BancorpSouth posts record 4Q profits, back in acquisition game after regulatory pause

Tupelo-based BancorpSouth, which fell behind its Arkansas regional banking peers in asset-size during a three-year FDIC probe, on Wednesday (Jan. 23) reported record fourth quarter profits as it reboots its growth plans following a string of key acquisitions in 2018.

For the period ended Dec. 31, BancorpSouth reported net income of $47.1 million, or 47 cents per share, up 25.6% from net income of $37.5 million, or 41 cents a year ago. Excluding items, the Mississippi bank reported fourth quarter earnings of 57 cents per share, two cents ahead of Wall Street expectations, according to Thomson Reuters.

On a yearly basis, BancorpSouth reported robust earnings of $221.3 million, or $2.23 per share, compared to $153.0 million, or $1.67 per share, in the same period of 2017. During the fourth quarter, BancorpSouth’s bank holding company announced acquisitions of two smaller banks in Texas and Alabama, which followed earlier purchase pacts with three community banks in those same states.

“The financial results for 2018 reflect several meaningful accomplishments achieved by our team through continued hard work and dedication,” said BancorpSouth Chairman and CEO Dan Rollins. “This growth was achieved through continued organic loan growth combined with the closing and integration of the first three bank transactions that our company has completed since 2007.”

In 2014, the Mississippi banking chain with a big presence across Arkansas had to table its merger pacts with Ouachita Bancshares Corp. in Monroe, La. and Central Community Corp., headquartered in Temple, Texas, after the Federal Deposit Insurance Corp. lowered the bank’s Community Reinvestment Act rating from “satisfactory” to “needs to improve.”

The FDIC downgrade occurred after the Consumer Financial Protection Bureau (CFPB) and the Department of Justice announced a joint action against BancorpSouth for discriminatory mortgage lending practices that harmed African Americans and other minorities. At the time, BancorpSouth was ordered to pay $4 million in direct loan subsidies to minority neighborhoods in Memphis, at least $800,000 for community programs, advertising, outreach, and credit repair, $2.78 million to African-American consumers who were unlawfully denied or overcharged for loans, and a $3 million penalty.

In early 2018, BancorpSouth was able to get two earlier stalled deals back online following a deal with federal regulators. Exactly a year ago, BancorpSouth completed both of those mergers, which grew the bank’s asset base by more than $2.1 billion and added more than 40 full service banking offices to the company’s portfolio.

Once those deals were completed, BancorpSouth announced plans in April to expand deeper into Texas with the purchase of Houston-based Icon Bank in a stock-and-cash deal valued at nearly $145 million. That deal was closed on Oct. 31, allowing it to combine Icon’s seven-full service banking offices with BancorpSouth’s two full-service banking locations, a mortgage loan production office, and a regional insurance office in the Houston market. Altogether, that deal added assets of $794 million and total deposits of $692 million to BancorpSouth’s operations.

One month later on Nov. 13, BancorpSouth announced two more definitive agreements on the same day to acquire Casey Bancorp Inc. and Merchants Bank in the Dallas area and Jackson, Ala., markets, respectively. Casey, operating under the name Grand Bank of Texas, operates four full-service banking offices in Dallas, Grand Prairie, Horseshoe Bay and Marble Falls, all in Texas. At the close of 2018, Grand Bank, had total assets of $344.0 million, total loans of $256.6 million and total deposits of $314.7 million.

Merchants operates six full-service banking offices in Clarke and Mobile counties in Alabama. As of Dec. 31, the Alabama community bank reported total assets of $219.1 million, total loans of $152.9 million and total deposits of $192.3 million. Subject to normal closing conditions and regulatory approval, BancorpSouth said it expects to close both of those deals in the first half of 2019.

Despite its recent acquisition spree, the Mississippi financial institution with more than 40 locations in Arkansas still has some catching up to do in key markets where similar-size regional banking rivals have already boosted their competitive advantage with key acquisitions during BancorpSouth’s decade-long acquisition dormancy.

For example, after several acquisitions in Arkansas and other Southeast U.S. markets, Little Rock-based Bank OZK and privately-held Arvest Bank in Fayetteville have moved well ahead of its regional banking peers at the end of 2018 with assets of $22.4 billion and $19 billion, respectively. Louisiana-based Iberia Bank, which has more than 40 locations across Arkansas and has also expanded in Florida and the southern market, has also moved well ahead of its Mississippi neighbor with more than $30 billion in assets at the end of this year.

Today, BancorpSouth is now sandwiched between those larger banks and Pine Bluff-based Simmons First National Bank and Home Bancshares in Conway with assets of $16.5 million and $15.5 million, respectively. Still, the Arkansas regional banks have already entered into key markets in Texas, Alabama and other southern states while federal regulators held up BancorpSouth’s growth plans.

Rollins, however, said the Mississippi regional banking group would continue to look forward after topping the $18 billion mark for the first time in the bank’s history at the end of 2018. “Our efforts to continue to improve our cost structure are evident in the improvement in our operating efficiency. As we look to 2019, our focus will remain much the same. We continue to emphasize the importance of organic growth to our team while also looking for additional strategic opportunities,” said Rollins, whose board includes Little Rock native and football great Keith Jackson.

“We will also work to take the steps necessary to complete our two pending merger transactions while working to realize additional cost savings associated with the merger transactions we closed in 2018. Most importantly, we will focus on continuing to manage and deploy capital in a manner that maximizes value for our shareholders,” said Rollins.

At the close of business Wednesday, BancorpSouth shares were down 16 cents at $28.54 on the New York Stock Exchange. Over the past 52 weeks, the Tupelo-based banking group’s shares have traded in the range of $24.31 as a low and $35.55 as a high.