10 Community Bank M&A Targets, Revisited

1. BancorpSouth

Shares of BancorpSouth (BXS) of Tupelo, Miss. closed at $10.15 Wednesday, down 36% year-to-date.

The company had $13.4 billion in total assets as of June 30.

Matt Olney said in January that with a focus on smaller communities, BancorpSouth "would be a target of a regional such as Wells Fargo (WFC).

BancorpSouth reported second-quarter net income of $12.8 million, or 15 cents a share, compared with a net loss of $12.6 million, or 15 cents a share, in the second quarter of 2010. The second-quarter provision for credit losses declined 48% year-over-year, to $32.2 million.

Nonperforming assets totaled $531 million as of June 30. The nonperforming assets ratio was 3.97% as of June 30, increasing from 2.76% a year earlier. The second-quarter net charge-off ratio was 1.42% and reserves covered 2.14% of total loans as of June 30.

CEO Aubrey Patterson said "In addition, we experienced a decline in nonaccrual loan formation for the third sequential quarter and a decline in [loans with early-stage delinquencies of 30 to 89 days] for the fifth sequential quarter." The CEO added that "new loans placed on non-accrual status during the quarter represent the lowest level of additions in eight quarters," and while he was "encouraged" by the improving credit quality, Patterson remained "cautious about short-term prospects for continued improvement given slow economic growth and persistently high unemployment."

Guggenheim Securities analyst Jeff Davis in August reiterated his neutral rating for BancorpSouth, but lowered his price target to $12 from $14, or just above the company's tangible book value per share, saying that "M&A speculation has provided support, in our view, at times since credit issues emerged, but that too may be less of a factor with M&A presently subdued."

The shares trade for 12 times the consensus 2012 earnings estimate of 83 cents a share and 0.9 times tangible book value, according to SNL Financial.

Out of 11 analysts covering BancorpSouth, one rates the shares a buy, nine have neutral ratings, and one analyst recommends investors sell the shares.

-- Philip van Doorn in Jupiter, Fla.

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