BancorpSouth, Inc. (BXS - Free Report) declared the final results of its voluntary early retirement program which it initiated primarily to curtail expenses and improve operating performance. The final responses were due from employees by May 23.
Out of approximately 418 employees who were eligible, 227 opted for the early retirement scheme. Hence, the program will result in pre-tax savings of around $9 million, or 6 cents per share (net of tax), on an annual basis. However, BancorpSouth will record a one-time pre-tax charge of $10.9 million, or 7 cents per share, associated with the added benefits presented under the terms of the program.
Eligible employees could opt for receiving the pension plan benefits either in the form of a lump sum or through allowance payments in installments. However, if the total lump sum payment, including the amount not related to the voluntary retirement program, exceeds $16.7 million, an added pre-tax non-cash charge of $8–$10 million will be incurred in 2013 by the company.
This charge will be mainly due to an increase in amortization of items included in other comprehensive income related to pension assets. A rise in this charge would reduce pension expenses by $0.7–$0.9 million, annually, through the next 11 years.
Since the economic crisis, many banks and financial firms are downsizing their workforces to improve efficiency and reduce costs. Among major banks, JPMorgan Chase & Co. (JPM - Free Report) announced overall 19,000 job cuts by the end of 2014. Bank of America Corp. (BAC - Free Report) and Goldman Sachs Group Inc. (GS - Free Report) also announced job cuts.
We believe that BancorpSouth’s announcement of the voluntary retirement scheme and its decision to downsize its workforce amid a slowly recovering economy bodes well for the company. The steps taken will likely drive profitability in the near term.
BancorpSouth currently carries a Zacks Rank #3 (Hold).