Tupelo, Miss.-based BancorpSouth posted third quarter net income of $23.825 million, up 95.1% compared to the 2011 quarter, with total revenue up just 2.15% for the quarter.
The per share earnings of 25 cents also beat the consensus analyst estimate of 22 cents per share.
The bank holding company was able to turn the profit on significantly lower set asides for bad loans. The loan-loss provision during the quarter was just $6 million, well below the more than $25 million during the 2011 quarter.
For the first nine months of 2012, the loan loss provision — the amount of cash a bank must set aside to cover possible losses on real estate and other loans – was $22 million, much lower than the $110.83 million during the same period of 2011.
Essentially, the bank’s improved income is more a function of cycling through bad loans than it is from top line revenue growth.
“Results for the third quarter reflect a record level of mortgage production volume," Aubrey Patterson, Chairman and CEO of BancorpSouth, said in the earnings statement released Thursday (Oct. 18) after the markets closed. “Earnings for the quarter also benefitted from stabilization of loan loss provision levels as non-performing loans ("NPLs"), classified asset totals, and other credit quality indicators continue to trend in a positive direction."
With respect to improving credit quality and fee-generating revenue, Patterson said the company has more work to, but “we believe that we are well positioned to continue to build on the momentum that we've gained over the last year and a half.”
Key points of the earnings report include:
• Record mortgage production of $607.9 million, which contributed to mortgage lending revenue of $16.8 million;
• Non-interest revenue increased to $70.4 million from $66.5 million for the second quarter and included sequential quarter increases in mortgage revenue, credit and debit card fees, service charges, and insurance commissions;
• Other real estate owned (REO) sales of $15.4 million, which contributed to a 10.7% decline in REO and an 8.5% reduction in total non-performing assets;
• Nonaccrual loans decreased $20.5 million, or 8.5%, from the prior quarter and $94.7 million, or 30.1%, from a year ago; and,
• At the end of the quarter, 56.9% of nonaccrual loans were paying in accordance with their contractual terms.
BancorpSouth shares (NYSE: BXS) closed Thursday at $14.04, down 15 cents. During the past 52 weeks the share price has ranged from a $15.69 high to an $8.57 low.