UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-10826
BancorpSouth, Inc.
(Exact name of registrant as specified in its charter)
Mississippi 64-0659571
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Mississippi Plaza, Tupelo, Mississippi 38801
(Address of principal executive offices) (Zip Code)
601/680-2000
(Registrant's telephone number, including area code)
(Former name, former address, and former fiscal year, if changed since last
year)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___
On March 31, 1995, the registrant had outstanding 8,763,666 shares of common
stock, par value $2.50 per share.
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PART I
FINANCIAL INFORMATION
BANCORPSOUTH, INC.
Consolidated Condensed Balance Sheets
(Unaudited)
(In Thousands)
<CAPTION>
March 31 December 31
1995 1994
<S> <C> <C>
ASSETS
Cash and due from banks $130,745 $130,085
Interest bearing deposits with other banks 8,266 1,367
Held-to-maturity securities, at amortized cost 499,473 496,838
Federal funds sold 49,100 0
Loans 1,925,304 1,895,298
Less: Unearned discount 62,256 61,402
Allowance for credit losses 28,780 27,529
Net loans 1,834,268 1,806,367
Available-for-sale securities 137,738 150,573
Mortgages held for sale 11,180 10,471
Premises and equipment, net 69,524 67,119
Other assets 51,238 43,323
TOTAL ASSETS $2,791,532 $2,706,143
LIABILITIES
Deposits:
Demand: Non-interest bearing $319,785 $371,367
Interest bearing 632,088 577,057
Savings 277,076 393,990
Time 1,216,901 995,822
Total deposits 2,445,850 2,338,236
Federal funds purchased and securities
sold under repurchase agreements 31,864 63,314
Long-term debt 47,037 48,028
Other liabilities 36,016 31,633
TOTAL LIABILITIES 2,560,767 2,481,211
SHAREHOLDERS' EQUITY
Common stock 22,045 19,932
Capital surplus 73,782 75,202
Unrealized gain (loss) on securities
available for sale 125 (878)
Retained earnings 135,847 131,710
Less cost of shares held in treasury (1,034) (1,034)
TOTAL SHAREHOLDERS' EQUITY 230,765 224,932
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,791,532 $2,706,143
<FN>
See accompanying notes to consolidated condensed financial statements.
</TABLE>
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<TABLE>
BANCORPSOUTH, INC.
Consolidated Condensed Statements of Income
(Unaudited)
(In thousands except for per share amounts)
<CAPTION>
Three months ended
March 31
1995 1994
<S> <C> <C>
INTEREST REVENUE:
Interest & fees on loans $42,255 $33,315
Deposits with other banks 82 81
Interest on federal funds sold 381 321
Interest on held-to-maturity securities:
U. S. Treasury 963 32
U. S. Government agencies & corporations 5,204 2,363
Obligations of states & political subdivisions 1,537 1,638
Other 67 137
Interest and dividends on available-for-sale 1,859 3,387
securities
Interest on mortgages held for sale 162 1,216
Total interest revenue 52,510 42,490
INTEREST EXPENSE:
Interest on deposits 21,111 16,061
Interest on federal funds purchased & securities
sold under repurchase agreements 458 243
Other interest expense 944 742
Total interest expense 22,513 17,046
Net interest revenue 29,997 25,444
Provision for credit losses 1,176 1,064
Net interest revenue, after provision for
credit losses 28,821 24,380
OTHER REVENUE:
Mortgage lending 899 (176)
Trust income 464 441
Service charges 3,385 2,977
Security losses, net (15) (589)
Life insurance income 746 683
Other 1,583 1,548
Total other revenue 7,062 4,884
OTHER EXPENSES:
Salaries and employee benefits 12,823 11,082
Occupancy, net 1,737 1,670
Equipment 1,806 1,605
Deposit insurance premiums 1,303 1,214
Other 7,788 6,289
Total other expenses 25,457 21,860
Income before income taxes 10,426 7,404
Income tax expense 3,385 2,015
Net income $7,041 $5,389
Net income per share $0.80 $0.62
Dividends declared per share $0.30 $0.27
<FN>
See accompanying notes to consolidated condensed financial statements.
