News

TUPELO, Miss., Jan. 21, 2015 /PRNewswire/ -- BancorpSouth, Inc. (NYSE: BXS) today announced financial results for the quarter and year ended December 31, 2014.

Highlights for the fourth quarter of 2014 included:

• Net income of $28.7 million or $0.30 per diluted share.
• Net operating income of $28.7 million or $0.30 per diluted share.
• Earnings adversely impacted by negative mortgage servicing rights ("MSR") valuation adjustment of $3.4 million.
• Generated net loan growth of $202.4 million, which resulted in total net loan growth of $754.9 million, or 8.4 percent for the year.
• Net interest margin remained stable at 3.60 percent compared to 3.62 percent for the third quarter of 2014.
• Announced authorization of stock repurchase program through November 30, 2016 to purchase up to 6 percent or 5,764,000 shares of BancorpSouth's outstanding common stock.

The Company reported net income of $28.7 million, or $0.30 per diluted share, for the fourth quarter of 2014 compared with net income of $27.7 million, or $0.29 per diluted share, for the fourth quarter of 2013 and net income of $28.8 million, or $0.30 per diluted share, for the third quarter of 2014.  Additionally, the Company reported net income of $116.8 million, or $1.21 per diluted share, for the year ended December 31, 2014 compared to $94.1 million, or $0.99 per diluted share, for the year ended December 31, 2013.

The Company reported net operating income (excluding merger related and other non-operating expenses) of $28.7 million, or $0.30 per diluted share, for the fourth quarter of 2014 compared to $27.7 million, or $0.29 per diluted share, for the fourth quarter of 2013 and $30.8 million, or $0.32 per diluted share, for the third quarter of 2014. 

"Our fourth quarter results reflect continued momentum in several key areas of our Company's performance, highlighted by another outstanding quarter of loan production," remarked Dan Rollins, Chairman and Chief Executive Officer.  "Our lending team produced net loan growth of over $200 million, or 8 percent annualized, for the quarter which resulted in loan growth of over $750 million for the year.  We are pleased with our ability to continue to maintain our net interest margin in a relatively steady range by offsetting pressure on loan yields with continued reductions in our cost of funding.  Earnings for the quarter were adversely impacted by the $3.4 million MSR valuation adjustment as well as expected seasonality in our insurance revenue stream.  Finally, we are pleased with the progress made toward remediating our compliance issues and are hopeful our regulators will recognize the outstanding work our team has produced."

Net Interest Revenue

Net interest revenue was $106.4 million for the fourth quarter of 2014, an increase of 3.9 percent from $102.4 million for the fourth quarter of 2013 and an increase of 0.8 percent from $105.6 million for the third quarter of 2014.  The fully taxable equivalent net interest margin was 3.60 percent for the fourth quarter of 2014 compared to 3.52 percent for the fourth quarter of 2013 and 3.62 percent for the third quarter of 2014.  Yields on loans and leases declined to 4.30 percent for the fourth quarter of 2014 compared with 4.52 percent for the fourth quarter of 2013 and 4.36 percent for the third quarter of 2014, while yields on total interest earning assets were relatively flat at 3.85 percent for the fourth quarter of 2014 compared with 3.86 percent for the fourth quarter of 2013 and 3.89 percent for the third quarter of 2014.  The average cost of deposits was 0.25 percent for the fourth quarter of 2014 compared to 0.34 percent for the fourth quarter of 2013 and 0.28 percent for the third quarter of 2014.

Asset, Deposit and Loan Activity

Total assets were $13.3 billion at December 31, 2014 compared with $13.0 billion at December 31, 2013.  Loans and leases, net of unearned income, were $9.7 billion at December 31, 2014 compared with $9.0 billion at December 31, 2013. 

Total deposits were $11.0 billion at December 31, 2014 compared with $10.8 billion at December 31, 2013.  The decrease in time deposits of $319.0 million, or 13.8 percent, at December 31, 2014 compared to December 31, 2013 was offset by growth in other lower cost deposits.  Noninterest bearing demand deposits increased $134.1 million, or 5.1 percent, over the same period.  Additionally, savings deposits increased $97.8 million, or 7.9 percent, while interest bearing demand deposits increased $285.6 million, or 6.2 percent, over the same period.  As of December 31, 2014, $659.9 million of time deposits were scheduled to mature during the following two quarters at a weighted average rate of 0.66 percent. 

