BancorpSouth, Inc.’s BXS adjusted operating earnings in first-quarter 2016 came in at 39 cents per share, beating the Zacks Consensus Estimate by a penny. Moreover, the bottom line exceeded the year-ago quarter tally by 18.2%.
Higher net interest income drove the results. However, decreased mortgage lending revenues and elevated legal expenses are a major drag. Further, higher provisions were a major headwind.
Including mortgage servicing rights (“MSR”) valuation adjustment of $8.0 million, the company’s first-quarter net income amounted to $22.5 million or 24 cents per share, down from $32.3 million or 33 cents reported in the year-ago quarter.
Bancorpsouth Inc. (BXS) EPS BNRI & Surprise Percent - Last 5 Quarters | FindTheCompany
Quarter in Detail
BancorpSouth’s first-quarter net revenue decreased 1.5% year over year to $176.7 million and also missed the Zacks Consensus Estimate of $185 million.
Net interest revenue amounted to $111.2 million, up 4.8% year over year. Fully taxable equivalent net interest margin (“NIM”) was 3.56%, in line with the prior-year quarter figure.
Non-interest revenues dipped 10.6% year over year to $65.5 million. The decline was mainly attributable to a substantial decrease in mortgage lending revenues and other non-interest revenues.
Excluding the MSR valuation adjustments, net mortgage lending revenues totaled $10.6 million, down 8.6% from $11.6 million in the year-ago quarter.
Non-interest expenses rose 3.9% year over year to $142.3 million. The figure includes the legal settlement charge of $13.8 million. This apart, increased salaries and employee benefit costs drove expenses higher.
As of Mar 31, 2016, total deposits were $11.5 billion, up 1.8% year over year; while net loans and leases rose 7.2% to $10.4 billion.
Credit Quality
BancorpSouth’s credit quality depicted a mixed picture. The company recorded $1 million of provisions in the reported quarter compared with negative provisions of $5 million in year-ago quarter. Allowance for credit losses to net loans and leases edged down to 1.21% from 1.40% in the prior-year quarter.
However, non-performing loans and leases increased to $94.2 million or 0.90% of net loans and leases as of Mar 31, 2016, from $61.5 million or 0.63% as of Mar 31, 2015. Also, non-performing assets were $106.9 million, up 19.6% year over year.
Moreover, annualized net charge-offs, as a percent of average loans and leases, increased 1 basis point (bp) year over year to 0.04%.
Capital Position
BancorpSouth remained well-capitalized during the first quarter. As of Mar 31, 2016, Tier I capital and tier I leverage capital was 12.34% and 10.61% compared with 12.81% and 10.71%, respectively, at the end of the prior-year quarter.
The ratio of total shareholders' equity to total assets was 12.06% at the end of the quarter, down from 12.07% as of Mar 31, 2015. However, the ratio of tangible shareholders' equity to tangible assets advanced 6 bps to 10.05%.
Our Viewpoint
We believe BancorpSouth is poised to expand through strategic acquisitions, backed by strong capital and liquidity position. Also, gradual economic recovery will likely boost the company’s top-line performance, highlighting its organic prospects. However, deteriorating credit metrics are a major negative for BancorpSouth.
Additionally, escalating expenses, a low interest rate environment and stringent regulatory reforms are added woes.
BancorpSouth currently carries a Zacks Rank #4 (Sell).
Among other Southeast banks, Regions Financial Corporation’s RF first-quarter 2016 earnings from continuing operations came in at 20 cents per share, beating the Zacks Consensus Estimate by a penny. Moreover, the figure improved 25% year over year.
First Horizon National Corp. FHN posted in-line results in first-quarter 2016 which had a minimal effect on its share price. Earnings per share of 20 cents were on par with the Zacks Consensus Estimate but compared favorably with the loss per share of 33 cents reported in the prior-year quarter.
Popular, Inc. BPOP is scheduled to report first-quarter results on Apr 25.
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