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Why is BancorpSouth (BXS) Up Despite Q3 Earnings Miss?
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BancorpSouth, Inc.’s third-quarter 2016 adjusted operating earnings of 39 cents per share missed the Zacks Consensus Estimate by a penny. The figure was in-line with the year-ago quarter.
However, shares of BancorpSouth were up 1.7% during yesterday’s regular trading session.
Despite elevated expenses, the company benefited from a growth in revenues, including net mortgage lending revenues in the quarter. Also, improving credit quality and escalating deposit balances added to the positives.
Including mortgage servicing rights (“MSR”) valuation adjustment of $1.8 million, the company’s third-quarter net income amounted to $37.8 million or 40 cents per share, up from $34.3 million or 36 cents in the year-ago quarter.
BancorpSouth’s third-quarter net revenue increased 6.6% year over year to $185.5 million but missed the Zacks Consensus Estimate of $189.3 million.
Net interest revenue amounted to $114.6 million, up 3.2% year over year.
Also, non-interest revenues increased 12.5% year over year to $70.9 million. The rise was mainly due to a substantial increase in mortgage banking revenues.
Excluding the MSR valuation adjustments, net mortgage lending revenues totaled $10.5 million, up from $7.6 million in the year-ago quarter.
However, fully taxable equivalent net interest margin was 3.51%, down 8 basis points (bps) from the prior-year quarter.
Non-interest expenses rose 2.4% year over year to $129.5 million. Increased salaries and employee benefit costs and deposit insurance assessments were partly mitigated by a reduction in other components of expenses.
As of Sep 30, 2016, total deposits were $11.6 billion, up 1.8% from the previous quarter, while net loans and leases remained nearly stable at $10.7 billion compared with the prior-quarter end.
Improving Credit Quality
The company recorded no provisions in the reported quarter as against negative provisions of $3 million in year-ago quarter.
Moreover, annualized net charge-offs, as a percent of average loans and leases were 0.04% compared with 0.09% in the prior-year quarter.
Also, allowance for credit losses to net loans and leases edged down to 1.18% from 1.30% in the prior-year quarter. Further, non-performing assets were $102.3 million, down 10.2% year over year.
However, non-performing loans and leases increased to $90.9 million as of Sep 30, 2016, from $90.3 million as of Sep 30, 2015.
Strong Capital Position
BancorpSouth remained well-capitalized during the third quarter.
As of Sep 30, 2016, Tier I capital and tier I leverage capital was 12.32% and 10.53% as against 12.29% and 10.56%, respectively, at the end of the prior-year quarter.
The ratio of its total shareholders' equity to total assets was 11.80% at the end of the quarter, down from 11.93% as of Sep 30, 2015. The ratio of tangible shareholders' equity to tangible assets decreased 2 bps to 9.86%.
Our Viewpoint
We believe BancorpSouth continues to face margin pressure amid the low rate environment. With interest rates expected to rise only gradually in the near term, any significant improvement in net interest margin seems elusive. Additionally, a stringent regulatory landscape and escalating expenses are added woes.
However, the company is likely to expand through strategic acquisitions, backed by a strong capital and liquidity position. Also, improving revenues further add to the positives.
BancorpSouth currently carries a Zacks Rank #4 (Sell).
Among other Southeast banks, Regions Financial Corporation’s (RF - Free Report) third-quarter 2016 earnings from continuing operations came in at 24 cents per share, surpassing the Zacks Consensus Estimate of 21 cents. This figure was up 26.3% year over year. On an adjusted basis, earnings per share would have been 23 cents. It carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Moreover, First Horizon National Corporation (FHN - Free Report) posted earnings per share of 27 cents for third-quarter 2016, surpassing the Zacks Consensus Estimate of 25 cents. The figure represents an increase of 8% over the year-ago quarter.
Also, we have Popular, Inc. (BPOP - Free Report) that is scheduled to report third-quarter 2016 results on Oct 25.
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Why is BancorpSouth (BXS) Up Despite Q3 Earnings Miss?