Provision for Credit Losses and Allowance for Credit Losses

Earnings for the quarter reflect no recorded provision for credit losses, which is consistent with no recorded provision for both the third quarter of 2014 and the fourth quarter of 2013.  Total non-performing assets ("NPAs") declined $5.9 million, or 5.3 percent, to $105.7 million at December 31, 2014 compared with $111.6 million at September 30, 2014 and declined $84.0 million, or 44.3 percent, from $189.7 million at December 31, 2013. 

Net charge-offs for the fourth quarter of 2014 were $1.5 million, compared with $0.7 million for the fourth quarter of 2013 and $3.2 million for the third quarter of 2014.  Recoveries of previously charged-off loans were $3.3 million for the fourth quarter of 2014, compared with $7.6 million for the fourth quarter of 2013 and $3.3 million for the third quarter of 2014.  Annualized net charge-offs were 0.06 percent of average loans and leases for the fourth quarter of 2014, compared with 0.03 percent for the fourth quarter of 2013 and 0.13 percent for the third quarter of 2014. 

Non-performing loans ("NPLs") were $71.7 million, or 0.74 percent of net loans and leases, at December 31, 2014, compared with $120.4 million, or 1.34 percent of net loans and leases, at December 31, 2013, and $68.9 million, or 0.72 percent of net loans and leases, at September 30, 2014.  The allowance for credit losses was $142.4 million, or 1.47 percent of net loans and leases, at December 31, 2014 compared with $153.2 million, or 1.71 percent of net loans and leases, at December 31, 2013 and $144.0 million, or 1.51 percent of net loans and leases, at September 30, 2014. 

NPLs at December 31, 2014 consisted primarily of $58.1 million of nonaccrual loans, compared with $54.6 million of nonaccrual loans at September 30, 2014.  Payments received on nonaccrual loans during the fourth quarter of 2014 totaled $8.5 million, compared with payments received on such loans of $11.9 million during the third quarter of 2014.  NPLs at December 31, 2014 also included $2.8 million of loans 90 days or more past due and still accruing, compared with $1.9 million of such loans at September 30, 2014, and included restructured loans still accruing of $10.9 million at December 31, 2014, compared with $12.4 million of such loans at September 30, 2014.  Early stage past due loans, representing loans 30-89 days past due, totaled $25.8 million at December 31, 2014 compared to $24.4 million at September 30, 2014.  

Included in nonaccrual loans at December 31, 2014 were $30.3 million of loans, or 52.2 percent of total nonaccrual loans, that were paying as agreed, compared with $31.7 million, or 58.1 percent of total nonaccrual loans, that were paying as agreed at September 30, 2014.  These loans were generally placed on nonaccrual status because the collateral values were less than the outstanding balances, and because of uncertainty as to whether the borrowers possessed adequate liquidity or would be able to generate sufficient cash flow to satisfy the debt given the short-fall in collateral values.  Such loans are generally deemed to be impaired, with a specific reserve established for the difference in the balance owed and the disposition value of the collateral.

Other real estate owned ("OREO") decreased $8.7 million to $34.0 million during the fourth quarter of 2014 from $42.7 million at September 30, 2014.  This net decrease reflected $2.3 million of OREO added through foreclosure, offset by sales of OREO of $8.5 million.  Write-downs in the value of existing properties were $2.4 million for the fourth quarter of 2014 compared to $1.6 million for the third quarter of 2014.  Sales of OREO during the fourth quarter of 2014 resulted in a net loss of $1.6 million compared to a net loss of $3.3 million for the third quarter of 2014.  At December 31, 2014, OREO was carried at 40.6 percent of the aggregate loan balances at the time of foreclosure, compared with 39.8 percent at September 30, 2014.

Noninterest Revenue

Noninterest revenue was $63.5 million for the fourth quarter of 2014, compared with $65.1 million for the fourth quarter of 2013 and $69.3 million for the third quarter of 2014.  These results included a negative MSR valuation adjustment of $3.4 million for the fourth quarter of 2014 compared with a positive MSR valuation adjustment of $2.9 million for the fourth quarter of 2013 and a positive MSR valuation adjustment of $0.6 million for the third quarter of 2014.  Valuation adjustments in the MSR asset are driven primarily by fluctuations in interest rates period over period.   

