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BancorpSouth (BXS) Q2 Earnings Meet Estimates, Revenues Lag

Zacks Equity Research

BancorpSouth BXS reported second-quarter 2019 net operating earnings of 61 cents per share, which came in line with the Zacks Consensus Estimate. Also, the bottom line increased 8.9% from the prior-year quarter.

Results were affected by lower non-interest income and higher expenses. However, an improvement in net interest revenues, net interest margin (NIM) and lower provisions were tailwinds.

After considering certain non-recurring items, the company’s net income for the second quarter amounted to $53.1 million compared with $54 million reported in the year-ago quarter.

Revenues Climb, Expenses Rise, Loans Improve

Net revenues for the reported quarter increased 5.5% year over year to $226.3 million. However, the top line missed the Zacks Consensus Estimate of $235 million.

Net interest revenues for the quarter came in at $160 million, up 12.6% year over year. Fully-taxable equivalent NIM was 3.87%, expanding 16 basis points (bps).

Non-interest revenues decreased 8.5% year over year to $66.3 million. However, the figure included a negative mortgage servicing rights valuation adjustment of $8.8 million. The downside mainly resulted from lower mortgage banking and credit card fees.

Non-interest expenses came in at $157.7 million, up 8.6% from the year-ago quarter. The rise stemmed from the impact of higher salaries and employee benefits, net occupancy, equipment and deposit insurance assessments.

As of Jun 30, 2019, total deposits were $15.1 billion, up 3% sequentially while loans and leases, net of unearned income, increased 4.5% to $13.7 billion.

Credit Quality: A Mixed Bag

Non-performing loans and leases were 0.66% of net loans and leases as of Jun 30, 2019, up from 0.59% as of Jun 30, 2018. However, annualized net charge-offs, as a percentage of average loans and leases, decreased to 0.04% from 0.07% recorded on Jun 30, 2018. Also, allowance for credit losses to net loans and leases was 0.85%, down from 0.97% in the year-ago quarter.

Non-performing assets were nearly $96 million, up from the prior-year quarter’s $81.2 million. However, the company recorded provision for credit losses of $0.5 million compared with the $2.5 million in the year-ago quarter.

Strong Capital Ratios

As of Jun 30, 2019, tier I capital and tier I leverage capital was 10.52% and 8.96%, down from 11.42% and 9.38%, respectively, at the end of the prior-year quarter.

Ratio of its total shareholders' equity to total assets was 12.29% at the end of the June-ended quarter, up from 12.03% as of Jun 30, 2018. However, the ratio of tangible shareholders' equity to tangible assets shrunk 29 bps to 8.41%.

Share Repurchases

During the reported quarter, the company repurchased 0.61 million common shares at a weighted average price of $28.21 per share.

Our Viewpoint

BancorpSouth’s second-quarter performance seems decent. Improved NIM, along with rise in loans and deposits, will likely be conducive to its top-line growth, moving ahead. Also, the company’s efforts to grow through acquisitions are encouraging. However, mounting expenses might impede bottom-line growth.

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.

Performance of Other Banks

Commerce Bancshares, Inc.’s CBSH second-quarter 2019 earnings per share of 96 cents surpassed the Zacks Consensus Estimate of 94 cents. Moreover, the figure was in line with the prior-year quarter’s earnings.

Washington Federal’s WAFD third-quarter fiscal 2019 (ended Jun 30) earnings came in at 67 cents per share, surpassing the Zacks Consensus Estimate of 64 cents. The figure also reflects year-over-year growth of 10%.

Hancock Whitney Corporation’s HWC second-quarter 2019 operating earnings per share of $1.01 came in line with the Zacks Consensus Estimate. The bottom line was 5.2% higher than the year-ago figure.

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