BancorpSouth, Inc.’s third-quarter 2016 adjusted operating earnings of 39 cents per share missed the Zacks Consensus Estimate by a penny. The figure was in-line with the year-ago quarter.
However, shares of BancorpSouth were up 1.7% during yesterday’s regular trading session.
Despite elevated expenses, the company benefited from a growth in revenues, including net mortgage lending revenues in the quarter. Also, improving credit quality and escalating deposit balances added to the positives.
Including mortgage servicing rights (“MSR”) valuation adjustment of $1.8 million, the company’s third-quarter net income amounted to $37.8 million or 40 cents per share, up from $34.3 million or 36 cents in the year-ago quarter.
Revenues Up Despite Higher Expenses
BancorpSouth’s third-quarter net revenue increased 6.6% year over year to $185.5 million but missed the Zacks Consensus Estimate of $189.3 million.
Net interest revenue amounted to $114.6 million, up 3.2% year over year.
Also, non-interest revenues increased 12.5% year over year to $70.9 million. The rise was mainly due to a substantial increase in mortgage banking revenues.
Excluding the MSR valuation adjustments, net mortgage lending revenues totaled $10.5 million, up from $7.6 million in the year-ago quarter.
However, fully taxable equivalent net interest margin was 3.51%, down 8 basis points (bps) from the prior-year quarter.
Non-interest expenses rose 2.4% year over year to $129.5 million. Increased salaries and employee benefit costs and deposit insurance assessments were partly mitigated by a reduction in other components of expenses.
As of Sep 30, 2016, total deposits were $11.6 billion, up 1.8% from the previous quarter, while net loans and leases remained nearly stable at $10.7 billion compared with the prior-quarter end.
Improving Credit Quality
The company recorded no provisions in the reported quarter as against negative provisions of $3 million in year-ago quarter.
Moreover, annualized net charge-offs, as a percent of average loans and leases were 0.04% compared with 0.09% in the prior-year quarter.
Also, allowance for credit losses to net loans and leases edged down to 1.18% from 1.30% in the prior-year quarter. Further, non-performing assets were $102.3 million, down 10.2% year over year.
However, non-performing loans and leases increased to $90.9 million as of Sep 30, 2016, from $90.3 million as of Sep 30, 2015.
Strong Capital Position
BancorpSouth remained well-capitalized during the third quarter.
As of Sep 30, 2016, Tier I capital and tier I leverage capital was 12.32% and 10.53% as against 12.29% and 10.56%, respectively, at the end of the prior-year quarter.
The ratio of its total shareholders' equity to total assets was 11.80% at the end of the quarter, down from 11.93% as of Sep 30, 2015. The ratio of tangible shareholders' equity to tangible assets decreased 2 bps to 9.86%.
Our Viewpoint
We believe BancorpSouth continues to face margin pressure amid the low rate environment. With interest rates expected to rise only gradually in the near term, any significant improvement in net interest margin seems elusive. Additionally, a stringent regulatory landscape and escalating expenses are added woes.
However, the company is likely to expand through strategic acquisitions, backed by a strong capital and liquidity position. Also, improving revenues further add to the positives.
BANCORPSOUTH Price, Consensus and EPS Surprise
BANCORPSOUTH Price, Consensus and EPS Surprise | BANCORPSOUTH Quote
BancorpSouth currently carries a Zacks Rank #4 (Sell).
Among other Southeast banks, Regions Financial Corporation’s (RF - Free Report) third-quarter 2016 earnings from continuing operations came in at 24 cents per share, surpassing the Zacks Consensus Estimate of 21 cents. This figure was up 26.3% year over year. On an adjusted basis, earnings per share would have been 23 cents. It carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Moreover, First Horizon National Corporation (FHN - Free Report) posted earnings per share of 27 cents for third-quarter 2016, surpassing the Zacks Consensus Estimate of 25 cents. The figure represents an increase of 8% over the year-ago quarter.
Also, we have Popular, Inc. (BPOP - Free Report) that is scheduled to report third-quarter 2016 results on Oct 25.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>.