Excluding the MSR valuation adjustments, net mortgage lending revenue was $6.7 million for the fourth quarter of 2014, compared with $6.7 million for the fourth quarter of 2013 and $6.3 million for the third quarter of 2014.  Mortgage origination volume for the fourth quarter of 2014 was $256.3 million, compared with $222.3 million for the fourth quarter of 2013 and $305.7 million for the third quarter of 2014.

Credit and debit card fee revenue was $9.9 million for the fourth quarter of 2014, compared with $8.3 million for the fourth quarter of 2013 and $9.0 million for the third quarter of 2014.  Deposit service charge revenue was $12.5 million for the fourth quarter of 2014, compared with $13.6 million for the fourth quarter of 2013 and $13.1 million for the third quarter of 2014.  Insurance commission revenue was $25.4 million for the fourth quarter of 2014, compared with $21.4 million for the fourth quarter of 2013 and $29.2 million for the third quarter of 2014.  Wealth management revenue was $5.8 million for the fourth quarter of 2014, compared with $5.3 million for the fourth quarter of 2013 and $6.0 million for the third quarter of 2014.    

Noninterest Expense

Noninterest expense for the fourth quarter of 2014 was $130.0 million, compared with $127.8 million for the fourth quarter of 2013 and $133.7 million for the third quarter of 2014.  Salaries and employee benefits expense was $76.8 million for the fourth quarter of 2014 compared to $75.5 million for the fourth quarter of 2013 and $77.5 million for the third quarter of 2014.  Foreclosed property expense was $4.6 million for the fourth quarter of 2014 compared with $2.8 million for the fourth quarter of 2013 and $5.7 million for the third quarter of 2014.  Deposit insurance assessments were $2.4 million for the fourth quarter of 2014 compared to $2.7 million for the fourth quarter of 2013 and $2.1 million for the third quarter of 2014.  Noninterest expense for the third quarter of 2014 included pre-tax costs totaling $3.1 million related to Bank Secrecy Act ("BSA") and anti-money-laundering ("AML") compliance remediation that were considered to be one-time in nature.  This reflects the Company's estimate of total one-time costs necessary to complete its enhancements to its BSA and AML compliance programs.   

Capital Management

BancorpSouth is a "well capitalized" financial holding company, as defined by federal regulations, with Tier 1 risk-based capital of 13.26 percent at December 31, 2014 and total risk based capital of 14.52 percent, compared with required minimum levels of 6 percent and 10 percent, respectively, for "well capitalized" classification.  The Company's equity capitalization is comprised entirely of common stock.  BancorpSouth's ratio of shareholders' equity to assets was 12.05 percent at December 31, 2014, compared with 11.61 percent at December 31, 2013 and 12.32 percent at September 30, 2014.  The ratio of tangible shareholders' equity to tangible assets was 9.92 percent at December 31, 2014, compared with 9.44 percent at December 31, 2013 and 10.14 percent at September 30, 2014.

Transaction Closings and Announcements

On January 8, 2014, the Company announced the signing of a definitive merger agreement with Ouachita Bancshares Corp., parent company of Ouachita Independent Bank (collectively referred to as "OIB"), headquartered in Monroe, Louisiana, pursuant to which Ouachita Bancshares Corp. will be merged with and into the Company.  OIB operates 12 full-service banking offices along the I-20 corridor and has loan production offices in Madison, Mississippi and Natchitoches, Louisiana.  As of December 31, 2014, OIB, on a consolidated basis, reported total assets of $636.6 million, total loans of $460.6 million and total deposits of $527.8 million.  Under the terms of the definitive agreement, the Company will issue approximately 3,675,000 shares of the Company's common stock plus $22.875 million in cash for all outstanding shares of Ouachita Bancshares Corp.'s capital stock, subject to certain conditions and potential adjustments.  The terms of the amended agreement provide for a minimum total deal value of $107.5 million but also allow Ouachita Bancshares Corp. to terminate the agreement if the average closing price of the Company's common stock declines below a certain threshold prior to closing.  The merger has been unanimously approved by the Board of Directors of each company and was approved by OIB shareholders on April 8, 2014.  On July 21, 2014, the Company announced the merger agreement was extended to allow for additional time to obtain the necessary regulatory approvals and to satisfy all closing conditions.  The transaction is expected to close shortly after receiving all required regulatory approvals, although the Company can provide no assurance that the merger will close timely or at all.

