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BancorpSouth's (BXS) Q4 Earnings Top Estimates, Revenues Up

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BancorpSouth Bank BXS delivered positive earnings surprise of 8.3% in fourth-quarter 2019 on higher interest income. Net operating earnings of 65 cents per share beat the Zacks Consensus Estimate of 60 cents. Also, the bottom line increased 14% from the prior-year quarter.

Higher net revenues aided by rise in interest income and non-interest revenues were the driving factors. Also, nil provisions during the quarter came as a tailwind. However, mounting expenses was a major drag.

After considering certain non-recurring items, the company’s net income for the fourth quarter amounted to $65.8 million or 63 cents per share, up from the $47.1 million or 47 cents reported in the year-ago quarter.

For full-year 2019, BancorpSouth reported net income of $234.3 million or $2.30 per share compared with $221.3 million or $2.23 in prior-year.

Revenues & Deposits Climb, Expenses Rise

Net revenues for the reported quarter increased 15.8% year over year to $245.5 million. Also, the top-line figure outpaced the Zacks Consensus Estimate of $242.6 million.

For 2019, the company reported net revenues of $930.6 million, up 8.6% from 2018. The reported figure surpassed the consensus estimate of $929.3 million.

Net interest revenues for the quarter came in at $170.8 million, up 11.7% year over year. Fully-taxable equivalent NIM was 3.76%, contracting 4 basis points (bps).

Non-interest revenues increased 26.5% year over year to $74.7 million. However, the figure included a positive mortgage servicing rights valuation adjustment of $3.2 million. This upswing resulted from rise in all the components except insurance commissions and credit card, debit card and merchant fees.

Non-interest expenses were $162.4 million, up 6.6% from the year-ago quarter. The upside stemmed from the impact of higher salaries and employee benefits, net occupancy and equipment expenses.

As of Dec 31, 2019, total deposits were $16.4 billion, up 2.4% sequentially, while loans and leases, net of unearned income, declined marginally to $14.1 billion.

Credit Quality: A Mixed Bag

Non-performing loans and leases were 0.79% of net loans and leases as of Dec 31, 2019, up from 0.67% as of Dec 31, 2018. Also, non-performing assets came in at $118.3 million, up 11.5% from the prior-year quarter.

However, allowance for credit losses to net loans and leases was 0.85% as of Dec 31, 2019, down from the year-ago quarter’s 0.92%. Moreover, in the fourth quarter, the company recorded nil provision for credit losses against $1 million provisions reported in the year-ago quarter.

Strong Capital Position

As of Dec 31, 2019, tier I capital and tier I leverage capital was 11.6% and 9.69%, up from 10.84% and 9.06%, respectively, at the end of the prior-year quarter. Also, the ratio of tangible shareholders' equity to tangible assets shrunk 49 bps to 8.92%.

Also, ratio of its total shareholders' equity to total assets was 12.75% at the end of the December-ended quarter, up from 12.25% as of Dec 31, 2018.

Share Repurchases

During the reported quarter, the company repurchased 0.29 million common shares at a weighted average price of $32.46 per share. In full-year 2019, BancorpSouth repurchased 2.5 million common shares at a weighted average price of $28.20 per share.

Our Viewpoint

Rising net interest revenues, despite lower interest rates, along with solid growth in non-interest revenues, are likely to be conducive to BancorpSouth’s bottom-line growth. Also, the company’s efforts to grow through acquisitions look encouraging. Nevertheless, rising expenses, mainly due to the company's inorganic growth strategy and digitization efforts, might partly impede bottom-line growth.

BancorpSouth Bank Price, Consensus and EPS Surprise

Currently, BancorpSouth carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

Northern Trust Corporation NTRS reported a negative earnings surprise of 4% in fourth-quarter 2019. Earnings per share of $1.70 lagged the Zacks Consensus Estimate of $1.77. Moreover, the reported figure declined 5.6% year over year. Results included certain one-time items.

Fifth Third Bancorp FITB reported fourth-quarter 2019 adjusted earnings per share of 68 cents, lagging the Zacks Consensus Estimate of 73 cents. However, including certain one-time items, the bottom line came in at 96 cents, up 50% year over year.

Comerica (CMA - Free Report) delivered positive earnings surprise of 6.3% in fourth-quarter 2019 on high interest income. Earnings per share of $1.85 surpassed the Zacks Consensus Estimate of $1.74. Earnings, however, came in lower than the prior-year quarter figure of $1.95.

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