MidSouth Bancorp Inc. (MSL-NYSE Amex)
October 1, 2010 Issue
The Most Powerful Name In Corporate News and Information
Over The Past 26 Years, MidSouth Bancorp President And CEO Rusty Cloutier Has Turned His $4 Million Bank Into A $1 billion Financial Institution That Now Has 34 Branches In Louisiana And Texas And Membership In The Prestigious Russell 3000 Index
MidSouth Bancorp, Inc. is a bank
holding company headquartered in Lafayette,
Louisiana, with assets of $972 million
as of June 30, 2010. Through its wholly owned
subsidiary, MidSouth Bank, N.A., it offers a full range of banking services
to commercial and retail customers in south
Louisiana and southeast Texas. One
of the fastest-growing bank holding companies in the South, MidSouth Bank
has 34 locations in Louisiana and
Texas and more than 50 ATMs.
Interview conducted by: Bud Wayne, Editorial Executive, CEOCFOinterviews.com, Published – October 1, 2010
Mr. Cloutier: I have been very active in the banking business, particularly on the national scene during the last fifteen years. I saw what happened to cause the banking crisis in March of 2008. This is the result of a build up of over thirty years of continual garbage being put out by Wall Street. The big banks felt they were not big enough, and they were not being taken care of well enough. In my book Big Bad Banks, which is out now and available nationwide, I talked about how they continuously worked to get bigger and bigger, to their current status of controlling 68% of the assets in America. However, they didn’t have much concern about Main Street. So I got very concerned in 2008 that if this happened again, next time we may not be able to come back from the brink of failure as we did this time. We got close, and it appears we will likely recover, although I suspect four or five of these large banks will be insolvent.
CEOCFO: Would you explain what the difference is between a big bank and a mid-size or small bank?
Mr. Cloutier: When I testified recently at the FDIC forum on the Dodd-Frank Bill, representatives of the largest nineteen banks attended. A large bank is one that concentrates on very large customers, those involved in international banking, large corporate banking, multi-million dollar credits and the like. A community bank is down on Main Street America, representing the small communities throughout the country or a metropolitan area—possibly a particular neighborhood that has been there a long time. It might be banking in an Italian neighborhood or an Irish neighborhood or the great African-American banks around the country that are great community banks in key urban areas. There are the rural banks in the country and the niche banks in the urban areas, versus the national big bank with a name everybody knows.
CEOCFO: You have had the chance to speak to Congress; do you think that Congress is getting the point that they don’t have to lump all banks together in one big category and treat them the same?
Mr. Cloutier: Yes and that really came about after March 2008. The big banks used to hide behind the skirts of all the community banks, and when they got in trouble they would throw all the community banks out front and talk about the banking industry. However, I think since 2008, Congress now understands there is a significant difference between banks under $10 billion and those over $10 billion. In the Dodd-Frank Bill, they made that distinction between community banks and the larger financial institutions. I think Congress “got it” this time. A lot of money was thrown at Congress by the largest nineteen, which Senator [Chris] Dodd said was the most he ever saw thrown at a piece of legislation, but I think Congress still got it. In addition, Congress is addressing the question of systemic risk and “too big to fail.”
CEOCFO: How long have you been CEO at MidSouth Bancorp?
Mr. Cloutier: I started when the bank was founded twenty-six years ago. We started de novo with a little under $4 million in capital, and we are now over $1 billion. In addition, we are trading in the Russell 3000 under our symbol MSL. We are doing extremely well.
What is your focus for growth over there at MidSouth?
CEOCFO: Do you ever look at acquisitions?
Mr. Cloutier: Yes, we do, but I have to admit we have always been somewhat conservative. We have never been willing to pay a premium compared to many banks that paid four to five times book and eventually got into trouble. We made a couple of acquisitions that were strategic alliances for us. One was a small $17 million bank and another was an $80 million bank that got us into Texas in 2004. We acquired a bank in Beaumont, and have since expanded further into Texas.
CEOCFO: How many branches do you have?
We have 34 locations.
CEOCFO: Are you looking to add to that, and do you have a goal for growth over the next couple of years?
Mr. Cloutier: We do not necessarily say we have a goal, or that we are going to grow this or do that. A few months ago, we raised $40 million in capital. We now have 14% tier-one capital. We are likely the best-capitalized bank in our range, definitely in the South and perhaps even in America. We look for strategic partnerships; we prefer not to call them acquisitions. We are looking for partners so that together we can be more profitable. Because we have the capital, we are able to partner with a bank that is lacking in that area.
