BancorpSouth, Inc.’s (BXS) adjusted operating earnings for fourth-quarter 2014 came in at 30 cents per share, missing the Zacks Consensus Estimate by a penny. However, earnings came in 3.4% higher than the prior-year quarter.
For full year 2014, earnings per share totaled $1.21, lagging the Zacks Consensus Estimate of $1.25 per share.
Higher non-interest expenses, coupled with lower non-interest revenues, influenced the results during the quarter. These were, however, partially offset by a rise in net interest revenue. Moreover, improvement in credit quality, a solid capital position and continued absence of provision for credit losses acted as major positives.
Considering merger-related expenses, the company’s fourth-quarter net income amounted to $28.7 million, up 3.5% from $27.7 million in the year-ago quarter.
For full year 2014, reported net income came in at $116.8 million, up 24% year over year.
Performance in Detail
BancorpSouth’s fourth-quarter net revenue totaled $170 million, up 1.4% year over year. However, it missed the Zacks Consensus Estimate of $176 million.
For full year 2014, net revenue came in at $685.8 million, up 1.7% from the prior-year figure, but below the Zacks Consensus Estimate of $704 million.
BancorpSouth’s net interest revenue was $106.4 million, up 3.9% year over year. Fully taxable equivalent net interest margin (“NIM”) climbed 8 basis points (bps) year over year to 3.60%. The rise was mainly attributable to lower cost of deposits, partially offset by a fall in yields on loans and leases.
Non-interest revenues fell 2.5% year over year to $63.5 million. The decline was mainly due to drop in both mortgage lending revenues and deposit service charges. These were, nevertheless, partially offset by a rise in wealth management revenues, insurance commissions and credit card revenues.
Excluding the MSR valuation adjustments, net mortgage lending revenue was $6.7 million, down nearly 31% from $9.6 million in the year-ago quarter.
BancorpSouth’s non-interest expense was $130 million, up 1.7% year over year. This was mainly due to higher salaries and employee benefits costs, occupancy costs and other expenses, partially offset by a decline in write-off and amortization of bond issue costs, equipment costs and deposit insurance assessments.
As of Dec 31, 2014, total deposits stood at $11 billion, climbing 1.8% year over year, while net loans and leases rose 8.7% to $9.6 billion.
Credit Quality
BancorpSouth witnessed a significant improvement in its credit quality. Provision for credit losses continued to be nil in the reported quarter. Further, as of Dec 31, 2014, BancorpSouth’s nonperforming loans and leases were $71.7 million or 0.74% of net loans and leases, down from $120.4 million or 1.34% as of Dec 31, 2013.
Allowance for credit losses to net loans and leases edged down to 1.47% from 1.71% in the prior-year quarter. Also, non-performing assets were $105.7 million, down 55.7% from $189.7 million in the prior-year quarter.
However, annualized net charge-offs, as a percent of average loans and leases, increased 3 bps year over year to 0.06%.
Capital Position
BancorpSouth exhibited a robust capital position. Tier I capital and tier I leverage capital stood at 13.26% and 10.55% compared with 12.99% and 9.93%, respectively, at the end of the prior-year quarter.
The ratio of total shareholders' equity to total assets increased to 12.05% at the end of the quarter from 11.61% as of Dec 31, 2013. Moreover, the ratio of tangible shareholders' equity to tangible assets advanced 48 bps to 9.92%.
Our Viewpoint
BancorpSouth’s financials exhibit a solid capital and liquidity position, enabling it to expand strategically through inorganic routes.
Moreover, given the slow but steady improvement in the economy, we expect growth in top line. Also, robust credit metrics seem favorable for future growth.
However, headwinds like volatile trend in loans and deposit growth, low interest rate environment and stringent regulatory reforms are anticipated to continue.
BancorpSouth currently carries a Zacks Rank #2 (Buy).
Among other Southeast banks, Regions Financial Corporation (RF) reported fourth-quarter earnings from continuing operations of 14 cents per share, down 17.6% from the prior-year quarter earnings. Lower revenues were responsible for the decline.
Popular, Inc. (BPOP) and IberiaBank Corp. (IBKC) are expected to release fourth-quarter and full-year 2014 results on Jan 22 and Jan 28, respectively.
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