BancorpSouth (BXS) Q3 Earnings & Revenues Surpass Estimates

BancorpSouth Bank BXS delivered an earnings surprise of 32.7% in third-quarter 2020 on higher interest income. Net operating earnings of 69 cents per share beat the Zacks Consensus Estimate of 52 cents. The bottom line, however, remains flat year over year.

Higher net revenues, aided by increases in interest income and non-interest revenues were driving factors. Moreover, higher deposit balances boosted profitability. However, elevated provisions and shrinking net interest margins hurt the bank.

The company’s net income for the September-end quarter amounted to $71.5 million or 69 cents per share, up from the $63.8 million or 63 cents reported in the year-ago quarter.

Revenues & Deposits Climb, Expenses Fall

Net revenues for the reported quarter increased 9.8% year over year to $265.9 million. Moreover, the top-line figure surpassed the Zacks Consensus Estimate of $259.5 million.

Net interest revenues for the quarter came in at $175.9 million, up 5.6% year over year. Fully-taxable equivalent net interest margin (NIM) was 3.31%, contracting 57 basis points (bps) year over year.

Non-interest revenues climbed 19.2% year over year to $89.9 million. Also, the figure included a positive mortgage servicing rights valuation adjustment of $0.4 million. This upswing resulted from rise in all the components except for deposit service charge revenues, wealth management revenues and other non-interest revenues.

Non-interest expenses were $155.5 million, down 2.6% year on year. This downside stemmed primarily from lower salaries and employee benefits, occupancy and other non-interest expenses.

As of Sep 30, 2020, total deposits were $19.4 billion, up 1.2% sequentially, while loans and leases, net of unearned income, deteriorated marginally sequentially to $15.3 billion.

Credit Quality Deteriorates

Non-performing loans and leases were 0.98% of net loans and leases as of Sep 30, 2020, up from 0.77% as of Sep 30, 2019. Also, non-performing assets were $157.3 million, up 35.6% from the prior-year quarter. In addition, in the July-September period, the company recorded $15 million in provision for credit losses as against the $0.5 million in provisions reported in the year-ago quarter.

However, allowance for credit losses to net loans and leases was 1.78% as of Sep 30, 2020, up 95 bps year on year.

Capital Position

As of Sep 30, 2020, tier 1 capital and tier 1 leverage capital ratios were 11.65% and 8.59% compared with the 10.54% and 9.14%, respectively, recorded at the end of the prior-year quarter. Furthermore, the ratio of tangible shareholders' equity to tangible assets expanded 30 bps to 8.77%.

However, ratio of its total shareholders' equity to total assets was 11.81% at the end of the third quarter, down from 12.54% as of Sep 30, 2019.

Share Repurchases

During the reported quarter, the company did not repurchase any shares under its share-repurchase program.

Our Viewpoint

BancorpSouth has a healthy balance-sheet position. This supports its acquisition and capital-deployment strategies. Apart from this, the decline in interest rates amid the Federal Reserve's accommodative policy stance is expected to hurt the company’s margins and revenues in the upcoming period.

BancorpSouth Bank Price, Consensus and EPS Surprise

BancorpSouth Bank Price, Consensus and EPS Surprise

BancorpSouth Bank price-consensus-eps-surprise-chart | BancorpSouth Bank Quote

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

Earnings Schedule of Other Banks

Texas Capital Bancshares TCBI, SEI Investments SEIC and East West Bancorp EWBC are scheduled to announce third-quarter results this week. While SEI Investmentsand Texas Capital Bancshares will release earnings figures on Oct 21, East West Bancorp will report on Oct 22.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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