MidSouth Bank Weighing Options on TARP Funds

When MidSouth Bank elected to sell $20 million worth of its preferred stock to the U.S. Treasury in association with the Capital Purchase Program, the bank’s management and board of directors believed they were entering into a public-private partnership with the federal government. Unlike the original Troubled Asset Relief Program funds, designed to bail out failing big banks, these TARP-related funds were for healthy community banks like MidSouth.

Convinced the money could be put to good use in the form of loans throughout its communities in Louisiana and Texas, the bank proactively launched a series of town hall-style meetings to get the word out to the business community that it was lending money to help stimulate the economy. The 14-meeting series concluded Thursday, Feb. 19, amid potential changes to the Capital Purchase Program that now have MidSouth Bank and numerous others that accepted the TARP funds wondering if they should return the money.

"We thought by accepting the capital, which is money we have to pay back with interest, we were embarking on a plan that would give us even more money to deploy in our communities at a time when the economy needs some new life," said MidSouth Bank President and CEO Rusty Cloutier. "It was sold to us by the feds as a partnership, but it’s turning out to be something very different. It’s looking more and more like the federal government wants to treat this like it was a needs-based issue, and we didn’t need the money."

Cloutier said community banks like his are now confused by the mixed signals the Treasury Department is sending out, attempting to put the same sweeping restrictions on healthy banks as the failing banks that received the original TARP money. "They’re talking about attaching all sorts of strings to the money, so banks have been sending it back," he added. "The Treasury needs to stop listening to the special interests of the ‘too big to fail’ banks that got us into this trouble and break them up. And at the same time it should back away from community banks and let us do what we’re supposed to do with the TARP funds — lend the money."

MidSouth Bank officials are waiting for the dust to settle on the Treasury’s plan for how it will structure the Capital Purchase Program, a plan that seems to change from day to day. "Basically, we’re trying to find out if the Obama administration is still interested in a public-private partnership with us," Cloutier said.

About MidSouth Bancorp, Inc.
MidSouth Bancorp, Inc. is a bank holding company headquartered in Lafayette, La., with total assets of $936.8 million as of Dec. 31, 2008. Through its wholly-owned bank subsidiary, MidSouth Bank, N.A., the Company offers complete banking services to commercial and retail customers in south Louisiana and southeast Texas. It has 34 locations in Louisiana and Texas and more than 170 ATMs. The group is community oriented and focuses primarily on offering commercial and consumer loan and deposit services to individuals, and small and middle market businesses.

Established in 1985, MidSouth Bank has 27 offices extending along the Interstate 10 corridor in south Louisiana located in Lafayette (9), Baton Rouge (3), New Iberia (3), Lake Charles (2), Sulphur, Jeanerette, Jennings, Thibodaux, Larose, Opelousas, Breaux Bridge, Cecilia, Morgan City and Houma. Additionally, the Company has seven full-service offices in the southeast region of Texas, including Houston, Beaumont (3), Vidor, College Station and Conroe. It also has a mortgage loan center in Conroe.