MidSouth Bancorp, Inc. Reports Fourth Quarter 2013 Results And Declares Quarterly Dividends

LAFAYETTE, La., Jan. 28, 2014 /PRNewswire/ -- MidSouth Bancorp, Inc. ("MidSouth") (NYSE:MSL) today reported record quarterly net earnings available to common shareholders of $3.4 million for the fourth quarter of 2013, compared to net earnings available to common shareholders of $1.3 million reported for the fourth quarter of 2012 and $3.1 million in net earnings available to common shareholders for the third quarter of 2013.  Diluted earnings for the fourth quarter of 2013 were $0.29 per common share, compared to $0.12 per common share reported for the fourth quarter of 2012 and $0.27 per common share reported for the third quarter of 2013. 

(Logo: http://photos.prnewswire.com/prnh/20100125/MIDSOUTHLOGO)

MidSouth's Board of Directors announced a cash dividend was declared in the amount of $0.08 per share to be paid on its common stock on April 1, 2014 to shareholders of record as of the close of business on March 14, 2014.  Additionally, a quarterly cash dividend of 1.00% per preferred share on its 4.00% Non-Cumulative Perpetual Convertible Preferred Stock, Series C was declared payable on April 15, 2014 to shareholders of record as of the close of business on April 1, 2014.  The Company's Series C Preferred Stock is now quoted on the OTC Bulletin Board ("OTCBB") under the ticker symbol MSLXP.

Dividends paid on the Series B Preferred Stock issued to the Treasury as a result of our participation in the Small Business Lending Fund ("SBLF") totaled $80,000 for the fourth quarter of 2013 based on a dividend rate of 1.00%.  The dividend rate was set at 1.00% for the fourth quarter of 2013 due to attaining the target 10% growth rate in qualified small business loans during the second quarter of 2013.  As a result of qualified small business loan growth as of September 30, 2013, the dividend rate was set at 1.00% for the period from January 1, 2014 through February 25, 2016.  The Series C Preferred Stock issued with the December 28, 2012 acquisition of PSB Financial Corporation ("PSB") paid dividends totaling $100,000 for the three months ended December 31, 2013. 

Balance Sheet

Consolidated assets remained constant at $1.9 billion for the years ended December 31, 2013 and December 31, 2012.   Deposits totaled $1.5 billion at December 31, 2013, compared to $1.6 billion at December 31, 2012.  Our stable core deposit base, which excludes time deposits, grew $38.9 million and accounted for 84.2% of deposits at December 31, 2013 compared to 80% of deposits at year end 2012.  Time deposits declined $72.0 million for the year ended December 31, 2013 primarily due to the run-off of acquired higher cost certificate of deposit accounts.  Net loans totaled $1.1 billion at December 31, 2013, compared to $1.0 billion at December 31, 2012.  Net loans grew $89.2 million, or 8.6% for the year ended December 31, 2013.  Net loans declined $7.6 million in the fourth quarter of 2013 primarily due to approximately $14.2 million in net paydowns received on commercial lines of credit.

MidSouth's Tier 1 leverage capital ratio was 9.35% at December 31, 2013 compared to 9.17% at September 30, 2013.  Tier 1 risk-based capital and total risk-based capital ratios were 13.47% and 14.19 % at December 31, 2013, compared to 13.13% and 13.84% at September 30, 2013, respectively.  Tier 1 common equity to total risk-weighted assets at December 31, 2013 was 7.86%.  Tangible common equity totaled $98.6 million at December 31, 2013, compared to $96.9 million at September 30, 2013.  Tangible book value per share at December 31, 2013 was $8.76 versus $8.61 at September 30, 2013.

Rusty Cloutier, President & CEO, commenting on the fourth quarter earnings stated, "We continued to see a strong return on average tangible common equity at 13.5% and improving trends in asset quality with stable net interest margins.  However, early in the fourth quarter, we announced that Jerry Reaux, our Vice Chairman and COO, would lead an initiative to accelerate improvement in earnings for our shareholders.  This initiative began with a study of our peers that report strong efficiency ratios and with the internal appointment of Clay Abington as Business Process Manager to oversee implementation of the initiative over the next 24 months.  We also engaged FIS Consulting Services to work with us in identifying opportunities for operating efficiencies and enhancing revenues.  To reinforce the initiative, the Board of Directors and executive management made a commitment to paying no bonuses under the annual incentive plan for 2013 and no raises are to be awarded to executive management in 2014.  In making the changes necessary to accomplish this efficiency initiative, we will reinforce priorities held throughout our history – a strong return on investment to our shareholders and a strong return on investment in the communities we serve for the benefit of our customers." 

