MidSouth Bancorp, Inc. Reports Fourth Quarter 2014 Results and Declares Quarterly Dividends

LAFAYETTE, La., Jan. 27, 2015 /PRNewswire/ -- MidSouth Bancorp, Inc. ("MidSouth") (NYSE:MSL) today reported quarterly net earnings available to common shareholders of $3.5 million for the fourth quarter of 2014, compared to net earnings available to common shareholders of $3.4 million reported for the fourth quarter of 2013 and $4.3 million in net earnings available to common shareholders for the third quarter of 2014.  Diluted earnings for the fourth quarter of 2014 were $0.30 per common share, compared to $0.29 per common share reported for the fourth quarter of 2013 and $0.37 per common share reported for the third quarter of 2014.  Third quarter 2014 net earnings included $700,000 of an after-tax gain on the sale of a commercial property held as other real estate ("ORE"), an after-tax charge of $168,000 on the redemption of the Company's Statutory Trust 1 and Capital Securities (TRUPS), and an after-tax charge of $256,000 for losses on disposal of fixed assets incurred in the quarter.  Net earnings for the fourth and third quarters of 2014 also included after-tax charges for efficiency consultant expenses of $101,000 and $130,000, respectively.  Excluding these non-operating income and expenses, operating earnings per share for the fourth and third quarters of 2014 was $0.31 and $0.36, respectively.  In addition, a special loan loss reserve for potential yet unidentified energy loan losses in the amount of $650,000, or approximately $0.04 per share after-tax, was established in the fourth quarter of 2014.

C. R. Cloutier, President and CEO, commenting on fourth quarter earnings remarked, "Excluding an increased provision for loan losses, the fourth quarter represents a continued improvement in the operating performance of the company.  On a sequential basis, we saw period-end annualized loan growth of over 11%, core net interest margin improvement and flat operating expenses.

"Obviously we are closely monitoring the effects of the recent sharp decline in oil prices.   We continue to communicate with our customers who provide valuable insight on the present energy cycle.  Our loan review function continues to stress test our oil and gas loan portfolio and review for potential downgrades.  We have not yet identified any specific loan impairments resulting from the recent downturn in oil prices.  However, in light of recent developments, we established this quarter a special reserve for potential future energy loan losses that have not yet been identified.  The amount of the special reserve was $650,000 or approximately 25 basis points of energy related loans.  We believe establishing this reserve is a prudent action at this time.

"MidSouth Bank began as an energy lender during the oil downturn of the 80's and we have a strong thirty year track record of lending to this industry. We have seen many ups and downs in the oil and gas industry over the years, and we don't bet on energy prices in our lending practices."

Balance Sheet

Consolidated assets remained constant at $1.9 billion for the quarters ended December 31, 2014 and September 30, 2014.  Our stable core deposit base, which excludes time deposits, totaled $1.3 billion at December 31, 2014 and September 30, 2014 and accounted for 84.1% of deposits compared to 85.7% of deposits, respectively.  Net loans totaled $1.3 billion at December 31, 2014, compared to $1.2 billion at September 30, 2014 and $1.1 billion at December 31, 2013.  Total loans grew $36.1 million, or 2.9% for the quarter and $146.9 million for the year ended December 31, 2014.  The majority of the loan growth during the fourth quarter was in the CRE and C&I portfolios, which was offset by a decline in the construction real estate loans.

MidSouth's Tier 1 leverage capital ratio was 9.52% at December 31, 2014 compared to 9.56% at September 30, 2014.  Tier 1 risk-based capital and total risk-based capital ratios were 12.90% and 13.73% at December 31, 2014, compared to 12.93% and 13.63% at September 30, 2014, respectively.  Tier 1 common equity to total risk-weighted assets at December 31, 2014 was 8.36%.  Tangible common equity totaled $118.6 million at December 31, 2014, compared to $115.3 million at September 30, 2014.  Tangible book value per share at December 31, 2014 was $10.46 versus $10.17 at September 30, 2014.

