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BancorpSouth (BXS) Q2 Earnings As Expected; Expenses Up
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BancorpSouth, Inc.’s adjusted operating earnings in second-quarter 2016 came in at 39 cents per share, in line with the Zacks Consensus Estimate as well as the year-ago quarter tally.
Higher revenue along with escalating loans and deposits balances were the positives. However, decreased mortgage lending revenues, deteriorating credit metrics and elevated expenses were a major drag.
Including mortgage servicing rights (“MSR”) valuation adjustment of $4.1 million, the company’s second-quarter net income amounted to $34.7 million or 37 cents per share, down from $39.7 million or 41 cents reported in the year-ago quarter.
Organic Growth Reflected; Costs Escalate
BancorpSouth’s second-quarter net revenue increased slightly year over year to $182 million but missed the Zacks Consensus Estimate of $187 million.
Net interest revenue amounted to $112.3 million, up 4.7% year over year. Fully taxable equivalent net interest margin was 3.56%, up 2 basis points (bps) from the prior-year quarter figure.
Non-interest revenues dropped 6.2% year over year to $69.7 million. The decline was mainly due to a substantial decrease in mortgage banking revenues.
Excluding the MSR valuation adjustments, net mortgage lending revenues totaled $13.1 million, up 33.7% from $9.8 million in the year-ago quarter.
Non-interest expenses rose slightly year over year to $128.7 million. Increased salaries and employee benefit costs were mostly counteracted by lowering other components of expenses.
As of Jun 30, 2016, total deposits were $11.4 billion, up 2.7% year over year; while net loans and leases rose 6% to $10.6 billion.
Credit Quality: A Mixed Bag
BancorpSouth’s credit quality depicted a mixed picture. The company recorded $2.0 million of provisions in the reported quarter compared with negative provisions of $5 million in year-ago quarter. Non-performing loans and leases increased to $80.2 million or 0.76% of net loans and leases as of Jun 30, 2016, from $79.4 million or 0.79% as of Jun 30, 2015.
Moreover, annualized net charge-offs, as a percent of average loans and leases were 0.06% compared with annualized net recoveries of 0.27% in the prior-year quarter.
However, allowance for credit losses to net loans and leases edged down to 1.20% from 1.38% in the prior-year quarter. Also, non-performing assets were $94.9 million, down 8.5% year over year.
Strong Capital Position
BancorpSouth remained well-capitalized during the second quarter. As of Jun 30, 2016, Tier I capital and tier I leverage capital was 12.37% and 10.66% while it was 12.81% and 10.96%, respectively, at the end of the prior-year quarter.
The ratio of its total shareholders' equity to total assets was 12.12% at the end of the quarter, down from 12.32% as of Jun 30, 2015. The ratio of tangible shareholders' equity to tangible assets decreased 15 bps to 10.11%.
Our Viewpoint
We believe BancorpSouth is well positioned to expand through strategic acquisitions, backed by a strong capital and liquidity position. Also, gradual economic recovery is likely to enhance the company’s top-line performance, highlighting its organic prospects. However, weakening 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 #3 (Hold).
Among other Southeast banks, Regions Financial Corporation’s (RF - Free Report) second-quarter 2016 earnings from continuing operations came in at 20 cents per share, in line with the Zacks Consensus Estimate and stable year over year. On an adjusted basis, earnings per share would have been 21 cents.
First Horizon National Corporation (FHN - Free Report) posted earnings per share of 24 cents for second-quarter 2016, surpassing the Zacks Consensus Estimate by a penny. Moreover, the figure represents an increase of 9.1% over the year-ago quarter.
Popular, Inc. (BPOP - Free Report) is scheduled to report second-quarter 2016 results on Jul 26.
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BancorpSouth (BXS) Q2 Earnings As Expected; Expenses Up
BancorpSouth, Inc.’s adjusted operating earnings in second-quarter 2016 came in at 39 cents per share, in line with the Zacks Consensus Estimate as well as the year-ago quarter tally.
