impairment in accordance with the Company’s allowance for loan loss methodology.  If it is determined an impairment exists, either because of a delinquency or other credit related issues, a specific reserve is recorded for the loan. There are no specific reserves on TDRs as of March 31, 2019 and 2018.

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NOTE 5: DERIVATIVES

Derivatives Designated as Hedging Instruments

Cash Flow Hedges

The Company uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps, designated as cash flow hedges, involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed payments over the life of the agreements without the exchange of the underlying notional amount. Forward starting interest rate swaps with a notional amount totaling $12.5 million and $15.0 million were entered into on July 6, 2016 and were designated as cash flow hedges of certain repurchase agreements and FHLB advances. The swaps mature in August 2021 and December 2021, respectively. The swaps operate under a pay fixed of .993% and 1.043%, respectively, and receive variable each at LIBOR flat. The swaps were determined to be fully effective during the periods presented and therefore no ineffectiveness has been included in net income. The aggregate fair value of the swaps is recorded in other assets/other liabilities with changes in fair value recorded in other comprehensive income (loss). The amount included in other comprehensive income (loss) would be reclassified to current earnings if the hedge transactions become probable of not occurring. The Company expects the hedges to remain fully effective during the remaining terms of the swaps. At March 31, 2019 and December 31, 2018, the fair value of the swap recorded in other assets totaled $805,000 and $1.1 million, respectively. Interest expense recorded on the swap transaction totaled $2,000 and $0 for the three months endedMarch 31, 2019 and 2018, respectively and is reported as a component of interest expense.

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NOTE 6: LEASES

As of January 1, 2019, the Company adopted ASU 2016-02 (Topic 842) on a prospective basis using the effective date method. The adoption of the new standard did not have a material impact on MidSouth's financial statements; however, additional disclosures have been added in accordance with the ASU. See Note 2 for additional information on this new accounting standard.

We have operating leases for branches and corporate offices. Our leases have remaining lease terms from 1 to 40 years, some of which have options to extend the leases up to 5 years, and some which include options to terminate the leases within 1 year. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight -line basis over the lease term. We rent or sublease certain real estate to third parties.

The following is a summary of net lease cost and other selected information related to operating leases (cost, in thousands):

	Three Months Ended March 31, 2019
Net lease cost:
Operating lease cost	$	466
Variable lease cost	(43		)
Sub lease income	(44		)
Net lease cost	$	379
Weighted average remaining lease term (years)	14
Weighted average discount rate	3.4		%

Maturities of leases payments, undiscounted cash flow, lease liability were as follows (in thousands):

	Lease Payments		Undiscounted Cash Flow		Lease Liability
2019	$	1,817	$	250	$	1,567
2020	1,820		196		1,624
2021	1,060		149		911
2022	518		132		386
2023	351		122		229
Thereafter	5,160		1,674		3,486
	$	10,726	$	2,523	$	8,203

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NOTE 7: OTHER COMPREHENSIVE LOSS

The following is a summary of the tax effects allocated to each component of other comprehensive income (loss) (in thousands):

	Three Months Ended March 31,
	2019								2018
	Before Tax Amount			Tax Effect		Net of Tax Amount			Before Tax Amount			Tax Effect			Net of Tax Amount
Other comprehensive income (loss):
Securities available-for-sale:
Change in unrealized gains/losses during period	6,476			$	—	$	6,476		$	(4,048	)	$	850		$	(3,198	)
Reclassification adjustment for gains included in net income	(373		)	—		(373		)	—			—			—
Derivative instruments designated as cash flow hedges:
Change in fair value of derivative instruments designated as cash flow hedges	(261		)	—		(261		)	309			(65		)	244
Total other comprehensive income (loss)	$	5,842		$	—	$	5,842		$	(3,739	)	$	785		$	(2,954	)

The reclassifications out of accumulated other comprehensive loss into net income are presented below (in thousands):

	Three months ended March 31,
	2019			2018
Details about Accumulated Other Comprehensive Income (Loss) Components	Reclassifications Out of Accumulated Other Comprehensive Income (Loss)			Reclassifications Out of Accumulated Other Comprehensive Income (Loss)			Income Statement  Line Item
Unrealized gains and losses on securities available-for-sale:
	$	373		$	—		Gain on sale of securities, net
	—			—			Tax expense
	$	373		$	—		Net of tax
Gains on derivative instruments:
	$	(262	)	$	(40	)	Interest expense
	—			8			Tax expense
	$	(262	)	$	(32	)	Net of tax

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NOTE 8: LOSS PER COMMON SHARE

The following table is a summary of computation of loss per common share based on the weighted average number of common shares outstanding (dollars in thousands, except per share amounts):

	Three Months Ended March 31,
	2019			2018
Net (loss) income	$	(5,830	)	$	360
Dividends on preferred stock	810			810
Adjusted net loss available to common shareholders	$	(6,640	)	$	(450	)
Weighted average number of common shares outstanding used in computation of basic loss per common share	16,674			16,495
Effect of dilutive securities:
Stock options	—			5
Weighted average number of common shares outstanding plus effect of dilutive securities – used in computation of diluted loss per share	16,674			16,500
Net loss per common share:
Basic	$	(0.40	)	$	(0.03	)
Diluted	$	(0.40	)	$	(0.03	)

The Company has reported a net loss for the three months ended March 31, 2019. As such, during those periods all potential common shares were excluded from the calculation of diluted earnings per share as they would have an anti-dilutive effect for the respective period.

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NOTE 9: FAIR VALUE MEASUREMENT

The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures.  Securities available-for-sale and derivative financial instruments are recorded at fair value on a recurring basis.  From time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as impaired loans, loans held-for-sale, other real estate and assets held-for-sale.  Additionally, the Company is required to disclose, but not record, the fair value of other financial instruments.

Fair Value Hierarchy

The Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.  These levels are:

Level 1 – Valuation is based upon quoted prices for identical instruments traded in active markets. 

Level 2 – Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. 

Level 3 – Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market.  These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability.  Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques. 

Following is a description of valuation methodologies used for assets and liabilities which are either recorded or disclosed at fair value.

Cash and cash equivalents—The carrying value of cash and due from banks, federal funds sold and interest-bearing deposits in other banks, and time deposits in other banks approximate fair value.

Debt Securities—Securities available-for-sale are recorded at fair value on a recurring basis.  Fair value measurement is based upon quoted prices, if available.  If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions.  Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange and Treasury securities that are traded by dealers or brokers in active over-the-counter market and money market funds.  Level 2 securities include mortgage-backed securities issued by government sponsored entities, municipal bonds, corporate debt securities and asset-backed securities and are valued based on observable inputs that include: quoted market prices for similar assets, quoted market prices that are not in an active market, or other inputs that are observable in the market and can be corroborated by observable market data for substantially the full term of the securities. Securities classified as Level 3 include asset-backed securities in less liquid markets. Securities classified as Level 3 are valued based on estimates obtained from broker-dealers and are not directly observable.

Loans held-for-sale—Loans held-for-sale are carried at the lower of carrying value or fair value. Fair value is based upon quotes or bids on these loans directly from the purchaser.

Loans—For disclosure purposes, the fair value of fixed rate loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made. For variable rate loans, the carrying amount is a reasonable estimate of fair value. The Company does not record loans at fair value on a recurring basis.

The fair value of impaired loans is estimated based on discounted contractual cash flows or underlying collateral values, where applicable. A loan is determined to be impaired if the Company believes it is probable that all principal and interest amounts due according to the terms of the note will not be collected as scheduled. The fair value of impaired loans is determined in accordance with ASC 310-10, Accounting by Creditors for Impairment of a Loan, and generally results in a specific reserve established through a charge to the provision for loan losses. Losses on impaired loans are charged to the allowance when management believes the uncollectability of a loan is confirmed. Management has determined that the majority of impaired loans are Level 3 assets due to the extensive use of market appraisals

Cash Surrender Value of Life Insurance Policies—Fair value for life insurance cash surrender value is based on cash surrender values indicated by the insurance companies.

Other Real Estate—Other real estate properties are adjusted to fair value upon transfer of the loans to other real estate, and annually thereafter to insure other real estate assets are carried at the lower of carrying value or fair value. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral.  When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the other real estate as nonrecurring Level 2.  When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and adjusts the appraisal value by taking an additional discount for market conditions and there is no observable market prices, the Company records the other real estate asset as nonrecurring Level 3.

25

Derivative Instruments—The fair value of derivatives are determined by an independent valuation firm and are estimated using prices of financial instruments with similar characteristics. As a result, they are classified within Level 2 of the fair value hierarchy.

Deposits—The fair value of demand deposits, savings accounts, NOW accounts, and money market deposits is the carrying amount at the reporting date. The fair value of fixed maturity certificates of deposit is estimated by discounting the future cash flows using the rates currently offered for deposits of similar remaining maturities. The estimated fair value does not include customer related intangibles.

Securities Sold Under Agreements to Repurchase—The fair value approximates the carrying value of repurchase agreements due to their short-term nature.

Federal Home Loan Bank Advances—The fair value approximates carrying amount because of the short maturity of these instruments.

Junior Subordinated Debentures—For junior subordinated debentures that bear interest on a floating basis, the fair value approximates carrying amount. For junior subordinated debentures that bear interest on a fixed rate basis, the fair value is estimated using a discounted cash flow analysis that applies interest rates currently being offered on similar types of borrowings.

Off-Balance-Sheet Instruments—Because commitments to extend credit and standby letters of credit are generally short-term and made using variable rates, the carrying value and estimated fair value associated with these instruments are immaterial for disclosure.

The following table presents the fair value measurements of certain assets and liabilities measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall (in thousands):

	Recurring Basis Fair Value Measurements
	March 31, 2019
	Fair Value		Level 1		Level 2		Level 3
Financial assets:
U.S. Government agencies	$	2,977	$	—	$	2,977	$	—
State, county, and municipal securities	28,657		$	—	$	28,657	—
Mortgage-backed securities	385,258		—		385,258		—
Corporate debt securities	17,787		—		17,787		—
Derivative assets	805		—		$	805	—
Total recurring assets at fair value	$	435,484	$	—	$	435,484	$	—
	Recurring Basis Fair Value Measurements
	December 31, 2018
	Fair Value		Level 1		Level 2		Level 3
Financial assets:
U.S. Government agencies	$	3,072	$	—	$	3,072	$	—
State, county, and municipal securities	44,088		$	—	$	44,088	$	—
Mortgage-backed securities	365,877		—		365,877		—
Corporate debt securities	24,717		—		24,717		—
Derivative assets	1,067		$	—	$	1,067	$	—
Total recurring assets at fair value	$	438,821	$	—	$	438,821	$	—

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The following table presents the fair value measurements of certain assets and liabilities measured at fair value on a non-recurring basis and the level within the fair value hierarchy in which the fair value measurements fall (dollars in thousands):

	Nonrecurring Basis Fair Value Measurements
	March 31, 2019
	Fair Value		Level 1		Level 2		Level 3
Financial assets:
Impaired loans	$	3,179	$	—	$	—	$	3,179
Loans held for sale	1,511		—		1,511		—
Other real estate	664		—		—		664
Assets held for sale	1,024		—		1,024		—
Total nonrecurring assets at fair value	$	6,378	$	—	$	2,535	$	3,843
	Nonrecurring Basis Fair Value Measurements
	December 31, 2018
	Fair Value		Level 1		Level 2		Level 3
Financial assets:
Impaired loans	$	3,086	$	—	$	—	$	3,086
Loans held for sale	23,876		—		23,876		—
Other real estate	1,067		—		—		1,067
Assets held for sale	1,024		—		1,024		—
Total nonrecurring assets at fair value	$	29,053	$	—	$	24,900	$	4,153

The inputs used to determine estimated fair value of impaired loans include market conditions, loan terms, underlying collateral characteristics and discount rates. The inputs used to determine fair value of OREO include market conditions, estimated marketing period or holding period, underlying collateral characteristics and discount rates.

For the three months endedMarch 31, 2019 and the year ended December 31, 2018, there was not a change in the methods and significant assumptions used to estimate fair value for assets carried at fair value.

The following table shows significant unobservable inputs used in the fair value measurement of Level 3 assets (dollars in thousands):

	Fair Value at
Description	March 31, 2019		Technique	Unobservable Inputs
Impaired loans	$	3,179	Third party appraisals	Collateral discounts and estimated costs to sell
Other real estate	664		Third party appraisals	Collateral discounts and estimated costs to sell
	Fair Value at
Description	December 31, 2018		Technique	Unobservable Inputs
Impaired loans	$	3,086	Third party appraisals	Collateral discounts and estimated costs to sell
Other real estate	1,067		Third party appraisals	Collateral discounts and estimated costs to sell

Limitations

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument.  These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument.  Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on many judgments.  These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision.  Changes in assumptions could significantly affect the estimates. Fair value estimates are based on existing on and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments

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The carrying amounts and estimated fair values of the Company’s financial instruments are as follows at March 31, 2019 and December 31, 2018 (dollars in thousands):

	Fair Value Measurements
	March 31, 2019
	Carrying Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	243,430	$	243,430	$	—	$	—
Securities available-for-sale	434,679		—		434,679		—
Securities held-to-maturity	35,107		—		34,834		—
Loans, net	868,871		—		—		869,568
Derivative assets	805		—		805		—
Cash surrender value of life insurance	15,188		—		15,188		—
Financial liabilities:
Non-interest-bearing deposits	$	418,321	$	—	$	418,321	$	—
Interest-bearing deposits	1,027,314		—		847,109		178,554
Securities sold under agreements to repurchase	11,968		11,968		—		—
FHLB borrowings	27,500		—		27,500		—
Other borrowings	22,167		—		22,167		—
	December 31, 2018
	Carrying Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	205,371	$	205,371	$	—	$	—
Available-for-sale securities	437,754		—		437,754		—
Securities held-to-maturity	37,759		—		36,974		—
Loans, net	882,355		—		—		885,054
Derivative assets	1,067		—		1,067		—
Cash surrender value of life insurance	15,135		—		15,135		—
Financial liabilities:
Non-interest-bearing deposits	383,167		—		383,167		—
Interest-bearing deposits	1,068,904		—		888,806		177,794
Securities sold under agreements to repurchase	11,220		11,220		—		—
FHLB borrowings	27,500		—		27,500		—
Other borrowings	22,167		—		22,167		—

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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operation.

MidSouth Bancorp, Inc. (the “Company”) is a bank holding company headquartered in Lafayette, Louisiana that conducts substantially all of its business through its wholly owned subsidiary bank, MidSouth Bank, N.A. (the “Bank”).  We offer complete banking services to commercial and retail customers in Louisiana and south and central Texas with 42 locations and are connected to a worldwide ATM network that provides customers with access to more than 55,000 surcharge-free ATMs.  We are community oriented and focus primarily on offering commercial and consumer loan and deposit services to individuals, small businesses, and middle market businesses.

The following discussion and analysis identifies significant factors that have affected our financial position and operating results during the periods included in the financial statements accompanying this report.  We encourage you to read this discussion in conjunction with our consolidated financial statements and the notes thereto presented herein and with the financial statements, the notes thereto, and related Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

Cautionary Statement regarding Forward-Looking Statements

Certain statements included in this report are "forward-looking statements" within the meaning of, and subject to the protections of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions and future performance and involve known and unknown risks, uncertainties and other factors, many of which may be beyond our control and which may cause the actual results, performance or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements.

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.  Some of the factors that may cause actual results, developments and business decisions to differ materially from those contemplated by such forward-looking statements include the factors discussed under the caption “Risk Factors” in this Report and in our 2018 Annual Report on form 10-K and under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Report and the following:

• 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 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 loanand leases 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;

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• 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;

• that required regulatory, shareholder or other approvals for the Company’s pending merger with Hancock Whitney Corporation are not obtained or the conditions to the parties’ obligations to complete the merger are not satisfied in a timely manner or at all;

• mergers and acquisitions, including the degree of success in integrating operations following the Company’s pending merger with Hancock Whitney Corporation and merger integration risk in connection with the Company’s pending merger with Hancock Whitney Corporation such as potential deposit attrition, higher than expected costs, customer loss and business disruption associated with the integration with Hancock Whitney Corporation, including, without limitation, potential difficulties in maintaining relationships with key personnel and other integration-related matters;

• 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

• the ability to manage the risks involved in the foregoing

We can give no assurance that any of the events anticipated by the forward-looking statements will occur or, if any of them do, what impact they will have on our results of operations and financial condition.  We disclaim any intent or obligation to publicly update or revise any forward-looking statements, regardless of whether new information becomes available, future developments occur or otherwise.

Critical Accounting Policies

There have been no significant changes to our critical accounting policies from those disclosed in our 2018 Annual Report on Form 10-K. The reader should refer to the notes to our consolidated financial statements in our 2018 Annual Report on Form 10-K for a full disclosure of all critical accounting policies.

The Company adopted ASU No. 2016-02 Leases (Topic 842). This ASU revised certain aspects of recognition, measurement, presentation and disclosure of leasing transactions.

Pending Merger with Hancock Whitney Corporation

On April 30, 2019, the Company and Hancock Whitney Corporation (“Hancock Whitney”) announced that they had entered into an Agreement and Plan of Merger (the “Merger Agreement”), providing for, among other things, the acquisition of the Company by Hancock Whitney (the “Merger”). Under the terms of the Merger Agreement, each share of the Company’s common stock will convert to the right to receive 0.2952 shares of Hancock Whitney common stock, $3.33 par value per share, plus cash in lieu of fractional shares. Immediately following the completion of the merger, the Bank will merge with and into Hancock Whitney’s wholly-owned bank subsidiary, Hancock Whitney Bank, with Hancock Whitney Bank continuing as the surviving bank.

The Merger is subject to the satisfaction of customary closing conditions, including regulatory approvals and approval by the Company’s shareholders. For more information on the pending Merger, please refer to the Company’s Current Report on Form 8-K filed with the SEC on May 2, 2019. The Merger Agreement was included as Exhibit 2.1 to the Form 8-K filed on May 2, 2019 and is incorporated by reference herein.

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Results of Operations

For the Three Months Ended March 31,2019 and 2018

Net loss available to common shareholders totaled $6.6 million, or $0.40 per share, for the three months endedMarch 31, 2019, compared to net loss available to common shareholders of $450,000, or $0.03 per share, for the three months endedMarch 31, 2018. Provision for loan loss totaled $7.6 million and $0 for the three months endedMarch 31, 2019 and 2018, respectively. The loan loss provisions increased substantially during 2019 primarliy due to a $6.6 million impairment charge for a shared national healthcare credit.

Fully taxable-equivalent ("FTE") net interest income was $15.5 million for the first quarter of 2019, a $2.0 million decrease compared to $17.5 million for the first quarter of 2018. Our annualized net interest margin, on a FTE basis, decreased 22 basis points in prior year quarterly comparison, from 4.12% for the first quarter of 2018 to 3.89% for the first quarter of 2019. Net interest income decreased $2.0 million in quarterly comparison, resulting from a $1.6 million decrease in interest income and a $435,000 increase in interest expense.

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 to March 31, 2018 to $7.6 million the three months ended March 31, 2019.

Dividends on preferred stock totaled $810,000 for the three months endedMarch 31, 2019 and 2018, respectively. Dividends on the Series B Preferred Stock were $720,000 for the three months endedMarch 31, 2019 and 2018, respectively. Dividends on the Series C Preferred Stock issued with the December 28, 2012 acquisition of PSB Financial Corporation (“PSB”) totaled $90,000 for the three months endedMarch 31, 2019 and 2018, respectively.

Net Interest Income

Our primary source of earnings is net interest income, which is the difference between interest earned on loans and investments and interest paid on deposits and other interest-bearing liabilities.  Changes in the volume and mix of earning assets and interest-bearing liabilities combined with changes in market rates of interest greatly affect net interest income.  Our net interest margin on a taxable equivalent basis, which is net interest income as a percentage of average earning assets, was 3.89% and 4.12% for the three months ended March 31, 2019 and 2018, respectively.   The tables below analyze the changes in net interest income in the three months ended March 31, 2019 and 2018.

FTE net interest income decreased $2.0 million in prior year quarterly comparison. Interest income on loans decreased $3.0 million due to a decrease in the average balance of loans of $255.4 million in prior year quarterly comparison. The average yield on loans increased 14 basis points in prior year quarterly comparison, from 5.60% to 5.74%.

FTE interest income on investments increased $947,000 in prior year quarterly comparison. The average volume of investment securities increased $90.0 million during the three months ended March 31, 2019 compared to same period in 2018 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.