On January 21, 2014, the Company announced the signing of a definitive merger agreement with Central Community Corporation, headquartered in Temple, Texas, pursuant to which Central Community Corporation will be merged with and into the Company.  Central Community Corporation is the parent company of First State Bank Central Texas ("First State Bank"), which is headquartered in Austin, Texas.  First State Bank operates 31 full-service banking offices in central Texas.  As of December 31, 2014, Central Community Corporation, on a consolidated basis, reported total assets of $1.4 billion, total loans of $595.4 million and total deposits of $1.1 billion.  Under the terms of the definitive agreement, the Company will issue approximately 7,250,000 shares of the Company's common stock plus $28.5 million in cash for all outstanding shares of Central Community Corporation's capital stock, subject to certain conditions and potential adjustments.  The terms of the amended agreement provide for a minimum total deal value of $191.0 million but also allow Central Community Corporation to terminate the agreement if the average closing price of the Company's common stock declines below a certain threshold prior to closing.  The merger has been unanimously approved by the Board of Directors of each company and was approved by Central Community Corporation shareholders on April 24, 2014.  On July 21, 2014, the Company announced the merger agreement was extended to allow for additional time to obtain the necessary regulatory approvals and to satisfy all closing conditions.  The transaction is expected to close shortly after receiving all required regulatory approvals, although the Company can provide no assurance that the merger will close timely or at all.

For additional information regarding the status of the merger with Ouachita Bancshares Corp. and the status of the merger with Central Community Corporation, please refer to the Current Report on Form 8-K that was previously filed with the Securities and Exchange Commission (the "SEC") on July 24, 2014, Part II, Item 5 of the Quarterly Report on Form 10-Q that was previously filed with the SEC on August 6, 2014 and the Current Report on Form 8-K that was previously filed with the SEC on September 4, 2014.

On April 9, 2014, BancorpSouth Insurance Services, Inc. acquired assets of Lafayette, Louisiana based Knox Insurance Group, LLC.  Knox was formed in 1972 and currently produces annual revenues of approximately $3 million.  Knox will continue to operate under current leadership in Lafayette.

Summary

Rollins concluded, "The financial results for 2014 reflect a great year of progress for our Company.  We were able to grow loans by over $750 million, or 8 percent, during the year and improve our net interest margin meaningfully at the same time.  Our insurance team produced considerable organic growth and our mortgage lenders continue to grow purchase money volume.  We also made tremendous progress in dealing with remaining credit issues as NPAs declined by approximately 45 percent over the course of the year.  All of these accomplishments were made while reducing total noninterest expense year-over-year.  As we enter 2015, our Company objectives remain simple.  We have to continue to sustain the growth momentum that's been built, continue to challenge our cost structure, and continue to ensure that we have the appropriate processes and procedures in place to comply with all regulatory requirements." 

Conference Call

BancorpSouth will conduct a conference call to discuss its fourth quarter 2014 results on January 22, 2015, at 10:00 a.m. (Central Time).  Investors may listen via the Internet by accessing BancorpSouth's website at http://www.bancorpsouth.com.  A replay of the conference call will be available at BancorpSouth's website for at least two weeks following the call.

About BancorpSouth, Inc.

BancorpSouth, Inc. is a financial holding company headquartered in Tupelo, Mississippi, with $13.3 billion in assets.  BancorpSouth Bank, a wholly-owned subsidiary of BancorpSouth, Inc., operates approximately 300 commercial banking, mortgage, and insurance locations in Alabama, Arkansas, Florida, Louisiana, Mississippi, Missouri, Tennessee and Texas, including an insurance location in Illinois.

