BancorpSouth (BXS) Reports In-Line Earnings, Revenues Up Y/Y - Analyst Blog

BancorpSouth, Inc. 's BXS operating earnings for first-quarter 2015 came in at 33 cents per share, in line with the Zacks Consensus Estimate. However, earnings came in 10% higher than the prior-year quarter.

Bancorpsouth Inc. - Earnings Surprise | FindTheCompany

Results reflected strong top-line performance, which was, however, offset by a rise in expenses. While, loans and deposits grew at a considerable rate and credit quality continued to show strength, capital ratios represented a mixed bag.

During the quarter, the company re-filed merger applications with concerned regulatory authorities to carry out the previously announced mergers with Louisiana-based Ouachita Bancshares Corp. and Texas-based Central Community Corporation.

Net income for the quarter came in at $32.3 million, up 13.4% year over year.

Quarter in Detail

BancorpSouth's first-quarter net revenue totaled $179.4 million, up 6.8% year over year. Moreover, it beat the Zacks Consensus Estimate of $178.8 million.

Net interest revenue was $106.1 million, up 4.5% year over year. Fully taxable equivalent net interest margin increased 2 basis points (bps) year over year to 3.56%. The rise was mainly attributable to lower cost of deposits, partially offset by a fall in yields on loans and leases.

Non-interest revenues surged 10.2% year over year to $73.3 million. The rise was driven by revenue growth in all components, particularly mortgage lending revenue which more than doubled year over year to $8.6 million. Moreover, the company reported record high insurance commission revenue of $33.5 million. However, drop in deposit service charges partially offset the overall rise.

Excluding the MSR valuation adjustments of $3 million, net mortgage lending revenue in the quarter was $11.6 million, significantly up from $4.9 million in the year-ago quarter.

BancorpSouth's non-interest expense was $136.9 million, up 8.1% year over year. This was mainly due to higher salaries, deposit insurance assessments and other expenses, partially offset by a decline in equipment and occupancy costs. Also, the quarter included a $5.5 million charge on litigation reserve, as a safeguard against contingent losses.

As of Mar 31, 2015, total deposits were $11.3 billion, up 2.8% year over year, while net loans and leases rose 7.5% to $9.7 billion.

Credit Quality

BancorpSouth witnessed a significant improvement in its credit quality. Provision for credit losses turned negative $5 million from nil over the past several quarters. Further, as of Mar 31, 2015, BancorpSouth's nonperforming loans and leases declined to $61.5 million or 0.63% of net loans and leases, from $93.3 million or 1.03% as of Mar 31, 2014.

Further, allowance for credit losses to net loans and leases edged down to 1.40% from 1.65% in the prior-year quarter, while non-performing assets fell 43% to $89.4 million from $156.9 million in the prior-year quarter.

Additionally, annualized net charge-offs, as a percent of average loans and leases, decreased 13 bps year over year to 0.03%.

Capital Position

BancorpSouth capital ratios represented a mixed bag. As of Mar 31, 2015, tier I leverage capital stood at 10.30% compared with 10.04%, at the end of the prior-year quarter.

The ratio of total shareholders' equity to total assets increased to 12.07% at the end of the quarter from 11.83% as of Mar 31, 2014. Moreover, the ratio of tangible shareholders' equity to tangible assets advanced 30 bps to 9.99%.

However, during the quarter, tier I capital declined to 12.87% from 13.18% as of Mar 31, 2014.

Our Viewpoint

We believe BancorpSouth is poised to expand through strategic acquisitions on the back of financial strength which exhibits a strong capital and liquidity position. Also, gradual economic recovery will likely boost top-line performance, highlighting the company's organic growth prospects. Besides, consistently improving credit metrics are a major positive for BancorpSouth.

However, headwinds like a volatile trend in loans and deposit growth, low interest rate environment and stringent regulatory reforms are likely to continue.

BancorpSouth currently carries a Zacks Rank #2 (Buy).

Among other Southeast banks, First Horizon National Corp. FHN reported adjusted first-quarter 2015 earnings of 18 cents, meeting the Zacks Consensus Estimate. Results reflected weak top-line performance and higher expenses. However, appreciable growth in loan and deposits and a decline in provisions acted as tailwinds.

IberiaBank Corp. IBKC and Popular, Inc. BPOP are expected to release first-quarter 2015 results on Apr 22 and Apr 27, respectively.

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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.

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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