Interest expense increased $435,000 in quarterly comparison. The increase in interest is primarily a result of a $442,000 increase in interest expense on deposits and a $67,000 increase in interest expense on Trust Preferred Securities ("TruPs"), 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 to 3.89% as of March 31, 2019 compared to the same period in 2018.

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The following table shows the relationship between interest revenue and expense and the average balances of interest-earning assets are interest-bearing liabilities as of the dates indicated (in thousands):

Average Balances, Net Interest Income and Yields/Rates
	Three Months Ended March 31,
	2019						2018
	Average Balance		Income/Expense		Yield/Rate		Average Balance		Income/Expense		Yield/Rate
Assets
Investment securities (1)
Taxable	$	436,549	$	3,071	2.81	%	$	334,419	$	2,047	2.45	%
Tax exempt (2)	38,424		323		3.36	%	50,550		400		3.17	%
Total investment securities	474,973		3,394		2.86	%	384,969		2,447		2.54	%
Federal funds sold	5,493		32		2.33	%	4,978		18		1.45	%
Time and interest bearing deposits in other banks	185,418		1,004		2.17	%	132,940		514		1.55	%
Other investments	16,936		95		2.24	%	12,721		87		2.74	%
Total loans(3)	904,293		12,987		5.74	%	1,159,671		16,015		5.60	%
Total earning assets	1,587,113		17,512		4.41	%	1,695,279		19,081		4.56	%
Nonearning assets	155,573						164,791
Total assets	$	1,742,686					$	1,860,070
Liabilities and shareholders’ equity
Total interest bearing deposits	$	1,042,918	$	1,680	0.64	%	$	1,056,417	$	1,238	0.47	%
Securities sold under repurchase agreements	12,069		14		0.46	%	40,115		40		0.40	%
FHLB borrowings	27,500		81		1.18	%	38,741		129		1.33	%
Other borrowings	22,167		287		5.18	%	22,167		220		3.97	%
Total interest bearing liabilities	1,104,654		2,062		0.75	%	1,157,440		1,627		0.57	%
Other liabilities	414,829						447,460
Shareholders’ equity	223,203						255,170
Total liabilities and shareholders’ equity	$	1,742,686					$	1,860,070
Net interest income and net interest spread			$	15,450	3.66	%			$	17,454	3.99	%
Net interest margin					3.89	%					4.12	%

⁽¹⁾ Securities classified as available-for-sale are included in average balances. Interest income figures reflect interest earned on such securities.

⁽²⁾Reflects taxable-equivalent adjustments using the federal statutory rate of 21% as of March 31, 2019 and 2018, respectively, in adjusting interest on tax-exempt securities to a fully taxable basis. The taxable equivalent adjustments included above are $68,000 for 2019 and $84,000 for 2018 for the quarter ended.

⁽³⁾ Interest income includes loan fees of $632,000 for 2019 and $1.0 million for 2018. Nonaccrual loans are included in average balances and income on such loans is recognized on a cash basis

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The following table shows the relative effect on net interest revenue resulting from changes in the average outstanding balances (volume) of interest-earning assets and interest-bearing liabilities and the rates earned and paid by the Company on such assets and liabilities (in thousands).

Rate/Volume Analysis on a Taxable Equivalent Basis
	Three Months Ended March 31, 2019 vs. 2018
	Change Attributable to
	Volume			Rate			Change(1)
Interest Income:
Investment securities	$	590		$	357		$	947
Federal funds sold	1			13			14
Time and interest bearing deposits in other banks	242			248			490
Other investments	86			(78		)	8
Loans, including fees	(5,664		)	2,636			(3,028		)
Total interest income	(4,745		)	3,176			(1,569		)
Interest Expense:
Deposits	(103		)	545			442
Securities sold under repurchase agreements	(63		)	37			(26		)
FHLB advances	(34		)	(14		)	(48		)
Other borrowings	—			67			67
Total interest expense	(200		)	635			435
Net interest income	$	(4,545	)	$	2,541		$	(2,004	)

⁽¹⁾ Amounts shown as increase (decrease) due to changes in either volume or rate includes an allocation of the amount that reflects the interaction of volume and rate changes. This allocation is based on the absolute dollar amounts of change due solely to changes in volume or rate.

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Non-interest Income

Total non-interest income was $6.3 million for the three months endedMarch 31, 2019, compared to $4.8 million for the same period in 2018. The following table presents the components of non-interest income (in thousands):

	Three Months Ended March 31,
	2019		2018
Service charges on deposits	$	1,793	$	2,206
ATM and debit card income	1,925		1,784
Credit card income	520		371
Gain on sale of securities, net	373		—
Gain on sale of loans, net	1,274		—
Other charges and fees	388		468
Total non-interest income	$	6,273	$	4,829

Non-interest income increased $1.4 million in quarterly comparison, from $4.8 million for the three months endedMarch 31, 2018 to $6.3 million for the three months endedMarch 31, 2019. The increase is primarily due to a $1.6 million gain on sale of loans and securities offset by a $413,000 decrease in service charges on deposits. The decline in service charge income during the three months ended March 31, 2019 is primarily a result of consumer behavior but more so due to the influx of tax refunds during this period. Historically, we have experienced a decline in service charge income during the first quarter due to tax season. Furthermore, non-interest bearing deposits have declined year over year which is also contributing to the change in service charge income recognized.

Non-interest Expenses

The following table presents the components of non-interest expense (in thousands).

	Three Months Ended March 31,
	2019		2018
Salaries and employee benefits	9,700		7,719
Occupancy expense	3,307		3,045
ATM and debit card	624		576
Data processing	848		665
Loss on transfer of loans to held for sale	—		875
Legal and professional fees	1,883		1,689
Regulatory remediation expense	—		3,926
Amortization of core deposit intangibles	277		277
FDIC Insurance	231		430
Marketing	319		195
Corporate development	369		237
Other	2,328		2,239
Total non-interest expense	$	19,886	$	21,873

Total non-interest expense was $19.9 million for the three months endedMarch 31, 2019, compared to $21.9 million ended March 31, 2018. Salaries and employee benefits expense increased $2.0 million for the three months endedMarch 31, 2019, respectively, from the same periods in 2018 due to continued investment in compliance staffing versus the same period a year ago.

Occupancy expense increased $262,000 for the three months endedMarch 31, 2019, respectively, from the same period in 2018. The increase is due to the loss of $180,000 on the sale of a previously closed branch, $152,000 for lease termination fees, offset by gains on sale of fixed assets of $135,000.

Regulatory remediation expense decreased $3.9 million for the three months endedMarch 31, 2019, respectively, from the same periods in 2018. The decrease is related to completion of various regulatory remediation projects.

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Balance Sheet Review

At March 31, 2019, we had total assets of approximately $1.7 billion, consisting principally of $868.9 million in net loans, $469.8 million in investment securities, $243.4 million in cash and cash equivalents and $11.2 million in Deferred Tax Assets with a fully offsetting valuation allowance. Our liabilities at March 31, 2019 totaled $1.5 billion, consisting primarily of $1.4 billion in deposits. At March 31, 2019, our shareholders' equity was $221.2 million.

At December 31, 2018, we had total assets of approximately $1.7 billion, consisting principally of $882.4 million in net loans, $475.5 million in investment securities and $205.4 million in cash and cash equivalents and $11.4 million in Deferred Tax Assets with a fully offsetting valuation allowance. Our liabilities at December 31, 2018 totaled $1.52 billion, consisting primarily of $1.45 billion in deposits. At December 31, 2018, our shareholders' equity was $222.0 million.

Investment securities totaled $469.8 million, or 26.9% of total assets at March 31, 2019, versus $475.5 million, or 27.3% of total assets at December 31, 2018. The investment portfolio had an effective duration of 2.60 years and a net unrealized loss of $70,000 at March 31, 2019.

The following table shows the composition of the Company's loan portfolio (in thousands).

Composition of Loans
	March 31, 2019			December 31, 2018
Commercial, financial and agricultural	$	255,410		$	267,340
Real estate – construction	89,723			87,506
Real estate – commercial	376,523			368,449
Real estate – residential	130,700			132,435
Consumer and other	40,784			43,506
Lease financing receivable	510			549
Total loans	893,650			899,785
Allowance for loan and lease losses	(24,779		)	(17,430		)
Total loans, net	$	868,871		$	882,355

Total deposits at March 31, 2019 remained stable at $1.45 billion with only a slight decrease when compared to December 31, 2018. Our stable core deposit base, which excludes time deposits, totaled $1.3 billion or 87.5% and 87.6% of total deposits at both March 31, 2019 and December 31, 2018.

FHLB borrowings remained unchanged at $27.5 million at March 31, 2019 and December 31, 2018. 

Off-Balance Sheet Arrangements

In the normal course of operations, the Company engages in a variety of financial transactions that, in accordance with GAAP, are not recorded in the financial statements.  These transactions involve, to varying degrees, elements of credit, interest rate, and liquidity risk.  Such transactions are used primarily to manage customers’ requests for funding and take the form of loan commitments, letters of credit and lines of credit.  For the period ended March 31, 2019, we did not engage in any off-balance sheet transactions reasonably likely to have a material impact on our financial condition, results of operations, or cash flows.

Liquidity and Capital

Bank Liquidity

Liquidity is the availability of funds to meet maturing contractual obligations and to fund operations.  The Bank’s primary liquidity needs involve its ability to accommodate customers’ demands for deposit withdrawals as well as customers’ requests for credit. Liquidity is deemed adequate when sufficient cash to meet these needs can be promptly raised at a reasonable cost to the Bank.

Liquidity is available through four sources: a stable base of funding sources, an adequate level of assets that can be readily converted into cash, borrowing lines with correspondent banks and brokered deposits. Our core deposits are our most stable and important source

35

of funding.  Cash deposits at other banks, federal funds sold, and principal payments received on loans and mortgage-backed securities provide additional primary sources of liquidity.  Approximately $56.5 million in projected cash flow from securities repayments for the remainder of 2019 provides an additional source of liquidity.

The Bank also has significant borrowing capacity with the FRB-Atlanta and with the FHLB–Dallas.  As of March 31, 2019, we had no borrowings with the FRB-Atlanta. FHLB advances totaled $27.5 million at March 31, 2019 and consisted of two advances on existing swap contracts. Under existing agreements with the FHLB-Dallas, our borrowing capacity totaled $298.4 million at March 31, 2019.  The Bank has the ability to post additional collateral of approximately $293.9 million if necessary to meet liquidity needs.  Additionally, $135.2 million in loan collateral is pledged under a Borrower-in-Custody line with the FRB-Atlanta. Unsecured borrowing lines totaling $20.0 million are available through correspondent banks.  We utilize these contingency funding alternatives to meet deposit volatility, which is more likely in the current environment, given unusual competitive offerings within our markets.

The Company holds minor investments in certain limited partnerships. As of March 31, 2019, the Bank had a recorded investment of $5.7 million in these limited partnerships and had committed to fund an additional $6.8 million related to future capital calls that has not been reflected in the consolidated balance sheet

Company Liquidity

At the Company level, cash is needed primarily to meet interest payments on the junior subordinated debentures, dividends on our common stock and dividend payments on the Series B and Series C Preferred Stocks.  The dividend rate on the $32.0 million of Series B Preferred Stock issued to the U.S. Treasury for participation in the Small Business Lending Fund (“SBLF”) was 9.0% for the three month period ended March 31, 2019 and 2018.

On December 28, 2012, the Company issued 756,511 shares of common stock and 99,971 shares of Series C Preferred Stock in connection with the PSB acquisition.  As of March 31, 2019, there were 89,721 shares of Series C Preferred Stock issued and outstanding.  The Series C Preferred Stock is entitled to the payment of noncumulative dividends, if and when declared by the Company’s Board of Directors, at the rate of 4.00% per annum, payable quarterly in arrears on January 15, April 15, July 15 and October 15 of each year.  The Series C Preferred Stock paid dividends totaling $90,000 for the three months ended March 31, 2019 and 2018.

Due to the loss reported for quarter ended March 31, 2019, we currently do not have the ability to approve dividends from the Bank to the Company without prior approval from the OCC.  As of March 31, 2019, the Company had $42.7 million of cash to fund general corporate obligations.

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Capital

The Company and the Bank are required to maintain certain minimum capital levels.  Risk-based capital requirements are intended to make regulatory capital more sensitive to the risk profile of an institution's assets.  Effective January 1, 2015, the Company and the Bank adopted the Basel III rules which included new minimum risk-based and leverage ratios, and modified capital and asset definitions for purposes of calculating these ratios.  These rules also created a new regulatory capital standard based on Tier 1 common equity and increased the minimum leverage and risk-based capital ratios applicable to all banking organizations.

In addition, the Basel III rules subject banking organizations to certain limitations on capital distributions and discretionary bonus payments to executive officers if the organization does not maintain a capital conservation buffer phased in by 2019 of 2.5% above the new regulatory minimum capital ratios.  The effect of the capital conservation buffer fully implemented on January 1, 2019 was to increase the minimum common equity Tier 1 capital ratio to 7.0%, the minimum Tier 1 risk-based capital ratio to 8.5% and the minimum total risk-based capital ratio to 10.5% for banking organizations seeking to avoid the limitations on capital distributions and discretionary bonus payments to executive officers.  The new minimum capital requirements were effective on January 1, 2015 for community banking organizations, such as MidSouth, whereas other requirements of the Basel III rules including the conservation buffer phased in as of January 2019.

At March 31, 2019, the Company and the Bank were in compliance with statutory minimum capital requirements and were classified as “well capitalized.”  Minimum capital requirements include a total risk-based capital ratio (total risk-based capital to risk-weighted assets) of 8.0%, with Tier 1 capital not less than 6.0%, a Tier 1 leverage ratio (Tier 1 to total average adjusted assets) of 4.0% based upon the regulators latest composite rating of the institution, and a common equity Tier 1 capital to total risk-weighted assets of 4.5%. However, effective July 19, 2017, the OCC established higher individual minimum capital ratios for the Bank. Specifically, the Bank must maintain a Tier 1 leverage ratio of at least 8%, and a total risk-based capital ratio of at least 12%. The Bank had a Tier 1 leverage capital ratio of 9.09% and a total risk-based capital ratio of 15.52% at March 31, 2019. As of March 31, 2019, the Company’s Tier 1 leverage ratio was 11.60%, Tier 1 capital to risk-weighted assets was 18.22%, total capital to risk-weighted assets was 19.49% and common equity Tier 1 capital to risk-weighted assets was 12.48%. 

Asset Quality

Credit Risk Management

We manage credit risk primarily by observing written, board approved policies that govern all credit underwriting and approval activities.  Our Chief Credit Officer (“CCO”) is responsible for credit underwriting as well as management of classified and criticized assets for the Bank.  The role of the CCO includes on-going review and development of lending policies, commercial credit analysis, centralized consumer underwriting, and overall credit risk management procedures.  The current risk management process requires that each individual loan officer review his or her portfolio on a quarterly basis and assign recommended credit ratings on each loan.  These efforts are supplemented by independent reviews performed by the loan review officer and other validations performed by the internal audit department.  The results of the reviews are reported directly to the Credit Risk Committee of the Board of Directors.

Credit concentrations are monitored and reported quarterly whereby individual customer and aggregate industry leverage, profitability, risk rating distributions, and liquidity are evaluated for each major standard industry classification segment.  At March 31, 2019, one industry segment concentration, the oil and gas industry, aggregated more than 10% of our loan portfolio.  Our exposure in the oil and gas (energy-related) industry, including related service and manufacturing industries, totaled approximately $106.8 million, or 12.0% of total loans with $3.7 million in nonaccrual oil and gas loans. 

Additional information regarding credit quality by loan classification is provided in Note 4 – Loans and Note 9 – Fair Value Measurement in the notes to the interim consolidated financial statements.

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Nonperforming Assets and Allowance for Loan Loss

The following table sets forth the Company's nonperforming assets (in thousands).

Nonperforming Assets and Loans Past Due 90 Days or More and Still Accruing
	March 31, 2019			December 31, 2018			March 31, 2018
Nonaccrual loans	$	23,191		$	8,920		$	82,275
Loans past due 90 days and over and still accruing	—			—			1
Total nonperforming loans	23,191			8,920			82,276
Nonperforming loans held for sale	—			20,441			808
Other real estate owned	664			1,067			1,803
Other assets repossessed	66			55			194
Total nonperforming assets	$	23,921		$	30,483		$	85,081
Troubled debt restructurings, accruing	$	713		$	1,334		$	1,153
Nonperforming assets to total assets	1.37		%	1.75		%	4.58		%
Nonperforming assets to total loans + ORE + other assets repossessed	2.68		%	3.39		%	7.47		%
ALLL to nonperforming loans	106.85		%	195.40		%	30.84		%
ALLL to total loans	2.77		%	1.94		%	2.23		%
QTD charge-offs	$	384		$	19,277		$	1,836
QTD recoveries	133			258			319
QTD net charge-offs	$	251		$	19,019		$	1,517
Annualized net charge-offs to total loans	0.11		%	8.45		%	0.54		%

Nonperforming assets totaled $23.9 million at March 31, 2019, a decrease of $6.6 million and $61.2 million from December 31, 2018 and March 31, 2018 reported amounts, respectively.  The decrease from December 31, 2018 to March 31, 2019 is primarily attributable to the sale of $16.9 million of nonperforming loans, which was offset by a $13.2 million increase in non-accrual loans that was due primarily to a $11.4 million shared national healthcare credit.

Allowance coverage for nonperforming loans was 106.85% at March 31, 2019 compared to 195.40% at December 31, 2018 and 30.84% at March 31, 2018.  The ALLL/total loans ratio was 2.77% at March 31, 2019, compared to 1.94% at December 31, 2018 and 2.23% at March 31, 2018.  The ratio of annualized net charge-offs to total loans was 0.11% for the three months ended March 31, 2019, compared to 8.45% for the three months ended December 31, 2018, and 0.54% for the three months ended March 31, 2018.

Total nonperforming assets to total loans plus ORE and other assets repossessed decreased to 2.68% at March 31, 2019 from 3.39% at December 31, 2018 and 7.47% at March 31, 2018.  Performing troubled debt restructurings (“TDRs”) totaled $713,000 at March 31, 2019, compared to $1.3 million at December 31, 2018 and $1.2 million at March 31, 2018.  Additional information regarding impaired loans is included in Note 4 – Loans and Note 9 – Fair Value Measurement in the notes to the interim consolidated financial statements.

Quarterly evaluations of the allowance for loan losses are performed in accordance with GAAP and regulatory guidelines.  The ALLL is comprised of specific reserves assigned to each impaired loan for which a probable loss has been identified as well as general reserves to maintain the allowance at an acceptable level for other loans in the portfolio where historical loss experience is available that indicates certain probable losses may exist.  Factors considered in determining provisions include estimated losses in significant credits; known deterioration in concentrations of credit; historical loss experience; trends in nonperforming assets; volume, maturity and composition of the loan portfolio; off-balance sheet credit risk; lending policies and control systems; national and local economic conditions; the experience, ability and depth of lending management; and the results of examinations of the loan portfolio by regulatory agencies and others.  The processes by which we determine the appropriate level of the ALLL, and the corresponding provision for probable credit losses, involves considerable judgment; therefore, no assurance can be given that future losses will not vary from current estimates. We believe the $24.8 million in the ALLL as of March 31, 2019 is sufficient to cover probable losses in the loan portfolio.

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Impact of Inflation and Changing Prices

The consolidated financial statements and notes thereto, presented herein, have been prepared in accordance with GAAP, which require the measurement of financial position and operating results in terms of historical dollars without considering the change in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of the Company’s operations.  Unlike most industrial companies, nearly all the assets and liabilities of the Company are financial.  As a result, interest rates have a greater impact on the Company’s performance than do the effects of general levels of inflation.  Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.

Non-GAAP Financial Measures

Certain financial information included in the Management’s Discussion and Analysis of Financial Condition and Results of Operations is determined by methods other than in accordance with GAAP. The table below presents a reconciliation of these non-GAAP financial measures to the most comparable GAAP financial measures. These non-GAAP financial measures include, "diluted earnings per share, operating" and "operating earnings available to common shareholders". "Diluted earnings per share, operating" is defined as net earnings available to common shareholders adjusted for specified one-time items divided by diluted weighted-average shares. "Operating earnings available to common shareholders" is defined as net earnings available to common shareholders adjusted for specified one-time items.

