BancorpSouth (BXS) of Tupelo, Miss., is coming off its strongest quarter in two years as improved asset quality and modest growth in fee income more than offset declining loan revenue.

The $13.3 billion-asset company said late Monday that its first-quarter earnings totaled $22.9 million, compared with a loss of $500,000 a year earlier. Its earnings per share of 25 cents beat analysts' expectations by eight cents, according to Thomson Reuters.

The bank's provision for credit losses fell 81%, to $10 million, year over year.

Nonperforming loans totaled $285.2 million, down 33% from a year earlier.

BancorpSouth's earnings were also helped by strong noninterest revenue, Aubrey Patterson, the company's chairman and chief executive, said in a news release.

Noninterest revenue totaled $72.4 million, up 6% from the same period a year earlier.

The company's mortgage business generated $395.1 million of new loans during the quarter and contributed $15.1 million of revenue, including a positive mortgage servicing rights valuation adjustment of $3.7 million.

These gains were partially offset by a roughly 3% decline, to $105.6 million, in net interest revenue. Loans and leases also fell roughly 5%, to $8.7 billion, as the construction, acquisition and development loan portfolio dropped 23%.

"Although continuing to improve asset quality is certainly still the top priority, we recognize the importance of focusing on quality loan production," Patterson said. "While we are encouraged by recent economic trends, we remain cautious about the prospects of significant near-term growth given the competitive landscape and subdued loan demand."

BancorpSouth's shares closed at $13.17 Tuesday afternoon, up 2.5% from Monday's close.

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