Asset Quality

Nonperforming assets declined 33.1% in year-over-year comparison and 9.2% in sequential-quarter comparison as asset quality continued to improve.  Total nonperforming assets were reduced from $17.9 million at December 31, 2012 to $13.2 million at September 30, 2013 and to $12.0 million at December 31, 2013, primarily due to a $5.0 million reduction in nonperforming loans during 2013.    

Allowance coverage for nonperforming loans increased to 166.36% at December 31, 2013 compared to 133.26% at September 30, 2013.  The ALL/total loans ratio was 0.77% at December 31, 2013, compared to 0.76% at September 30, 2013.  Including valuation accounting adjustments on acquired loans, the total valuation accounting adjustment plus ALL was 1.50% of loans at December 31, 2013.  The ratio of annualized net charge-offs to total loans was 0.24% for the three months ended December 31, 2013 compared to 0.11% for the three months ended September 30, 2013.  The increase in annualized net charge-offs during the fourth quarter of 2013 resulted primarily from the charge-off of several small commercial loans totaling approximately $427,000.

Total nonperforming assets to total loans plus ORE and other assets repossessed decreased to 1.05% at December 31, 2013 from 1.15% at September 30, 2013.  Loans classified as troubled debt restructurings ("TDRs") totaled $412,000 at December 31, 2013 compared to $419,000 at September 30, 2013.  Classified assets, including ORE, decreased $3.6 million, or 10.4%, to $30.9 million compared to $34.5 million at September 30, 2013.

Fourth Quarter 2013 vs. Fourth Quarter 2012 Earnings Comparison

Fourth quarter 2013 net earnings available to common shareholders totaled $3.4 million compared to $1.3 million for the fourth quarter of 2012.  Revenues from consolidated operations increased $7.0 million in quarterly comparison and included a net increase of $940,000 in purchase accounting adjustments on the 2012 and 2011 acquisitions.  Noninterest income increased $1.2 million in quarterly comparison, from $3.7 million for the three months ended December 31, 2012 to $4.9 million for the three months ended December 31, 2013.  Increases in noninterest income consisted primarily of $591,000 in service charges on deposit accounts and $480,000 in ATM/debit card income due to the acquired branches in the Timber Region, formerly PSB. 

Noninterest expenses increased $3.9 million for the fourth quarter 2013 compared to fourth quarter 2012 and included approximately $1.8 million in operating expenses for the Timber Region and approximately $374,000 in operating costs for six new branches opened in late 2012 and 2013.  The remaining $1.7 million of increased operating costs consisted primarily of $1.3 million in salaries and benefits costs, $368,000 in occupancy expense and $281,000 in ATM/debit card expense.  The increased costs were partially offset by a $263,000 decrease in legal and professional fees, a $163,000 decrease in data processing costs and a $184,000 decrease in expenses on ORE.  The provision for loan losses increased $300,000 primarily as a result of increased net charge-offs in the fourth quarter of 2013.  Income tax expense increased $880,000 in quarterly comparison.

Fully taxable-equivalent ("FTE") net interest income totaled $19.8 million and $14.0 million for the quarters ended December 31, 2013 and 2012, respectively.  The FTE net interest income increased $5.8 million in prior year quarterly comparison primarily due to a $414.2 million increase in the volume of average earning assets primarily as a result of the PSB acquisition.  The average volume of loans increased $342.5 million in quarterly comparison and the average yield on loans increased 6 basis points, from 6.21% to 6.27%.  Purchase accounting adjustments on acquired loans added 51 basis points to the average yield on loans for the fourth quarter of 2013 and 22 basis points to the average yield on loans for the fourth quarter of 2012.  Net of the impact of the purchase accounting adjustments, average loan yields declined 23 basis points in prior year quarterly comparison, from 5.99% to 5.76%.  Loan yields have declined primarily as the result of a sustained low market interest rate environment.

