It has been about a month since the last earnings report for BancorpSouth (BXS). Shares have added about 15.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is BancorpSouth due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
BancorpSouth Q4 Earnings Top Estimates on High Revenues
BancorpSouth reported fourth-quarter 2018 net operating earnings of 57 cents per share, surpassing the Zacks Consensus Estimate of 54 cents. Also, the bottom line increased 39% from the prior-year quarter.
Results benefited from an improvement in net interest revenues, partially offset by higher expenses. Further, a dismal capital position and higher provisions were the undermining factors.
The company’s net income for the quarter amounted to $47.1 million or 47 cents per share compared with $37.5 million or 41 cents per share reported in the year-ago quarter.
Earnings per share for 2018 came in at $2.23 per share compared with $1.67 per share reported in the prior year. The company’s net income for 2018 amounted to $221.3 million compared with $153 million recorded in the prior year.
Higher Expenses Offset Revenue Growth, Loans Improve
Net revenues for the quarter increased nearly 14.9% year over year to $211.9 million. However, the reported figure missed the Zacks Consensus Estimate of $221.4 million.
Net revenues for 2018 increased nearly 15.5% year over year to $857.3 million. The revenue figure, however, missed the Zacks Consensus Estimate of $864.1 million.
Net interest revenues for the quarter came in at $152.9 million, up 26% year over year. Fully-taxable equivalent net interest margin (NIM) was 3.80%, expanding 22 basis points (bps) from the prior-year quarter.
Non-interest revenues decreased 6.4% year over year to $59 million. However, the figure included a negative mortgage servicing rights valuation adjustment of $8.1 million. The downside stemmed from lower insurance commission and wealth management revenues.
Non-interest expenses came in at $152.3 million, flaring up 21% from the year-ago quarter. The upswing stemmed from the impact of elevated salaries and employee benefits, and other non-interest expenses.
As of Dec 31, 2018, total deposits were $14.1 billion, up 5.4% sequentially, while loans and leases, net of unearned income, increased 5.3% to $13.1 billion.
Credit Quality: A Mixed Bag
Non-performing loans and leases were 0.74% of net loans and leases as of Dec 31, 2018, up from 0.71% as of Dec 31, 2017. However, allowance for credit losses to net loans and leases was 0.92%, down from 1.07% registered in the year-ago quarter. Annualized net charge-offs, as a percentage of average loans and leases, remained stable at 0.06% year over year.
Further, non-performing assets were nearly $106 million, up from $84.5 million in the prior-year quarter. However, the company recorded provision for credit losses of $1 million compared to $0.5 million in the year-ago quarter.
Capital Ratios Deteriorate
As of Dec 31, 2018, tier I capital and tier I leverage capital ratios was 10.85% and 9.06%, down from 12.15% and 10.12%, respectively, at the end of the prior-year quarter.
The ratio of its total shareholders' equity to total assets was 12.25% at the end of the fourth quarter, up from 11.20% as of Dec 31, 2017. However, the ratio of tangible shareholders' equity to tangible assets shrunk 85 bps to 8.46%.
During 2018, the company repurchased 6 million shares of its outstanding common stock at a weighted average price of $31.19 per share. Notably, during the quarter under review, the company repurchased 3 million common shares at a weighted average price of $30.22 per share.
As of Dec 31, 2018, the company had 3 million remaining shares available for repurchase under its current share repurchase authorization, which expires on Dec 31, 2019.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month.
At this time, BancorpSouth has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
BancorpSouth has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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