Several days before MidSouth Bank was acquired by Hancock Whitney last month, the Lafayette-based bank was fined by federal regulators over flood insurance rule violations.
MidSouth Bank signed a consent agreement to pay $108,796 as a civil monetary penalty to the Office of the Comptroller of the Currency on Sept. 11 but doesn't admit any wrongdoing as part of the settlement. Hancock Whitney shareholders approved the $214 million acquisition on Sept. 18.
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MidSouth Bank was cited for a pattern of violations of two main aspects under the Flood Disaster Protection Act, which refers to eligibility for federal financial assistance to properties in high-risk flood areas.
The bank was allegedly violating two sections of that law: flood insurance requirements before underwriting a loan and notice to home mortgage borrowers about high-risk flood areas, according to the consent agreement.
Details about the MidSouth Bank case were not available and the Office of the Comptroller of the Currency declined comment.
Under sections of the federal act cited in the consent order, banks are prohibited from underwriting loans on buildings or residential homes in high-risk flood areas unless those are covered by flood insurance. Banks must accept private flood insurance if it meets the requirement scope of a National Flood Insurance Program policy, which is only available from insurance companies, not directly from the federal government. Likewise, banks must give written notice to borrowers about whether or not the property sits in a special flood hazard area.
MidSouth Bank also entered into consent agreements with the OCC in 2018 and 2017, but neither of those agreements included a monetary settlement.
In 2018, MidSouth Bank was cited for not implementing an anti-money laundering program that satisfied federal requirements such as weak internal controls, monitoring gaps and deficiencies in customer due diligence. The bank agreed to implement a compliance committee and strengthen its internal controls to prevent money laundering. In 2017, the bank was cited for "unsafe and unsound banking practices" related to credit administration, strategic planning and its allowance for loan and lease losses, or the amount set aside in case of a loan default. At the time, the bank signed an agreement to overhaul its internal audit program, loan review, loan portfolio management and problem assets among other aspects of management.
Hancock Whitney said it has reached a deal to acquire Lafayette-based MidSouth Bank in an all-stock transaction valued at about $214 million.
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