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 results should not be viewed as a substitute for results determined in accordance with GAAP, and are not necessarily comparable to non-GAAP performance measures that other companies may use.

Reconciliations of these non-GAAP financial measures to the most directly comparable measures as reported in accordance with GAAP are included in the table below (in thousands).

Reconciliation of Non-GAAP Financial Measures
	Three Months Ended March 31,
	2019			2018
Operating Net (Loss) Income
Net loss available to common shareholders	$	(6,640	)	$	(450	)
Adjustment items:
Regulatory remediation costs	—			3,926
Loans held for sale expense	—			963
Branch closure expenses	—			145
Tax effect adjustments	—			(1,057		)
Diluted (loss) earnings, operating	$	(6,640	)	$	3,527
Weighted average number of shares - diluted	16,674			16,500
Net loss per diluted share	$	(0.40	)	$	(0.03	)
Effect of adjustment items	$	—		$	0.24
Operating net (loss) income per diluted share	$	(0.40	)	$	0.21

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Item 3.    Quantitative and Qualitative Disclosures About Market Risk.

There have been no significant changes to disclosures impacting market risk from those disclosed under the heading "Funding Sources-Interest Rate Sensitivity" in our 2018 Annual Report on Form 10-K. The reader should reference our 2018 Annual Report on Form 10-K for the full disclosure over quantitative and qualitative market risk.

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Item 4.    Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  As of the end of the period covered by this Quarterly Report on Form 10-Q, the Chief Executive Officer and Chief Financial Officer have concluded that such disclosure controls and procedures were not effective due to the material weaknesses in the Company’s internal control over financial reporting, as described below.

The management of MidSouth Bancorp, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting.  The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s Chief Executive Officer and the Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with the accounting principles generally accepted in the United States of America.  Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934, as amended.

The Company’s internal control systems are designed to ensure that transactions are properly authorized and recorded in the financial records and to safeguard assets from material loss or misuse. Such assurance cannot be absolute because of inherent limitations in any internal control system.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of March 31, 2019 based on the criteria for effective internal control established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.  Based on this assessment, management has determined that the Company did not maintain effective internal control over financial reporting as of March 31, 2019 because the Company’s previously reported material weaknesses in internal controls over financial reporting as of December 31, 2018 are still not effective given the lack of time to test and assess remediation efforts as described below. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

As previously disclosed in Part II, Item 9A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, we have identified a material weakness in our internal control over income tax reporting. This material weakness relates to an error in the Company’s tax entries for the fourth quarter of 2018 that included a misstatement of the Company’s valuation allowance and a related tax expense of $3.6 million. This error was identified by the Company’s external auditors after the Company’s books were closed but prior to the public release of the Company’s fourth quarter 2018 earnings statement and the related filing with the SEC. With turnover in the Company’s Accounting Department, lack of a repeatable and sustainable process for determining tax expense was revealed. The error was corrected in the Company’s fourth quarter 2018 earnings statement and the related filing with the SEC. Management performed a severity assessment to determine the significance of the control deficiency and concluded this was an isolated Material Weakness in the internal controls over the creation of the tax entries caused mainly by personnel turnover within the organization.

During the fourth quarter 2018 review of the ALLL process management concluded that while controls were in place, they did not operate effectively with regard to: 1) formal documentation for some of the key management estimates, 2) robust documentation for model updates and methodology changes, and 3) well defined review controls. Management performed a severity assessment to determine the significance of the control deficiencies and concluded that although these issues did not require an audit adjustment, they did aggregate to a level of Material Weakness in the internal controls over the preparation of the ALLL.

The identified material weaknesses did not result in any material misstatement in the Company’s consolidated financial statements.

Remediation Activities

Management is committed to timely remediating the identified weaknesses with appropriate oversight from the Company’s Audit Committee. The Company has commenced efforts to remediate the material weaknesses identified above.

Prior to the end of the first quarter of 2019 we engaged Horne, LLC, a tax advisory firm, to assist with the remediation for our tax deficiencies to include assistance with the preparation of the ASC 740 journal entries at quarter end. Additional focus going forward will include assistance with developing an ASC 740 accounting policy, defining the necessary controls surrounding tax accounting, and developing a complete set of procedural documents and provide ongoing training.

Meetings commenced in February with GlassRatner to review ALLL policies and procedures and complete an evaluation of GAAP and regulatory guidance. The ALLL process was fully analyzed with interviews conducted with key members of Credit and Accounting

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including the Chief Credit Officer, the Chief Financial Officer, the Director of Special Assets, Director of SEC Reporting, and other Special Assets employees. As part of the immediate remediation to improve documentation, a more robust ALLL memo for first quarter of 2019 was prepared for submission to the Credit Risk Committee and control procedures for review of model inputs that included loans, impairments, net charge-offs and qualitative factors had redundant reviews to ensure accuracy and completeness. A working draft of ALLL procedures has been developed and is expected to be presented for approval to Credit Risk Committee in the second quarter of 2019.     

Given the steps outlined above, management believes these efforts will effectively remediate the material weaknesses. Additionally, management will continually assess the effectiveness of the remediation efforts and may determine to take additional measures to address control deficiencies or modify the remediation plan described above.

Changes in Internal Control Over Financial Reporting

Other than as described above, there have been no other changes in the Company’s internal control over financial reporting that occurred during the quarter ended March 31, 2019 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting, other than the material weaknesses described above.

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Part II – Other Information

Item 1.    Legal Proceedings.

The Bank has been named as a defendant in various legal actions arising from normal business activities in which damages of various amounts are claimed.  While the amount, if any, of ultimate liability with respect to such matters cannot be currently determined, management believes, after consulting with legal counsel, that any such liability will not have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows.  However, in the event of unexpected future developments in these matters, if the ultimate resolution of any such matter is unfavorable, the result may be material to the Company’s consolidated financial position, consolidated results of operations or consolidated cash flows.

Item 1A.    Risk Factors.

Because the market price of Hancock Whitney common stock will fluctuate, the value of the merger consideration to be received by our shareholders may change.

Pursuant to the Agreement and Plan of Merger, dated as of April 30, 2019 (the “Merger Agreement”), between Hancock Whitney and the Company, upon completion of the merger, each share of Company common stock, except for certain shares to be canceled in accordance with Section 1.5(c) of the Merger Agreement, that is issued and outstanding immediately prior to the effective time, will cease to be outstanding and will be converted automatically into the right to receive 0.2952 shares of Hancock Whitney common stock, par value $3.33 per share. The closing price of Hancock Whitney common stock on the date that the merger is completed may vary from the closing price of Hancock Whitney common stock on the date Hancock Whitney and the Company announced the signing of the Merger Agreement and the date of the special meeting of the Company’s shareholders regarding the merger. Because the merger consideration is determined by a fixed conversion ratio, at the time of the Company special meeting, Company shareholders will not know or be able to calculate the value of the shares of Hancock Whitney common stock they will receive upon completion of the merger. Any change in the market price of Hancock Whitney common stock prior to completion of the merger may affect the value of the merger consideration that Company shareholders will receive upon completion of the merger. Stock price changes may result from a variety of factors, including general market and economic conditions, changes in the companies’ respective businesses, operations and prospects, and regulatory considerations, among other things. Many of these factors are beyond the control of Hancock Whitney and the Company. Company shareholders should obtain current market quotations for shares of Hancock Whitney common stock and Company common stock before voting their shares at the Company special meeting.

Regulatory approvals may not be received, may take longer than expected or may impose conditions that are not presently anticipated or cannot be met.

Before the transactions contemplated by the Merger Agreement may be completed, various approvals must be obtained from bank regulatory authorities. In determining whether to grant these approvals, the applicable regulatory authorities consider a variety of factors, including the competitive impact of the proposal in the relevant geographic markets; financial, managerial and other supervisory considerations of each party; convenience and needs of the communities to be served and the record of the insured depository institution subsidiaries under the Community Reinvestment Act of 1977 and the regulations promulgated thereunder; effectiveness of the parties in combating money laundering activities; any significant outstanding supervisory matters; and the extent to which the proposal would result in greater or more concentrated risks to the stability of the United States banking or financial system. These regulatory authorities may impose conditions on the granting of such approvals. Such conditions or changes and the process of obtaining regulatory approvals could have the effect of delaying completion of the merger or of imposing additional costs or limitations on the combined company following the merger. The regulatory approvals may not be received at all, may not be received in a timely fashion, or may contain conditions on the completion of the merger that are not anticipated or cannot be met. Furthermore, such conditions or changes may constitute a materially burdensome regulatory condition that may allow the parties to terminate the Merger Agreement. If the consummation of the merger does not occur, or is delayed, including by a delay in receipt of necessary regulatory approvals, the business, financial condition and results of operations of the Company may be materially and adversely affected.

Failure of the merger to be completed, the termination of the Merger Agreement, or a significant delay in the consummation of the merger could negatively impact the Company.

The Merger Agreement is subject to a number of conditions which must be fulfilled in order to complete the merger. These conditions to the consummation of the merger may not be fulfilled and, accordingly, the merger may not be completed. In addition, if the merger is not completed on or before April 30, 2020, either Hancock Whitney or the Company may choose to terminate the Merger Agreement at any time after that date if the failure of the merger to occur on or before that date is not caused by any breach of the Merger Agreement by the party electing to terminate the Merger Agreement, before or after shareholder approval.

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If the merger is not consummated, the ongoing business, financial condition and results of operations of the Company may be materially adversely affected and the market price of the Company’s common stock may decline significantly, particularly to the extent that the current market price reflects a market assumption that the merger will be consummated. If the consummation of the merger is delayed, the business, financial condition and results of operations of the Company may be materially adversely affected.

In addition, the Company has incurred and will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the Merger Agreement. If the merger is not completed, the Company would have to recognize these expenses without realizing the expected benefits of the merger. Any of the foregoing, or other risks arising in connection with the failure of or delay in consummating the merger, including the diversion of management attention from pursuing other opportunities and the constraints in the Merger Agreement on the ability to make significant changes to the Company’s ongoing business during the pendency of the merger, could have a material adverse effect on the Company’s business, financial condition and results of operations.

Additionally, the Company’s business may be adversely impacted by the failure to pursue other beneficial opportunities due to the focus of management on the merger, without realizing any of the anticipated benefits of completing the merger, and the market price of Company common stock might decline to the extent that the current market price reflects a market assumption that the merger will be completed. If the Merger Agreement is terminated and the Company’s board of directors seeks another merger or business combination, Company shareholders cannot be certain that the Company will be able to find a party willing to engage in a transaction on equally or more attractive terms than the merger with Hancock Whitney.

The Company will be subject to business uncertainties and contractual restrictions while the merger is pending.

Uncertainty about the effect of the merger on employees, customers (including depositors and borrowers), suppliers and vendors may have an adverse effect on the business, financial condition and results of operations of the Company. These uncertainties may impair the Company’s ability to attract, retain and motivate key personnel and customers (including depositors and borrowers) pending the consummation of the merger, as such personnel and customers may experience uncertainty about their future roles and relationships following the consummation of the merger. Additionally, these uncertainties could cause customers (including depositors and borrowers), suppliers, vendors and others who deal with the Company to seek to change existing business relationships with the Company or fail to extend an existing relationship with the Company. In addition, competitors may target the Company’s existing customers by highlighting potential uncertainties and integration difficulties that may result from the merger.

The pursuit of the merger and the preparation for the integration may place a burden on the Company’s management and internal resources. Any significant diversion of management attention away from ongoing business concerns and any difficulties encountered in the transition and integration process could have a material adverse effect on the Company’s business, financial condition and results of operations.

In addition, the Merger Agreement restricts each party from taking certain actions without the other party’s consent while the merger is pending. These restrictions could have a material adverse effect on the Company’s business, financial condition and results of operations.

The Merger Agreement contains provisions that may discourage other companies from pursuing, announcing or submitting a business combination proposal to the Company that might result in greater value to Company shareholders.

The Merger Agreement contains provisions that may discourage a third party from pursuing, announcing or submitting a business combination proposal to the Company that might result in greater value to Company shareholders than the merger with Hancock Whitney. These provisions include a general prohibition on the Company from soliciting, or, subject to certain exceptions, entering into discussions with any third party regarding any acquisition proposal or offers for competing transactions. Furthermore, if the Merger Agreement is terminated, under certain circumstances, the Company may be required to pay Hancock Whitney a termination fee equal to $8,000,000.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds.

The Company did not sell any unregistered equity securities or repurchase any equity securities during the quarter ended March 31, 2019.

Item 3.    Defaults Upon Senior Securities.

None.

Item 4.    Mine Safety Disclosures.

None.

Item 5.    Other Information.

None.

Item 6.    Exhibits.

Exhibit Number	Document Description
2.1	Agreement and Plan of Merger, dated as of April 30, 2019, by and between Hancock Whitney Corporation and MidSouth Bancorp, Inc. (filed as Exhibit 2.1 to the Company's Current Report on Form 8-K filed on May 2, 2019)
3.1	Amended and Restated Articles of Incorporation of MidSouth Bancorp, Inc. (restated solely for purposes of Item 601(b)(3) of Regulation S-K) (filed as Exhibit 3.1 to MidSouth's Annual Report on Form 10-K filed on March 18, 2013 and incorporated herein by reference)
3.2	Amended and Restated By-laws of MidSouth Bancorp, Inc. effective as of September 26, 2012 (restated solely for purposes of Item 601(b)(3) of Regulation S-K (filed as Exhibit 3.3 to MidSouth’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 and incorporated herein by reference)
10.1	Consulting Agreement dated May 2, 2019, between MidSouth Bank, N.A. and D. Michael Kramer
31.1	Certification pursuant to Exchange Act Rules 13(a) – 14(a)
31.2	Certification pursuant to Exchange Act Rules 13(a) – 14(a)
32.1	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	The following financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2018, formatted in Extensible Business Reporting Language (“XBRL”): (i) Consolidated Statements of Operations, (ii) Consolidated Balance Sheets, (iii) Consolidated Statements of Cash Flows and (iv) Notes to Consolidated Financial Statements.*

* Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not to be “filed” or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, or Section 18 of the Securities Act of 1934, as amended, and otherwise are not subject to liability under these sections.

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Signatures

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	MidSouth Bancorp, Inc. (Registrant)
Date: May 10, 2019
	/s/ James R. McLemore
	James R. McLemore, President and CEO
	(Principal Executive Officer)
	/s/ Lorraine D. Miller
	Lorraine D. Miller, CFO
	(Principal Financial Officer and Principal Accounting Officer)

45

EX-10.1

INDEPENDENT CONSULTANT AGREEMENT This Agreement (“Agreement”) is made as of May 2, 2019 by and between Midsouth Bank N.A. (“MSB”), having its principal place of business at 102 Versailles Blvd, Lafayette, LA 70501, and D. Michael Kramer (“Consultant”), having a principal place of business at [address on file with Human Resources]. W I T N E S S E T H WHEREAS, MidSouth Bancorp, Inc. (“MidSouth”) has entered into that certain Agreement and Plan of Merger (the “Merger Agreement”), dated as of April 30, 2019, with Hancock Whitney Corporation, a Mississippi corporation (“Hancock Whitney” and, unless the context otherwise requires, the term “Hancock Whitney” shall include Hancock Whitney and its wholly-owned subsidiary bank, Hancock Whitney Bank (“Hancock Whitney Bank”)); and WHEREAS, MSB desires to retain the Consultant to provide consulting services to assist executive management of MSB and MidSouth throughout the process of announcing, managing and closing the proposed merger transaction contemplated by the Merger Agreement; NOW, THEREFORE, in consideration of the promises and obligations contained herein, as well as other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, MSB and Consultant (collectively referred to herein as the “Parties”) agree as follows: 1. Engagement: Subject to the terms and conditions of this Agreement, MSB hereby engages the Consultant to provide such assistance, advice and consultation as requested by the Boards of Directors of MSB and MidSouth to consult with and assist executive management of MSB and MidSouth throughout the process of announcing, managing and closing its proposed merger transaction and to provide the Boards and executive management with advice and counsel regarding all applicable SEC and bank regulatory applications, filings and other documentation as well as finance and accounting organizational matters (the “Consulting Services”). The Consultant hereby accepts such engagement. 2. Scope of Engagement: In performing the Consulting Services, Consultant shall (i) at all times comply with the terms and conditions of this Agreement, all applicable policies and procedures of MSB, MidSouth and any subsidiary and affiliate of MSB, and any reasonable written or oral instructions that may be provided to Consultant by MSB in connection with Consultant’s performance of Consulting Services under this Agreement, (ii) attend all merger- related meetings, discussions and planning sessions, and (ii) have access to and attend all meetings of executive management of MSB and MidSouth, and all management committee meetings and be available to the executive management of MSB and MidSouth and their respective Board for consultation. Nothing contained herein shall be construed to limit Consultant’s ability to provide services to any other person or entity for any other purpose provided such services do not conflict with the services contemplated by this Agreement.

3. Term: 3.1 Unless earlier terminated pursuant to Section 3.2, the Consultant’s engagement under this Agreement shall be for the period commencing on the date first set forth above and expiring on February 29, 2020 (the “Term”). 3.2. The Consultant’s engagement under this Agreement shall terminate upon the occurrence of any of the following events: (a) The death or disability of the Consultant; (b) The termination of the Merger Agreement prior to the closing of the merger of Hancock Whitney and MidSouth pursuant to the terms thereof; (c) The termination of the Consultant’s engagement immediately with written notice from MSB to the Consultant in the event MSB determines, in its sole discretion, that Consultant has (i) compromised any Confidential Information, (ii) acted in a manner which may jeopardize MSB’s or MidSouth’s relationship with its customers, vendors or other independent consultants, (iii) violated any term or condition of this Agreement, (iv) refused to perform in a timely and professional manner any services contemplated by this Agreement, or (v) engaged in any conduct MSB considers to be grossly negligent, illegal, immoral, unethical or unprofessional; or (d) by Consultant for any reason, with or without cause, by providing at least ten (10) days’ advance written notice. 3.3 Upon the termination of the engagement of the Consultant hereunder by Consultant for any reason or by MSB for any reason described in Section 3.2, the Consultant shall be entitled to all compensation earned or accrued under Section 7(a) as of his termination date, but from and after such termination date no additional compensation shall be earned by or payable to the Consultant hereunder. 4. Independent Contractor Status: In the performance of this consulting arrangement, Consultant will be acting in his own separate capacity and not as an agent, employee, partner, joint venturer or associate of MSB or MidSouth. During the Term, the Consultant shall be classified as an independent contractor and he shall be wholly and exclusively responsible for and shall pay any and all taxes, fees and assessments (and all interest and penalties thereon) of every kind and nature arising by reason of, or in connection with, his performance hereunder. Consultant will not be entitled to participate in or receive any benefits or other rights under any employee benefit plan of MSB, MidSouth or any subsidiary or affiliate of MSB as the result of this consulting arrangement. The Consultant does not have, nor shall he hold himself out as having, any right, power, or authority to create any contract or obligation, either express or implied, on behalf, in the name of, or binding upon MSB, MidSouth or any subsidiary or affiliate of MSB, unless MSB shall consent thereto in advance in writing. 2 38734805v3

