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BancorpSouth (BXS) Q1 Earnings Top Estimates, Revenues Miss

Zacks Equity Research

BancorpSouth Bank BXS delivered a positive earnings surprise of 43.5% in first-quarter 2020 on higher interest income. Net operating earnings of 33 cents per share beat the Zacks Consensus Estimate of 23 cents. However, the bottom line compared unfavorably with the year-ago quarter’s figure of 56 cents.

Higher net revenues, aided by rise in interest income and non-interest revenues were the driving factors. However, higher expenses were a major drag.

The company’s net income for the first quarter amounted to $21.9 million or 21 cents per share, up from $51.6 million or 52 cents reported in the year-ago quarter.

Revenues & Deposits Climb, Expenses Rise

Net revenues for the reported quarter increased 12.5% year over year to $244 million. However, the top-line figure lagged the Zacks Consensus Estimate of $243.9 million.

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Net interest revenues for the quarter were $167.5 million, up 9.8% year over year. Fully-taxable equivalent NIM was 3.54%, contracting 32 basis points (bps) year over year.

Non-interest revenues increased 19.1% year over year to $76.5 million. Also, the figure included a negative mortgage servicing rights valuation adjustment of $11.1 million. The upswing resulted from rise in all the components except for insurance commissions, annuity fees and net securities losses.

Non-interest expenses were $168 million, up 12% from the year-ago quarter. The upside stemmed primarily from the impact of higher salaries and employee benefits, net occupancy, and equipment expenses.

As of Mar 31, 2020, total deposits were $16.9 billion, up 3% sequentially, while loans and leases, net of unearned income, improved 0.9% sequentially to $14.2 billion.

Credit Quality: A Mixed Bag

Non-performing loans and leases were 0.90% of net loans and leases as of Mar 31, 2020, up from 0.67% as of Mar 31, 2019. Also, non-performing assets were $137.8 million, up 42% from the prior-year quarter.

However, allowance for credit losses to net loans and leases was 1.53% as of Mar 31, 2020, upfrom the year-ago quarter’s 0.89%. However, in the first quarter, the company recorded $46 million provision for credit losses against $0.5 million provisions reported in the year-ago quarter.

Capital Position

As of Mar 31, 2020, tier I capital and tier I leverage capital were 11.11% and 8.85% compared with 10.75% and 9.03%, respectively, at the end of the prior-year quarter. Also, the ratio of tangible shareholders' equity to tangible assets shrunk 41 bps to 8.82%.

Also, ratio of its total shareholders' equity to total assets was 12.75% at the end of the March-end quarter, up from 12.16% as of Mar 31, 2019.

Share Repurchases

During the reported quarter, the company repurchased 3.3 million common shares at a weighted average price of $26.42 per share.

Our Viewpoint

BancorpSouth has a strong balance-sheet position. This supports its acquisition and capital deployment strategies.  However, rising expenses might partly impede bottom-line growth. Further, the decline in interest rates amid the Federal Reserve's accommodative policy stance is expected to hurt the company’s margins and revenues, going forward.

BancorpSouth Bank Price, Consensus and EPS Surprise

 

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 #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings Release Schedule of Other Banks

Allegiance Bancshares, Inc. ABTX is slated to report first-quarter 2020 results on Apr 30, 2020.

Ameris Bancorp ABCB will report its first-quarter 2020 numbers on Apr 23, 2020.

Hope Bancorp, Inc. HOPE is slated to report results on Apr 28, 2020.

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