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Mortgage adjustment hurts BancorpSouth’s earnings

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Damaged by a negative mortgage servicing rights valuation adjustment of $4.1 million, Tupelo, Miss.-based BancorpSouth Inc. (NYSE: BXS) posted a drop in second-quarter earnings.

Net income fell 12.6 percent to $34.7 million, or 37 cents per diluted share, from $39.7 million, or 41 cents per share, a year earlier, according to a news release. An MSR is an arrangement where a third party collects mortgage payments in exchange for a fee, according to Investopedia.com

Separately during the quarter, BancorpSouth reached a $10.6 million settlement with the Department of Justice and Consumer Financial Protection Bureau over allegations of discriminatory mortgage lending practices. BancorpSouth Chairman and CEO Dan Rollins said the company recorded a liability of $13.8 million during the first quarter for the settlement, meaning the second quarter was not materially affected by the Justice Department’s action.

“We believe putting this matter behind us was in the best interests of our customers, teammates and shareholders,” he said in the release. “Despite this distraction, our core financial results continue to improve.”

Second-quarter financial notes:
    •    Net interest revenue improved 4.7 percent to $112.3 million from $107.3 million a year earlier.
    •    Provision for credit losses was $2 million, compared with a negative provision of $5 million in second-quarter 2015.
    •    Noninterest expense was roughly flat at $128.7 million.

As of June 30, BancorpSouth held $14.1 billion in assets and $11.4 billion in deposits. The company operates 238 branches, including six in Springfield.

BXS shares were trading at $23.68 as of 10:53 a.m., compared with a 52-week range of $18.69 to $27.23.

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