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MidSouth Bancorp Inc. in Lafayette, La., has agreed to buy a branch in Tyler, Texas, from Beacon Federal Bancorp Inc.
August 17 -
Expectations had been high that 2011 would bring some serious moving and shaking among community banks. But the murky economy and regulatory uncertainty have discouraged buyers, turning them skeptical and picky.
June 10 -
Four banks based in the state have agreed to sell since December, when Hancock Holding of Gulfport, Miss., said it would buy Whitney, a New Orleans stalwart.
April 6
If the three deals he's announced in the past couple of months are any indication, Rusty Cloutier has had a change of heart about acquisitions.
Earlier this year, the colorful president and chief executive of MidSouth Bancorp Inc. made several comments about the difficulties of striking deals, drawing particular attention to his struggle to temper sellers' expectations. Irrational price tags remain a challenge, Cloutier says, but it is a hurdle that he sees as shrinking.
"The problem has been that since 2008, boards get together to plan in the fall and hope that things are going to get better," Cloutier said in an interview Tuesday. "Now, with what [Federal Reserve Chairman Ben] Bernanke has said about interest rates, I think every bank is going to be going through a soul-searching experience in determining what they want to do and I bet a lot of them are going to realize it pays to pair up."
MidSouth, of Lafayette, La., said Tuesday that it had agreed to buy all of the assets and deposits of the $115 million-asset First Louisiana National Bank for $11.5 million in cash and 725,000 shares of its common stock, or 160% of the seller's tangible book value. MidSouth said it expects to complete the purchase by the end of the year.
Efforts to reach First Louisiana were unsuccessful, though it seems that the Breaux Bridge, La., bank had reached the type of inflection point that Cloutier described. "The reality is that it is increasingly difficult for small banks to absorb the financial burden of more stringent regulatory requirements," James Fontenot, the president and CEO of First Louisiana, said in a press release. "When you couple that with the uncertainty of the economic environment, you realize there is strength in numbers."
Analysts endorsed the deal, particularly given the infill opportunity that it brings to MidSouth. Also, the seller has high capital ratios and low nonperforming assets that were a meager 6 basis points of total assets at June 30.
"The bank has very strong credit metrics and there are some great opportunities for synergies," said William Wallace, an analyst at Raymond James Financial Inc. "All in all, this deal is right in line with [MidSouth's] strategy to deploy their capital."
The deal for First National follows MidSouth's announcement this month that it was buying a branch from Beacon Federal Bancorp Inc. in the oil-rich town of Tyler, Texas. In that deal, the $1.05 billion-asset company agreed to pay a 4% deposit premium for $77 million of deposits and will buy $26 million in loans. In late July, MidSouth bought five branches in Dallas, $70 million in loans and $150 million of deposits previously owned by Jefferson Bank in a deal structured through the bankruptcy court.
MidSouth is on track to have $1.4 billion of assets by yearend through acquisitions, but Cloutier said he would like to add another $100 million of assets through organic growth by early 2012.
Brian Martin, an analyst at FIG Partners LLC, said he was pleased to see the company put more capital to work. MidSouth had a total risk-based capital ratio of 21.64% at June 30. (MidSouth also obtained $32 million last week after selling preferred stock to the Treasury Department under the Small Business Lending Fund.)
"They raised $30 million at the end of 2009 and then just sat on it for a year," Martin said. "They are starting to be opportunistic. The bankruptcy deal was both creative and strategic because they really wanted to be in Dallas, the Tyler branch deal was a bolt-on opportunity and this one for First Louisiana is a good in-market transaction that should have some nice cost saves."
Wallace said MidSouth has the capacity to add up to $300 million of assets in the near term.
Cloutier said he has bitten off enough for now and will focus on integration. That is unless, of course, the right deal comes around. "We gotta take a breather. I am not going to go hunting again for a while," he said. "If somebody comes walking in my door with a great deal, we will have to consider it."
