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Lured by growth opportunities and low M&A prices, mid-cap banks in neighboring states are pushing deeper into the failure-ravaged Southeast and remapping the region's competitive landscape.
August 1 -
MidSouth Bancorp (MSL) in Lafayette, La., announced Monday that it is buying two branches in Baton Rouge from rival Hancock Holding (HBHC).
June 18 -
Bank dealmaking is no place for vanity, MidSouth CEO Rusty Cloutier says. Sellers need to get real about their prospects, and buyers and sellers need to look beyond face value and short-term valuations, he says in a Q&A.
May 25
Management at MidSouth Bancorp (MSL) in Lafayette, La., can finally take a break from deals after agreeing to buy PSB Financial in Many, La.
The $39 million deal seals most of the gap in MidSouth's targeted branch network, taking it into northern Louisiana and northeast Texas,
The focus going forward will be on organic growth. "This takes us out of the deal flow for a while, but we've got what we like right now," Cloutier says.
Cloutier says the goal is to reach $4 billion in assets over the next five years by focusing mostly on Louisiana and Texas. Cloutier says he is focused on building out operations such as information technology to handle upcoming conversions and future growth.
"Our biggest problem …is that we've grown from $960 million to nearly $2 billion in assets" in two years without adding IT personnel, he says.
"The organic strategy makes sense because they pretty much used all their excess capital with this deal," says Derek Hewett, an analyst at KBW's Keefe Bruyette & Woods. "I like the deal. &hellilp;It seems like it's going to be very profitable."
MidSouth will pay about 1.5-times tangible book value for PSB, doling out $16 million in cash and the rest in stock. It also offered a $2 million cash consideration if PSB resolves certain loans from a borrower over the next three years.
MidSouth also said Pete Abington, PSB's chairman and chief executive, will become its biggest shareholder when the deal closed. Abington will also join MidSouth's board.
Abington is "going to continue to have skin in the game," Hewett says. "This is a positive for the market because they have a gentleman who believes in the value of MidSouth's stock."
Hewett says MidSouth offered a "reasonable valuation" given PSB's health. PSB's Peoples State Bank is profitable with a clean balance sheet and positive returns on equity and assets. It's well-capitalized with a 14.8% total risk-based capital ratio at June 30.
Cloutier has known certain PSB senior executives for a decade, but it took a
"We've got a great opportunity here between the two companies to really grow," says J.J. Blake, the president and chief executive of Peoples State Bank. Blake will become a regional president for MidSouth. To grow, "you've got to have capital and, as a privately held community bank, there were not a lot of places" to find capital.
MidSouth will add some new businesses by buying PSB, including student loans and a stake in an insurance agency. MidSouth said in its press release that it expects the deal to increase its earning per share by 30% next year, with an internal rate of return in the "mid-teens." The company estimated pretax expense savings of 25%, excluding $500,000 in acquisition costs.
Cloutier may be focused on organic growth, but he says that MidSouth would entertain a deal for branches in Texas.
"It's very possible we may acquire something smaller," Cloutier says. "We'll continue to look at that, but I don't think we'll see another deal this size any time soon."