5. Warranties. Consultant hereby warrants that he is not a party to any restrictive covenant, contract or other agreement limiting or otherwise adversely affecting his ability to provide the Consulting Services. 6. Non-Delegation of Duties: Consultant acknowledges that this Agreement is a personal contract and the rights, interests and obligations hereunder of Consultant may not be assigned, delegated or subcontracted, in whole or in part, without the prior written consent of MSB, and any attempt to do so in contravention of this provision shall be deemed void and shall serve as grounds for the immediate termination of this Agreement. 7. Compensation: MSB will provide the Consultant with the following consulting fee and expense reimbursements during the Term: (a) Consulting Fee. The Consultant will be paid a consulting fee of $20,000 per calendar month in arears, payable no later than the last day of each month during the Term. (b) Expenses. MSB agrees to reimburse Consultant for all reasonable and necessary travel related expenses actually incurred by him in the performance of the Consulting Services. Travel related expenses include, but are not limited to, lodging, meals and transportation costs. Travel to bank offices for specific project work will be eligible for reimbursement. Expense will be reimbursed on the same basis as MSB employees only with the submission of an expense report with accompanying receipts. The Parties anticipate that Consultant shall be in Lafayette, Louisiana up to four (4) days per week throughout the Term and shall incur expenses consistent with that level of travel. 8. Confidential Information: Consultant hereby acknowledges that in connection with the performance of services hereunder they may acquire and become acquainted with certain confidential and proprietary information relating to and used in MSB’s or MidSouth’s business, including, without limitation, ideas, concepts, designs, specifications, prototypes, procedures, business plans, forecasts, financial information, technical data, methods, secrets, client and customer (actual or prospective) lists and information, contact and other information regarding other outside consultants, non-public OCC information as defined in 12 C.F.R. 4.32(b), account lists, requirements, costs, sales, pricing and marketing information, and similar information, documents and records (“Confidential Information”). Accordingly, Consultant hereby agrees that all Confidential Information is and shall remain the sole and exclusive property of MSB or MidSouth. Consultant agrees not to use such Confidential Information except as authorized by MSB and further agrees to surrender to MSB all tangible Confidential Information in his possession and control upon the termination of the Consulting Services and/or this Agreement. Consultant further agrees not to disclose, or cause any third party to disclose, any Confidential Information to any person not a party to this Agreement without the written consent of MSB, except as necessary to comply with any regulatory and court ordered demand from either an empowered regulatory agency or a court of competent jurisdiction. Consultant represents and warrants to MSB that Consultant is aware of, and agrees to abide by, the prohibition on the dissemination of non-public OCC information contained in paragraph (b)(1) of 12 C.F.R. 4.37 and Consultant agrees not to use the non-public OCC information for any purpose 3 38734805v3

other than in connection with the performance of the Services for MSB. MSB and the Consultant agree that the work product created by Consultant hereunder shall belong to MSB and be kept confidential between Consultant and members of the Boards of Directors of MSB and MidSouth. The Parties agree that this Section 8 shall survive the termination of this Agreement. 9. Remedies for Breach: Consultant acknowledges and agrees that any actual or threatened breach of this Agreement will cause irreparable harm to MSB and that it may be difficult to determine or adequately compensate MSB through monetary damages. Accordingly, Consultant agrees that MSB shall be entitled to obtain injunctive relief, temporary, preliminary or permanent, against such breach or threatened breach. Consultant further agrees that MSB shall also be entitled to all costs and attorneys’ fees incurred by it to enforce these provisions. Consultant acknowledges that nothing contained herein shall be construed to prohibit or otherwise limit MSB from pursuing any other remedies which may be available, including the recovery of damages from Consultant. 10. Indemnification: 10.1 Consultant hereby agrees to indemnify and hold MSB harmless from any and all claims, liabilities, damages and expenses (including reasonable attorney’s fees) that may be incurred by or asserted against MSB on account of or arising out of (i) any act or omission by Consultant or anyone acting on his behalf, in conjunction with the performance of his services hereunder, (ii) any and all claims, damages or defense costs arising from, or involving the enforcement or defense of, any restrictive covenants or other agreements referred to in Section 1; or (iii) any and all taxes, penalties, interest and attorneys’ fees assessed against or incurred by MSB on account of any assessment or claim made against it for the payment of such taxes. 10.2 Except as provided in Section 10.1, MSB hereby agrees to indemnify and hold Consultant harmless from any and all claims, liabilities, damages and expenses (including reasonable attorney’s fees) that may be incurred by or asserted against Consultant on account of or arising out of any act or omission by MSB or anyone acting on its behalf in connection with this Agreement. 11. Return of Confidential Information and Property: Upon termination of this Agreement, Consultant agrees to immediately return to MSB any and all reports, files, memoranda, records, designs, budgets, programs, strategic plans and other documents, as well as any other physical, intellectual or personal property of any nature that he received, prepared, helped prepare or directed preparation of, in connection with his consulting with MSB. Consultant agrees not to retain any copies, duplicates, reproductions or excerpts of any such property or information without the approval of MSB. 12. Regulatory Approval. Notwithstanding any other provision of this Agreement, the Consultant’s right to receive any payments under Section 7 of this Agreement is contingent upon and subject to any restrictions imposed upon MSB or its affiliates by law or any approval from regulatory bodies with authority over MSB or its affiliates, if required. 4 38734805v3

13. Successor-in-Interest: This Agreement shall be binding upon, and shall inure to the benefit of, the heirs, executors, administrators, agents and successors-in-interest to each of the Parties. 14. Severability: The Parties agree that each and every paragraph, sentence, clause, term and provision of this Agreement is separate, distinct and severable from the other provisions of this Agreement and that the invalidity or unenforceability of any Agreement provision shall not affect the validity or enforceability of any other provision of this Agreement. Further, if any provision of this Agreement is ruled invalid or unenforceable by a court of competent jurisdiction the remaining portions thereof shall remain in effect and be enforced to the fullest extent permitted by law. 15. Non-Waiver, Modification or Amendment: Except as specifically provided herein, no waiver, alteration or modification of any provision of this Agreement shall be valid and binding unless in writing and signed by both Parties. Furthermore, either Party’s failure to exercise any right under this Agreement shall not operate nor be construed as a waiver or abandonment of any subsequent exercise of that or any other right. 16. Notices. All notices or other communications required or permitted to be given or made hereunder shall be in writing and delivered personally or sent by facsimile or e-mail transmission and by mailing a copy thereof to the recipient on the date of such facsimile or e- mail to the intended recipient thereof in accordance with the information set forth below. Either Party may change the information set forth below by giving notice thereof to the other Party hereto in the manner provided herein. (i) If to MSB: MidSouth Bank, N.A. 102 Versailles Blvd Lafayette, LA 70501 (ii) If to the Consultant, D. Michael Kramer [Address on file with Human Resources] 17. Miscellaneous: This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, and all of such together shall constitute one and the same instrument. The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. This Agreement shall be deemed to have been jointly drafted by the Parties and shall not be construed against either Party. Capitalized terms not otherwise defined herein shall have the meanings assigned to them in the Merger Agreement. 18. Governing Law: This Agreement shall be interpreted in accordance with and be governed exclusively by the laws of the State of Louisiana. 5 38734805v3

19. Entire Agreement: This Agreement constitutes the full and complete agreement between the Parties with regard to the subject matter addressed herein and shall supersede any and all previous agreements and/or commitments, whether oral or written, between the Parties. The Parties further agree that no verbal or other statements, discussions or impressions, other than those provisions contained in this Agreement, have been relied upon by either Party in executing this Agreement. [Signature page follows] 6 38734805v3

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first set forth above. MIDSOUTH BANK, N.A. By: /s/ Jake Delhomme Name: /s/ Jake Delhomme Title: Chairman of the Board CONSULTANT By: /s/ D. Michael Kramer D. Michael Kramer

EX-31.1

Exhibit 31.1

CERTIFICATION

I, James R. McLemore, President and CEO, certify that:

1.  I have reviewed this quarterly report on Form 10-Q of MidSouth Bancorp, Inc.;

2.  Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.  Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.  The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) designed such internal control over financial reporting, or cause such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluations; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.  The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	May 10, 2019
		/s/ James R. McLemore
		Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Lorraine D. Miller, CFO, certify that:

1.  I have reviewed this quarterly report on Form 10-Q of MidSouth Bancorp, Inc.;

2.  Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.  Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.  The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) designed such internal control over financial reporting, or cause such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluations; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.  The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	May 10, 2019
		/s/ Lorraine D. Miller
		Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of MidSouth Bancorp, Inc. (the “Company”) on Form 10-Q for the period ending March 31, 2019 (the “Report”), I, James R. McLemore, Chief Executive Officer of the Company, certify that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ James R. McLemore

James R. McLemore

Chief Executive Officer

May 10, 2019

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of MidSouth Bancorp, Inc. (the “Company”) on Form 10-Q for the period ending March 31, 2019 (the “Report”), I, Lorraine D. Miller, Chief Financial Officer of the Company, certify that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Lorraine D. Miller

Lorraine D. Miller

Chief Financial Officer

May 10, 2019

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2019	May 08, 2019
Document and Entity Information [Abstract]
Entity Registrant Name	MIDSOUTH BANCORP INC
Entity Central Index Key	0000745981
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		16,717,021
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q1
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2019
Entity Emerging Growth Company	false
Entity Small Business	false

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Assets
Cash and due from banks	$ 28,257	$ 27,701
Interest-bearing deposits in banks	212,973	174,909
Federal funds sold	2,200	2,761
Securities available-for-sale, at fair value (cost $434,749 and $443,928)	434,679	437,754
Securities held-to-maturity, (fair value $34,834 and $36,974)	35,107	37,759
Total securities	469,786	475,513
Other investments	17,083	16,614
Loans held for sale	1,511	23,876
Loans	893,650	899,785
Allowance for loan losses	(24,779)	(17,430)
Loans, net	868,871	882,355
Bank premises and equipment, net	55,097	55,382
Operating lease right-of-use assets	8,263	0
Goodwill and Intangibles	44,303	44,580
Cash surrender value of life insurance	15,188	15,135
Other real estate	664	1,067
Other assets	21,139	23,505
Total Assets	1,745,335	1,743,398
Deposits:
Noninterest-bearing	418,321	383,167
Interest-bearing	1,027,314	1,068,904
Total deposits	1,445,635	1,452,071
Securities sold under agreements to repurchase	11,968	11,220
Operating lease liability	8,203	0
Short-term Federal Home Loan Bank advances	27,500	27,500
Junior subordinated debentures	22,167	22,167
Other liabilities	8,696	8,450
Total liabilities	1,524,169	1,521,408
Shareholders’ equity:
Common stock, $0.10 par value; 30,000,000 shares authorized, 16,715,671 and 16,641,017 shares issued and outstanding, respectively	1,671	1,664
Additional paid-in capital	169,244	169,111
Accumulated other comprehensive income (loss)	1,807	(4,035)
Retained earnings	7,472	14,278
Total shareholders’ equity	221,166	221,990
Total liabilities and shareholders’ equity	1,745,335	1,743,398
Series B Preferred Stock
Shareholders’ equity:
Preferred stock	32,000	32,000
Series C Preferred stock
Shareholders’ equity:
Preferred stock	$ 8,972	$ 8,972

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Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Assets
Securities available-for-sale, cost	$ 434,749	$ 443,928
Securities held-to-maturity, fair value	$ 34,834	$ 36,974
Stockholders' equity:
Common stock, par value (in dollars per share)	$ 0.10	$ 0.10
Common stock, authorized (in shares)	30,000,000	30,000,000
Common stock, issued (in shares)	16,715,671	16,641,017
Common stock, outstanding (in shares)	16,715,671	16,641,017
Series B Preferred Stock
Stockholders' equity:
Preferred stock, authorized (in shares)	5,000,000	5,000,000
Preferred stock, issued (in shares)	32,000	32,000
Preferred stock, outstanding (in shares)	32,000	32,000
Series C Preferred stock
Stockholders' equity:
Preferred stock, authorized (in shares)	100,000	100,000
Preferred stock, issued (in shares)	89,721	89,721
Preferred stock, outstanding (in shares)	89,721	89,721

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Consolidated Statements of Operations (unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Interest income:
Loans, including fees	$ 12,987	$ 16,015
Securities and other investments:
Taxable	3,071	2,047
Nontaxable	255	316
Interest bearing deposits in other banks	1,132	619
Total interest income	17,445	18,997
Interest expense:
Deposits	1,680	1,238
Securities sold under agreements to repurchase	14	40
Federal Home Loan Bank advances	81	129
Junior subordinated debentures	287	220
Total interest expense	2,062	1,627
Net interest income	15,383	17,370
Provision for loan losses	7,600	0
Net interest income after provision for loan losses	7,783	17,370
Non-interest income:
Service charges on deposits	1,793	2,206
ATM and debit card income	1,925	1,784
Credit card income	520	371
Gain on sale of securities, net	373	0
Gain on sale of loans, net	1,274	0
Other charges and fees	388	468
Total non-interest income	6,273	4,829
Non-interest expenses:
Salaries and employee benefits	9,700	7,719
Occupancy expense	3,307	3,045
ATM and debit card expense	624	576
Data processing	848	665
Regulatory remediation expense	0	3,926
Legal and professional fees	1,883	1,689
Loss on transfer of loans to held for sale	0	875
Other	3,524	3,378
Total non-interest expenses	19,886	21,873
(Loss) Income before income tax benefit	(5,830)	326
Income tax benefit	0	(34)
Net (loss) income	(5,830)	360
Dividends on preferred stock	810	810
Net loss available to common shareholders	$ (6,640)	$ (450)
Basic loss per common share (in dollars per share)	$ (0.40)	$ (0.03)
Diluted loss per common share (in dollars per share)	$ (0.40)	$ (0.03)
Weighted average number of shares outstanding:
Basic (in shares)	16,674	16,495
Diluted (in shares)	16,674	16,500
Dividends declared per common share (in dollars per share)	$ 0.01	$ 0.01

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Consolidated Statements of Comprehensive Income (Loss) (unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Statement of Comprehensive Income [Abstract]
Net (loss) income	$ (5,830)	$ 360
Unrealized gain (loss) on securities available-for-sale:
Unrealized holding gains (losses) arising during the year	6,476	(4,048)
Less: reclassification adjustment for net gain on sales of securities available-for-sale	(373)	0
Unrealized holding gains (losses) arising during the year	6,103	(4,048)
Unrealized gain on derivative instruments designated as cash flow hedges:
Unrealized holding gains on derivatives arising during the period	(261)	309
Net change in unrealized (loss) gain on derivative instruments	(261)	309
Total other comprehensive income (loss), before tax	5,842	(3,739)
Income tax effect related to items of other comprehensive income (loss)	0	785
Total other comprehensive income (loss), net of tax	5,842	(2,954)
Total comprehensive income (loss)	$ 12	$ (2,594)

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Consolidated Statement of Shareholders' Equity (unaudited) - USD ($) $ in Thousands	Total	Preferred Stock	Common Stock	Additional Paid-in Capital	Unearned ESOP Shares	Accumulated Other Comprehensive (Loss) Income	Retained Earnings
Beginning balance (in shares) at Dec. 31, 2017		121,875	16,548,829
Beginning balance at Dec. 31, 2017	$ 254,015	$ 40,987	$ 1,655	$ 168,412	$ (937)	$ (1,828)	$ 45,726
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	360						360
Dividends on Series B and Series C preferred stock	(810)						(810)
Dividends on common stock	(165)						(165)
Restricted stock grant (in shares)			52,278
Restricted stock grant	0		$ 5	(5)
Restricted stock forfeitures (in shares)			(12,375)
Restricted stock forfeitures			$ (1)	1
ESOP shares released for allocation	31				31
Exercise of stock options (in shares)			33,079
Exercise of stock options	429		$ 3	426
ESOP compensation expense	10			10
Stock option and restricted stock compensation expense	(79)			(79)
Change in accumulated other comprehensive income	(2,954)					(2,954)
Ending balance (in shares) at Mar. 31, 2018		121,875.000	16,621,811.000
Ending balance at Mar. 31, 2018	250,837	$ 40,987	$ 1,662	168,765	$ (906)	(4,782)	45,111
Beginning balance (in shares) at Dec. 31, 2018		121,721	16,641,017
Beginning balance at Dec. 31, 2018	221,990	$ 40,972	$ 1,664	169,111		(4,035)	14,278
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(5,830)						(5,830)
Dividends on Series B and Series C preferred stock	(810)						(810)
Dividends on common stock	(166)						(166)
Restricted stock grant (in shares)			77,704
Restricted stock grant	0		$ 7	(7)
Restricted stock forfeitures (in shares)			(3,050)
Stock option and restricted stock compensation expense	140			140
Change in accumulated other comprehensive income	5,842					5,842
Ending balance (in shares) at Mar. 31, 2019		121,721.000	16,715,671.000
Ending balance at Mar. 31, 2019	$ 221,166	$ 40,972	$ 1,671	$ 169,244		$ 1,807	$ 7,472

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Consolidated Statement of Shareholders' Equity (Parenthetical) - $ / shares	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Statement of Stockholders' Equity [Abstract]
Dividends on common stock (in dollars per share)	$ 0.01	$ 0.01

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Consolidated Statements of Cash Flows (unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Cash flows from operating activities:
Net (loss) income	$ (5,830)	$ 360
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation	1,956	2,072
Provision for loan losses	7,600	0
Deferred tax expense	0	1,614
ESOP and stock-based compensation expense	140	(51)
Net gain on sale of investment securities	(373)	0
Gain on sale of loans held for sale	(1,274)	0
Proceeds from sale of loans held for sale	19,273	14,514
Net loss (gain) on sale of other real estate owned	24	(1)
Net write down of other real estate owned	27	48
Loss on transfer of loans to held for sale	0	875
Net loss on sale/disposal of premises and equipment	135	55
Change in other assets	(5,940)	(1,831)
Change in other liabilities	8,177	2,063
Net cash provided by operating activities	23,915	19,718
Cash flows from investing activities:
Proceeds from maturities and calls of securities available-for-sale	13,374	12,272
Proceeds from maturities and calls of securities held-to-maturity	2,619	7,583
Proceeds from sale of securities available-for-sale	32,352	410
Purchases of securities available-for-sale	(36,763)	(2,000)
Purchases of other investments	(469)	(682)
Net change in loans	10,250	44,026
Purchases of premises and equipment	(1,186)	(275)
Proceeds from sale of premises and equipment	279	224
Proceeds from sale of other real estate owned	352	151
Net cash provided by investing activities	20,808	61,709
Cash flows from financing activities:
Change in deposits	(6,436)	24,248
Change in securities sold under agreements to repurchase	748	(34,107)
Borrowings from FHLB	55,000	82,500
Repayments to FHLB	(55,000)	(95,000)
Proceeds from exercise of stock options	0	429
Payment of dividends on preferred stock	(810)	(810)
Payment of dividends on common stock	(166)	(165)
Net cash used by financing activities	(6,664)	(22,905)
Net increase in cash and cash equivalents	38,059	58,522
Cash and cash equivalents, beginning of period	205,371	152,964
Cash and cash equivalents, end of period	243,430	211,486
Supplemental cash flow information:
Interest paid	2,073	1,654
Noncash investing and financing activities:
Transfer of loans to held for sale	$ 0	$ 221

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Basis of Presentation

3 Months Ended

Mar. 31, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

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-month period ended March 31, 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 income 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.

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Recent Accounting Pronouncements and Adoption of New Accounting Standards

3 Months Ended

Mar. 31, 2019

Accounting Policies [Abstract]

Recent Accounting Pronouncements and Adoption of New Accounting Standards

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.

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.

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Investment Securities

3 Months Ended

Mar. 31, 2019

Investments, Debt and Equity Securities [Abstract]

Investment Securities

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
March 31, 2019
U.S. Agencies	$	2,868	$	109	$	—	$	2,977
State, county, and municipal securities	28,492		352		187		28,657
Mortgage-backed securities	385,321		2,757		2,820		385,258
Corporate debt securities	18,068		280		561		17,787
	$	434,749	$	3,498	$	3,568	$	434,679
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
March 31, 2019
State, county, and municipal securities	$	1,662	$	2	$	5	$	1,659
Mortgage-backed securities	33,445		104		374		33,175
	$	35,107	$	106	$	379	$	34,834
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

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
March 31, 2019
Due after one year through five years	$	6,389	$	5,888
Due after five years through ten years	24,097		24,505
Due after ten years	18,942		19,028
Mortgage-backed securities¹	385,321		385,258
	$	434,749	$	434,679
Held-to-maturity:
Due in one year or less	$	451	$	451
Due after one year through five years	1,211		1,208
Mortgage-backed securities¹	33,445		33,175
	$	35,107	$	34,834

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
March 31, 2019
State, county, and municipal securities	$	—	$	—	$	11,647	$	187	$	11,647	$	187
Mortgage-backed securities	—		—		169,319		2,820		169,319		2,820
Corporate debt securities	2,029		561		—		—		2,029		561
	$	2,029	$	561	$	180,966	$	3,007	$	182,995	$	3,568
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

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
March 31, 2019
State, county, and municipal securities	$	—	$	—	$	819	$	5	$	819	$	5
Mortgage-backed securities	—		—		18,778		374		18,778		374
	$	—	$	—	$	19,597	$	379	$	19,597	$	379
December 31, 2018
State, county, and municipal securities	$	—	$	—	$	1,703	$	10	$	1,703	$	10
Mortgage-backed securities	—		—		35,006		776		35,006		776
	$	—	$	—	$	36,709	$	786	$	36,709	$	786

At March 31, 2019, the Company had 66 securities in an unrealized loss position. Management evaluates whether unrealized losses on securities represent impairment that is other than temporary on a quarterly basis. For debt securities, the Company considers its intent to sell or hold the securities and if it is more likely than not the Company will be required to sell the securities.  If such impairment is identified, based upon the intent to sell or the more likely than not threshold, the carrying amount of the security is reduced to fair value with a charge to earnings. Upon the result of the aforementioned review, management then reviews for potential other than temporary impairment based upon other qualitative factors.  In making this evaluation, management considers changes in market rates relative to those available when the security was acquired, changes in market expectations about the timing of cash flows from securities that can be prepaid, performance of the debt security, and changes in the market’s perception of the issuer’s financial health and the security’s credit quality. If determined that a debt security has incurred other than temporary impairment, then the amount of the credit related impairment is determined.  For equity securities, management reviews the near term prospects of the issuer, the nature and cause of the unrealized loss, the severity and duration of the impairments and other factors when determining if an unrealized loss is other than temporary. If a credit loss is evident, the amount of the credit loss is charged to earnings and the non-credit related impairment is recognized through other comprehensive income. At March 31, 2019, there was no intent to sell any of the securities in an unrealized loss position, and it is more likely than not the Company will not be required to sell these securities. Furthermore, the present value of cash flows expected to be collected exceeded the Company's amortized cost basis of the investment securities; therefore, these securities are not deemed to be other than temporarily impaired.

