BancorpSouth’s (NYSE: BXS) net loss of $494,000 for the first quarter of 2011 reveals that credit issues are still plaguing the bank. BancorpSouth's losses for the quarter, as compared to a net profit of $8.4 million in the year-ago quarter, can primarily be attributed to an increase in provision for credit losses, decline in mortgage lending revenue, and an increase in salaries and benefits.

Fools need to be wary of this company and its mounting losses.

Credit losses
Unlike many of its banking peers, BancorpSouth’s provision for credit losses rose, both sequentially and on a year-on-year basis. It went up to $53.5 million in this quarter, compared with $43.5 million in the first quarter of 2010 and $43.3 million in the preceding quarter. This comes at the same time when many national and regional banks are finally seeing the light of day. Not so for BancorpSouth -- I guess.

Non-performing loans at the end of the quarter were 4.61% of net loans and leases, up from 2.43% of net loans and leases in the same quarter a year ago. Now, considering the fact that most of the American banks are showing improvements in credit quality, this should be a cause for serious concern for BancorpSouth. Several banks, such as Citigroup (NYSE: C) and US Bancorp (NYSE: USB) -- which have recently announced impressive quarterly results -- have all witnessed improvement in their credit portfolios.

What next?
If BancorpSouth's non-performing loans increase further, there probably will be an additional rise in provision for credit losses. This will eventually result in the bank’s earnings taking yet another hit and investors having many unhappy faces. The bank’s loss per diluted share of $0.01 at the end of this quarter is one of the few metrics the market likes to pay heed to. Its EPS has declined in each of the last three years. I would choose to wait and watch before splurging money on this stock.

Fool contributor Zeeshan Siddique does not own any of the stocks mentioned in the article. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.