</TABLE>
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<TABLE>
BANCORPSOUTH, INC.
Consolidated Condensed Statements of Cash Flows
(Unaudited)
(In Thousands)
<CAPTION>
Three Months Ended
March 31
1995 1994
<S> <C> <C>
Net cash provided by operating activities $10,965 $54,056
Investing activities:
Proceeds from calls and maturities of
held-to-maturity securities 5,401 12,768
Proceeds from calls and maturities of
available-for-sale securities 74,872 121,599
Proceeds from sales of
held-to-maturity securities - 994
Purchases of held-to-maturity securities (6,912) (31,871)
Purchases of available-for-sale securities (61,552) (116,484)
Net increase in short-term
investments (49,100) (41,865)
Net increase in loans (28,624) (46,088)
Purchases of premises and equipment (4,221) (2,090)
Other (6,692) (8,248)
Net cash used by investing activities (76,828) (111,285)
Financing activities:
Net increase in deposits 107,614 55,445
Net increase (decrease) in short-term
borrowings and other liabilities (31,019) 1,526
Increase (decrease) in long-term debt (991) 22,223
Payment of cash dividends (2,372) (2,125)
Issuance of common stock 33 191
Other 157 72
Net cash provided by financing activities 73,422 77,332
Increase in cash and cash
equivalents 7,559 20,103
Cash and cash equivalents at beginning of
period 131,452 122,848
Cash and cash equivalents at end of period $139,011 $142,951
<FN>
See accompanying notes to consolidated condensed financial statements
</TABLE>
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BANCORPSOUTH, INC.
Notes to Consolidated Condensed Financial Statements
(Unaudited)
1. The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with the accounting policies in effect as of
December 31, 1994, as set forth in the annual consolidated financial statements
of BancorpSouth, Inc. (the "Company"), as of such date. In the opinion of
management, all adjustments necessary for a fair presentation of the
consolidated financial statements have been included. The results of operations
for the three-month period ended March 31, 1995 are not necessarily indicative
of the results to be expected for the full year.
2. On March 31, 1995, the Company merged with LF Bancorp, Inc. ("LF Bancorp"),
the parent company of Laurel Federal Savings and Loan Association,
headquartered in Laurel, Mississippi. The consolidated total assets of LF
Bancorp were $189.5 million at the merger date. Each share of outstanding
LF Bancorp common stock was exchanged for 1.013 shares of the Company's
common stock. A total of 832,101 shares of the Company's common stock were
issued to effect the transaction.
This business combination was accounted for by the pooling-of-interests
method. Accordingly, prior year and quarterly financial statements have been
restated to reflect the consolidation. The results of operations of the Company
and LF Bancorp for the period before the combination was consummated are
presented below.
Three Months Ended Three Months Ended
March 31, 1995
(In thousands)
BancorpSouth LF Bancorp
Net interest revenue $ 28,437 $ 1,560
Net income $ 6,884 157
3. Comparative net income per share amounts have been restated to reflect the
acquisition of LF Bancorp accounted for as a pooling-of-interests. The
computation of net income per share is based upon the weighted average number of
common shares outstanding (8,760,239 and 8,713,325 for the three months ended
March 31, 1995 and 1994, respectively).
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion provides certain information concerning the
consolidated financial condition and results of operations of BancorpSouth, Inc.
(the "Company"), a bank and thrift holding company and the parent of Bank of
Mississippi ("BOM"), Volunteer Bank ("VOL") and Laurel Federal Savings and Loan
Association ("Laurel"). Laurel was a subsidiary of LF Bancorp, Inc. which
merged into the Company on March 31, 1995, in a business combination accounted
for by the pooling-of-interests method. Accordingly, all the information
regarding the financial condition and results of operations on which this
discussion is based reflects the combined results of the Company and LF Bancorp
for the periods analyzed. This discussion should be read in conjunction with
the unaudited consolidated condensed financial statements for the periods ended
March 31, 1995 and 1994. Reference is also made to Note 2 to those unaudited
consolidated condensed financial statements for additional discussion regarding
the merger with LF Bancorp.
