LAFAYETTE, LA., October 29, 2013/PRNewswire-FirstCall/ -- MidSouth Bancorp, Inc. (“MidSouth”) (NYSE:MSL) today reported record quarterly net earnings available to common shareholders of $3.1 million for the third quarter of 2013, compared to net earnings available to common shareholders of $2.2 million reported for the third quarter of 2012 and $3.3 million in net earnings available to common shareholders for the second quarter of 2013. Diluted earnings for the third quarter of 2013 were $0.27 per common share, compared to $0.21 per common share reported for the third quarter of 2012 and $0.29 per common share reported for the second quarter of 2013.
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 $368,000 for the third quarter of 2013 based on a dividend rate of 4.60%. The dividend rate is 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. 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 September 30, 2013.
Balance Sheet
Total consolidated assets at September 30, 2013 were $1.9 billion, compared to $1.4 billion at September 30, 2012 and $1.9 billion at June 30, 2013. Deposits totaled $1.5 billion at September 30, 2013, compared to $1.2 billion at September 30, 2012 and $1.5 billion at June 30, 2013. Total deposits declined $29.7 million during the quarter due to fluctuations in demand deposit accounts, primarily public fund accounts and, to a lesser extent, acquired higher cost certificate of deposit accounts. Net loans totaled $1.1 billion at September 30, 2013, compared to $801.5 million at September 30, 2012 and $1.1 billion at June 30, 2013. Net loans grew $26.3 million in the third quarter and $96.8 million for the nine months ended September 30, 2013 at annualized growth rates of 9.5% and 12.5%, respectively.
MidSouth’s Tier 1 leverage capital ratio was 9.17% at September 30, 2013 compared to 9.14% at June 30, 2013. Tier 1 risk-based capital and total risk-based capital ratios were 13.13% and 13.84% at September 30, 2013, compared to 13.24% and 13.95% at June 30, 2013, respectively. The Tier 1 common equity to total risk-weighted assets at September 30, 2013 was 7.56%. Tangible common equity totaled $96.9 million at September 30, 2013, compared to $94.5
million at June 30, 2013. Tangible book value per share at September 30, 2013 was $8.61 versus $8.39 at June 30, 2013.
Rusty Cloutier, President & CEO, commenting on third quarter earnings stated, “We invested significantly in marketing our brand throughout our footprint during the quarter to spur loan growth and continue the momentum of our successful SBLF campaign in the second quarter. As a result, we grew loans $26 million this quarter. However, our operating efficiencies are not meeting our expectations as we position the Bank to reap the benefits of recent investments in growth through acquisitions and branch expansions. Over the next year, Jerry Reaux, Vice Chairman and COO, will lead our executive management team to analyze revenue and expenses, including our branch network structure, to accelerate improvements in profitability.”
Asset Quality
Nonperforming assets declined 12.6% in year-over-year comparison and 1.7% in sequential quarter comparison as asset quality continued to improve. Total nonperforming assets were reduced from $18.5 million at December 31, 2012 to $13.8 million at June 30, 2013 and to $13.6 million at September 30, 2013, primarily due to a $4.0 million reduction in nonperforming loans, including loans past due 90 days and over, during the first nine months of 2013.
Allowance coverage for nonperforming loans increased to 126.29% at September 30, 2013 compared to 123.84% at June 30, 2013. The ALL/total loans ratio was 0.76% at September 30, 2013, unchanged from June 30, 2013. Including valuation accounting adjustments on acquired loans, the total valuation accounting adjustment plus ALL was 1.61% of loans at September 30, 2013. The ratio of annualized net charge-offs to total loans was 0.11% for the three months ended September 30, 2013 compared to 0.06% for the three months ended June 30, 2013.
Total nonperforming assets to total loans plus ORE and other assets repossessed decreased to 1.18% at September 30, 2013 from 1.23% at June 30, 2013. Loans classified as troubled debt restructurings (“TDRs”) totaled $533,000 at September 30, 2013 compared to $535,000 at June 30, 2013. Classified assets, including ORE, decreased to $34.5 million compared to $36.1 million at June 30, 2013.
