A month has gone by since the last earnings report for BancorpSouth (BXS - Free Report) . Shares have lost about 3.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is BancorpSouth due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
BancorpSouth Q1 Earnings Top Estimates, Costs Up
BancorpSouth reported first-quarter 2019 net operating earnings of 56 cents per share, surpassing the Zacks Consensus Estimate of 54 cents. Also, the bottom line increased 3.7% from the prior-year quarter.
Results were driven by an improvement in net interest revenues, net interest margin and lower provisions. However, non-interest income and higher expenses were headwinds.
The company’s net income for the first quarter amounted to $51.6 million compared with $53.5 million reported in the year-ago quarter.
Revenues Decline, Expenses Rise, Deposits Improve
Net revenues for the reported quarter decreased slightly year over year to $216.8 million. Further, the revenue figure missed the Zacks Consensus Estimate of $221.2 million.
Net interest revenues for the quarter came in at $152.6 million, up 10.5% year over year. Fully-taxable equivalent NIM was 3.86%, expanding 19 basis points (bps) year over year.
Non-interest revenues decreased 18.6% year over year to $64.2 million. However, the figure included a negative mortgage servicing rights valuation adjustment of $4.9 million. The downside mainly resulted from lower mortgage banking and other revenues.
Non-interest expenses came in at $150 million, up 1.5% from the year-ago quarter. The upswing stemmed from the impact of elevated salaries and employee benefits, net occupancy, equipment and deposit insurance assessments.
As of Mar 31, 2019, total deposits were $14.7 billion, up 4.4% sequentially, while loans and leases, net of unearned income, edged down to $13.1 billion.
Credit Quality: A Mixed Bag
Non-performing loans and leases were 0.67% of net loans and leases as of Mar 31, 2019, up from 0.66% as of Mar 31, 2018. Annualized net charge-offs, as a percentage of average loans and leases, increased to 0.12% from net recoveries of 0.01% recorded as of Mar 31, 2018. However, allowance for credit losses to net loans and leases was 0.89%, marginally down from 0.97% registered in the year-ago quarter.
Non-performing assets were nearly $97 million, up from the prior-year quarter’s $90.9 million. However, the company recorded provision for credit losses of $0.5 million compared with the $1 million reported in the year-ago quarter.
Strong Capital Ratios
As of Mar 31, 2019, tier I capital and tier I leverage capital was 10.79% and 11.60%, down from 11.30% and 12.18%, respectively, witnessed at the end of the prior-year quarter.
The ratio of its total shareholders' equity to total assets was 12.16% at the end of the Mar-end quarter, up from 11.99% as of Mar 31, 2018. However, the ratio of tangible shareholders' equity to tangible assets shrunk 28 bps to 8.41%.
During the reported quarter, the company repurchased 1 million common shares at a weighted average price of $27.60 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
Currently, BancorpSouth has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, BancorpSouth has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.