Fried Earnings at BancorpSouth

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On Jan. 22, 2009, BancorpSouth (BXS Quote), reported a 47.9% drop in its Q4 FY08 earnings, hurt by lower noninterest revenue and increased provision for credit losses. Net income declined to $16.80 million or $0.20 per share from $32.23 million or $0.39 per share a year ago. The latest quarterly earnings missed the consensus estimate of $0.31 per share.

The company's interest revenue declined 18.2% to $166.57 million from $203.58 million in the last year's quarter. However, net interest revenue, before provision for credit losses, totaled $111.32 million, up from $109.66 million a year ago, driven by a decrease in total interest expenses. Total interest expenses declined 41.2% to $55.25 million from $93.93 million a year ago. Average taxable equivalent yield on earnings assets decreased to 5.55% from 6.84%, while average rate paid on interest bearing liabilities reduced to 2.16% from 3.68%. Consequently, net interest margin improved somewhat to 3.74% from 3.72%, and net interest spread widened to 3.39% from 3.15%. Noninterest revenue fell 28.7% to $39.45 million from $55.31 million, primarily led by a $16.30 million write-down of mortgage servicing assets and an $8.60 million write-down related to certain investment securities. BancorpSouth's insurance business revenue grew 15.9% to $18.75 million, driven by the acquisition of two insurance agencies in the first quarter of FY08.

In Q4 FY08, provision for credit losses mounted to $17.82 million from $7.77 million a year ago. Annualized net charge-offs as a percentage of average loans increased to 0.57% from 0.21% a year ago. In addition, non-performing loans and leases were $61.50 million or 0.64% of loans and leases at Dec 31, 2008, compared to $28.50 million or 0.31% of loans and leases a year ago.

For FY08, total interest revenue dropped to $705.41 million from $801.24 million in FY07, whereas non-interest revenue grew to $242.38 million from $231.80 million. Increase in provision for credit losses and salaries and employee benefits led to a 12.7% decline in earnings to $120.41 million or $1.45 per share.

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