CEOCFO: What separates your bank from the other community banks in your area?
Mr. Cloutier: I do not think there is a lot that separates community banks. What I mean to say is that we all have that community bank philosophy about providing excellent customer service. However, MidSouth is very much a niche. We have a couple of niche products on the lending side that we have developed over the years: we do a great job in insurance contract financing, and we have a great leasing program. We do excellent work with medical and attorney-client business. Then, of course, we are well known by oil field service companies. Those are our niches. I dare say most community banks likely have their own respective niches. We do not try to be all things to all people because we do not have the size to do that. We stay in our niche, and we think we do pretty well with it.
CEOCFO: When a customer comes in and they need to be reassured that your bank is safe and a good place to keep their money, what do you tell them? How do you reassure them?
Mr. Cloutier: Well, being in the Russell 3000 helps us a great deal. We are a widely traded public company. We trade a substantial number of shares daily that can easily be tracked. Additionally, our 14% tier-one capital ratio is one of the highest in the nation. We have maintained unlimited FDIC insurance on our demand deposit accounts and $250,000 on our savings accounts. We call attention to the strength of our institution, the very good ratings we have from all the regulating agencies.
CEOCFO: Do you have all the latest products, such as remote deposit capture?
Mr. Cloutier: Yes. Although there is always something new on the horizon, for a community bank we keep updating our services and technology. We are currently exploring iPhone deposit technology that has recently come on the scene. There is always a new product or service being explored by our R&D Department. We aim to remain ahead of the demand, not on the bleeding edge but right behind the cutting-edge.
CEOCFO: Some CEOs tell me that their shareholders like for them to go out and tell their story and try to increase the value of their stock. Do you get involved with investor relations?
Mr. Cloutier: We have an Investor Relations Department. We recently employed a Senior Vice President formerly from Robinson Humphrey who resides in Atlanta, Georgia. Our CFO and I make numerous investor calls, going on road trips twice a year, and participating in four or five dog-and-pony shows every year. Yes, we are out there a good bit. At the end of every quarter, we announce our earnings and we take calls from institutional shareholders who own our stock.
CEOCFO: So you are always looking to increase your shareholder base then?
Mr. Cloutier: Oh absolutely!
CEOCFO: Will you address potential investors and why they should consider MidSouth Bancorp?
Mr. Cloutier: We have a very stable team here. I have been here for twenty-six years, and I think our track record speaks for itself. As an example, many companies cannot raise capital right now. However, last December we had a stock offering of $30 million and we were over subscribed selling $40 million in MidSouth Stock. We actually could have sold over four times the amount of our original offering. We had several institutional investors that invested. We have made a considerable amount of money for our shareholders, and we insiders still have a significant ownership position. Insiders at the bank own about 30% of the stock. I personally still have a large ownership position as well. Anyone in our company is really a partner and being in the Russell gives an investor liquidity to get into and out of the stock. Sometimes a small community bank does not allow this much flexibility.
CEOCFO: Was MidSouth involved with TARP?
Mr. Cloutier: Yes we did take TARP, and we have studied all the alternatives. As you know, there is a small business bill coming out next week that would allow the conversion of TARP to perhaps small business capital. We really do not need it, but we kept it because it has given us some leverage until we can determine what turn the economy will take. We took TARP because I was very active nationally at the time. And I have to admit, Mr. [Henry] Paulson, Mr. [Ben] Bernanke and Mr. [Timothy] Geithner scared the hell out of me as I listened to them talk in 2008. We took the TARP as a precaution and a cushion.
CEOCFO: Well you know what they say; you can’t have too much capital.
Mr. Cloutier: Right, right, and we have plenty. We are looking at it and investigating every possibility, but the small lending program that we could convert it to may be an option. We have to wait and see, but we could pay it back in the morning and not have any real effect on our capital position.
I would like to encourage our readers to buy Big Bad Banks. It is a
terrific book that will help them understand what caused the economic
downturn and the bank crisis of 2008.
A few months ago, we raised $40 million in capital. We now have 14% tier-one capital. We are likely the best-capitalized bank in our range, definitely in the South and perhaps even in America. We look for strategic partnerships; we prefer not to call them acquisitions. We are looking for partners so that together we can be more profitable. Because we have the capital, we are able to partner with a bank that is lacking in that area. - C. Rusty Cloutier
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