RESULTS OF OPERATIONS
Net Income
The Company's net income for the first quarter of 1995 was $7.04 million,
an increase of 30.7% from $5.39 million in the first quarter of 1994. Net income
per common share for the first quarter of 1995 was $0.80, an increase of 29.3%
from $0.62 for the same period in 1994. The annualized returns on average assets
for the first quarter of 1995 and 1994 were 1.03% and 0.86%, respectively.
Net Interest Revenue
Net interest revenue, the difference between interest earned on assets and
the cost of interest-bearing liabilities, is the largest component of the
Company's net income. For purposes of this discussion, all interest revenue has
been adjusted to a fully taxable equivalent basis. The primary items of concern
in managing net interest revenue are the mix and maturity balance between
interest-sensitive assets and liabilities.
Net interest revenue was $31.5 million for the three months ended March 31,
1995, compared to $26.6 million for the same period in 1994. Earning assets
averaged $2.52 billion in the first quarter of 1995, compared with $2.30 billion
in the respective period in 1994. Average interest-bearing liabilities were
$2.10 billion in the first quarter of 1995, compared with $1.94 billion for the
same period of 1994.
Net interest revenue, expressed as a percentage of average earning assets,
was 5.08% for the first quarter of 1995, as compared to 4.69% for the same
period of 1994. While interest-earning assets increased at a faster pace than
the interest-bearing liabilities, the average yield earned on those assets rose
at a faster pace than the average rate paid on interest-sensitive liabilities.
Provision and Allowance for Credit Losses
The provision for credit losses charged to operating expense is an amount
which, in the judgment of management, is necessary to maintain the allowance for
credit losses at a level that is adequate to meet the present and potential
risks of losses in the Company's current portfolio of loans. Management's
judgment is based on a variety of factors which include the Company's experience
related to loan balances, charge-offs and recoveries, scrutiny of individual
loans and risk factors, results of regulatory agency reviews of loans, and
present and anticipated future economic conditions of the Company's market area.
Material estimates that are particularly susceptible to significant change in
the near term are a necessary part of this process. Future additions to the
allowance may be necessary based on changes in economic conditions. In addition,
various regulatory agencies, as an integral part of their examination process,
periodically review the Company's allowance for credit losses. These agencies
may require the Company to recognize additions to the allowance based on their
judgments about information available to them at the time of their examination.
The provision for credit losses totaled $1.18 million for the first quarter
of 1995, compared to $1.06 million for the same period of 1994. This increase is
due to the growth in the Company's loan portfolio. The allowance for credit
losses as a percent of loans outstanding was 1.54% at the end of the first
quarter 1995, compared to 1.50% at December 31, 1994.
Other Revenue
Other revenue for the quarter ended March 31, 1995 totaled $7.06 million,
compared to $4.89 million for the same period of 1994, a 44.6 % increase. The
most significant change in other revenue was in mortgage lending where net
revenue of $899,000 was reported in 1995, compared to a net loss of $176,000 in
1994. The loss in 1994 was attributable to realized and unrealized losses on
mortgage loans held for sale during the rapidly rising rate environment of the
first quarter of 1994. Trust income and life insurance income showed modest
increases. Service charges on deposit accounts increased 13.7%.
Other Expenses
Other expenses totaled $25.46 million for the first quarter of 1995, a 16.5
% increase over 1994's expense for the same period. The components of other
expenses reflect normal increases for personel related expenses and general
inflation in the cost of services and supplies purchased by the Company.
Income Tax
Income tax expense was $3.38 million for the first quarter of 1995 (an
effective tax rate of 32.5%) and $2.02 million for the first quarter 1994 (an
effective tax rate of 27.2%). This increase resulted from a decrease in the
relative level of the Company's investment in assets with respect to which
earnings are afforded favorable tax treatment. The Company's taxable net income
continues to increase.
