By NEMS Daily Journal
TUPELO – BancorpSouth reported a second-quarter loss of $12.6 million, reversing a $33.9 million profit for the same period a year ago.
It also marked the company’s second decline in three quarters. For the fourth quarter, it posted a loss of $2.1 million. In the first quarter of this year, BancorpSouth recorded net income of $8.4 million.
In prepared remarks, company Chairman and CEO Aubrey Patterson said the second-quarter loss was due to increased credit costs. The provision for credit losses was $62.4 million, compared to $17.6 million for the year-ago quarter and $43.5 million in the first quarter of this year.
Nonperforming loans and leases also increased by $66.6 million, bringing the total to $302.3 million for the year.
“The bulk of credit quality issues are concentrated geographically, enhancing the focus of our resolution efforts,” Patterson said. “The majority of NPLs at the quarter end were in Alabama and the Nashville and the greater Memphis areas. Slowed housing starts coupled with an excess of lot inventory have combined to create an environment that has caused many borrowers to be unable to amortize their debt. This environment has also caused declines in real estate collateral values.”
But Patterson said that other areas of the company’s business “remained relatively stable, despite continued weakness in the economy.” He also noted BancorpSouth posted pre-provision earnings of $46.4 million.
Net interest revenue was $109.3 million for the quarter, a 1.5 percent drop from $110.9 million from 2009. The net interest margin was 3.71 percent, compared to 3.75 percent for the year-ago period.
Total assets at the end of the quarter were $13.4 billion, compared with $13.3 billion last year. Total deposits were $11.2 billion, an increase of 10.5 percent from $10.2 billion from a year ago. Loans and leases, net of unearned income, were $9.6 billion, a decrease of 1.2 percent from $9.8 billion last year.
Loans and leases fell $114.5 million year-over-year, a drop primarily driven by a $270.5 million drop in construction, acquisition and development, or CAD, loans.
Deposits grew 10.5 percent to $11.2 billion.
Annualized net charge-offs were 2.08 percent of average loans and leases for the second quarter, compared with 0.55 a year earlier and 1.26 percent for the first quarter of 2010.
NPLs increased to $302.3 million, or 3.13 percent of net loans and leases, compared to $97.7 million, or 1 percent of net loans and leases a year ago. In the first quarter, NPLs were valued at $235.7 million, or 2.43 percent of net loans and leases.
The allowance for credit losses increased to 2.08 percent of net loans and leases for the second quarter, compared to 1.42 percent a year ago and 1.95 percent at the end of the first quarter.
“The second quarter of 2010 was a difficult one, focused on dealing with continuing credit issues,” Patterson said. “The challenge in dealing with these issues is to work through those problems, without neglecting areas that continue to present opportunities that will serve the company well in the future. … we believe that we are well-positioned and have made significant progress in addressing our credit issues. We are – and intend to remain – well reserved against losses inherent in our loan portfolio. In addition, our strong capital supports our ability to work with our borrowers appropriately to avoid unnecessarily costly resolutions. We believe we have a good understanding of the specific markets primarily accountable for our increased NPLs, and we are taking appropriate action in resolving these problems.
“While the difficulties we have faced are not insignificant, they remain manageable, and we expect an improving economy to support a stronger performance within our core operations.”