Asset Quality

Nonperforming assets totaled $15.1 million at December 31, 2014, an increase of $2.6 million compared to $12.5 million reported at September 30, 2014.  The increase resulted primarily from the addition of a commercial real estate (CRE) loan unrelated to energy that was placed on nonaccrual status during the quarter.  The increase in nonaccrual loans in the fourth quarter of 2014 resulted in a lower allowance coverage for nonperforming loans of 103.10% at December 31, 2014, compared to 121.25% at September 30, 2014.  The ALLL/total loans ratio was 0.87% at December 31, 2014 and 0.75% at September 30, 2014.  Including valuation accounting adjustments on acquired loans, the total valuation accounting adjustment plus ALLL was 1.29% of loans at December 31, 2014.  The ratio of annualized net charge-offs to total loans was 0.28% for the three months ended December 31, 2014 compared to 0.26% for the three months ended September 30, 2014. 

Total nonperforming assets to total loans plus ORE and other assets repossessed was 1.17% at December 31, 2014 compared to 0.99% at September 30, 2014.  Loans classified as troubled debt restructurings ("TDRs") totaled $410,000 at December 31, 2014 compared to $416,000 at September 30, 2014.  Classified assets, including ORE, decreased $0.8 million, or 2.3%, to $33.6 million at December 31, 2014 compared to $34.4 million at September 30, 2014.

Fourth Quarter 2014 vs. Fourth Quarter 2013 Earnings Comparison

Fourth quarter 2014 net earnings available to common shareholders totaled $3.5 million compared to $3.4 million for the fourth quarter of 2013.  Revenues from consolidated operations increased $875,000 in quarterly comparison.  Net interest income increased $721,000 in quarterly comparison, as decreases of $566,000 in loan valuation income and $310,000 in interest income on investment securities were offset primarily by a $1.3 million increase in interest income earned on a higher volume of loans and a $259,000 decrease in interest expense on junior subordinated debentures.  Noninterest income increased $154,000 in quarterly comparison, from $4.9 million for the three months ended December 31, 2013 to $5.1 million for the three months ended December 31, 2014.  The increase in noninterest income resulted primarily from a $147,000 increase in ATM/debit card income.   

Excluding non-operating expenses of $156,000, fourth quarter 2014 noninterest expenses decreased $1.3 million compared to fourth quarter 2013 and primarily consisted of decreases of $522,000 in salaries and benefits costs, $166,000 in occupancy expenses, $176,000 in legal and professional fees, and $119,000 in courier expense, combined with smaller decreases in several other noninterest expense categories. The provision for loan losses increased $1.9 million in quarterly comparison, primarily due to establishing the aforementioned special reserve in the amount of $650,000 and an impairment of approximately $575,000 related to a CRE loan unrelated to energy being placed on a non-accrual status.

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 2014 based on a dividend rate of 1.00%.  The dividend rate is set at 1.00% through February 25, 2016.  The Series C Preferred Stock issued with the December 28, 2012 acquisition of PSB Financial Corporation ("PSB") paid dividends totaling $94,000 for the three months ended December 31, 2014. 

Fully taxable-equivalent ("FTE") net interest income totaled $20.5 million and $19.8 million for the quarters ended December 31, 2014 and 2013, respectively.  The FTE net interest income increased $662,000 in prior year quarterly comparison primarily due to a $752,000 increase in interest income on loans despite a $566,000 reduction in purchase accounting adjustments on acquired loans.  The increased interest income on loans resulted from a $122.2 million increase in the average volume of loans in quarterly comparison. The average yield on loans decreased 37 basis points, from 6.27% to 5.90%.  The purchase accounting adjustments added 26 basis points to the average yield on loans for the fourth quarter of 2014 and 51 basis points to the average yield on loans for the fourth quarter of 2013.  Net of the impact of the purchase accounting adjustments, average loan yields declined 12 basis points in prior year quarterly comparison, from 5.76% to 5.64%.  Loan yields have declined primarily as the result of a sustained low interest rate environment.

Investment securities totaled $418.2 million, or 21.6% of total assets at December 31, 2014, versus $497.2 million, or 26.9% of total assets at December 31, 2013.  The investment portfolio had an effective duration of 3.2 years and a net unrealized gain of $4.4 million at December 31, 2014.  The average volume of investment securities decreased $85.1 million in prior year quarterly comparison.  The average tax equivalent yield on investment securities increased 17 basis points, from 2.57% to 2.74%.  The $85.1 million decrease in the average volume of investment securities was used to fund loan growth during the same period.