FINANCIAL CONDITION
Loans
The loan portfolios of the Company's bank and thrift subsidiaries make up
the largest single component of the Company's earning assets. The portfolio,
net of unearned discount, totaled $1.86 billion at March 31, 1995, which
represents a 1.6% increase from $1.83 billion at December 31, 1994. Non-
performing loans were 0.48 % of all loans outstanding at March 31, 1995. This
percentage is unchanged from December 31, 1994.
Securities and Other Earning Assets
The securities portfolios are used to make various term investments, to
provide a source of liquidity and to serve as collateral to secure certain types
of deposits. Held-to-maturity securities at March 31, 1995 were $499.5 million,
compared with $496.8 million at the end of 1994, a 0.5% increase. Available-for-
sale securities were $137.7 million at March 31, 1995, compared to $150.6
million at December 31, 1994, an 8.6% decrease.
Deposits
Total deposits at the end of the first quarter were $2.45 billion as
compared to $2.34 billion at December 31, 1994, representing a 4.6% increase.
Deposits continue to be the Company's primary source of funds with which to
support its earning assets.
LIQUIDITY
Liquidity is the ability of the Company to fund the need of its borrowers,
depositors and creditors. The Company's traditional sources of liquidity
include maturing loans and investment securities, purchased federal funds and
its base of core deposits. Management believes these sources are adequate to
meet liquidity needs for normal operations.
The Company continues to pursue a lending policy stressing adjustable
rate loans, in furtherance of its strategy for matching interest sensitive
assets with an increasingly interest sensitive liability structure.
CAPITAL RESOURCES
The Company is required to comply with the risk-based capital requirements
of the Board of Governors of the Federal Reserve System (FRB). These
requirements apply a variety of weighting factors which vary according to the
level of risk associated with the particular assets. At March 31, 1995, the
Company's Tier 1 capital and total capital, as a percentage of total risk-
adjusted assets, was 11.51% and 13.71%, respectively. Both ratios exceed the
required minimum levels for these ratios of 4.0% and 8.0%, respectively. In
addition, the Company's leverage capital ratio (Tier 1 capital divided by total
assets, less goodwill) was 8.20 % at March 31, 1995, compared to the required
minimum leverage capital raio of 4%.
The Company's current capital position continues to provide it with a
level of resources available for the acquisition of depository institutions and
businesses closely related to banking in the event opportunities arise.
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended March 31,
1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BancorpSouth, Inc.
(Registrant)
DATE: May 12, 1995 L. Nash Allen, Jr.
L. Nash Allen, Jr.
Treasurer and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 130,745
<INT-BEARING-DEPOSITS> 8,266
<FED-FUNDS-SOLD> 49,100
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 137,738
<INVESTMENTS-CARRYING> 137,508
<INVESTMENTS-MARKET> 137,738
<LOANS> 1,863,048
<ALLOWANCE> 28,780
<TOTAL-ASSETS> 2,791,532
<DEPOSITS> 2,445,850
<SHORT-TERM> 31,864
<LIABILITIES-OTHER> 36,016
<LONG-TERM> 47,037
<COMMON> 22,045
0
0
<OTHER-SE> 208,720
<TOTAL-LIABILITIES-AND-EQUITY> 2,791,532
<INTEREST-LOAN> 42,255
<INTEREST-INVEST> 9,630
<INTEREST-OTHER> 625
<INTEREST-TOTAL> 52,510
<INTEREST-DEPOSIT> 21,111
<INTEREST-EXPENSE> 22,513
<INTEREST-INCOME-NET> 29,997
<LOAN-LOSSES> 1,176
<SECURITIES-GAINS> (15)
<EXPENSE-OTHER> 25,457
<INCOME-PRETAX> 10,426
<INCOME-PRE-EXTRAORDINARY> 7,041
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,041
<EPS-PRIMARY> 0.80
<EPS-DILUTED> 0.80
<YIELD-ACTUAL> 5.08
<LOANS-NON> 1,275
<LOANS-PAST> 3,035
<LOANS-TROUBLED> 1,282
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 28,142
<CHARGE-OFFS> 800
<RECOVERIES> 262
<ALLOWANCE-CLOSE> 28,780
<ALLOWANCE-DOMESTIC> 28,780
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
