UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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 June 30, 1995, the registrant had outstanding 8,771,959 shares of
common stock, par value $2.50 per share.
<PAGE>
PART I
FINANCIAL INFORMATION
<TABLE>
BANCORPSOUTH, INC.
Consolidated Condensed Balance Sheets
(Unaudited)
(In Thousands)
<CAPTION>
June 30 December 31
1995 1994
<S> <C> <C>
ASSETS
Cash and due from banks 124,414 130,085
Interest bearing deposits with other banks 13,353 1,367
Held-to-maturity securities, at amortized 444,842 496,838
cost
Federal funds sold 68,350 -
Loans 1,984,367 1,895,925
Less: Unearned discount 65,524 61,416
Allowance for credit losses 29,483 28,142
Net loans 1,889,360 1,806,367
Available-for-sale securities 132,043 150,573
Mortgages held for sale 24,160 10,471
Premises and equipment, net 72,271 67,119
Other assets 48,934 43,323
TOTAL ASSETS 2,817,727 2,706,143
LIABILITIES
Deposits:
Demand: Non-interest bearing 331,834 372,939
Interest bearing 607,465 575,485
Savings 288,795 287,416
Time 1,237,828 1,102,396
Total deposits 2,465,922 2,338,236
Federal funds purchased and securities
sold under repurchase agreements 36,473 63,314
Long-term debt 46,298 48,028
Other liabilities 32,134 31,633
TOTAL LIABILITIES 2,580,827 2,481,211
SHAREHOLDERS' EQUITY
Common stock 22,065 22,004
Capital surplus 73,847 73,130
Unrealized gain (loss) on
available-for-sale securities 776 (878)
Retained earnings 141,246 131,710
Less cost of shares held in treasury (1,034) (1,034)
TOTAL SHAREHOLDERS' EQUITY 236,900 224,932
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 2,817,727 2,706,143
<FN>
See accompanying notes to consolidated
condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
BANCORPSOUTH, INC.
Consolidated Condensed Statements of Income
(Unaudited)
(In thousands except for per share amounts)
<CAPTION>
Three months ended Six months ended
June 30 June 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
INTEREST REVENUE:
Interest & fees on loans 44,597 35,828 86,852 69,143
Deposits with other banks 136 82 218 163
Interest on federal funds sold 620 739 1,001 1,060
Interest on held-to-maturity securities:
U. S. Treasury 986 180 1,949 212
U. S. Government agencies & corporations 4,980 3,248 10,184 5,611
Obligations of states & political 1,744 1,451 3,281 3,089
subdivisions
Other - 99 67 236
Interest and dividends on available-for-sale 1,866 3,061 3,725 6,448
securities
Interest on mortgages held for sale 318 678 480 1,894
Total interest revenue 55,247 45,366 107,757 87,856
INTEREST EXPENSE:
Interest on deposits 23,448 17,208 44,559 33,269
Interest on federal funds purchased &
securities
sold under repurchase agreements 457 228 915 471
Other interest expense 937 980 1,881 1,722
Total interest expense 24,842 18,416 47,355 35,462
Net interest revenue 30,405 26,950 60,402 52,394
Provision for credit losses 1,190 1,393 2,366 2,457
Net interest revenue, after provision for
credit losses 29,215 25,557 58,036 49,937
OTHER REVENUE:
Mortgage lending 926 (318) 1,825 (494)
Trust income 486 455 950 896
Service charges 3,657 3,325 7,042 6,302
Security gains (losses), net (24) 478 (39) (111)
Life insurance income 621 678 1,367 1,361
Other 1,611 818 3,194 2,366
Total other revenue 7,277 5,436 14,339 10,320
OTHER EXPENSES:
Salaries and employee benefits 12,104 10,478 24,927 21,560
Net occupancy expense 1,794 1,749 3,531 3,419
Equipment expense 1,885 1,603 3,691 3,208
Deposit insurance premiums 1,301 1,219 2,604 2,433
Other 7,659 6,854 15,447 13,143
Total other expenses 24,743 21,903 50,200 43,763
Income before income taxes 11,749 9,090 22,175 16,494
Income tax expense 3,752 2,350 7,137 4,365
Net income 7,997 6,740 15,038 12,129
Net income per share 0.91 0.77 1.71 1.39
Dividends declared per common share 0.30 0.27 0.60 0.54
<FN>
See accompanying notes to consolidated
condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
BANCORPSOUTH, INC.
