BancorpSouth Beats Estimates, Plans Capital Raise

BancorpSouth Inc. in Tupelo, Miss., on Tuesday reported better-than-expected earnings for the fourth quarter and hopes to parlay the good news into a successful capital-raising effort.

After the market closed, the $13 billion-asset company reported earnings of $13.3 million for the quarter, down 16% from a year earlier, as credit improvements were offset by lower interest and noninterest revenues. Still, the earnings, at 16 cents per share, beat the analysts' consensus by a penny. Jeff Davis, an analyst with Guggenheim Securities LLC, expected the company to earn 11 cents per share.

"The quarter was better than I was looking for," Davis said in a brief interview. "There was a nice reduction in nonperforming loans, credit costs continue to improve, mortgage was good, loans were down a bit, the net interest margin was stable."

BancorpSouth's nonperforming assets remain high at $496 million, or 5.59% of total assets, but the company nonetheless lowered its provision for loan losses during the quarter by 55%, to $19.3 million.

In its earnings release, the company also told investors that previously reported material weakness in internal control over financial reporting has been remediated. "The hard work applied to address our deficiencies will provide stronger credit processes for our business in the future," its chairman and chief executive, Aubrey Patterson, said in a news release.

Also late Tuesday, BancorpSouth announced plans to raise up to $100 million in a common stock offering. The company said it would use the proceeds for things like maintaining capital ratios, growth opportunities and potentially providing equity capital to the bank unit.

The bank is not under any formal regulatory orders, but last year its board adopted a resolution requested by the Federal Deposit Insurance Corp. and the Mississippi Department of Banking and Consumer Finance to maintain "enhanced capital ratios." At the end of 2011, the company had a total risk-based capital ratio of 13.03% and a tangible common equity ratio of 7.67%, which is considered healthy by analysts.

Davis called the decision to raise more capital "a bit of head scratcher. There is not a pressing need for capital. He speculated that the company could be looking to take advantage of a 33% recent run-up in its stock price since mid-November to build a larger capital cushion.

"It will be interesting to see how [the stock] trades on Wednesday."

BancorpSouth's shares closed at $12.19 Tuesday.