Proceeds from sales of available-for-sale securities as of March 31, 2019 and 2018 were $32.4 million and $410,000, respectively. Gross gains and losses on sales of available-for-sale securities for the three months ended March 31, 2019 were $375,000 and $2,000, respectively. There were not any gains or losses recognized on the sales of available-for-sale securities for the three months ended March 31, 2018.

The composition of investment securities reflects the strategy of management to maintain an appropriate level of liquidity while providing a relatively stable source of revenue. The securities portfolio may at times be used to mitigate interest rate risk associated with other areas of the balance sheet while also providing a means for the investment of available funds, providing liquidity and supplying investment securities that are required to be pledged as collateral against specific deposits and for other purposes. Securities with an aggregate carrying value of $110.9 million at March 31, 2019 and $162.5 million at December 31, 2018 were pledged to secure public funds on deposit and for other purposes required or permitted by law.

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Loans

3 Months Ended

Mar. 31, 2019

Receivables [Abstract]

Loans

LOANS

The loan portfolio consisted of the following (in thousands):

	March 31, 2019			December 31, 2018
Commercial, financial and agricultural	$	255,410		$	267,340
Real estate – construction	89,723			87,506
Real estate – commercial	376,523			368,449
Real estate – residential	130,700			132,435
Consumer and other	40,784			43,506
Lease financing receivable	510			549
Total loans	893,650			899,785
Allowance for loan and lease losses	(24,779		)	(17,430		)
Total loans, net	$	868,871		$	882,355

The Company monitors loan concentrations and evaluates individual customer and aggregate industry leverage, profitability, risk rating distributions, and liquidity for each major standard industry classification segment.  At March 31, 2019, one industry segment concentration, the oil and gas industry, constituted more than 10% of the loan portfolio.  The Company’s exposure in the oil and gas industry, including related service and manufacturing industries, totaled approximately $106.8 million, or 12.0% of total loans, with $3.7 million in nonaccrual oil and gas loans. 

Allowance for Loan Losses

The allowance for loan losses is a valuation account available to absorb probable losses on loans. All losses are charged to the allowance for loan losses when the loss actually occurs or when a determination is made that a loss is likely to occur. Recoveries are credited to the allowance for loan losses at the time of recovery.  Quarterly, the probable level of losses in the existing portfolio is estimated through consideration of various quantitative and qualitative factors. As such, some of the factors considered in determining provisions include estimated losses relative to specific credits; known deterioration in concentrations of credit; historical loss experience; trends in nonperforming assets; volume, maturity and composition of the loan portfolio; off–balance sheet credit risk; lending policies and control systems; national and local economic conditions; the experience, ability and depth of lending management; and the results of examinations of the loan portfolio by regulatory agencies and others. Based on these estimates, the allowance for loan losses is increased by charges to earnings and decreased by charge‑offs (net of recoveries).

The allowance is composed of general reserves and specific reserves.  General reserves are determined by applying loss percentages to segments of the portfolio.  The loss percentages are based on each segment’s historical loss experience, generally over the past three to five years, and adjustment factors derived from conditions in the Company’s internal and external environment.  All loans considered to be impaired are evaluated on an individual basis to determine specific reserve allocations in accordance with GAAP.  Loans for which specific reserves are provided are excluded from the calculation of general reserves.

The Company has an internal loan review department that is independent of the lending function to challenge and corroborate the loan grade assigned by the lender and to provide additional analysis in determining the adequacy of the allowance for loan losses. Additionally, the Company utilizes the services of a third party to supplement its loan review efforts.

A rollforward of the activity within the allowance for loan losses by loan type and recorded investment in loans as of and for the three months ended March 31, 2019 and 2018 is as follows (in thousands):

	March 31, 2019
	Commercial, Financial & Agricultural			Real Estate - Construction		Real Estate- Commercial			Real Estate - Residential			Consumer and other			Lease financing receivable			Total
Allowance for loan losses:
Beginning balance	$	10,633		$	140	$	4,913		$	1,156		$	585		$	3		$	17,430
Charge-offs	(293		)	—					—			(91		)	—			(384		)
Recoveries	82			—		25			1			25			—			133
Provision	8,431			271		(560		)	(504		)	(35		)	(3		)	7,600
Ending balance	$	18,853		$	411	$	4,378		$	653		$	484		$	—		$	24,779
Ending balance: individually evaluated for impairment	$	8,040		$	—	$	75		$	—		$	—		$	—		$	8,115
Ending balance: collectively evaluated for impairment	$	10,813		$	411	$	4,303		$	653		$	484		$	—		$	16,664
Loans:
Ending balance	$	255,410		$	89,723	$	376,523		$	130,700		$	40,784		$	510		$	893,650
Ending balance: individually evaluated for impairment	$	16,938		$	323	$	4,412		$	—		$	—		$	—		$	21,673
Ending balance: collectively evaluated for impairment	$	238,472		$	89,400	$	372,111		$	130,700		$	40,784		$	510		$	871,977

	March 31, 2018
	Commercial, Financial & Agricultural			Real Estate - Construction			Real Estate- Commercial			Real Estate - Residential			Consumer and other			Lease financing receivable		Total
Allowance for loan losses:
Beginning balance	$	20,577		$	596		$	3,918		$	837		$	957		$	3	$	26,888
Charge-offs	(1,524		)	(2		)	(86		)	(3		)	(221		)	—		(1,836		)
Recoveries	276			—			6			1			36			—		319
Provision	(264		)	159			(105		)	64			146			—		—
Ending balance	$	19,065		$	753		$	3,733		$	899		$	918		$	3	$	25,371
Ending balance: individually evaluated for impairment	$	5,968		$	94		$	76		$	20		$	6		$	—	$	6,164
Ending balance: collectively evaluated for impairment	$	13,097		$	659		$	3,657		$	879		$	912		$	3	$	19,207
Loans:
Ending balance	$	401,048		$	94,679		$	444,277		$	145,671		$	50,888		$	692	$	1,137,255
Ending balance: individually evaluated for impairment	$	55,092		$	192		$	26,005		$	2,088		$	50		$	—	$	83,427
Ending balance: collectively evaluated for impairment	$	345,956		$	94,487		$	418,272		$	143,583		$	50,838		$	692	$	1,053,828

Non-Accrual and Past Due Loans

Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due.  Loans are placed on non-accrual status when, in management’s opinion, the probability of collection of interest is deemed insufficient to warrant further accrual.  For loans placed on non-accrual status, the accrual of interest is discontinued and subsequent payments received are applied to the principal balance.  Interest income is recorded after principal has been satisfied and as payments are received.  Non-accrual loans may be returned to accrual status if all principal and interest amounts contractually owed are reasonably assured of repayment within a reasonable period and there is a period of at least six months to one year of repayment performance by the borrower depending on the contractual payment terms.

An age analysis of past due loans (including both accruing and non-accruing loans) is as follows (in thousands):

	March 31, 2019
	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current		Total Loans		Loans >90 Days Past Due and Still Accruing
Commercial, financial and agricultural	$	1,658	$	62	$	3,630	$	5,350	$	250,060	$	255,410	$	—
Real estate – construction	4,332		128		117		4,577		85,146		89,723		—
Real estate – commercial	984		—		1,394		2,378		374,145		376,523		—
Real estate – residential	213		427		1,194		1,834		128,866		130,700		—
Consumer and other	85		27		29		141		40,643		40,784		—
Lease financing receivable	—		—		—		—		510		510		—
	$	7,272	$	644	$	6,364	$	14,280	$	879,370	$	893,650	$	—
	December 31, 2018
	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current		Total Loans		Loans >90 Days Past Due and Still Accruing
Commercial, financial and agricultural	$	385	$	902	$	2,173	$	3,460	$	263,880	$	267,340	$	—
Real estate – construction	47		—		117		164		87,342		87,506		—
Real estate – commercial	435		—		771		1,206		367,243		368,449		—
Real estate – residential	695		31		1,407		2,133		130,302		132,435		—
Consumer and other	176		28		56		260		43,246		43,506		—
Lease financing receivable	—		—		—		—		549		549		—
	$	1,738	$	961	$	4,524	$	7,223	$	892,562	$	899,785	$	—

Non-accrual loans are as follows (in thousands):

	March 31, 2019		December 31, 2018
Commercial, financial, and agricultural	$	16,629	$	3,599
Real estate - construction	351		278
Real estate - commercial	4,462		2,977
Real estate - residential	1,720		2,008
Consumer and other	29		58
	$	23,191	$	8,920

Impaired Loans

Loans are considered impaired when, based upon current information, it is probable the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. All loans classified as special mention, substandard, or doubtful, based on credit risk rating factors, are reviewed to determine whether impairment testing is appropriate.  All loan relationships with an outstanding commitment balance above a specified threshold are evaluated for potential impairment. All loan relationships with an outstanding commitment balance below the specified threshold are assigned an allowance allocation percentage that is determined by management and adjusted periodically based on certain factors. An allowance for each impaired loan is calculated based on the present value of expected future cash flows discounted at the loan’s effective interest rate or at the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent.  All impaired loans are reviewed, at a minimum, on a quarterly basis.  Existing valuations are reviewed to determine if additional discounts or new appraisals are required.  After this review, when comparing the resulting collateral valuation to the outstanding loan balance, if the discounted collateral value exceeds the loan balance, no specific allocation is reserved. 

The following table presents loans that are individually evaluated for impairment (in thousands). Interest income recognized represents interest on accruing loans modified in a troubled debt restructuring (TDR).

	March 31, 2019						December 31, 2018
	Recorded Investment(1)		Unpaid Principal Balance		Related Allowance (1)		Recorded Investment (1)		Unpaid Principal Balance		Related Allowance (1)
With no related allowance recorded:
Commercial, financial, and agricultural	$	3,299	$	4,988	$	—	$	2,924	$	3,011	$	—
Real estate - construction	323		323		—		117		117		—
Real estate - commercial	4,281		5,439		—		3,395		3,395		—
Real estate - residential	—		—		—		—				—
Consumer and other	—		—		—		—		—		—
Subtotal:	7,903		10,750		—		6,436		6,523		—
With an allowance recorded:
Commercial, financial, and agricultural	13,639		13,781		8,040		1,025		1,025		470
Real estate - construction	—		—		—		131		131		4
Real estate - commercial	131		131		75		—		—		—
Real estate - residential	—		—		—		—		—		—
Consumer and other	—		—		—		—		—		—
Subtotal:	13,770		13,912		8,115		1,156		1,156		474
Total impaired loans	21,673		24,662		8,115		7,592		7,679		474

⁽¹⁾Troubled debt restructuring totaling $2.8 million and $1.3 million are included in the recorded investment of impaired loans as of March 31, 2019 and December 31, 2018.

The average balances of impaired loans and income recognized on impaired loans while they were considered impaired are presented below for the periods indicated (in thousands). 

	March 31, 2019		March 31, 2018
	Average Recorded Investment	Interest Income Recognized During Impairment	Average Recorded Investment	Interest Income Recognized During Impairment
Commercial, financial, and agricultural	17,430	12	46,935	18
Real estate - construction	336	—	129	—
Real estate - commercial	6,729	—	18,567	—
Real estate - residential	—	—	1,353	—
Consumer and other	—	—	—	—
Total	24,495	12	66,984	18

Credit Quality

The Company manages credit risk by observing written underwriting standards and the lending policy established by the Board of Directors and management to govern all lending activities.  The risk management program requires that each individual loan officer review his or her portfolio on a quarterly basis and assign recommended credit ratings on each loan.  These efforts are supplemented by independent reviews performed by a loan review officer and other validations performed by the internal audit department.  The results of the reviews are reported directly to the Credit Risk Committee of the Board of Directors.

Loans are categorized into risk categories based on relevant information about the ability of borrowers to serve their debt, such as: current financial information, historical payment experience, credit documentation, public information, current economic trends, and other factors. Loans are analyzed individually and classified according to their credit risk. This analysis is performed on a continuous basis. The following definitions are used for risk ratings:

Special Mention: Weakness exists that could cause future impairment, including the deterioration of financial ratios, past due status, and questionable management capabilities. Collateral values generally afford adequate coverage but may not be immediately marketable.

Substandard: Specific and well-defined weaknesses exist that may include poor liquidity and deterioration of financial ratios. Currently the borrower maintains the capacity to service the debt. The loan may be past due and related deposit accounts experiencing overdrafts. Immediate corrective action is necessary.

Doubtful: Specific weaknesses characterized as Substandard exist that are severe enough to make collection in full unlikely. There is no reliable secondary source of full repayment. Loans classified as Doubtful will usually be placed on non-accrual status. The probability of some loss is extremely high but because of certain important and reasonably specific factors, the amount of loss cannot be determined.

Loans not meeting the criteria above that are analyzed individually as part of the above-described process are considered to be Pass rated loans.

The following tables present the classes of loans by risk rating (in thousands):

			Special
	Pass		Mention		Substandard		Doubtful		Total
March 31, 2019
Commercial, financial and agricultural	$	224,476	$	10,871	$	20,063	$	—	$	255,410
Real estate – construction	84,869		4,428		426		—		89,723
Real estate – commercial	338,994		19,156		18,373		—		376,523
Real estate – residential	124,742		1,911		4,047		—		130,700
Consumer and other	40,725		1		58		—		40,784
Lease financing receivable	510		—		—		—		510
Total loans	$	814,316	$	36,367	$	42,967	$	—	$	893,650
December 31, 2018
Commercial, financial and agricultural	$	240,232	$	20,259	$	6,849	$	—	$	267,340
Real estate – construction	83,240		3,910		356		—		87,506
Real estate – commercial	329,213		23,475		15,761		—		368,449
Real estate – residential	125,984		1,955		4,496		—		132,435
Consumer and other	43,416		5		85		—		43,506
Lease financing receivable	549		—		—		—		549
Total loans	$	822,634	$	49,604	$	27,547	$	—	$	899,785

Troubled Debt Restructurings

A TDR is a restructuring of a debt made by the Company to a debtor for economic or legal reasons related to the debtor’s financial difficulties that it would not otherwise consider. The Company grants the concession in an attempt to protect as much of its investment as possible.

The following tables present information about TDRs that were modified during the periods presented by portfolio segment (in thousands):

	Three months ended
	March 31, 2019			March 31, 2018
	Number of loans	Pre-modification recorded investment		Number of loans	Pre-modification recorded investment
Commercial, financial and agricultural (1)	3	$	1,983	—	$	—

⁽¹⁾ The pre-modification and post-modification recorded investment amount represent the recorded investment on the date of the loan modification. Since the modification of these loans were payment modifications, not principal reductions, the pre-modification and post-modification recorded investment amount is the same.

During the three months ended ending March 31, 2019 and 2018, TDRs that had a payment default during the twelve-month periods and that were modified within the previous 12 months was $713,000 and $0, respectively. The Company defines a payment default as any loan that is greater than 30 days past due or was past due greater than 30 days at any point during the reporting period, or since the date of modification, whichever is shorter.

A troubled debt restructuring by definition is an impaired loan, as such all TDRs that meet the dollar threshold are reviewed for specific impairment in accordance with the Company’s allowance for loan loss methodology.  If it is determined an impairment exists, either because of a delinquency or other credit related issues, a specific reserve is recorded for the loan. There are no specific reserves on TDRs as of March 31, 2019 and 2018.

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Derivatives

3 Months Ended

Mar. 31, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives

DERIVATIVES

Derivatives Designated as Hedging Instruments

Cash Flow Hedges

The Company uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps, designated as cash flow hedges, involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed payments over the life of the agreements without the exchange of the underlying notional amount. Forward starting interest rate swaps with a notional amount totaling $12.5 million and $15.0 million were entered into on July 6, 2016 and were designated as cash flow hedges of certain repurchase agreements and FHLB advances. The swaps mature in August 2021 and December 2021, respectively. The swaps operate under a pay fixed of .993% and 1.043%, respectively, and receive variable each at LIBOR flat. The swaps were determined to be fully effective during the periods presented and therefore no ineffectiveness has been included in net income. The aggregate fair value of the swaps is recorded in other assets/other liabilities with changes in fair value recorded in other comprehensive income (loss). The amount included in other comprehensive income (loss) would be reclassified to current earnings if the hedge transactions become probable of not occurring. The Company expects the hedges to remain fully effective during the remaining terms of the swaps. At March 31, 2019 and December 31, 2018, the fair value of the swap recorded in other assets totaled $805,000 and $1.1 million, respectively. Interest expense recorded on the swap transaction totaled $2,000 and $0 for the three months endedMarch 31, 2019 and 2018, respectively and is reported as a component of interest expense.

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Leases

3 Months Ended

Mar. 31, 2019

Leases [Abstract]

Leases

LEASES

As of January 1, 2019, the Company adopted ASU 2016-02 (Topic 842) on a prospective basis using the effective date method. The adoption of the new standard did not have a material impact on MidSouth's financial statements; however, additional disclosures have been added in accordance with the ASU. See Note 2 for additional information on this new accounting standard.

We have operating leases for branches and corporate offices. Our leases have remaining lease terms from 1 to 40 years, some of which have options to extend the leases up to 5 years, and some which include options to terminate the leases within 1 year. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight -line basis over the lease term. We rent or sublease certain real estate to third parties.

The following is a summary of net lease cost and other selected information related to operating leases (cost, in thousands):

	Three Months Ended March 31, 2019
Net lease cost:
Operating lease cost	$	466
Variable lease cost	(43		)
Sub lease income	(44		)
Net lease cost	$	379
Weighted average remaining lease term (years)	14
Weighted average discount rate	3.4		%

Maturities of leases payments, undiscounted cash flow, lease liability were as follows (in thousands):

	Lease Payments		Undiscounted Cash Flow		Lease Liability
2019	$	1,817	$	250	$	1,567
2020	1,820		196		1,624
2021	1,060		149		911
2022	518		132		386
2023	351		122		229
Thereafter	5,160		1,674		3,486
	$	10,726	$	2,523	$	8,203

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Other Comprehensive Loss

3 Months Ended

Mar. 31, 2019

Equity [Abstract]

Other Comprehensive Loss

OTHER COMPREHENSIVE LOSS

The following is a summary of the tax effects allocated to each component of other comprehensive income (loss) (in thousands):

	Three Months Ended March 31,
	2019								2018
	Before Tax Amount			Tax Effect		Net of Tax Amount			Before Tax Amount			Tax Effect			Net of Tax Amount
Other comprehensive income (loss):
Securities available-for-sale:
Change in unrealized gains/losses during period	6,476			$	—	$	6,476		$	(4,048	)	$	850		$	(3,198	)
Reclassification adjustment for gains included in net income	(373		)	—		(373		)	—			—			—
Derivative instruments designated as cash flow hedges:
Change in fair value of derivative instruments designated as cash flow hedges	(261		)	—		(261		)	309			(65		)	244
Total other comprehensive income (loss)	$	5,842		$	—	$	5,842		$	(3,739	)	$	785		$	(2,954	)

The reclassifications out of accumulated other comprehensive loss into net income are presented below (in thousands):

	Three months ended March 31,
	2019			2018
Details about Accumulated Other Comprehensive Income (Loss) Components	Reclassifications Out of Accumulated Other Comprehensive Income (Loss)			Reclassifications Out of Accumulated Other Comprehensive Income (Loss)			Income Statement  Line Item
Unrealized gains and losses on securities available-for-sale:
	$	373		$	—		Gain on sale of securities, net
	—			—			Tax expense
	$	373		$	—		Net of tax
Gains on derivative instruments:
	$	(262	)	$	(40	)	Interest expense
	—			8			Tax expense
	$	(262	)	$	(32	)	Net of tax

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Earnings Per Common Share

3 Months Ended

Mar. 31, 2019

Earnings Per Share [Abstract]

Earnings Per Common Share

PER COMMON SHARE

The following table is a summary of computation of loss per common share based on the weighted average number of common shares outstanding (dollars in thousands, except per share amounts):

	Three Months Ended March 31,
	2019			2018
Net (loss) income	$	(5,830	)	$	360
Dividends on preferred stock	810			810
Adjusted net loss available to common shareholders	$	(6,640	)	$	(450	)
Weighted average number of common shares outstanding used in computation of basic loss per common share	16,674			16,495
Effect of dilutive securities:
Stock options	—			5
Weighted average number of common shares outstanding plus effect of dilutive securities – used in computation of diluted loss per share	16,674			16,500
Net loss per common share:
Basic	$	(0.40	)	$	(0.03	)
Diluted	$	(0.40	)	$	(0.03	)

The Company has reported a net loss for the three months ended March 31, 2019. As such, during those periods all potential common shares were excluded from the calculation of diluted earnings per share as they would have an anti-dilutive effect for the respective period.