Consolidated Condensed Statements of Cash
Flows
(Unaudited)
(In Thousands)
<CAPTION>
Six Months Ended
June 30
1995 1994
<S> <C> <C>
Net cash provided by operating activities 8,247 105,086
Investing activities:
Proceeds from calls and maturities of
held-to-maturity securities 66,494 29,625
Proceeds from calls and maturities of
available-for-sale securities 160,784 261,998
Proceeds from sales of
held-to-maturity securities 994
-
Proceeds from sales of
available-for-sale securities 225 4,000
Purchases of held-to-maturity securities (25,795) (95,398)
Purchases of available-for-sale securities (128,133) (244,107)
Net increase in short-term investments (68,350) (38,900)
Net increase in loans (84,362) (108,573)
Purchases of premises and equipment (8,831) (4,307)
Other (5,508) (7,315)
Net cash used by investing activities (93,476) (201,983)
Financing activities:
Net increase in deposits 127,686 79,300
Net decrease in short-term
borrowings and other liabilities (29,956) (2,715)
Increase (decrease) in long-term debt (1,729) 24,862
Payment of cash dividends (4,747) (4,249)
Issuance of common stock 119 219
Other 171 182
Net cash provided by financing activities 91,544 97,599
Increase in cash and cash equivalents 6,315 702
Cash and cash equivalents at beginning of
period 131,452 122,848
Cash and cash equivalents at end of period 137,767 123,550
<FN>
See accompanying notes to consolidated
condensed financial statements
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 and all such adjustments
were of a normal recurring nature. The results of operations for
the three-month and six-month periods ended June 30, 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, financial
statements for periods prior to the merger have been restated.
3. Comparative net income per share amounts have been restated to
reflect the acquisition of LF Bancorp, which was accounted for as a
pooling-of-interests. The computation of net income per share is
based upon weighted average number of shares outstanding
(8,828,225 and 8,734,960 for the three months ended June 30, 1995,
and 1994, respectively; 8,814,792 and 8,733,849 for the six months
ended June 30, 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 June 30, 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 second quarter of 1995 was $8.0
million compared to $6.74 million in the second quarter of 1994.
For the first six months of 1995, net income was $15.04 million, an
increase of 24.0% from $12.13 million for the same period of 1994.
Net income per share was $0.91 for the second quarter of 1995
compared to $0.77 in 1994. For the first six months of 1995,
earnings per share were $1.71, an increase of 23.0% from $1.39 for
the first six months of 1994. The annualized returns on average
assets for the second quarter of 1995 and 1994 were 1.15% and
1.03%, respectively. For the six months ended June 30, the
annualized returns on average assets were 1.09% and 0.95% for 1995
and 1994, 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 $31.32 million for the three months
ended June 30, 1995, compared to $27.67 million for the same period
in 1994. For the six months ended June 30, 1995 and 1994, net
interest revenue was $62.26 million and $54.28 million,
respectively. Earning assets averaged $2.58 billion in the second
quarter and $2.55 billion for the first six months of 1995,
compared with $2.40 billion and $2.35 billion in the respective
periods in 1994. Average interest-bearing liabilities were $2.20
billion in the second quarter and $2.15 billion for the first six
months of 1995, compared with $2.03 billion and $1.99 billion in
the respective periods in 1994.
Net interest revenue, expressed as a percentage of average
earning assets, was 4.88% for the second quarter of 1995 as
compared to 4.62% for the same period of 1994 and 4.93% for the
first six months of 1995 as compared to 4.65% for the same period
of 1994.
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 on the
Company's current portfolio of loans. Management's judgment is
based on a variety of factors which include the Company's experi
ence 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 $1.19 million for the
second quarter of 1995 compared to $1.39 million for the same
period of 1994. For the six month periods ended June 30, 1995 and
1994, the provision for credit losses totaled $2.37 million and
$2.46 million, respectively. The quality of the Company's loan
portfolio is evidenced by the low levels of charge-offs experienced
in the first six months of 1995. The allowance for credit losses
as a percent of loans outstanding was 1.54% at the end of the
second quarter 1995, compared to 1.50% at December 31, 1994.
Other Revenue
Other revenue for the quarter ended June 30, 1995, totaled
$7.28 million compared to $5.44 million for the same period of
1994, a 33.9% increase. For the six months ended June 30, 1995 and
1994, other revenue was $14.34 million and $10.32 million,
respectively, a 38.9% increase. The most significant change in
other revenue was in mortgage lending where income of $1.83 million
was recorded during the first six months of 1995 versus a loss of
$0.49 million in the same period of 1994. This loss was
attributable to realized and unrealized losses on mortgage loans
held for sale during the rising rate environment of the first six
months of 1994. Trust income and life insurance premiums both
showed a modest increase. Service charges on deposit accounts for
the first six months increased 11.7%.
Other Expenses
Other expenses totaled $24.74 million for the second quarter
of 1995, a 13.0% increase from the same period of 1994. For the
six months ended June 30, 1995, other expenses totaled $50.20
million , a 14.7% increase over 1994's other expenses. The
components of other expenses reflect normal increases for personnel
related expenses and general inflation in the cost of services and
supplies purchased by the Company. Also included in other expenses
for the first six months of 1995 are amounts totalling $577,000 related
to merger and acquisition activity.
Income Tax
Income tax expense was $3.75 million and $2.35 million for the
second quarters of 1995 and 1994, respectively. For the six month
period ended June 30, 1995, income tax expense was $7.14 million
compared to $4.37 million for the same period in 1994. The
increase in the Company's effective tax rate (32.2% for the first
six months of 1995 versus 26.5% for comparable period of 1994)
reflects the 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. These portfolios, net of unearned discount,
totaled $1.92 billion at June 30, 1995, which represents a 4.6%
increase from the December 31, 1994 total of $1.83 billion. Non-
performing loans were 0.46% of all loans outstanding at June 30,
1995, compared to 0.48% at the end of 1994.
