BancorpSouth (BXS) Tops Q3 EPS by 16c

BancorpSouth (NYSE: BXS) reported Q3 EPS of $0.69, $0.16 better than the analyst estimate of $0.53.

Highlights for the third quarter of 2020 included:

• Achieved record quarterly net income available to common shareholders of $71.5 million, or $0.69 per diluted common share, and record net operating income available to common shareholders – excluding MSR – of $71.2 million, or $0.69 per diluted common share.
• Recorded provision for credit losses of $15.0 million primarily as a result of the lengthening of the anticipated recovery time for certain economic factors included in the Company's allowance for credit losses methodology associated with the coronavirus ("COVID-19") pandemic; net charge-offs for the quarter totaled $1.4 million, or 0.04 percent of net loans and leases on an annualized basis.
• Generated a record $110.0 million in pre-tax pre-provision net revenue, or 1.88 percent of average assets on an annualized basis, which represents an increase from 1.87 percent for the third quarter of 2019 and an increase from 1.81 percent for the second quarter of 2020.
• Generated total deposit and customer repo growth of $174.9 million for the quarter, or 3.5 percent on an annualized basis.
• Mortgage production volume of $937.7 million contributed to mortgage production and servicing revenue of $26.7 million.
• Continued improvement in operating efficiency reflected in the decline in the operating efficiency ratio – excluding MSR – to 58.4 percent for the quarter.
• Maintained strong regulatory capital metrics; estimated total risk-based capital of 14.20 percent at September 30, 2020 compared to 11.28 percent at September 30, 2019.

"We continue to report strong financial performance despite the lingering economic and operational impact of the COVID-19 pandemic," remarked Dan Rollins, Chairman and Chief Executive Officer. "While the economies across our footprint have generally re-opened and most businesses are performing well, there are certain industries, including hospitality, that are still feeling the impact of the pandemic. The economic forecasts that we utilize in our reserve methodology reflect a lengthening in the anticipated economic recovery time as compared to the forecasts at the end of the second quarter. Accordingly, we recorded a provision for credit losses of $15.0 million for the third quarter of 2020. Outside of this additional provisioning, we continue to be pleased with our operating performance. We generated a record $110.0 million in pre-tax pre-provision net revenue for the quarter, or 1.88 percent of average assets on an annualized basis."

"As we look more specifically at our third quarter performance, our mortgage team had another outstanding quarter generating production volume of over $937.7 million and total production and servicing revenue of $26.7 million. Although refinance activity remains elevated, purchase money production remains very strong, representing 61 percent of total volume for the quarter. Although loan demand has been slow following the completion of the Paycheck Protection Program ("PPP"), we had a solid quarter from a deposit growth standpoint as total deposits and customer repos increased $174.9 million, or 3.5 percent on an annualized basis, during the third quarter. While we saw a meaningful increase in net interest income, the shift in earning asset mix resulting from the additional liquidity continues to pressure our net interest margin. Finally, our operating efficiency continues to improve as reflected in the operating efficiency ratio – excluding MSR – of 58.4 percent for the third quarter. This marks the first time our efficiency ratio has been below 60 percent for a quarter since well before the last financial crisis."

Summary

Rollins concluded, "As we look to the remainder of 2020 and into 2021, we will not be immune to the headwinds facing our industry and our nation's economy. While we expect our mortgage operation to continue to provide a significant component of our revenue, it's not reasonable to believe that production volume can remain at the level that we have seen thus far in 2020. In addition, it's inevitable there will be some customers experience financial hardships as the economic impact of this pandemic continues. Beyond continuing to ensure we protect the health of our teammates and customers, monitoring credit quality and working through issues with our customers will be our top priority. Given the changes in customer behavior as well as lessons learned through this pandemic, banks like ours will need to continue to automate processes and rethink the workplace while ensuring the customer experience is a top priority. As we work through our 2021 strategic planning and budgeting process, our team is working diligently to identify ways to improve our cost structure including continued investments in technology as well as an enhanced focus on optimizing our branch structure. I'm confident that the strength of both our balance sheet and capital position will aide us in navigating this economic cycle and continuing to improve shareholder value."

For earnings history and earnings-related data on BancorpSouth (BXS) click here.

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