Higher revenue along with escalating loans and deposits balances were the positives. However, decreased mortgage lending revenues, deteriorating credit metrics and elevated expenses were a major drag.
Including mortgage servicing rights (“MSR”) valuation adjustment of $4.1 million, the company’s second-quarter net income amounted to $34.7 million or 37 cents per share, down from $39.7 million or 41 cents reported in the year-ago quarter.
Organic Growth Reflected; Costs Escalate
BancorpSouth’s second-quarter net revenue increased slightly year over year to $182 million but missed the Zacks Consensus Estimate of $187 million.
Net interest revenue amounted to $112.3 million, up 4.7% year over year. Fully taxable equivalent net interest margin was 3.56%, up 2 basis points (bps) from the prior-year quarter figure.
Non-interest revenues dropped 6.2% year over year to $69.7 million. The decline was mainly due to a substantial decrease in mortgage banking revenues.
Excluding the MSR valuation adjustments, net mortgage lending revenues totaled $13.1 million, up 33.7% from $9.8 million in the year-ago quarter.
Non-interest expenses rose slightly year over year to $128.7 million. Increased salaries and employee benefit costs were mostly counteracted by lowering other components of expenses.
As of Jun 30, 2016, total deposits were $11.4 billion, up 2.7% year over year; while net loans and leases rose 6% to $10.6 billion.
Credit Quality: A Mixed Bag
BancorpSouth’s credit quality depicted a mixed picture. The company recorded $2.0 million of provisions in the reported quarter compared with negative provisions of $5 million in year-ago quarter. Non-performing loans and leases increased to $80.2 million or 0.76% of net loans and leases as of Jun 30, 2016, from $79.4 million or 0.79% as of Jun 30, 2015.
Moreover, annualized net charge-offs, as a percent of average loans and leases were 0.06% compared with annualized net recoveries of 0.27% in the prior-year quarter.
However, allowance for credit losses to net loans and leases edged down to 1.20% from 1.38% in the prior-year quarter. Also, non-performing assets were $94.9 million, down 8.5% year over year.
Strong Capital Position
BancorpSouth remained well-capitalized during the second quarter. As of Jun 30, 2016, Tier I capital and tier I leverage capital was 12.37% and 10.66% while it was 12.81% and 10.96%, respectively, at the end of the prior-year quarter.
The ratio of its total shareholders' equity to total assets was 12.12% at the end of the quarter, down from 12.32% as of Jun 30, 2015. The ratio of tangible shareholders' equity to tangible assets decreased 15 bps to 10.11%.
Our Viewpoint
We believe BancorpSouth is well positioned to expand through strategic acquisitions, backed by a strong capital and liquidity position. Also, gradual economic recovery is likely to enhance the company’s top-line performance, highlighting its organic prospects. However, weakening credit metrics are a major negative for BancorpSouth.
Additionally, escalating expenses, a low interest rate environment and stringent regulatory reforms are added woes.
BANCORPSOUTH Price, Consensus and EPS Surprise
BANCORPSOUTH Price, Consensus and EPS Surprise | BANCORPSOUTH Quote
BancorpSouth currently carries a Zacks Rank #3 (Hold).
Among other Southeast banks, Regions Financial Corporation’s (RF - Free Report) second-quarter 2016 earnings from continuing operations came in at 20 cents per share, in line with the Zacks Consensus Estimate and stable year over year. On an adjusted basis, earnings per share would have been 21 cents.
First Horizon National Corporation (FHN - Free Report) posted earnings per share of 24 cents for second-quarter 2016, surpassing the Zacks Consensus Estimate by a penny. Moreover, the figure represents an increase of 9.1% over the year-ago quarter.
Popular, Inc. (BPOP - Free Report) is scheduled to report second-quarter 2016 results on Jul 26.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>