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Fair Value Measurement

3 Months Ended

Mar. 31, 2019

Fair Value Disclosures [Abstract]

Fair Value Measurement

FAIR VALUE MEASUREMENT

The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures.  Securities available-for-sale and derivative financial instruments are recorded at fair value on a recurring basis.  From time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as impaired loans, loans held-for-sale, other real estate and assets held-for-sale.  Additionally, the Company is required to disclose, but not record, the fair value of other financial instruments.

Fair Value Hierarchy

The Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.  These levels are:

Level 1 – Valuation is based upon quoted prices for identical instruments traded in active markets. 

Level 2 – Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. 

Level 3 – Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market.  These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability.  Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques. 

Following is a description of valuation methodologies used for assets and liabilities which are either recorded or disclosed at fair value.

Cash and cash equivalents—The carrying value of cash and due from banks, federal funds sold and interest-bearing deposits in other banks, and time deposits in other banks approximate fair value.

Debt Securities—Securities available-for-sale are recorded at fair value on a recurring basis.  Fair value measurement is based upon quoted prices, if available.  If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions.  Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange and Treasury securities that are traded by dealers or brokers in active over-the-counter market and money market funds.  Level 2 securities include mortgage-backed securities issued by government sponsored entities, municipal bonds, corporate debt securities and asset-backed securities and are valued based on observable inputs that include: quoted market prices for similar assets, quoted market prices that are not in an active market, or other inputs that are observable in the market and can be corroborated by observable market data for substantially the full term of the securities. Securities classified as Level 3 include asset-backed securities in less liquid markets. Securities classified as Level 3 are valued based on estimates obtained from broker-dealers and are not directly observable.

Loans held-for-sale—Loans held-for-sale are carried at the lower of carrying value or fair value. Fair value is based upon quotes or bids on these loans directly from the purchaser.

Loans—For disclosure purposes, the fair value of fixed rate loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made. For variable rate loans, the carrying amount is a reasonable estimate of fair value. The Company does not record loans at fair value on a recurring basis.

The fair value of impaired loans is estimated based on discounted contractual cash flows or underlying collateral values, where applicable. A loan is determined to be impaired if the Company believes it is probable that all principal and interest amounts due according to the terms of the note will not be collected as scheduled. The fair value of impaired loans is determined in accordance with ASC 310-10, Accounting by Creditors for Impairment of a Loan, and generally results in a specific reserve established through a charge to the provision for loan losses. Losses on impaired loans are charged to the allowance when management believes the uncollectability of a loan is confirmed. Management has determined that the majority of impaired loans are Level 3 assets due to the extensive use of market appraisals

Cash Surrender Value of Life Insurance Policies—Fair value for life insurance cash surrender value is based on cash surrender values indicated by the insurance companies.

Other Real Estate—Other real estate properties are adjusted to fair value upon transfer of the loans to other real estate, and annually thereafter to insure other real estate assets are carried at the lower of carrying value or fair value. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral.  When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the other real estate as nonrecurring Level 2.  When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and adjusts the appraisal value by taking an additional discount for market conditions and there is no observable market prices, the Company records the other real estate asset as nonrecurring Level 3.

Derivative Instruments—The fair value of derivatives are determined by an independent valuation firm and are estimated using prices of financial instruments with similar characteristics. As a result, they are classified within Level 2 of the fair value hierarchy.

Deposits—The fair value of demand deposits, savings accounts, NOW accounts, and money market deposits is the carrying amount at the reporting date. The fair value of fixed maturity certificates of deposit is estimated by discounting the future cash flows using the rates currently offered for deposits of similar remaining maturities. The estimated fair value does not include customer related intangibles.

Securities Sold Under Agreements to Repurchase—The fair value approximates the carrying value of repurchase agreements due to their short-term nature.

Federal Home Loan Bank Advances—The fair value approximates carrying amount because of the short maturity of these instruments.

Junior Subordinated Debentures—For junior subordinated debentures that bear interest on a floating basis, the fair value approximates carrying amount. For junior subordinated debentures that bear interest on a fixed rate basis, the fair value is estimated using a discounted cash flow analysis that applies interest rates currently being offered on similar types of borrowings.

Off-Balance-Sheet Instruments—Because commitments to extend credit and standby letters of credit are generally short-term and made using variable rates, the carrying value and estimated fair value associated with these instruments are immaterial for disclosure.

The following table presents the fair value measurements of certain assets and liabilities measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall (in thousands):

	Recurring Basis Fair Value Measurements
	March 31, 2019
	Fair Value		Level 1		Level 2		Level 3
Financial assets:
U.S. Government agencies	$	2,977	$	—	$	2,977	$	—
State, county, and municipal securities	28,657		$	—	$	28,657	—
Mortgage-backed securities	385,258		—		385,258		—
Corporate debt securities	17,787		—		17,787		—
Derivative assets	805		—		$	805	—
Total recurring assets at fair value	$	435,484	$	—	$	435,484	$	—
	Recurring Basis Fair Value Measurements
	December 31, 2018
	Fair Value		Level 1		Level 2		Level 3
Financial assets:
U.S. Government agencies	$	3,072	$	—	$	3,072	$	—
State, county, and municipal securities	44,088		$	—	$	44,088	$	—
Mortgage-backed securities	365,877		—		365,877		—
Corporate debt securities	24,717		—		24,717		—
Derivative assets	1,067		$	—	$	1,067	$	—
Total recurring assets at fair value	$	438,821	$	—	$	438,821	$	—

The following table presents the fair value measurements of certain assets and liabilities measured at fair value on a non-recurring basis and the level within the fair value hierarchy in which the fair value measurements fall (dollars in thousands):

	Nonrecurring Basis Fair Value Measurements
	March 31, 2019
	Fair Value		Level 1		Level 2		Level 3
Financial assets:
Impaired loans	$	3,179	$	—	$	—	$	3,179
Loans held for sale	1,511		—		1,511		—
Other real estate	664		—		—		664
Assets held for sale	1,024		—		1,024		—
Total nonrecurring assets at fair value	$	6,378	$	—	$	2,535	$	3,843
	Nonrecurring Basis Fair Value Measurements
	December 31, 2018
	Fair Value		Level 1		Level 2		Level 3
Financial assets:
Impaired loans	$	3,086	$	—	$	—	$	3,086
Loans held for sale	23,876		—		23,876		—
Other real estate	1,067		—		—		1,067
Assets held for sale	1,024		—		1,024		—
Total nonrecurring assets at fair value	$	29,053	$	—	$	24,900	$	4,153

The inputs used to determine estimated fair value of impaired loans include market conditions, loan terms, underlying collateral characteristics and discount rates. The inputs used to determine fair value of OREO include market conditions, estimated marketing period or holding period, underlying collateral characteristics and discount rates.

For the three months endedMarch 31, 2019 and the year ended December 31, 2018, there was not a change in the methods and significant assumptions used to estimate fair value for assets carried at fair value.

The following table shows significant unobservable inputs used in the fair value measurement of Level 3 assets (dollars in thousands):

	Fair Value at
Description	March 31, 2019		Technique	Unobservable Inputs
Impaired loans	$	3,179	Third party appraisals	Collateral discounts and estimated costs to sell
Other real estate	664		Third party appraisals	Collateral discounts and estimated costs to sell
	Fair Value at
Description	December 31, 2018		Technique	Unobservable Inputs
Impaired loans	$	3,086	Third party appraisals	Collateral discounts and estimated costs to sell
Other real estate	1,067		Third party appraisals	Collateral discounts and estimated costs to sell

Limitations

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument.  These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument.  Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on many judgments.  These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision.  Changes in assumptions could significantly affect the estimates. Fair value estimates are based on existing on and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments

The carrying amounts and estimated fair values of the Company’s financial instruments are as follows at March 31, 2019 and December 31, 2018 (dollars in thousands):

	Fair Value Measurements
	March 31, 2019
	Carrying Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	243,430	$	243,430	$	—	$	—
Securities available-for-sale	434,679		—		434,679		—
Securities held-to-maturity	35,107		—		34,834		—
Loans, net	868,871		—		—		869,568
Derivative assets	805		—		805		—
Cash surrender value of life insurance	15,188		—		15,188		—
Financial liabilities:
Non-interest-bearing deposits	$	418,321	$	—	$	418,321	$	—
Interest-bearing deposits	1,027,314		—		847,109		178,554
Securities sold under agreements to repurchase	11,968		11,968		—		—
FHLB borrowings	27,500		—		27,500		—
Other borrowings	22,167		—		22,167		—
	December 31, 2018
	Carrying Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	205,371	$	205,371	$	—	$	—
Available-for-sale securities	437,754		—		437,754		—
Securities held-to-maturity	37,759		—		36,974		—
Loans, net	882,355		—		—		885,054
Derivative assets	1,067		—		1,067		—
Cash surrender value of life insurance	15,135		—		15,135		—
Financial liabilities:
Non-interest-bearing deposits	383,167		—		383,167		—
Interest-bearing deposits	1,068,904		—		888,806		177,794
Securities sold under agreements to repurchase	11,220		11,220		—		—
FHLB borrowings	27,500		—		27,500		—
Other borrowings	22,167		—		22,167		—

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Recent Accounting Pronouncements and Adoption of New Accounting Standards (Policies)

3 Months Ended

Mar. 31, 2019

Accounting Policies [Abstract]

Accounting Standards Adopted in 2019 and Recent Accounting Pronouncements

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.

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.

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Investment Securities (Tables)

3 Months Ended

Mar. 31, 2019

Investments, Debt and Equity Securities [Abstract]

Schedule of Available-for-Sale 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
March 31, 2019
U.S. Agencies	$	2,868	$	109	$	—	$	2,977
State, county, and municipal securities	28,492		352		187		28,657
Mortgage-backed securities	385,321		2,757		2,820		385,258
Corporate debt securities	18,068		280		561		17,787
	$	434,749	$	3,498	$	3,568	$	434,679
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

Schedule of Held-to-Maturity Securities

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
March 31, 2019
State, county, and municipal securities	$	1,662	$	2	$	5	$	1,659
Mortgage-backed securities	33,445		104		374		33,175
	$	35,107	$	106	$	379	$	34,834
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

Summary of Amortized Cost and Fair Value of Debt Securities by Contractual Maturity

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
March 31, 2019
Due after one year through five years	$	6,389	$	5,888
Due after five years through ten years	24,097		24,505
Due after ten years	18,942		19,028
Mortgage-backed securities¹	385,321		385,258
	$	434,749	$	434,679
Held-to-maturity:
Due in one year or less	$	451	$	451
Due after one year through five years	1,211		1,208
Mortgage-backed securities¹	33,445		33,175
	$	35,107	$	34,834

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

Schedule of Investment Securities with Unrealized Losses

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
March 31, 2019
State, county, and municipal securities	$	—	$	—	$	11,647	$	187	$	11,647	$	187
Mortgage-backed securities	—		—		169,319		2,820		169,319		2,820
Corporate debt securities	2,029		561		—		—		2,029		561
	$	2,029	$	561	$	180,966	$	3,007	$	182,995	$	3,568
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

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
March 31, 2019
State, county, and municipal securities	$	—	$	—	$	819	$	5	$	819	$	5
Mortgage-backed securities	—		—		18,778		374		18,778		374
	$	—	$	—	$	19,597	$	379	$	19,597	$	379
December 31, 2018
State, county, and municipal securities	$	—	$	—	$	1,703	$	10	$	1,703	$	10
Mortgage-backed securities	—		—		35,006		776		35,006		776
	$	—	$	—	$	36,709	$	786	$	36,709	$	786

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Loans (Tables)

3 Months Ended

Mar. 31, 2019

Receivables [Abstract]

Components of Loans Receivable

The loan portfolio consisted of the following (in thousands):

	March 31, 2019			December 31, 2018
Commercial, financial and agricultural	$	255,410		$	267,340
Real estate – construction	89,723			87,506
Real estate – commercial	376,523			368,449
Real estate – residential	130,700			132,435
Consumer and other	40,784			43,506
Lease financing receivable	510			549
Total loans	893,650			899,785
Allowance for loan and lease losses	(24,779		)	(17,430		)
Total loans, net	$	868,871		$	882,355

Roll Forward of Activity in Allowance for Loan Losses

A rollforward of the activity within the allowance for loan losses by loan type and recorded investment in loans as of and for the three months ended March 31, 2019 and 2018 is as follows (in thousands):

	March 31, 2019
	Commercial, Financial & Agricultural			Real Estate - Construction		Real Estate- Commercial			Real Estate - Residential			Consumer and other			Lease financing receivable			Total
Allowance for loan losses:
Beginning balance	$	10,633		$	140	$	4,913		$	1,156		$	585		$	3		$	17,430
Charge-offs	(293		)	—					—			(91		)	—			(384		)
Recoveries	82			—		25			1			25			—			133
Provision	8,431			271		(560		)	(504		)	(35		)	(3		)	7,600
Ending balance	$	18,853		$	411	$	4,378		$	653		$	484		$	—		$	24,779
Ending balance: individually evaluated for impairment	$	8,040		$	—	$	75		$	—		$	—		$	—		$	8,115
Ending balance: collectively evaluated for impairment	$	10,813		$	411	$	4,303		$	653		$	484		$	—		$	16,664
Loans:
Ending balance	$	255,410		$	89,723	$	376,523		$	130,700		$	40,784		$	510		$	893,650
Ending balance: individually evaluated for impairment	$	16,938		$	323	$	4,412		$	—		$	—		$	—		$	21,673
Ending balance: collectively evaluated for impairment	$	238,472		$	89,400	$	372,111		$	130,700		$	40,784		$	510		$	871,977

	March 31, 2018
	Commercial, Financial & Agricultural			Real Estate - Construction			Real Estate- Commercial			Real Estate - Residential			Consumer and other			Lease financing receivable		Total
Allowance for loan losses:
Beginning balance	$	20,577		$	596		$	3,918		$	837		$	957		$	3	$	26,888
Charge-offs	(1,524		)	(2		)	(86		)	(3		)	(221		)	—		(1,836		)
Recoveries	276			—			6			1			36			—		319
Provision	(264		)	159			(105		)	64			146			—		—
Ending balance	$	19,065		$	753		$	3,733		$	899		$	918		$	3	$	25,371
Ending balance: individually evaluated for impairment	$	5,968		$	94		$	76		$	20		$	6		$	—	$	6,164
Ending balance: collectively evaluated for impairment	$	13,097		$	659		$	3,657		$	879		$	912		$	3	$	19,207
Loans:
Ending balance	$	401,048		$	94,679		$	444,277		$	145,671		$	50,888		$	692	$	1,137,255
Ending balance: individually evaluated for impairment	$	55,092		$	192		$	26,005		$	2,088		$	50		$	—	$	83,427
Ending balance: collectively evaluated for impairment	$	345,956		$	94,487		$	418,272		$	143,583		$	50,838		$	692	$	1,053,828

Age Analysis of Past Due Loans by Class of Loans

An age analysis of past due loans (including both accruing and non-accruing loans) is as follows (in thousands):

	March 31, 2019
	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current		Total Loans		Loans >90 Days Past Due and Still Accruing
Commercial, financial and agricultural	$	1,658	$	62	$	3,630	$	5,350	$	250,060	$	255,410	$	—
Real estate – construction	4,332		128		117		4,577		85,146		89,723		—
Real estate – commercial	984		—		1,394		2,378		374,145		376,523		—
Real estate – residential	213		427		1,194		1,834		128,866		130,700		—
Consumer and other	85		27		29		141		40,643		40,784		—
Lease financing receivable	—		—		—		—		510		510		—
	$	7,272	$	644	$	6,364	$	14,280	$	879,370	$	893,650	$	—
	December 31, 2018
	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current		Total Loans		Loans >90 Days Past Due and Still Accruing
Commercial, financial and agricultural	$	385	$	902	$	2,173	$	3,460	$	263,880	$	267,340	$	—
Real estate – construction	47		—		117		164		87,342		87,506		—
Real estate – commercial	435		—		771		1,206		367,243		368,449		—
Real estate – residential	695		31		1,407		2,133		130,302		132,435		—
Consumer and other	176		28		56		260		43,246		43,506		—
Lease financing receivable	—		—		—		—		549		549		—
	$	1,738	$	961	$	4,524	$	7,223	$	892,562	$	899,785	$	—

Schedule of Loans on Nonaccrual Status

Non-accrual loans are as follows (in thousands):

	March 31, 2019		December 31, 2018
Commercial, financial, and agricultural	$	16,629	$	3,599
Real estate - construction	351		278
Real estate - commercial	4,462		2,977
Real estate - residential	1,720		2,008
Consumer and other	29		58
	$	23,191	$	8,920

Schedule of Loans Evaluated for Impairment

The following table presents loans that are individually evaluated for impairment (in thousands). Interest income recognized represents interest on accruing loans modified in a troubled debt restructuring (TDR).

	March 31, 2019						December 31, 2018
	Recorded Investment(1)		Unpaid Principal Balance		Related Allowance (1)		Recorded Investment (1)		Unpaid Principal Balance		Related Allowance (1)
With no related allowance recorded:
Commercial, financial, and agricultural	$	3,299	$	4,988	$	—	$	2,924	$	3,011	$	—
Real estate - construction	323		323		—		117		117		—
Real estate - commercial	4,281		5,439		—		3,395		3,395		—
Real estate - residential	—		—		—		—				—
Consumer and other	—		—		—		—		—		—
Subtotal:	7,903		10,750		—		6,436		6,523		—
With an allowance recorded:
Commercial, financial, and agricultural	13,639		13,781		8,040		1,025		1,025		470
Real estate - construction	—		—		—		131		131		4
Real estate - commercial	131		131		75		—		—		—
Real estate - residential	—		—		—		—		—		—
Consumer and other	—		—		—		—		—		—
Subtotal:	13,770		13,912		8,115		1,156		1,156		474
Total impaired loans	21,673		24,662		8,115		7,592		7,679		474

⁽¹⁾Troubled debt restructuring totaling $2.8 million and $1.3 million are included in the recorded investment of impaired loans as of March 31, 2019 and December 31, 2018.

The average balances of impaired loans and income recognized on impaired loans while they were considered impaired are presented below for the periods indicated (in thousands). 

