A major shareholder of MidSouth Bancorp is urging the Lafayette-based bank to pursue a sale, saying that would be the most responsible action.
In a letter sent to the MidSouth board of directors on Wednesday and filed with the Securities and Exchange Commission, Sy Jacobs, founder and managing partner of Jacobs Asset Management, said he was frustrated with the bank's performance and lack of action taken to create shareholder value.
In a statement issued Friday, MidSouth said its board will carefully review the letter sent by Jacobs with its legal and financial advisers. The board “remains committed to act in the best interests of all MidSouth shareholders,” it said.
JAM and its entities own a 7 percent stake in MidSouth, making it the second-largest shareholder in the business. The largest shareholder is Basswood Capital Management, which owns nearly 9.9 percent of the outstanding shares in the bank.
Jacobs notes while MidSouth has posted substantial losses over the past 18 months, the rest of the U.S. banking industry has enjoyed record profits and rising stock prices. Banks have used the profits to acquire other entities.
While shares of MidSouth closed Friday at $14.85, up 10 cents for the day, Jacobs said he estimates banks could be willing to pay $19 to $20 per share for the company. MidSouth has a responsibility to pursue swapping an “unprofitable, shrinking, inwardly-focused bank” into a “profitable, growing” bank. “If it does not, we look forward to exercising our rights as shareholders and having our voice and vote heard at next year’s annual meeting,” the letter said.
On July 30, MidSouth reported a second-quarter net loss of $1.5 million, tied primarily to its efforts to remedy problems that saw it labeled by federal regulators in mid-2017 as a “troubled bank." The bank had a $450,000 net loss in the first quarter and an $11.3 million loss in the fourth quarter of 2017.
The bank’s troubles surfaced in spring 2017, when it fired high-profile founder C.R. “Rusty” Cloutier. Cloutier’s son, Troy, was also fired as president and chief executive officer. The bank said it made the moves to enhance performance after it was knocked during the oil downturn.
Federal banking regulators said MidSouth was in troubled condition because of sustained low oil prices. The bank closed branches and launched a $55 million stock sale to improve its bottom line.
Jacobs said MidSouth’s plans to improve its financial standing have gone awry. “Clearly the restructured board and management team had a poor grasp on the scope of the turnaround plan necessary when capital was raised in 2017,” Jacobs said in the letter. “Given how badly the plan has gone we question whether there was purposeful deception or just plain delusion. Wherever the truth lies, you have blown your second chance with shareholders and don’t deserve to remain independent.”