The average yield on all earning assets decreased 11 basis points in prior year quarterly comparison, from 5.06% for the fourth quarter of 2013 to 4.95% for the fourth quarter of 2014.  Net of the impact of purchase accounting adjustments, the average yield on total earning assets increased 5 basis points, from 4.72% to 4.77% for the three month periods ended December 31, 2013 and 2014, respectively, due to a favorable shift in earning assets from investment securities to loans.

The impact to interest expense of a $29.5 million increase in the average volume of interest- bearing liabilities was offset by a 9 basis point decrease in the average rate paid on interest- bearing liabilities, from 0.49% at December 31, 2013 to 0.40% at December 31, 2014.  Net of purchase accounting adjustments on acquired certificates of deposit and FHLB borrowings, the average rate paid on interest-bearing liabilities was 0.55% for the fourth quarter of 2013 and declined to 0.44% for the fourth quarter of 2014.

As a result of these changes in volume and yield on earning assets and interest bearing liabilities, the FTE net interest margin decreased 4 basis points, from 4.69% for the fourth quarter of 2013 to 4.65% for the fourth quarter of 2014.  Net of purchase accounting adjustments on loans, deposits and FHLB borrowings, the FTE margin increased 13 basis points, from 4.31% for the fourth quarter of 2013 to 4.44% for the fourth quarter of 2014.

Fourth Quarter 2014 vs. Third Quarter 2014 Earnings Comparison

In sequential-quarter comparison, net earnings available to common shareholders decreased $808,000 primarily due to a $1.5 million increase in the provision for loan losses.  The increase in provision for loan losses in the fourth quarter was primarily due to the aforementioned special reserve in the amount of $650,000 and an impairment in the amount of approximately $575,000 on a CRE loan unrelated to energy being placed on non-accrual.   Additionally, the decrease in net earnings available to common shareholders resulted from a $1.1 million decrease in non-interest income.  Excluding the $1.1 million gain on the sale of a commercial property held as ORE included in third quarter 2014, noninterest income decreased $67,000 in sequential-quarter comparison as a $161,000 decrease in service charges on deposit accounts was partially offset by a $96,000 increase in the cash surrender value of life insurance. 

Third quarter noninterest expenses included a charge of $258,000 on the redemption of the Company's Statutory Trust 1 and Capital Securities (TRUPS) and a charge of $394,000 for losses on disposal of fixed assets incurred in the quarter.  Additionally, noninterest expenses in the fourth and third quarters of 2014 included efficiency consultant expenses of $156,000 and $200,000, respectively.  Excluding these non-operating expenses, noninterest expense increased $166,000 in sequential-quarter comparison and consisted primarily of an increase of $147,000 in marketing expenses. 

FTE net interest income increased $640,000 in sequential-quarter comparison primarily due to an increase of $31.8 million in the average volume of loans.  The average yield on loans increased 2 basis points, from 5.88% for the third quarter of 2014 to 5.90% for the fourth quarter of 2014.  Net of purchase accounting adjustments, the loan yield declined 2 basis points, from 5.66% to 5.64% during the same period.  The average yield on total earning assets decreased 1 basis point for the same period, from 4.96% to 4.95%, respectively.  Average interest bearing liabilities increased $20.7 million, as a $26.2 million increase in the average volume of interest bearing deposits was partially offset by a $4.1 million average decrease in junior subordinated debentures.  As a result of these changes in volume and yield on earning assets and interest bearing liabilities, the FTE net interest margin increased 4 basis points, from 4.61% to 4.65%.  Net of purchase accounting adjustments, the FTE net interest margin increased 2 basis points, from 4.42% for the third quarter of 2014 to 4.44% for the fourth quarter of 2014.