Investment securities totaled $497.2 million, or 26.9% of total assets at December 31, 2013, versus $578.1 million, or 31.2% of total assets at December 31, 2012.  The investment portfolio had an effective duration of 4.2 years and an unrealized loss of $164,000 at December 31, 2013.  The average volume of investment securities increased $78.4 million in quarterly comparison primarily due to $152.7 million in securities acquired with the PSB acquisition at year end December 2012, of which $28.8 million were sold early in the first quarter of 2013.  The average tax equivalent yield on investment securities decreased 5 basis points, from 2.62% to 2.57%.  

The average yield on all earning assets increased 23 basis points in prior year quarterly comparison, from 4.83% for the fourth quarter of 2012 to 5.06% for the fourth quarter of 2013.   Net of the impact of purchase accounting adjustments, the average yield on total earning assets increased 2 basis points, from 4.70% to 4.72% for the three month periods ended December 31, 2012 and 2013, respectively.

The impact to interest expense of a $346.7 million increase in the average volume of interest bearing liabilities was partially offset by a 9 basis point decrease in the average rate paid on interest bearing liabilities, from 0.58% at December 31, 2012 to 0.49% at December 31, 2013.  Net of purchase accounting adjustments on acquired certificates of deposit and FHLB borrowings, the average rate paid on interest bearing liabilities was 0.66% for the fourth quarter of 2012 and declined to 0.55% for the fourth quarter of 2013.

As a result of these changes in volume and yield on earning assets and interest bearing liabilities, the FTE net interest margin increased 28 basis points, from 4.41% for the fourth quarter of 2012 to 4.69% for the fourth quarter of 2013.  Net of purchase accounting adjustments on loans, deposits and FHLB borrowings, the FTE margin increased 9 basis points, from 4.22% for the fourth quarter of 2012 to 4.31% for the fourth quarter of 2013.

Fourth Quarter 2013 vs. Third Quarter 2013 Earnings Comparison

In sequential-quarter comparison, net earnings available to common shareholders increased $293,000 as the positive impact from a $368,000 increase in net interest income and a $288,000 decrease in preferred dividends was partially offset by a $350,000 increase in provision for loan losses.  Net interest income increased in sequential-quarter comparison primarily due to $483,000 in non-recurring interest income recorded in the fourth quarter of 2013.  This amount was comprised of additional discount accretion earned from the PSB loan portfolio as a result of higher than anticipated loan payoffs.

Noninterest expenses decreased $54,000 as reductions in several noninterest expense categories offset increases of $141,000 in salaries and benefits costs and $203,000 in legal and professional fees. 

FTE net interest income increased $348,000 in sequential-quarter comparison primarily due to an increase in purchase accounting adjustments that resulted in an increase in the average yield on loans, from 6.24% for the third quarter of 2013 to 6.27% for the fourth quarter of 2013.  An average decrease of $12.0 million in investment securities partially funded an $18.7 million increase in the average volume of loans.  The average yield on total earning assets increased 7 basis points for the same period, from 4.99% to 5.06%, respectively.  An average decrease of $6.4 million in interest bearing deposits was offset by an average increase of $2.7 million in overnight repurchase agreements.  As a result of these changes in volume and yield on earning assets and interest bearing liabilities, the FTE net interest margin increased 9 basis points, from 4.60% to 4.69%.  Net of purchase accounting adjustments, the FTE net interest margin increased 1 basis point, from 4.30% for the quarter ended September 30, 2013 to 4.31% for the quarter ended December 31, 2013.

Year-Over-Year Earnings Comparison

In year-over-year comparison, net earnings available to common shareholders increased $4.7 million primarily as a result of a $21.5 million improvement in net interest income and a $4.4 million increase in noninterest income.  The $25.9 million improvement in revenues was offset by an $18.0 million increase in noninterest expense, a $2.4 million increase in income tax expense and a $1.0 million increase in provision for loan loss.  The $21.5 million increase in net interest income included approximately $12.6 million earned in the acquired Timber Region and $4.1 million in increased purchase accounting adjustments in year-to-date comparison.