Forward-Looking Statements

Certain statements contained in this news release may not be based upon historical facts and are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements may be identified by their reference to a future period or periods or by the use of forward-looking terminology such as "anticipate," "believe," "could," "estimate," "expect," "foresee," "hope," "intend," "may," "might," "plan," "will," or "would" or future or conditional verb tenses and variations or negatives of such terms. These forward-looking statements include, without limitation, those relating to the terms, timing and closings of the proposed mergers with Ouachita Bancshares Corp. and Central Community Corporation, the Company's ability to satisfy the requirements of the consent order issued by the FDIC and the Mississippi Department of Banking and Consumer Finance ("Mississippi Banking Department"), the Company's undertaking and performance of the necessary actions to remediate and fully resolve those concerns regarding the Company's procedures, systems and processes related to certain of its compliance programs, including its Bank Secrecy Act and anti-money-laundering programs, that have been identified by its federal bank regulators, the findings and results of the joint investigation by the Consumer Financial Protection Bureau (the "CFPB") and the United States Department of Justice ("DOJ") of the Company's fair lending practices, the acceptance by customers of Ouachita Bancshares Corp. and Central Community Corporation of the Company's products and services if the proposed mergers close, the outcome of any instituted, pending or threatened material litigation, amortization expense for intangible assets, goodwill impairments, loan impairment, utilization of appraisals and inspections for real estate loans, maturity, renewal or extension of construction, acquisition and development loans, net interest revenue, fair value determinations, the amount of the Company's non-performing loans and leases, additions to OREO, credit quality, credit losses, liquidity, off-balance sheet commitments and arrangements, valuation of mortgage servicing rights, allowance and provision for credit losses, continued weakness in the economic environment, early identification and resolution of credit issues, utilization of non-GAAP financial measures, the ability of the Company to collect all amounts due according to the contractual terms of loan agreements, the Company's reserve for losses from representation and warranty obligations, the Company's foreclosure process related to mortgage loans, the resolution of non-performing loans that are collaterally dependent, real estate values, fully-indexed interest rates, interest rate risk, interest rate sensitivity, calculation of economic value of equity, impaired loan charge-offs, troubled debt restructurings, diversification of the Company's revenue stream, liquidity needs and strategies, sources of funding, net interest margin, declaration and payment of dividends, cost saving initiatives, improvement in the Company's efficiencies, operating expense trends, future acquisitions and consideration to be used therefor, the impact of litigation regarding debit card fees and the impact of certain claims and ongoing, pending or threatened litigation, administrative and investigatory matters. 

The Company cautions readers not to place undue reliance on the forward-looking statements contained in this news release, in that actual results could differ materially from those indicated in such forward-looking statements as a result of a variety of factors. These factors may include, but are not limited to, the ability of the Company to resolve to the satisfaction of its federal bank regulators those identified concerns regarding the Company's procedures, systems and processes related to certain of its compliance programs, including its Bank Secrecy Act and anti-money laundering programs, the Company's ability to comply with the consent order issued by the FDIC and the Mississippi Banking Department, the findings and results of the CFPB and the DOJ in their review of the Company's fair lending practices, the ability of the Company, Ouachita Bancshares Corp. and Central Community Corporation to obtain regulatory approval of and close the proposed mergers, the potential impact upon the Company of the delay in the closings of these proposed mergers, the impact of any ongoing, pending or threatened litigation, administrative and investigatory matters involving the Company, conditions in the financial markets and economic conditions generally, the adequacy of the Company's provision and allowance for credit losses to cover actual credit losses, the credit risk associated with real estate construction, acquisition and development loans, losses resulting from the significant amount of the Company's OREO, limitations on the Company's ability to declare and pay dividends, the availability of capital on favorable terms if and when needed, liquidity risk, governmental regulation, including the Dodd-Frank Act, and supervision of the Company's operations, the short-term and long-term impact of changes to banking capital standards on the Company's regulatory capital and liquidity, the impact of regulations on service charges on the Company's core deposit accounts, the susceptibility of the Company's business to local economic and environmental conditions, the soundness of other financial institutions, changes in interest rates, the impact of monetary policies and economic factors on the Company's ability to attract deposits or make loans, volatility in capital and credit markets, reputational risk, the impact of the loss of any key Company personnel, the impact of hurricanes or other adverse weather events, any requirement that the Company write down goodwill or other intangible assets, diversification in the types of financial services the Company offers, the Company's ability to adapt its products and services to evolving industry standards and consumer preferences, competition with other financial services companies, risks in connection with completed or potential acquisitions, the Company's growth strategy, interruptions or breaches in the Company's information system security, the failure of certain third-party vendors to perform, unfavorable ratings by rating agencies, dilution caused by the Company's issuance of any additional shares of its common stock to raise capital or acquire other banks, bank holding companies, financial holding companies and insurance agencies, other factors generally understood to affect the assets, business, cash flows, financial condition, liquidity, prospects and/or results of operations of financial services companies and other factors detailed from time to time in the Company's press and news releases, reports and other filings with the SEC.  Forward-looking statements speak only as of the date that they were made, and, except as required by law, the Company does not undertake any obligation to update or revise forward-looking statements to reflect events or circumstances that occur after the date of this news release.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SOURCE BancorpSouth, Inc.