Lafayette's MidSouth Bancorp Inc. posted a net loss of $5.7 million, or 34 cents per share, for the third quarter, taking an after-tax charge of $4.3 million for regulatory remediation costs.
MidSouth, the parent company of MidSouth Bank, posted net income of $856,000, or 5 cents per share, for the same period last year. The bank is expected to face $20 million in remediation costs for the year, with $15 million already behind it.
Meanwhile, the bank reached an agreement with a major MidSouth shareholder who had urged the bank to sell in August after lamenting continued losses while the rest of the financial sector sees healthy gains.
MidSouth Bank has named Thomas Lane as senior vice president and treasurer, managing the bank’s investments, liquidity and interest rate risk …
The agreement gives Jacobs Asset Management LLC, the second-largest shareholder, and Basswood Capital Management, its largest shareholder, the right to have one nonvoting observer attend the MidSouth's board meeting for two years.
Sy Jacobs, founder and managing partner of Jacobs Asset Management, had sent a letter to MidSouth, blasting the company's turnaround efforts and urging a sale. Jacobs Asset Management owns 7 percent of the bank, while Basswood owns 9.9 percent of the outstanding shares.
The bank also plans to add Ryan Medo, founder of an Alabama real estate firm, to its board. Medo was "introduced to MidSouth" by Jacobs Asset Management. The bank said it also would ask regulators to let it add John Heffern, a private fund manager in New Jersey, to its board.
"We are pleased to have reached these agreements and MidSouth’s board and management are committed to work constructively with our stakeholders to build franchise value through the execution of our strategic plan to reduce risk and to become a more efficient and focused commercial bank," said MidSouth Chairman Jake Delhomme.
MidSouth President and CEO Jim McLemore said earnings continued to be heavily affected by costs stemming from a 2017 agreement with the Office of the Comptroller of the Currency after regulators labeled MidSouth a "troubled bank." He said MidSouth is making progress in its remediation efforts and expects to see a significant wind down of those efforts in the fourth quarter.
A major shareholder of MidSouth Bancorp is urging the Lafayette-based bank to pursue a sale, saying that would be the most responsible action.
MidSouth's problems surfaced in spring 2017, when it fired founder C.R. "Rusty" Cloutier. Cloutier's son, Troy, also was fired as president and CEO.
The bank was hit hard by sustained low oil prices and closed branches and launched a $55 million stock sale to improve its bottom line.
The third-quarter earnings come after a loss of $1.5 million, or 9 cents per share, in the second quarter. Excluding nonoperating expenses, the bank reported earnings for the third quarter were a loss of $1.4 million, or 8 cents per share.
McLemore said total remediation costs are expected to be $20 million for the year, and the bank has incurred about $15 million in costs through the third quarter.