Third Quarter 2013 vs. Third Quarter 2012 Earnings Comparison
Third quarter 2013 net earnings available to common shareholders totaled $3.1 million compared to $2.2 million for the third quarter of 2012. Revenues from consolidated operations increased $6.4 million in quarterly comparison and included $1.2 million in purchase accounting adjustments on the 2012 and 2011 acquisitions. Noninterest income increased $1.2 million in quarterly comparison, from $3.8 million for the three months ended September 30, 2012 to $5.0 million for the three months ended September 30, 2013. Increases in noninterest income consisted primarily of $454,000 in service charges on deposit accounts and $596,000 in ATM/debit card income due to the acquired branches in the Timber Region.
Noninterest expenses increased $4.9 million for the third quarter 2013 compared to third quarter 2012 and included approximately $1.7 million in operating expenses for the Timber Region and approximately $368,000 in operating costs for four new branches opened in late 2012 and early 2013. The remaining $2.8 million of increased operating costs consisted primarily of $1.2 million in salaries and benefits costs, $464,000 in occupancy expense, $293,000 in ATM/debit card expense, $117,000 in marketing costs and $173,000 in data processing expenses. The increased costs were partially offset by a $230,000 decrease in legal and professional fees. The provision for loan losses increased $150,000 primarily as a result of the loan growth experienced during the third quarter of 2013. Income tax expense increased $526,000 in quarterly comparison.
Fully taxable-equivalent (“FTE”) net interest income totaled $19.5 million and $14.2 million for the quarters ended September 30, 2013 and 2012, respectively. The FTE net interest income increased $5.3 million in prior year quarterly comparison primarily due to a $413.4 million increase in the volume of average earning assets primarily as a result of the PSB acquisition. The average volume of loans increased $350.2 million in quarterly comparison and the average yield on loans decreased 22 basis points, from 6.46% to 6.24%. Purchase accounting adjustments on acquired loans added 39 basis points to the average yield on loans for the third quarter of 2013 and 23 basis points to the average yield on loans for the third quarter of 2012. Net of the impact of the purchase accounting adjustments, average loan yields declined 38 basis points in prior year quarterly comparison, from 6.23% to 5.85%. Loan yields have declined primarily as the result of a sustained low market interest rate environment.
Investment securities totaled $517.8 million, or 27.8% of total assets at September 30, 2013, versus $458.8 million, or 32.1% of total assets at September 30, 2012. The investment portfolio had an effective duration of 4.4 years and an unrealized gain of $2.1 million at September 30, 2013. The average volume of investment securities increased $57.1 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 4 basis points, from 2.63% to 2.59%. The average yield on all earning assets increased 7 basis points in prior year quarterly comparison, from 4.92% for the third quarter of 2012 to 4.99% for the third quarter of 2013. Net of the impact of purchase accounting adjustments, the average yield on total earning assets declined 5 basis points, from 4.79% to 4.74% for the three month periods ended September 30, 2012 and 2013, respectively.
The impact to interest expense of a $335.8 million increase in the average volume of interest bearing liabilities was partially offset by an 11 basis point decrease in the average rate paid on interest bearing liabilities, from 0.62% at September 30, 2012 to 0.51% at September 30, 2013. Net of purchase accounting adjustments on acquired certificates of deposit and FHLB borrowings, the average rate paid on interest bearing liabilities was 0.71% for the third quarter of 2012 and declined to 0.58% for the third 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 14 basis points, from 4.46% for the third quarter of 2012 to 4.60% for the third quarter of 2013. Net of purchase accounting adjustments on loans, deposits and FHLB borrowings, the FTE margin increased 4 basis points, from 4.26% for the third quarter of 2012 to 4.30% for the third quarter of 2013.
