BancorpSouth Inc.'s shares plunged Tuesday after the Tupelo, Miss., company reported an increase in problem loans and Moody's Corp. downgraded its credit rating.

Though the $13 billion-asset company reported after the markets closed Monday that third-quarter earnings rose 5% and that capital levels increased from the same period a year ago, investors appeared to be spooked by its mixed signals on credit quality.

Overall, nonperforming loans declined 11% since last year's third quarter, to $363 million, which allowed the company to reduce its provision for loan losses by 54%. But gross nonaccruing loans increased by nearly $61 million since June 30, after after three straight quarters of declines, while early stage delinquencies increased for the first time in six quarters, according to a research note from Sandler O'Neill & Partners LP.

Late Monday, Moody's downgraded the company's credit rating from Baa1 to Baa2 — or just two rungs above non-investment grade — citing concerns about its asset quality, and lowered its outlook to "negative" from "under review."

BancorpSouth's shares fell 15% Tuesday, to close at $9.33.

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