Year-Over-Year Earnings Comparison

In year-over-year comparison, net earnings available to common shareholders totaled $18.4 million at December 31, 2014, an increase of $5.6 million compared to $12.8 million at December 31, 2013.  The $5.6 million included $3.0 million of executive life insurance proceeds and a $1.1 million gain on sale of ORE recorded in noninterest income for the year ended December 31, 2014.  Excluding these non-operating income items and non-operating expenses of $394,000 in losses on disposal of fixed assets, a $258,000 loss on redemption of Trust Preferred Securities, $516,000 in efficiency consultant expenses, and $189,000 of expenses related to the loss of an executive officer, operating earnings totaled $15.6 million at December 31, 2014.  Net of $214,000 of net merger and conversion related expenses associated with the PSB acquisition in the first quarter of 2013, operating earnings totaled $13.0 million at December 31, 2013.  The net increase of $2.6 million in operating earnings in year-over-year comparison resulted primarily from a $3.7 million decrease in noninterest expense and a $1.0 million increase in noninterest income.  Net interest income also increased $1.0 million which included a $732,000 decrease in interest expense.  The increase in revenues was partially offset by a $2.6 million increase in the provision for loan losses and a $1.2 million increase in income tax expense.

Excluding non-operating income, increases in noninterest income consisted primarily of $555,000 in service charges on deposit accounts and $809,000 in ATM and debit card income.  Excluding the non-operating expenses in 2014 and 2013, decreases in noninterest expense primarily included $666,000 in marketing expenses, $474,000 in salaries and benefits costs, $440,000 in legal and professional fees, $510,000 in expenses on ORE and other repossessed assets, $397,000 in courier expense and $316,000 in printing and supplies.  The decreased expenses were partially offset by a $510,000 increase in ATM/debit card expense. 

A reduction in the dividend rate paid on the Series B preferred stock issued in connection with SBLF resulted in a $634,000 decrease in dividends on preferred stock in year-over-year comparison. 

In year-to-date comparison, FTE net interest income increased $658,000 primarily due to a $732,000 decrease in interest expense.  Interest income remained relatively flat in year-over-year comparison, as a $1.1 million decrease in interest income on investments was offset by a $1.3 million increase in interest income on loans.  Interest income on loans increased $1.3 million despite a $2.9 million reduction in purchase accounting adjustments on acquired loans.  The average volume of loans increased $115.1 million in year-over-year comparison, and the average yield on loans decreased 51 basis points, from 6.47% to 5.96%.  The average yield on earning assets decreased in year-over-year comparison, from 5.10% at December 31, 2013 to 4.97% at December 31, 2014.  The purchase accounting adjustments added 60 basis points to the average yield on loans for the year ended December 31, 2013 and 28 basis points for the year ended December 31, 2014.  Net of purchase accounting adjustments, the average yield on earning assets increased 6 basis points, from 4.71% at December 31, 2013 to 4.77% at December 31, 2014.

Interest expense decreased $732,000 in year-over-year comparison primarily due to a 7 basis point decrease in the average rate paid on interest-bearing liabilities, from 0.52% at December 31, 2013 to 0.45% at December 31, 2014.  Net of purchase accounting adjustments, the average rate paid on interest-bearing liabilities decreased 10 basis points, from 0.60% at December 31, 2013 to 0.50% at December 31, 2014.  The FTE net interest margin decreased 8 basis points, from 4.71% for the year ended December 31, 2013 to 4.63% for the year ended December 31, 2014.  Net of purchase accounting adjustments, the FTE net interest margin increased 13 basis points, from 4.26% to 4.39% for the years ended December 31, 2013 and 2014, respectively, due to a favorable shift in earning assets from investment securities to loans.

Dividends

MidSouth's Board of Directors announced a cash dividend was declared in the amount of $0.09 per share to be paid on its common stock on April 1, 2015 to shareholders of record as of the close of business on March 13, 2015.  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, 2015 to shareholders of record as of the close of business on April 1, 2015.  MidSouth's Series C Preferred Stock is quoted on the OTC Bulletin Board ("OTCBB") under the ticker symbol MSLXP.

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, 2014. MidSouth Bancorp, Inc. trades on the NYSE under the symbol "MSL." MidSouth's Series C Preferred Stock is 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 58 locations in Louisiana and Texas and is connected to a worldwide ATM network that provides customers with access to more than 55,000 surcharge-free ATMs. Additional corporate information is available at MidSouthBank.com.

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 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, 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, 2013 filed with the SEC on March 14, 2014 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.

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SOURCE MidSouth Bancorp, Inc.

Related Links

http://www.MidSouthBank.com