	March 31, 2019		March 31, 2018
	Average Recorded Investment	Interest Income Recognized During Impairment	Average Recorded Investment	Interest Income Recognized During Impairment
Commercial, financial, and agricultural	17,430	12	46,935	18
Real estate - construction	336	—	129	—
Real estate - commercial	6,729	—	18,567	—
Real estate - residential	—	—	1,353	—
Consumer and other	—	—	—	—
Total	24,495	12	66,984	18

Credit Quality Indicators by Class of Loans

The following tables present the classes of loans by risk rating (in thousands):

			Special
	Pass		Mention		Substandard		Doubtful		Total
March 31, 2019
Commercial, financial and agricultural	$	224,476	$	10,871	$	20,063	$	—	$	255,410
Real estate – construction	84,869		4,428		426		—		89,723
Real estate – commercial	338,994		19,156		18,373		—		376,523
Real estate – residential	124,742		1,911		4,047		—		130,700
Consumer and other	40,725		1		58		—		40,784
Lease financing receivable	510		—		—		—		510
Total loans	$	814,316	$	36,367	$	42,967	$	—	$	893,650
December 31, 2018
Commercial, financial and agricultural	$	240,232	$	20,259	$	6,849	$	—	$	267,340
Real estate – construction	83,240		3,910		356		—		87,506
Real estate – commercial	329,213		23,475		15,761		—		368,449
Real estate – residential	125,984		1,955		4,496		—		132,435
Consumer and other	43,416		5		85		—		43,506
Lease financing receivable	549		—		—		—		549
Total loans	$	822,634	$	49,604	$	27,547	$	—	$	899,785

Schedule of Modified Troubled Debt Restructurings During the Period

The following tables present information about TDRs that were modified during the periods presented by portfolio segment (in thousands):

	Three months ended
	March 31, 2019			March 31, 2018
	Number of loans	Pre-modification recorded investment		Number of loans	Pre-modification recorded investment
Commercial, financial and agricultural (1)	3	$	1,983	—	$	—

⁽¹⁾ The pre-modification and post-modification recorded investment amount represent the recorded investment on the date of the loan modification. Since the modification of these loans were payment modifications, not principal reductions, the pre-modification and post-modification recorded investment amount is the same.

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Leases (Tables)

3 Months Ended

Mar. 31, 2019

Leases [Abstract]

Net Lease Cost and Other Selected Information

The following is a summary of net lease cost and other selected information related to operating leases (cost, in thousands):

	Three Months Ended March 31, 2019
Net lease cost:
Operating lease cost	$	466
Variable lease cost	(43		)
Sub lease income	(44		)
Net lease cost	$	379
Weighted average remaining lease term (years)	14
Weighted average discount rate	3.4		%

Maturities of Lease Liabilities

Maturities of leases payments, undiscounted cash flow, lease liability were as follows (in thousands):

	Lease Payments		Undiscounted Cash Flow		Lease Liability
2019	$	1,817	$	250	$	1,567
2020	1,820		196		1,624
2021	1,060		149		911
2022	518		132		386
2023	351		122		229
Thereafter	5,160		1,674		3,486
	$	10,726	$	2,523	$	8,203

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Other Comprehensive Loss (Tables)

3 Months Ended

Mar. 31, 2019

Equity [Abstract]

Summary of Tax Effects

The following is a summary of the tax effects allocated to each component of other comprehensive income (loss) (in thousands):

	Three Months Ended March 31,
	2019								2018
	Before Tax Amount			Tax Effect		Net of Tax Amount			Before Tax Amount			Tax Effect			Net of Tax Amount
Other comprehensive income (loss):
Securities available-for-sale:
Change in unrealized gains/losses during period	6,476			$	—	$	6,476		$	(4,048	)	$	850		$	(3,198	)
Reclassification adjustment for gains included in net income	(373		)	—		(373		)	—			—			—
Derivative instruments designated as cash flow hedges:
Change in fair value of derivative instruments designated as cash flow hedges	(261		)	—		(261		)	309			(65		)	244
Total other comprehensive income (loss)	$	5,842		$	—	$	5,842		$	(3,739	)	$	785		$	(2,954	)

Reclassification Out of Accumulated Other Comprehensive Income

The reclassifications out of accumulated other comprehensive loss into net income are presented below (in thousands):

	Three months ended March 31,
	2019			2018
Details about Accumulated Other Comprehensive Income (Loss) Components	Reclassifications Out of Accumulated Other Comprehensive Income (Loss)			Reclassifications Out of Accumulated Other Comprehensive Income (Loss)			Income Statement  Line Item
Unrealized gains and losses on securities available-for-sale:
	$	373		$	—		Gain on sale of securities, net
	—			—			Tax expense
	$	373		$	—		Net of tax
Gains on derivative instruments:
	$	(262	)	$	(40	)	Interest expense
	—			8			Tax expense
	$	(262	)	$	(32	)	Net of tax

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Earnings Per Common Share (Tables)

3 Months Ended

Mar. 31, 2019

Earnings Per Share [Abstract]

Components of Earnings per Common Share

The following table is a summary of computation of loss per common share based on the weighted average number of common shares outstanding (dollars in thousands, except per share amounts):

	Three Months Ended March 31,
	2019			2018
Net (loss) income	$	(5,830	)	$	360
Dividends on preferred stock	810			810
Adjusted net loss available to common shareholders	$	(6,640	)	$	(450	)
Weighted average number of common shares outstanding used in computation of basic loss per common share	16,674			16,495
Effect of dilutive securities:
Stock options	—			5
Weighted average number of common shares outstanding plus effect of dilutive securities – used in computation of diluted loss per share	16,674			16,500
Net loss per common share:
Basic	$	(0.40	)	$	(0.03	)
Diluted	$	(0.40	)	$	(0.03	)

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Fair Value Measurement (Tables)

3 Months Ended

Mar. 31, 2019

Fair Value Disclosures [Abstract]

Schedule of Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents the fair value measurements of certain assets and liabilities measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall (in thousands):

	Recurring Basis Fair Value Measurements
	March 31, 2019
	Fair Value		Level 1		Level 2		Level 3
Financial assets:
U.S. Government agencies	$	2,977	$	—	$	2,977	$	—
State, county, and municipal securities	28,657		$	—	$	28,657	—
Mortgage-backed securities	385,258		—		385,258		—
Corporate debt securities	17,787		—		17,787		—
Derivative assets	805		—		$	805	—
Total recurring assets at fair value	$	435,484	$	—	$	435,484	$	—
	Recurring Basis Fair Value Measurements
	December 31, 2018
	Fair Value		Level 1		Level 2		Level 3
Financial assets:
U.S. Government agencies	$	3,072	$	—	$	3,072	$	—
State, county, and municipal securities	44,088		$	—	$	44,088	$	—
Mortgage-backed securities	365,877		—		365,877		—
Corporate debt securities	24,717		—		24,717		—
Derivative assets	1,067		$	—	$	1,067	$	—
Total recurring assets at fair value	$	438,821	$	—	$	438,821	$	—

Schedule of Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

The following table presents the fair value measurements of certain assets and liabilities measured at fair value on a non-recurring basis and the level within the fair value hierarchy in which the fair value measurements fall (dollars in thousands):

	Nonrecurring Basis Fair Value Measurements
	March 31, 2019
	Fair Value		Level 1		Level 2		Level 3
Financial assets:
Impaired loans	$	3,179	$	—	$	—	$	3,179
Loans held for sale	1,511		—		1,511		—
Other real estate	664		—		—		664
Assets held for sale	1,024		—		1,024		—
Total nonrecurring assets at fair value	$	6,378	$	—	$	2,535	$	3,843
	Nonrecurring Basis Fair Value Measurements
	December 31, 2018
	Fair Value		Level 1		Level 2		Level 3
Financial assets:
Impaired loans	$	3,086	$	—	$	—	$	3,086
Loans held for sale	23,876		—		23,876		—
Other real estate	1,067		—		—		1,067
Assets held for sale	1,024		—		1,024		—
Total nonrecurring assets at fair value	$	29,053	$	—	$	24,900	$	4,153

Schedule of Significant Observable Inputs Used in Fair Value Measurement of Level 3 Assets

The following table shows significant unobservable inputs used in the fair value measurement of Level 3 assets (dollars in thousands):

	Fair Value at
Description	March 31, 2019		Technique	Unobservable Inputs
Impaired loans	$	3,179	Third party appraisals	Collateral discounts and estimated costs to sell
Other real estate	664		Third party appraisals	Collateral discounts and estimated costs to sell
	Fair Value at
Description	December 31, 2018		Technique	Unobservable Inputs
Impaired loans	$	3,086	Third party appraisals	Collateral discounts and estimated costs to sell
Other real estate	1,067		Third party appraisals	Collateral discounts and estimated costs to sell

Schedule of Carrying Amounts and Estimated Fair Values of Financial Instruments

The carrying amounts and estimated fair values of the Company’s financial instruments are as follows at March 31, 2019 and December 31, 2018 (dollars in thousands):

	Fair Value Measurements
	March 31, 2019
	Carrying Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	243,430	$	243,430	$	—	$	—
Securities available-for-sale	434,679		—		434,679		—
Securities held-to-maturity	35,107		—		34,834		—
Loans, net	868,871		—		—		869,568
Derivative assets	805		—		805		—
Cash surrender value of life insurance	15,188		—		15,188		—
Financial liabilities:
Non-interest-bearing deposits	$	418,321	$	—	$	418,321	$	—
Interest-bearing deposits	1,027,314		—		847,109		178,554
Securities sold under agreements to repurchase	11,968		11,968		—		—
FHLB borrowings	27,500		—		27,500		—
Other borrowings	22,167		—		22,167		—
	December 31, 2018
	Carrying Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	205,371	$	205,371	$	—	$	—
Available-for-sale securities	437,754		—		437,754		—
Securities held-to-maturity	37,759		—		36,974		—
Loans, net	882,355		—		—		885,054
Derivative assets	1,067		—		1,067		—
Cash surrender value of life insurance	15,135		—		15,135		—
Financial liabilities:
Non-interest-bearing deposits	383,167		—		383,167		—
Interest-bearing deposits	1,068,904		—		888,806		177,794
Securities sold under agreements to repurchase	11,220		11,220		—		—
FHLB borrowings	27,500		—		27,500		—
Other borrowings	22,167		—		22,167		—

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Basis of Presentation (Details) - $ / shares	12 Months Ended
	Dec. 31, 2019	Mar. 31, 2019	Dec. 31, 2018
Business Acquisition [Line Items]
Common stock, par value (in dollars per share)		$ 0.10	$ 0.10
Hancock Whitney Corporation
Business Acquisition [Line Items]
Common stock, par value (in dollars per share)		$ 3.33
Scenario, Forecast | Hancock Whitney Corporation | Hancock Whitney Corporation
Business Acquisition [Line Items]
Number of shares issued for each share of acquiree common stock (in shares)	0.2952

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Recent Accounting Pronouncements and Adoption of New Accounting Standards (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Jan. 01, 2019	Dec. 31, 2018
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating lease right-of-use assets	$ 8,263		$ 0
Operating lease liability	$ 8,203		$ 0
ASU 2016-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating lease right-of-use assets		$ 8,700
Operating lease liability		$ 8,700

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Investment Securities - Portfolio of Available-for-Sale Securities (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	$ 434,749	$ 443,928
Unrealized Gains	3,498	1,795
Unrealized Losses	3,568	7,969
Fair Value	434,679	437,754
U.S. Agencies
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	2,868	3,016
Unrealized Gains	109	56
Unrealized Losses	0	0
Fair Value	2,977	3,072
State, county, and municipal securities
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	28,492	44,639
Unrealized Gains	352	214
Unrealized Losses	187	765
Fair Value	28,657	44,088
Mortgage-backed securities
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	385,321	370,706
Unrealized Gains	2,757	1,092
Unrealized Losses	2,820	5,921
Fair Value	385,258	365,877
Corporate debt securities
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	18,068	25,567
Unrealized Gains	280	433
Unrealized Losses	561	1,283
Fair Value	$ 17,787	$ 24,717

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Investment Securities - Portfolio of Held-to-Maturity Securities (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Schedule of Held-to-maturity Securities [Line Items]
Held-to-maturity, Amortized Cost	$ 35,107	$ 37,759
Unrealized Gains	106	1
Unrealized Losses	379	786
Fair Value	34,834	36,974
State, county, and municipal securities
Schedule of Held-to-maturity Securities [Line Items]
Held-to-maturity, Amortized Cost	1,662	1,977
Unrealized Gains	2	1
Unrealized Losses	5	10
Fair Value	1,659	1,968
Mortgage-backed securities
Schedule of Held-to-maturity Securities [Line Items]
Held-to-maturity, Amortized Cost	33,445	35,782
Unrealized Gains	104	0
Unrealized Losses	374	776
Fair Value	$ 33,175	$ 35,006

XML

Investment Securities - Summary of Amortized Cost and Fair Value by Contractual Maturity (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Amortized Cost
Available-for-sale: Due after one year through five years	$ 6,389
Available-for-sale: Due after five years through ten years	24,097
Available-for-sale: Due after ten years	18,942
Amortized Cost	434,749	$ 443,928
Fair Value
Available-for-sale: Due after one year through five years	5,888
Available-for-sale: Due after five years through ten years	24,505
Available-for-sale: Due after ten years	19,028
Fair Value	434,679	437,754
Amortized Cost
Held-to-maturity: Due in one year or less	451
Held-to-maturity: Due after one year through five years	1,211
Amortized Cost	35,107	37,759
Fair Value
Held-to-maturity: Due in one year or less	451
Held-to-maturity: Due after one year through five years	1,208
Fair Value	34,834	36,974
Mortgage-backed securities
Amortized Cost
Amortized Cost	385,321	370,706
Fair Value
Fair Value	385,258	365,877
Amortized Cost
Amortized Cost	33,445	35,782
Fair Value
Fair Value	$ 33,175	$ 35,006

XML

Investment Securities - Summary of Unrealized Losses of Available-for-Sale Securities (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Debt Securities, Available-for-sale [Line Items]
Securities with losses under 12 months, fair value	$ 2,029	$ 31,586
Securities with losses under 12 months, gross unrealized loss	561	1,328
Securities with losses over 12 months, fair value	180,966	216,575
Securities with losses over 12 months, gross unrealized loss	3,007	6,641
Fair Value	182,995	248,161
Unrealized Loss	3,568	7,969
State, county, and municipal securities
Debt Securities, Available-for-sale [Line Items]
Securities with losses under 12 months, fair value	0	2,573
Securities with losses under 12 months, gross unrealized loss	0	11
Securities with losses over 12 months, fair value	11,647	19,539
Securities with losses over 12 months, gross unrealized loss	187	754
Fair Value	11,647	22,112
Unrealized Loss	187	765
Mortgage-backed securities
Debt Securities, Available-for-sale [Line Items]
Securities with losses under 12 months, fair value	0	25,706
Securities with losses under 12 months, gross unrealized loss	0	34
Securities with losses over 12 months, fair value	169,319	197,036
Securities with losses over 12 months, gross unrealized loss	2,820	5,887
Fair Value	169,319	222,742
Unrealized Loss	2,820	5,921
Corporate debt securities
Debt Securities, Available-for-sale [Line Items]
Securities with losses under 12 months, fair value	2,029	3,307
Securities with losses under 12 months, gross unrealized loss	561	1,283
Securities with losses over 12 months, fair value	0	0
Securities with losses over 12 months, gross unrealized loss	0	0
Fair Value	2,029	3,307
Unrealized Loss	$ 561	$ 1,283

XML

Investment Securities - Summary of Unrealized Losses of Held-to-Maturity Securities (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Schedule of Held-to-maturity Securities [Line Items]
Held-to-maturity, less than 12 months, fair value	$ 0	$ 0
Held-to-maturity, less than 12 months, gross unrealized losses	0	0
Held-to-maturity, 12 months or more, fair value	19,597	36,709
Held-to-maturity, 12 months or more, gross unrealized losses	379	786
Held-to-maturity, fair value	19,597	36,709
Held-to-maturity, gross unrealized losses	379	786
State, county, and municipal securities
Schedule of Held-to-maturity Securities [Line Items]
Held-to-maturity, less than 12 months, fair value	0	0
Held-to-maturity, less than 12 months, gross unrealized losses	0	0
Held-to-maturity, 12 months or more, fair value	819	1,703
Held-to-maturity, 12 months or more, gross unrealized losses	5	10
Held-to-maturity, fair value	819	1,703
Held-to-maturity, gross unrealized losses	5	10
Mortgage-backed securities
Schedule of Held-to-maturity Securities [Line Items]
Held-to-maturity, less than 12 months, fair value	0	0
Held-to-maturity, less than 12 months, gross unrealized losses	0	0
Held-to-maturity, 12 months or more, fair value	18,778	35,006
Held-to-maturity, 12 months or more, gross unrealized losses	374	776
Held-to-maturity, fair value	18,778	35,006
Held-to-maturity, gross unrealized losses	$ 374	$ 776

XML

Investment Securities - Narrative (Details)	3 Months Ended
	Mar. 31, 2019 USD ($) security	Mar. 31, 2018 USD ($)	Dec. 31, 2018 USD ($)
Investments, Debt and Equity Securities [Abstract]
Securities in an unrealized loss position (number of positions) | security	66
Proceeds from sale of securities available-for-sale	$ 32,352,000	$ 410,000
Available-for-sale securities, gross gains on sales	375,000	0
Available-for-sale securities, gross losses on sales	(2,000)	$ 0
Securities pledged as collateral for public funding	$ 110,900,000		$ 162,500,000

XML

Loans - Components of Loans Receivable (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018	Mar. 31, 2018
Loan portfolio [Abstract]
Loans	$ 893,650	$ 899,785	$ 1,137,255
Allowance for loan and lease losses	(24,779)	(17,430)
Loans, net	868,871	882,355
Commercial, financial and agricultural
Loan portfolio [Abstract]
Loans	255,410	267,340	401,048
Real estate – construction
Loan portfolio [Abstract]
Loans	89,723	87,506	94,679
Real estate – commercial
Loan portfolio [Abstract]
Loans	376,523	368,449	444,277
Real estate – residential
Loan portfolio [Abstract]
Loans	130,700	132,435	145,671
Consumer and other
Loan portfolio [Abstract]
Loans	40,784	43,506	50,888
Lease financing receivable
Loan portfolio [Abstract]
Loans	$ 510	$ 549	$ 692

XML

Loans - Roll Forward of Activity In Allowance for Loan Losses (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Allowance for loan losses:
Beginning balance	$ 17,430	$ 26,888
Charge-offs	(384)	(1,836)
Recoveries	133	319
Provision	7,600	0
Ending balance	24,779	25,371
Ending balance: individually evaluated for impairment	8,115	6,164
Ending balance: collectively evaluated for impairment	16,664	19,207
Loans:
Ending balance	893,650	1,137,255	$ 899,785
Ending balance: individually evaluated for impairment	21,673	83,427
Ending balance: collectively evaluated for impairment	871,977	1,053,828
Commercial, financial and agricultural
Allowance for loan losses:
Beginning balance	10,633	20,577
Charge-offs	(293)	(1,524)
Recoveries	82	276
Provision	8,431	(264)
Ending balance	18,853	19,065
Ending balance: individually evaluated for impairment	8,040	5,968
Ending balance: collectively evaluated for impairment	10,813	13,097
Loans:
Ending balance	255,410	401,048	267,340
Ending balance: individually evaluated for impairment	16,938	55,092
Ending balance: collectively evaluated for impairment	238,472	345,956
Real estate – construction
Allowance for loan losses:
Beginning balance	140	596
Charge-offs	0	(2)
Recoveries	0	0
Provision	271	159
Ending balance	411	753
Ending balance: individually evaluated for impairment	0	94
Ending balance: collectively evaluated for impairment	411	659
Loans:
Ending balance	89,723	94,679	87,506
Ending balance: individually evaluated for impairment	323	192
Ending balance: collectively evaluated for impairment	89,400	94,487
Real estate – commercial
Allowance for loan losses:
Beginning balance	4,913	3,918
Charge-offs		(86)
Recoveries	25	6
Provision	(560)	(105)
Ending balance	4,378	3,733
Ending balance: individually evaluated for impairment	75	76
Ending balance: collectively evaluated for impairment	4,303	3,657
Loans:
Ending balance	376,523	444,277	368,449
Ending balance: individually evaluated for impairment	4,412	26,005
Ending balance: collectively evaluated for impairment	372,111	418,272
Real estate – residential
Allowance for loan losses:
Beginning balance	1,156	837
Charge-offs	0	(3)
Recoveries	1	1
Provision	(504)	64
Ending balance	653	899
Ending balance: individually evaluated for impairment	0	20
Ending balance: collectively evaluated for impairment	653	879
Loans:
Ending balance	130,700	145,671	132,435
Ending balance: individually evaluated for impairment	0	2,088
Ending balance: collectively evaluated for impairment	130,700	143,583
Consumer and other
Allowance for loan losses:
Beginning balance	585	957
Charge-offs	(91)	(221)
Recoveries	25	36
Provision	(35)	146
Ending balance	484	918
Ending balance: individually evaluated for impairment	0	6
Ending balance: collectively evaluated for impairment	484	912
Loans:
Ending balance	40,784	50,888	43,506
Ending balance: individually evaluated for impairment	0	50
Ending balance: collectively evaluated for impairment	40,784	50,838
Lease financing receivable
Allowance for loan losses:
Beginning balance	3	3
Charge-offs	0	0
Recoveries	0	0
Provision	(3)	0
Ending balance	0	3
Ending balance: individually evaluated for impairment	0	0
Ending balance: collectively evaluated for impairment	0	3
Loans:
Ending balance	510	692	$ 549
Ending balance: individually evaluated for impairment	0	0
Ending balance: collectively evaluated for impairment	$ 510	$ 692

