BancorpSouth Bank (BXSFree Report) delivered an earnings surprise of 28.36% in second-quarter 2021 on higher interest income. Net operating earnings of 86 cents per share beat the Zacks Consensus Estimate of 67 cents. Also, the bottom line compares favorably with the 59 cents reported in the year-ago quarter.

Higher net revenues were aided by increases in net interest revenues and non-interest revenues. Moreover, higher deposit balances and improved credit quality aided the company. However, shrinking net interest margins and loan growth were major drags.

The company’s net income for the June-end quarter amounted to $73.2 million or 69 cents per share, up from the $58.8 million or 57 cents reported in the year-ago quarter.

Revenues & Deposits Climb, Expenses Rise

Net revenues for the reported quarter increased 6.9% year over year to $282.1 million. In addition, the top-line figure surpassed the Zacks Consensus Estimate of $272.08 million.

Net interest revenues for the quarter came in at $172.8 million, up 3.2% year over year. Fully-taxable equivalent net interest margin (NIM) was 3.15%, contracting 39 basis points (bps) year over year.

Non-interest revenues climbed 11.6% year over year to $101.9 million. The figure included a negative mortgage servicing rights valuation adjustment of $1.9 million. This upswing resulted from rise in all the components.

Non-interest expenses came in at $174 million, flaring up 7.1% year on year. This upside stemmed primarily from higher salaries, occupancy expense, other non-interest expenses and merger-related expenses.

As of Jun 30, 2021, total deposits were $22.8 billion, up 9.4% sequentially, while loans and leases, net of unearned income, fell 2.9% sequentially to $15.47 billion.

Credit Quality Strengthens

Non-performing loans and leases were 0.56% of net loans and leases as of Jun 30, 2021, down from 0.96% as of Jun 30, 2020. Also, non-performing assets were $101.7 million, down 34.5% from the prior-year quarter. Additionally, during the April-June period, the company recorded provision for credit losses of $11.5 million compared with the provision of $20 million witnessed in the second quarter of 2020. The provision was primarily associated with the day one accounting provision requirements for loans acquired during the quarter. However, allowance for credit losses to net loans and leases was 1.77% as of Jun 30, 2021, up 23 bps, year on year.

Capital Position

As of Jun 30, 2021, tier 1 capital and tier 1 leverage capital ratios were 11.85% and 8.43% compared with the 11.22% and 8.54%, respectively, recorded at the end of the prior-year quarter.

However, the ratio of tangible shareholders’ equity to tangible assets shrunk 33 bps to 7.11%. Additionally, ratio of its total shareholders’ equity to total assets was 11.12% at the end of the second quarter, down from 11.76% as of Jun 30, 2020.

Our Viewpoint

BancorpSouth has a healthy balance-sheet position. This supports its acquisition and capital-deployment strategies. Apart from this, the decline in interest rates amid the Federal Reserve’s accommodative policy stance might hurt the company’s margins in the upcoming period.

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

Bank of America‘s (BACFree Report) second-quarter 2021 earnings of $1.03 per share handily beat the Zacks Consensus Estimate of 77 cents. The bottom line compared favorably with the 37 cents earned in the prior-year quarter.

PNC Financial (PNCFree Report) delivered second-quarter 2021 earnings surprise of 42.4% on substantial reserve release. Adjusted earnings per share of $4.50 surpassed the Zacks Consensus Estimate of $3.16.

Large reserve releases, solid investment banking performance and modest rise in loan demand drove JPMorgan‘s (JPMFree Report) second-quarter 2021 earnings of $3.78 per share. The bottom line comfortably outpaced the Zacks Consensus Estimate of $3.05.

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