Increases in noninterest income consisted primarily of $1.8 million in service charges on deposit accounts and $1.8 million in ATM and debit card income.  Noninterest expenses increased $18.0 million in year-to-date comparison and included approximately $7.3 million in operating expenses for the Timber Region and approximately $2.0 million in operating expenses for the six new branches opened in late 2012 and 2013.  Increases in noninterest expense, excluding operating expenses on the Timber Region and the new branches, included primarily $4.2 million in salary and benefits costs, $1.7 million in occupancy expense, $766,000 in ATM/debit card expense and $425,000 in corporate development expense.  The increase was partially offset by a $656,000 decrease in expenses on ORE and repossessed assets, excluding expenses on ORE and repossessed assets incurred by the Timber Region.

In year-to-date comparison, FTE net interest income increased $22.0 million primarily due to a $402.9 million increase in the average volume of earning assets that resulted in a $22.7 million increase in interest income.  The average yield on earning assets increased in year-to-date comparison, from 4.92% at December 31, 2012 to 5.10% at December 31, 2013.  Net of a 39 basis point effect of discount accretion on acquired loans, the average yield on earning assets was 4.71% at December 31, 2013, compared to 4.76% at December 31, 2012, net of a 16 basis point effect of discount accretion on acquired loans.

Interest expense increased in year-over-year comparison primarily due to a $317.4 million increase in the average volume of interest bearing liabilities, from $946.1 million at December 31, 2012 to $1.3 billion at December 31, 2013.  The average rate paid on interest-bearing liabilities decreased 10 basis points, from 0.62% at December 31, 2012 to 0.52% at December 31, 2013.  Net of an 8 basis point effect of premium amortization on acquired certificates of deposit and FHLB advances, the average rate paid on interest bearing liabilities was 0.60% at December 31, 2013.  The FTE net interest margin increased 26 basis points, from 4.45% for the year ended December 31, 2012 to 4.71% for the year ended December 31, 2013.  Net of purchase accounting adjustments, the FTE net interest margin increased 4 basis points, from 4.22% to 4.26% for the years ended December 31, 2012 and 2013, respectively.

About MidSouth Bancorp, Inc.

MidSouth Bancorp, Inc. is a financial holding company headquartered in Lafayette, Louisiana, with assets of $1.9 billion as of December 31, 2013. MidSouth Bancorp, Inc. trades on the NYSE under the symbol "MSL." The Company's Series C Preferred Stock is now quoted on the OTC Bulletin Board ("OTCBB") under the ticker symbol MSLXP.  Through its wholly owned subsidiary, MidSouth Bank, N.A., MidSouth offers a full range of banking services to commercial and retail customers in Louisiana and Texas. MidSouth Bank currently has 62 locations in Louisiana and Texas, including a Loan Production Office in Austin, Texas, and is connected to a worldwide ATM network that provides customers with access to more than 50,000 surcharge-free ATMs. Additional corporate information is available at www.midsouthbank.com.

Forward-Looking Statements

Certain statements contained herein are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, which involve risks and uncertainties.  These statements include, among others, the expected impacts of the recently completed PSB acquisition, future expansion plans and future operating results.  Actual results may differ materially from the results anticipated in these forward-looking statements.  Factors that might cause such a difference include, among other matters, the ability of MidSouth to integrate the PSB operations and capitalize on new market opportunities resulting from the acquisition; the effect of the PSB acquisition on relations with customers and employees; 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, 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; the timing and ability to reach any agreement to restructure nonaccrual loans;  increased competition for deposits and loans which could affect compositions, rates and terms; the timing and impact of future acquisitions, the success or failure of integrating operations, and the ability to capitalize on growth opportunities upon entering new markets; loss of critical personnel and the challenge of hiring qualified personnel at reasonable compensation levels; legislative and regulatory changes, including 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; and other factors discussed under the heading "Risk Factors" in MidSouth's Annual Report on Form 10-K for the year ended December 31, 2012 filed with the SEC on March 18, 2013 and in its other filings with the SEC.  MidSouth does not undertake any obligation to publicly update or revise any of these forward-looking statements, whether to reflect new information, future events or otherwise, except as required by law.

SOURCE MidSouth Bancorp, Inc.