Third Quarter 2013 vs. Second Quarter 2013 Earnings Comparison
In sequential-quarter comparison, net earnings available to common shareholders decreased $199,000 as a $671,000 decrease in net interest income and a $214,000 increase in noninterest expenses were partially offset by an $800,000 decrease in provision for loan losses. Net interest income decreased in sequential-quarter comparison primarily due to $842,000 in non-recurring interest income recorded in the second quarter of 2013. This amount was comprised of additional discount accretion totaling $630,000 was earned from the PSB purchased credit impaired loan portfolio and $212,000 in interest income was recaptured on a nonperforming loan in June of 2013.
Noninterest expenses increased $214,000 and consisted primarily of increases of $271,000 in salaries and benefits costs, $196,000 in marketing expenses and $149,000 in occupancy expenses, which were partially offset by decreases of $216,000 in expenses on ORE and $230,000 in legal and professional fees.
FTE net interest income decreased $593,000 in sequential quarter comparison primarily due to a reduction in purchase accounting adjustments resulting from the payoff of certain PSB purchased credit impaired loans. The reduction in purchase accounting adjustments resulted in a decrease in the average yield on loans, from 6.76% for the second quarter of 2013 to 6.24% for the third quarter of 2013. An average decrease of $19.3 million in investment securities and an average increase of $23.3 million in FHLB advances funded a $42.8 million increase in the average volume of loans. The average yield on total earning assets decreased 27 basis points for the same period, from 5.26% to 4.99%, respectively. An average decrease of $16.2 million in deposits was offset by an average increase of $16.6 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 decreased 27 basis points, from 4.87% to 4.60%. Net of purchase accounting adjustments, the FTE net interest margin decreased 3 basis points, from 4.33% for the quarter ended June 30, 2013 to 4.30% for the quarter ended September 30, 2013.
Year-Over-Year Earnings Comparison
In year-over-year comparison, net earnings available to common shareholders increased $2.7 million primarily as a result of a $15.7 million improvement in net interest income and a $3.2 million increase in noninterest income which offset a $14.1 million increase in noninterest expense, a $700,000 increase in provision for loan loss and a $1.5 million increase in income tax expense. The $15.7 million increase in net interest income included approximately $9.7 million earned from the Timber Region. An increase in purchase accounting adjustments of $3.2 million in year-to-date comparison also contributed to the increase in net interest income.
Increases in noninterest income consisted primarily of $1.2 million in service charges on deposit accounts and $1.3 million in ATM and debit card income. Noninterest expenses increased $14.1 million in year-to-date comparison and included approximately $5.0 million in operating expenses for the Timber Region and approximately $1.2 million in operating expenses for the four new branches opened in late 2012 and early 2013. Increases in noninterest expense, excluding operating expenses on the Timber Region and the new branches, included primarily $3.7 million in salary and benefits costs, $1.4 million in occupancy expense, $486,000 in ATM/debit card expense and $370,000 in corporate development expense. The increase was partially offset by a $529,000 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 $16.1 million primarily due to a $399.1 million increase in the average volume of earning assets that resulted in a $16.6 million increase in interest income. The average yield on earning assets increased in year-to-date comparison, from 4.95% at September 30, 2012 to 5.11% at September 30, 2013. Net of a 41 basis point effect of discount accretion on acquired loans, the average yield on earning assets was 4.70% at September 30, 2013.
Interest expense increased in year-over-year comparison primarily due to a $307.5 million increase in the average volume of interest bearing liabilities, from $951.8 million at September 30, 2012 to $1.3 billion at September 30, 2013. The average rate paid on interest-bearing liabilities decreased 10 basis points, from 0.63% at September 30, 2012 to 0.53% at September 30, 2013. Net of a 9 basis point effect of premium amortization on acquired certificates of deposit and FHLB advances, the average rate paid on interest bearing liabilities was 0.62% at September 30, 2013. The FTE net interest margin increased 23 basis points, from 4.48% for the nine months ended September 30, 2012 to 4.71% for the nine months ended September 30, 2013. Net of purchase accounting adjustments, the FTE net interest margin increased 1 basis point, from 4.23% to 4.24% for the nine months ended September 30, 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 September 30, 2013. MidSouth Bancorp, Inc. trades on the NYSE under the symbol “MSL.” 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 61 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.
