BXS BancorpSouth Bank

BancorpSouth, Inc.’s (BXS) fourth-quarter 2013 earnings per share came in at 29 cents, beating the Zacks Consensus Estimate by a penny. Further, earnings compared favorably with the prior-year quarter figure of 18 cents. With this, the company has delivered positive earnings surprises in three of the last four quarters.

For full-year 2013, BancorpSouth’s earnings per share of 99 cents missed the Zacks Consensus Estimate by a penny. However, it came in ahead of the prior-year figure of 90 cents.

BancorpSouth’s results benefited from increased net interest revenue, lower expenses and the absence of provision for credit losses. These positives were partially offset by decline in non-interest revenues.

The company’s net income stood at $27.7 million in the reported quarter, reflecting a significant increase of 63.1% from the year-ago quarter. Also, for 2013, it came in at $94.1 million, up 1.1% year over year

Quarter in Detail

BancorpSouth’s net interest revenue came in at $102.4 million, up 1.5% year over year. Fully taxable equivalent net interest margin (NIM) climbed 8 basis points (bps) year over year to 3.52%. The rise was mainly due to lower interest expenses, partially offset by a fall in yields on loans and leases and interest earning assets.

Non-interest revenues declined 8.2% year over year to $65.1 million. The decline was mainly due to lower deposit service charge revenues, partially offset by higher credit and debit card fee revenues as well as insurance commission revenue. Non-interest revenues for the quarter included a positive mortgage servicing right (MSR) valuation adjustment of $2.9 million, compared with a positive adjustment of $0.2 million for fourth-quarter 2012.

Excluding the MSR valuation adjustments, net mortgage lending revenue was $6.7 million, a significant decline from $17.0 million in the year-ago quarter.

BancorpSouth’s non-interest expense declined 10.8 % year over year to $127.8 million. This was mainly due to lower salaries and employee benefits costs as well as lower foreclosed property expenses.

As of Dec 31, 2013, total deposits stood at $10.8 billion, down 2.8% year over year, while net loans and leases rose 3.9% to $9.0 billion.

Credit Quality

BancorpSouth reported a partial improvement in its credit quality. Provision for credit losses was nil in the reported quarter. Annualized net charge-offs as a percent of average loans and leases declined 46 bps year over year to 0.03%.
Further, as of Dec 31, 2013, BancorpSouth’s nonperforming loans were $120.4 million or 1.34% of net loans and leases, decreasing from $233.6 million or 2.70% as of Dec 31, 2012.

However, allowance for credit losses to non-performing loans and leases significantly increased to 127.27% from the prior-year figure of 70.42%. Also, allowance for credit losses to non-performing assets stood at 80.76% compared with 48.83% in the prior-year quarter.

Capital Position

Though capital ratios declined in the reported quarter, BancorpSouth remained well capitalized.  Tier I capital and tier I leverage capital stood at 12.99% and 9.93%, respectively, compared with 13.77% and 10.25% at the end of the prior-year quarter.
As of Dec 31, 2013, total risk based capital came in at 14.25 %.

The ratio of total shareholders' equity to total assets increased to 11.61% at the end of the quarter from 10.82% as of Dec 31, 2012. Moreover, the ratio of tangible shareholders' equity to tangible assets advanced 61 bps to 9.44%.

Our Take

The results of BancorpSouth reflect a commendable year for the company. While there are lingering concerns over the prevalent stringent regulatory landscape and a weak mortgage market that may adversely impact NIM, we believe that improvement in the company’s fee-based business will help it navigate through the current cycle.

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

Among other banks, F.N.B. Corporation’s (FNB) fourth-quarter operating earnings came in at 21 cents per share, which was in line with the Zacks Consensus Estimate.

State Street Corporation (STT) is scheduled to report fourth-quarter results on Jan 24, while Zions Bancorporation (ZION) will report on Jan 27.
 

 
BANCORPSOUTH (BXS): Free Stock Analysis Report
 
FNB CORP (FNB): Free Stock Analysis Report
 
STATE ST CORP (STT): Free Stock Analysis Report
 
ZIONS BANCORP (ZION): Free Stock Analysis Report
 
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