XML

Loans - Age Analysis of Past Due Loans by Class of Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Age Analysis of Past Due Loans by Class of Loans [Abstract]
Total Past Due	$ 14,280	$ 7,223
Current	879,370	892,562
Total Loans	893,650	899,785
Loans 90 Days Past Due and Still Accruing	0	0
Commercial, financial and agricultural
Age Analysis of Past Due Loans by Class of Loans [Abstract]
Total Past Due	5,350	3,460
Current	250,060	263,880
Total Loans	255,410	267,340
Loans 90 Days Past Due and Still Accruing	0	0
Real estate – construction
Age Analysis of Past Due Loans by Class of Loans [Abstract]
Total Past Due	4,577	164
Current	85,146	87,342
Total Loans	89,723	87,506
Loans 90 Days Past Due and Still Accruing	0	0
Real estate – commercial
Age Analysis of Past Due Loans by Class of Loans [Abstract]
Total Past Due	2,378	1,206
Current	374,145	367,243
Total Loans	376,523	368,449
Loans 90 Days Past Due and Still Accruing	0	0
Real estate – residential
Age Analysis of Past Due Loans by Class of Loans [Abstract]
Total Past Due	1,834	2,133
Current	128,866	130,302
Total Loans	130,700	132,435
Loans 90 Days Past Due and Still Accruing	0	0
Consumer and other
Age Analysis of Past Due Loans by Class of Loans [Abstract]
Total Past Due	141	260
Current	40,643	43,246
Total Loans	40,784	43,506
Loans 90 Days Past Due and Still Accruing	0	0
Lease financing receivable
Age Analysis of Past Due Loans by Class of Loans [Abstract]
Total Past Due	0	0
Current	510	549
Total Loans	510	549
Loans 90 Days Past Due and Still Accruing	0	0
30-59 Days Past Due
Age Analysis of Past Due Loans by Class of Loans [Abstract]
Total Past Due	7,272	1,738
30-59 Days Past Due | Commercial, financial and agricultural
Age Analysis of Past Due Loans by Class of Loans [Abstract]
Total Past Due	1,658	385
30-59 Days Past Due | Real estate – construction
Age Analysis of Past Due Loans by Class of Loans [Abstract]
Total Past Due	4,332	47
30-59 Days Past Due | Real estate – commercial
Age Analysis of Past Due Loans by Class of Loans [Abstract]
Total Past Due	984	435
30-59 Days Past Due | Real estate – residential
Age Analysis of Past Due Loans by Class of Loans [Abstract]
Total Past Due	213	695
30-59 Days Past Due | Consumer and other
Age Analysis of Past Due Loans by Class of Loans [Abstract]
Total Past Due	85	176
30-59 Days Past Due | Lease financing receivable
Age Analysis of Past Due Loans by Class of Loans [Abstract]
Total Past Due	0	0
60-89 Days Past Due
Age Analysis of Past Due Loans by Class of Loans [Abstract]
Total Past Due	644	961
60-89 Days Past Due | Commercial, financial and agricultural
Age Analysis of Past Due Loans by Class of Loans [Abstract]
Total Past Due	62	902
60-89 Days Past Due | Real estate – construction
Age Analysis of Past Due Loans by Class of Loans [Abstract]
Total Past Due	128	0
60-89 Days Past Due | Real estate – commercial
Age Analysis of Past Due Loans by Class of Loans [Abstract]
Total Past Due	0	0
60-89 Days Past Due | Real estate – residential
Age Analysis of Past Due Loans by Class of Loans [Abstract]
Total Past Due	427	31
60-89 Days Past Due | Consumer and other
Age Analysis of Past Due Loans by Class of Loans [Abstract]
Total Past Due	27	28
60-89 Days Past Due | Lease financing receivable
Age Analysis of Past Due Loans by Class of Loans [Abstract]
Total Past Due	0	0
Greater than 90 Days Past Due
Age Analysis of Past Due Loans by Class of Loans [Abstract]
Total Past Due	6,364	4,524
Greater than 90 Days Past Due | Commercial, financial and agricultural
Age Analysis of Past Due Loans by Class of Loans [Abstract]
Total Past Due	3,630	2,173
Greater than 90 Days Past Due | Real estate – construction
Age Analysis of Past Due Loans by Class of Loans [Abstract]
Total Past Due	117	117
Greater than 90 Days Past Due | Real estate – commercial
Age Analysis of Past Due Loans by Class of Loans [Abstract]
Total Past Due	1,394	771
Greater than 90 Days Past Due | Real estate – residential
Age Analysis of Past Due Loans by Class of Loans [Abstract]
Total Past Due	1,194	1,407
Greater than 90 Days Past Due | Consumer and other
Age Analysis of Past Due Loans by Class of Loans [Abstract]
Total Past Due	29	56
Greater than 90 Days Past Due | Lease financing receivable
Age Analysis of Past Due Loans by Class of Loans [Abstract]
Total Past Due	$ 0	$ 0

XML

Loans - Schedule of Loans on Nonaccrual Status (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans on nonaccrual status	$ 23,191	$ 8,920
Commercial, financial and agricultural
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans on nonaccrual status	16,629	3,599
Real estate – construction
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans on nonaccrual status	351	278
Real estate – commercial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans on nonaccrual status	4,462	2,977
Real estate – residential
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans on nonaccrual status	1,720	2,008
Consumer and other
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans on nonaccrual status	$ 29	$ 58

XML

Loans - Schedule of Loans Evaluated for Impairment (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
With no related allowance recorded:
Recorded Investment	$ 7,903		$ 6,436
Unpaid Principal Balance	10,750		6,523
With an allowance recorded:
Recorded Investment	13,770		1,156
Unpaid Principal Balance	13,912		1,156
Related Allowance	8,115		474
Total impaired loans
Recorded Investment	21,673		7,592
Unpaid Principal Balance	24,662		7,679
Related Allowance	8,115		474
Average Recorded Investment	24,495	$ 66,984
Interest Income Recognized During Impairment	12	18
Troubled debt restructuring included in recorded investment of impaired loans	2,800		1,300
Commercial, financial and agricultural
With no related allowance recorded:
Recorded Investment	3,299		2,924
Unpaid Principal Balance	4,988		3,011
With an allowance recorded:
Recorded Investment	13,639		1,025
Unpaid Principal Balance	13,781		1,025
Related Allowance	8,040		470
Total impaired loans
Related Allowance	8,040		470
Average Recorded Investment	17,430	46,935
Interest Income Recognized During Impairment	12	18
Real estate – construction
With no related allowance recorded:
Recorded Investment	323		117
Unpaid Principal Balance	323		117
With an allowance recorded:
Recorded Investment	0		131
Unpaid Principal Balance	0		131
Related Allowance	0		4
Total impaired loans
Related Allowance	0		4
Average Recorded Investment	336	129
Interest Income Recognized During Impairment	0	0
Real estate – commercial
With no related allowance recorded:
Recorded Investment	4,281		3,395
Unpaid Principal Balance	5,439		3,395
With an allowance recorded:
Recorded Investment	131		0
Unpaid Principal Balance	131		0
Related Allowance	75		0
Total impaired loans
Related Allowance	75		0
Average Recorded Investment	6,729	18,567
Interest Income Recognized During Impairment	0	0
Real estate – residential
With no related allowance recorded:
Recorded Investment	0		0
Unpaid Principal Balance	0
With an allowance recorded:
Recorded Investment	0		0
Unpaid Principal Balance	0		0
Related Allowance	0		0
Total impaired loans
Related Allowance	0		0
Average Recorded Investment	0	1,353
Interest Income Recognized During Impairment	0	0
Consumer and other
With no related allowance recorded:
Recorded Investment	0		0
Unpaid Principal Balance	0		0
With an allowance recorded:
Recorded Investment	0		0
Unpaid Principal Balance	0		0
Related Allowance	0		0
Total impaired loans
Related Allowance	0		$ 0
Average Recorded Investment	0	0
Interest Income Recognized During Impairment	$ 0	$ 0

XML

Loans - Credit Quality Indicators by Class of Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018	Mar. 31, 2018
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans	$ 893,650	$ 899,785	$ 1,137,255
Commercial, financial and agricultural
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans	255,410	267,340	401,048
Real estate – construction
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans	89,723	87,506	94,679
Real estate – commercial
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans	376,523	368,449	444,277
Real estate – residential
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans	130,700	132,435	145,671
Consumer and other
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans	40,784	43,506	50,888
Lease financing receivable
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans	510	549	$ 692
Pass
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans	814,316	822,634
Pass | Commercial, financial and agricultural
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans	224,476	240,232
Pass | Real estate – construction
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans	84,869	83,240
Pass | Real estate – commercial
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans	338,994	329,213
Pass | Real estate – residential
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans	124,742	125,984
Pass | Consumer and other
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans	40,725	43,416
Pass | Lease financing receivable
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans	510	549
Special Mention
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans	36,367	49,604
Special Mention | Commercial, financial and agricultural
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans	10,871	20,259
Special Mention | Real estate – construction
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans	4,428	3,910
Special Mention | Real estate – commercial
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans	19,156	23,475
Special Mention | Real estate – residential
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans	1,911	1,955
Special Mention | Consumer and other
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans	1	5
Special Mention | Lease financing receivable
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans	0	0
Substandard
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans	42,967	27,547
Substandard | Commercial, financial and agricultural
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans	20,063	6,849
Substandard | Real estate – construction
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans	426	356
Substandard | Real estate – commercial
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans	18,373	15,761
Substandard | Real estate – residential
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans	4,047	4,496
Substandard | Consumer and other
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans	58	85
Substandard | Lease financing receivable
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans	0	0
Doubtful
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans	0	0
Doubtful | Commercial, financial and agricultural
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans	0	0
Doubtful | Real estate – construction
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans	0	0
Doubtful | Real estate – commercial
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans	0	0
Doubtful | Real estate – residential
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans	0	0
Doubtful | Consumer and other
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans	0	0
Doubtful | Lease financing receivable
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans	$ 0	$ 0

XML

Loans - Schedule of Modified Troubled Debt Restructurings During the Period (Details) - Commercial, financial and agricultural $ in Thousands	3 Months Ended
	Mar. 31, 2019 USD ($) contract	Mar. 31, 2018 USD ($) contract
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of loans | contract	3	0
Pre-modification recorded investment | $	$ 1,983	$ 0

XML

Loans - Narrative (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2019 USD ($) industry_concentration	Mar. 31, 2018 USD ($)
Financing Receivable, Recorded Investment [Line Items]
Number of industry segment concentration above threshold limit | industry_concentration	1
Concentration risk percentage	10.00%
Loans exposure in oil and gas industry	$ 106,800
Loans with exposure in commercial real estate	3,700
TDRs that had a payment default that were modified within the previous 12 months	$ 713	$ 0
Loans and Finance Receivables | Customer Concentration Risk | Manufacturing Industry
Financing Receivable, Recorded Investment [Line Items]
Concentration risk percentage	12.00%

XML

Derivatives (Details) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018	Jul. 06, 2016
Designated as hedging instrument | Cash flow hedging | Interest rate swaps, repurchase agreements
Derivative [Line Items]
Notional amount				$ 12,500,000.0
Pay fixed rate			0.993%
Designated as hedging instrument | Cash flow hedging | Interest rate swaps, FHLB advances
Derivative [Line Items]
Notional amount				$ 15,000,000.0
Pay fixed rate			1.043%
Designated as hedging instrument | Cash flow hedging | Interest rate swaps
Derivative [Line Items]
Derivative asset fair value	$ 805,000		$ 1,100,000
Interest expense | Interest rate swaps
Derivative [Line Items]
Interest expense	$ 2,000	$ 0

XML

Leases - Narrative (Details)	3 Months Ended
	Mar. 31, 2019
Lessee, Lease, Description [Line Items]
Extension option term	5 years
Option to terminate, period	1 year
Minimum
Lessee, Lease, Description [Line Items]
Remaining lease term	1 year
Maximum
Lessee, Lease, Description [Line Items]
Remaining lease term	40 years

XML

Leases - Net Lease Cost and Other Selected Information (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2019 USD ($)
Net lease cost:
Operating lease cost	$ 466
Variable lease cost	(43)
Sub lease income	(44)
Net lease cost	$ 379
Weighted average remaining lease term	14 years
Weighted average discount rate	3.40%

XML

Leases - Maturities of Lease Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Lease Payments
2019	$ 1,817
2020	1,820
2021	1,060
2022	518
2023	351
Thereafter	5,160
Total	10,726
Undiscounted Cash Flow
2019	250
2020	196
2021	149
2022	132
2023	122
Thereafter	1,674
Total	2,523
Lease Liability
2019	1,567
2020	1,624
2021	911
2022	386
2023	229
Thereafter	3,486
Total	$ 8,203	$ 0

XML

Other Comprehensive Loss - Summary of the Tax Effects (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Accumulated Other Comprehensive Income (Loss) [Line Items]
Total other comprehensive income (loss), before tax	$ 5,842	$ (3,739)
Total other comprehensive (loss) income, tax effect	0	785
Total other comprehensive income (loss), net of tax	5,842	(2,954)
Securities available-for-sale:
Accumulated Other Comprehensive Income (Loss) [Line Items]
Change in unrealized gains/losses during period, before tax	6,476	(4,048)
Change in unrealized gains/losses during period, tax effect	0	850
Change in unrealized gains/losses during period, net of tax	6,476	(3,198)
Reclassification adjustment for gains included in net income, before tax	(373)	0
Reclassification adjustment for gains included in net income, tax effect	0	0
Reclassification adjustment for gains included in net income, net of tax	(373)	0
Derivative instruments designated as cash flow hedges:
Accumulated Other Comprehensive Income (Loss) [Line Items]
Change in unrealized gains/losses during period, before tax	(261)	309
Change in unrealized gains/losses during period, tax effect	0	(65)
Change in unrealized gains/losses during period, net of tax	(261)	244
Total other comprehensive income (loss)
Accumulated Other Comprehensive Income (Loss) [Line Items]
Total other comprehensive income (loss), before tax	5,842	(3,739)
Total other comprehensive (loss) income, tax effect	0	785
Total other comprehensive income (loss), net of tax	$ 5,842	$ (2,954)

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Other Comprehensive Loss - Reclassifications (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Gain on sale of securities, net	$ 373	$ 0
Tax expense	0	(34)
Interest expense	2,062	1,627
Net of tax	(5,830)	360
Unrealized gains and losses on securities available-for-sale: | Reclassifications Out of Accumulated Other Comprehensive Income (Loss)
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Gain on sale of securities, net	373	0
Tax expense	0	0
Net of tax	373	0
Gains on derivative instruments: | Interest Rate Contract | Reclassifications Out of Accumulated Other Comprehensive Income (Loss)
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Tax expense	0	8
Interest expense	(262)	(40)
Net of tax	$ (262)	$ (32)

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Earnings Per Common Share - Components of Earnings per Common Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Earnings Per Share [Abstract]
Net (loss) income	$ (5,830)	$ 360
Dividends on preferred stock	810	810
Adjusted net loss available to common shareholders	$ (6,640)	$ (450)
Weighted average number of common shares outstanding used in computation of basic loss per common share (in shares)	16,674	16,495
Effect of dilutive securities:
Stock options (in shares)	0	5
Weighted average number of common shares outstanding plus effect of dilutive securities - used in computation of diluted loss per share (in shares)	16,674	16,500
Net loss per common share:
Basic (in dollars per share)	$ (0.40)	$ (0.03)
Diluted (in dollars per share)	$ (0.40)	$ (0.03)

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Fair Value Measurement - On a Recurring and Nonrecurring Basis (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	$ 434,679	$ 437,754
Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	805	1,067
Total assets at fair value	435,484	438,821
Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	0	0
Total assets at fair value	0	0
Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	805	1,067
Total assets at fair value	435,484	438,821
Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	0	0
Total assets at fair value	0	0
Nonrecurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans	3,179	3,086
Loans held for sale	1,511	23,876
Other real estate	664	1,067
Assets held for sale	1,024	1,024
Total assets at fair value	6,378	29,053
Nonrecurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans	0	0
Loans held for sale	0	0
Other real estate	0	0
Assets held for sale	0	0
Total assets at fair value	0	0
Nonrecurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans	0	0
Loans held for sale	1,511	23,876
Other real estate	0	0
Assets held for sale	1,024	1,024
Total assets at fair value	2,535	24,900
Nonrecurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans	3,179	3,086
Loans held for sale	0	0
Other real estate	664	1,067
Assets held for sale	0	0
Total assets at fair value	3,843	4,153
U.S. Government agencies
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	2,977	3,072
U.S. Government agencies | Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	2,977	3,072
U.S. Government agencies | Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	0	0
U.S. Government agencies | Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	2,977	3,072
U.S. Government agencies | Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	0	0
State, county, and municipal securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	28,657	44,088
State, county, and municipal securities | Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	28,657	44,088
State, county, and municipal securities | Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	0	0
State, county, and municipal securities | Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	28,657	44,088
State, county, and municipal securities | Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	0	0
Mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	385,258	365,877
Mortgage-backed securities | Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	385,258	365,877
Mortgage-backed securities | Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	0	0
Mortgage-backed securities | Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	385,258	365,877
Mortgage-backed securities | Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	0	0
Corporate debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	17,787	24,717
Corporate debt securities | Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	17,787	24,717
Corporate debt securities | Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	0	0
Corporate debt securities | Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	17,787	24,717
Corporate debt securities | Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	$ 0	$ 0

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Fair Value Measurement - Schedule of Significant Observable Inputs Used in Fair Value Measurement of Level 3 Assets (Details) - Nonrecurring - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loans	$ 3,179	$ 3,086
Other real estate	664	1,067
Level 3
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loans	3,179	3,086
Other real estate	664	1,067
Third party appraisals | Level 3
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loans	3,179	3,086
Other real estate	$ 664	$ 1,067

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Fair Value Measurement - Schedule of Carrying Amounts and Estimated Fair Values of Financial Instruments (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Financial assets:
Securities available-for-sale	$ 434,679	$ 437,754
Securities held-to-maturity	34,834	36,974
Carrying Value
Financial assets:
Cash and cash equivalents	243,430	205,371
Securities available-for-sale	434,679	437,754
Securities held-to-maturity	35,107	37,759
Loans, net	868,871	882,355
Derivative assets	805	1,067
Cash surrender value of life insurance	15,188	15,135
Financial liabilities:
Non-interest-bearing deposits	418,321	383,167
Interest-bearing deposits	1,027,314	1,068,904
Securities sold under agreements to repurchase	11,968	11,220
FHLB borrowings	27,500	27,500
Other borrowings	22,167	22,167
Fair Value | Level 1
Financial assets:
Cash and cash equivalents	243,430	205,371
Securities available-for-sale	0	0
Securities held-to-maturity	0	0
Loans, net	0	0
Derivative assets	0	0
Cash surrender value of life insurance	0	0
Financial liabilities:
Non-interest-bearing deposits	0	0
Interest-bearing deposits	0	0
Securities sold under agreements to repurchase	11,968	11,220
FHLB borrowings	0	0
Other borrowings	0	0
Fair Value | Level 2
Financial assets:
Cash and cash equivalents	0	0
Securities available-for-sale	434,679	437,754
Securities held-to-maturity	34,834	36,974
Loans, net	0	0
Derivative assets	805	1,067
Cash surrender value of life insurance	15,188	15,135
Financial liabilities:
Non-interest-bearing deposits	418,321	383,167
Interest-bearing deposits	847,109	888,806
Securities sold under agreements to repurchase	0	0
FHLB borrowings	27,500	27,500
Other borrowings	22,167	22,167
Fair Value | Level 3
Financial assets:
Cash and cash equivalents	0	0
Securities available-for-sale	0	0
Securities held-to-maturity	0	0
Loans, net	869,568	885,054
Derivative assets	0	0
Cash surrender value of life insurance	0	0
Financial liabilities:
Non-interest-bearing deposits	0	0
Interest-bearing deposits	178,554	177,794
Securities sold under agreements to repurchase	0	0
FHLB borrowings	0	0
Other borrowings	$ 0	$ 0