MidSouth Bancorp, Inc. :MSL-US: Earnings Analysis: Q2, 2017 By the Numbers : September 28, 2017

MidSouth Bancorp, Inc. reports financial results for the quarter ended June 30, 2017.

Highlights

  • Summary numbers: Revenues of USD 23.47 million, Net Earnings of USD -5.41 million.
  • Net interest income margins narrowed from 78.69% to 77.75% compared to the same period last year.
  • Net loan assets changed -2.05% compared to same period last year and -2.55% from previous period, total deposits changed -1.53% compared to same period last year and -2.33% from previous period.
  • Change in operating cash flow of -55.76% compared to same period last year is about the same as change in earnings, likely no significant movement in accruals or reserves.
  • Earnings decline from worsening in operating margins as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2017-06-30 2017-03-31 2016-12-31 2016-09-30 2016-06-30
Relevant Numbers (Quarterly)
Revenues (mil) 23.47 23.11 23.31 23.41 22.86
Revenue Growth (%YOY) 2.65 1.04 1.13 -2.4 -9.94
Earnings (mil) -5.41 2.49 2.2 2.4 2.49
Earnings Growth (%YOY) -317.17 6.05 19.64 -7.38 -51.11
Net Margin (%) -23.07 10.78 9.44 10.25 10.9
EPS -0.51 0.15 0.12 0.14 0.15
Return on Equity (%) -2.61 0.78 0.64 0.73 0.78
Return on Assets (%) -1.12 0.51 0.45 0.49 0.52

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Market Share Versus Profits

Revenues History
Earnings History

Compared to the same period last year, MSL-US’s change in revenue was close to the amount of its change in earnings. It remains to be seen how the rest of its peer group’s results will turn out and if MSL-US’s performance is a sign of any major shift in the composition of market share in this sector. Also, for comparison purposes, revenues changed by 1.55% and earnings by -317.34% compared to the previous period.

Earnings Growth Analysis

MSL-US’s year-on-year decline in earnings was influenced by a weakening of net interest income margins from 78.69% to 77.75% as well as issues with loan loss provisions. As a result, net interest income after provisions margins went from 68.63% to 24.48% in this period. For comparison, net interest income margins were 78.17% and net interest income after provisions margins 66.06% in the last period. In addition, loan loss provisions as a percentage of net interest income were 68.51% this period and 12.78% a year ago.

Net Interest Income Margin History
Loan Loss Provisions Margin History

Net Loans and Total Deposits

A financial institution’s core operations represented by Net Interest Income and Net Interest Income after Provisions are dependent on both the growth and quality of its deposits as well as the growth and quality of its loans. A firm could boost its interest income in the short-term by just increasing its loan assets with less concern about their quality – but this would eventually lead to greater loan loss provisions. Similarly a drive to increase deposits could result in higher interest expenses and eventually effect the firm’s equity. It is thus important to understand net interest income performance in context to loan loss provisions, loan assets and deposits.

Loan Assets Growth Rate History (Qtr YOY)
Total Deposits Growth Rate History (Qtr YOY)

The firm’s decline in net interest income margins was influenced by both the relative drops in the levels of net loan assets and the level of total deposits as a percentage of equity. On an absolute basis, net loan assets changed -2.05% compared to the same period last year and -2.55% from the previous period. Total deposits changed -1.53% compared to the same period last year and -2.33% from the previous period.

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

MSL-US’s year-on-year change in operating cash flow of -55.76% is around its change in earnings. This suggests that there are likely no significant movement in accruals or reserves for managing earnings this period.

Margins

The company’s decline in earnings has been influenced by the following factors: (1) Contraction of operating margins from 15.41% to -32.38% and (2) One-time items that contributed to a decrease in pretax margins from 15.41% to -36.79%

EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for MidSouth Bancorp, Inc.

Company Profile

MidSouth Bancorp, Inc. is a bank holding company, which engages in the provision of commercial and retail community banking services. Its products and services include interest-bearing and noninterest-bearing checking accounts, investment accounts, cash management services, and electronic banking services. It also offers remote deposit capturing services, internet banking, and debit and credit cards. The company was founded in 1984 and is headquartered in Lafayette, LA.

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