Lafayette-based MidSouth Bank released its earnings report Tuesday for the fourth quarter of 2014, possibly showing the first signs of impact from the ongoing oil price drop.
The bank’s earnings for the quarter, compared to the fourth quarter in 2013, were up, rising from $3.4 million to $3.5 million. Share prices also rose slightly, from $0.29 per share in the fourth quarter of 2013 to finish out the fourth quarter of 2014 at $0.30 per share.
The downside, however, is that since the onset of the oil price plunge in the middle of 2014, MidSouth’s shares have dropped considerably, hitting $15.11 per share on Tuesday, a 10 percent decline over the last 12 months.
According to MidSouth President and CEO Rusty Cloutier, the bank is preparing for the oil price drop with a special reserve fund of $650,000.
Here’s what Cloutier had to say in a prepared statement:
Obviously we are closely monitoring the effects of the recent sharp decline in oil prices. We continue to communicate with our customers who provide valuable insight on the present energy cycle. Our loan review function continues to stress test our oil and gas loan portfolio and review for potential downgrades. We have not yet identified any specific loan impairments resulting from the recent downturn in oil prices. However, in light of recent developments, we established this quarter a special reserve for potential future energy loan losses that have not yet been identified. The amount of the special reserve was $650,000 or approximately 25 basis points of energy related loans. We believe establishing this reserve is a prudent action at this time.
MidSouth Bank began as an energy lender during the oil downturn of the 80’s and we have a strong thirty year track record of lending to this industry. We have seen many ups and downs in the oil and gas industry over the years, and we don’t bet on energy prices in our lending practices.
For more on the drop in oil prices and the potential impact on Louisiana’s banking industry, click here.