BancorpSouth, Inc. Sees Solid Growth; Mergers Delayed

BancorpSouth (NYSE: BXS  ) announced last night that its net income jumped from $0.22 per share in the second quarter of last year to $0.32 in the second quarter of this, however, the big news did not come from its second-quarter results.

In the earnings release the bank noted it has been informed that federal regulators have concerns surrounding "procedures, systems and processes related to certain of its compliance programs," which include both "its Bank Secrecy Act and anti-money-laundering programs."

In addition to the inquiries by regulators surrounding its compliance programs the bank also noted the Consumer Financial Protection Bureau (CFPB) is reviewing its fair lending practices.

As a result of these inquires the bank delayed two of its previously announced mergers, -- with Ouachita Bancshares and Central Community Corporation -- which had their merger agreements extended until June of 2015.

"While disappointed in the delay in being able to close these transactions, we are working diligently to resolve the compliance concerns that have been identified and to make the necessary improvements in our compliance programs," noted the chairman and CEO of Bancorp South, Dan Rollins, in the earnings announcement. "We are pleased with the confidence that our merger partners have demonstrated through the extension of the merger agreements."

On an overall basis, while the bank did see a growth in its net income, its operating results improved, but not nearly as significantly. In total its net operating income -- which excludes merger and other non-operating expenses -- rose from $0.29 per share in the second quarter of last year to $0.33 per share in the most recent quarter, a gain of 12%.

The bank did highlight it saw its net loans grow by $243 million, which represented an annualized gain of 10.8% over the first quarter. In addition, it continued to see improvement in its loan portfolio, as its non-performing loans (NPLs) fell from $168 million in the second quarter of last year to $74 million in the most recent quarter.

In addition it also saw an expansion in its net interest margin -- the difference between what it earns from loans versus what it pays out on deposits and other forms of borrowing -- which grew from 3.36% in the second quarter of 2013 to 3.59%.

"Clearly, our financial performance continues to improve and reflect the internal progress that we have made both in shifting our focus toward growth and in continuing to challenge our cost structure," noted Rollins when speaking of the operating results.

While Rollins was pleased with the results, BancorpSouth did also miss analyst expectations of $0.35 in earnings per share.

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