Investment Securities and Other Earning Assets
The securities portfolios are used to make various term invest
ments, to provide a source of liquidity and to serve as collateral
to secure certain types of deposits. Held-to-maturity securities at
June 30, 1995, were $444.8 million compared with $496.8 million at
the end of 1994, a 10.5% decrease. Available for sale securities
were $132.0 million at June 30, 1995, compared to $150.6 million at
December 31, 1994, a 12.3% decrease. Proceeds from maturing
investment securities have been used to fund the Company's loan
growth.
Deposits
Total deposits at the end of the second quarter were $2.47
billion as compared to $2.34 billion at December 31, 1994,
representing a 5.5% 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 June 30, 1995, the Company's Tier 1
capital and total capital, as a percentage of total risk-adjusted
assets, was 11.67% and 13.88%, 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 8.25%
at June 30, 1995, compared to the required minimum leverage capital
ratio 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of shareholders of the Company was held on
Tuesday, April 25, 1995. At this meeting, the following matters
were voted upon by the Company's shareholders:
(a) Election of Class III Directors
Aubrey Burns Patterson, Frank A. Riley, Dr. Andrew R. Townes
and J. Louis Griffin, Jr. were elected to serve as Class III
directors of the Company until the annual meeting of shareholders
in 1998 or until their respective successors are elected and
qualified. The vote was as follows:
Votes Cast Votes Cast Abstentions/
in Favor Against or Withheld Non Votes
NAME
Aubrey Burns Patterson 6,560,602 25,939 0
Frank A. Riley 6,557,111 29,430 0
Dr. Andrew R. Townes 6,557,680 28,861 0
J. Louis Griffin, Jr. 6,472,601 113,940 0
The following directors continue in office following the meeting:
NAME Term Expires
A. Douglas Jumper 1996
Turner O. Lashlee 1996
W. G. Holliman, Jr. 1996
Alan W. Perry 1996
S. H. Davis 1997
Hassell H. Franklin 1997
Travis E. Staub 1997
Lowery A. Woodall 1997
(b) 1994 Stock Incentive Plan and 1995 Non Qualified Stock Option
Plan for Non-Employee Directors
The Company's shareholders jointly approved the Company's
1994 Stock Incentive Plan and 1995 Non-Qualified Stock Option Plan
for Non-Employee Directors by the following vote:
Votes Cast Votes Cast Abstentions/
in Favor Against or Withheld Non Votes
6,080,683 395,818 110,040
(c) Selection of Independent Auditors
The shareholders of the Company ratified the appointment of
KPMG Peat Marwick LLP as the Company's independent auditors for the
fiscal year ended December 31, 1995 by the following vote:
Votes Cast Votes Cast Abstentions/
in Favor Against or Withheld Non Votes
6,546,141 6,077 34,323
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) (27) Financial Data Schedule
(b) On June 22, 1995, the Registrant
filed a Current Report on Form 8-K disclosing under Item 5 the
signing of a definitive agreement providing for the merger of Wes-
Tenn Bancorp, Inc. with and into the Registrant and filing a copy
of the merger agreement as an exhibit.
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: August 11, 1995 _____________________________________
L. Nash Allen, Jr.
Treasurer and
Chief Financial Officer
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-1-1995
<PERIOD-END> JUN-30-1995
<CASH> 124,414
<INT-BEARING-DEPOSITS> 13,353
<FED-FUNDS-SOLD> 68,350
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 132,043
<INVESTMENTS-CARRYING> 132,043
<INVESTMENTS-MARKET> 132,043
<LOANS> 1,918,843
<ALLOWANCE> 29,483
<TOTAL-ASSETS> 2,817,727
<DEPOSITS> 2,465,922
<SHORT-TERM> 36,473
<LIABILITIES-OTHER> 32,134
<LONG-TERM> 46,298
<COMMON> 22,065
0
0
<OTHER-SE> 214,835
<TOTAL-LIABILITIES-AND-EQUITY> 2,817,727
<INTEREST-LOAN> 86,852
<INTEREST-INVEST> 15,481
<INTEREST-OTHER> 4,205
<INTEREST-TOTAL> 107,757
<INTEREST-DEPOSIT> 44,559
<INTEREST-EXPENSE> 47,355
<INTEREST-INCOME-NET> 60,402
<LOAN-LOSSES> 2,366
<SECURITIES-GAINS> (39)
<EXPENSE-OTHER> 50,200
<INCOME-PRETAX> 22,175
<INCOME-PRE-EXTRAORDINARY> 15,038
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,038
<EPS-PRIMARY> 1.71
<EPS-DILUTED> 1.71
<YIELD-ACTUAL> 4.93
<LOANS-NON> 1,563
<LOANS-PAST> 3,811
<LOANS-TROUBLED> 506
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 28,142
<CHARGE-OFFS> 1,623
<RECOVERIES> 598
<ALLOWANCE-CLOSE> 29,483
<ALLOWANCE-DOMESTIC> 29,483
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
