<PAGE> 1
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 September 30, 1996
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 October 24, 1996, the registrant had outstanding 21,045,735 shares of
common stock, par value $2.50 per share.
<PAGE> 2
BANCORPSOUTH, INC.
CONTENTS
PAGE
PART I Financial Information
ITEM 1 Financial Statements (unaudited)
Consolidated Condensed Balance Sheets
September 30, 1996, and December 31, 1995............... 3
Consolidated Condensed Statements of Income
Three and Nine Months Ended September 30, 1996 and1995.. 4
Consolidated Condensed Statements of Cash Flows
Nine Months Ended September 30, 1996 and 1995........... 5
Notes to Consolidated Condensed Financial Statements.... 6
ITEM 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations........... 7
PART II Other Information
ITEM 6 Exhibits and Reports on Form 8-K ....................... 11
<PAGE> 3
PART I
FINANCIAL INFORMATION BANCORPSOUTH, INC.
Consolidated Condensed Balance Sheets
<TABLE>
<CAPTION>
(Unaudited) (In Thousands)
September 30 December 31
1996 1995
<S> <C> <C>
ASSETS
Cash and due from banks $135,266 $149,923
Interest bearing deposits with other banks 11,770 15,892
Held-to-maturity securities, at amortized cost 504,387 439,303
Federal funds sold 62,100 35,450
Loans 2,568,652 2,371,684
Less: Unearned discount 84,207 76,518
Allowance for credit losses 37,628 34,636
Net loans 2,446,817 2,260,530
Available-for-sale securities 219,356 239,755
Mortgages held for sale 26,279 25,168
Premises and equipment, net 89,448 81,240
Other assets 64,591 54,767
TOTAL ASSETS $3,560,014 $3,302,028
LIABILITIES
Deposits:
Demand: Non-interest bearing $406,389 $393,417
Interest bearing 726,308 665,313
Savings 389,577 333,436
Time 1,561,008 1,471,446
Total deposits 3,083,282 2,863,612
Federal funds purchased and securities
sold under repurchase agreements 37,612 35,848
Long-term debt 81,171 73,624
Other liabilities 50,557 40,849
TOTAL LIABILITIES 3,252,622 3,013,933
SHAREHOLDERS' EQUITY
Common stock 52,887 52,764
Capital surplus 84,598 84,391
Unrealized gain on
available-for-sale securities, net 931 2,480
Retained earnings 170,070 149,494
Less cost of shares held in treasury (1,094) (1,034)
TOTAL SHAREHOLDERS' EQUITY 307,392 288,095
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $3,560,014 $3,302,028
<FN>
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<PAGE> 4
BANCORPSOUTH, INC.
Consolidated Condensed Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
(In thousands except for per share amounts)
Three months ended Nine months ended
September 30 September 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
INTEREST REVENUE:
Interest & fees on loans $57,762 $52,619 $167,748 $149,509
Deposits with other banks 117 218 453 568
Interest on federal funds sold 744 742 1,995 1,767
Interest on held-to-maturity securities:
U. S. Treasury 1,298 991 2,909 2,940
U. S. Government agencies & corporations 4,744 5,962 14,626 18,448
Obligations of states & political subdivisions 1,665 1,846 5,110 5,884
Other - - 2 67
Interest and dividends on available-for-sale securities 3,443 1,982 10,807 5,879
Interest on mortgages held for sale 464 561 1,509 1,041
Total interest revenue 70,237 64,921 205,159 186,103
INTEREST EXPENSE:
Interest on deposits 29,964 27,967 87,549 78,758
Interest on federal funds purchased & securities
sold under repurchase agreements 454 572 1,500 1,551
Other interest expense 1,448 1,321 4,300 3,890
Total interest expense 31,866 29,860 93,349 84,199
Net interest revenue 38,371 35,061 111,810 101,904
Provision for credit losses 2,500 2,057 7,004 4,595
Net interest revenue, after provision for
credit losses 35,871 33,004 104,806 97,309
OTHER REVENUE:
Mortgage lending 1,415 903 4,878 2,747
Trust income 697 654 1,944 1,604
Service charges 4,666 4,102 13,154 11,851
Security gains (losses), net 33 (666) 311 (698)
Life insurance income 1,237 731 3,227 2,098
Other 1,718 1,417 5,166 5,198
Total other revenue 9,766 7,141 28,680 22,800
OTHER EXPENSES:
Salaries and employee benefits 13,569 13,304 42,256 40,967
Net occupancy expense 2,152 2,204 6,275 6,451
Equipment expense 2,499 2,118 7,216 5,820
Deposit insurance 2,094 12 2,453 2,642
Other 9,729 8,767 28,288 25,932
Total other expenses 30,043 26,405 86,488 81,812
Income before income taxes 15,594 13,740 46,998 38,297
Income tax expense 5,030 4,196 15,785 11,979
10,564 9,544 31,213 26,318
Net income per share $0.50 $0.45 $1.47 $1.25
Dividends declared per share $0.17 $0.15 $0.51 $0.45
<FN>
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<PAGE> 5
BANCORPSOUTH, INC.
Consolidated Condensed Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
(In Thousands)
Nine Months Ended
September 30
1996 1995
<S> <C> <C>
Net cash provided by operating activities $47,666 $24,496
Investing activities:
Proceeds from calls and maturities of
held-to-maturity securities 82,771 102,432
Proceeds from calls and maturities of
available-for-sale securities 150,385 233,497
Proceeds from sales of
available-for-sale securities 3,942 9,262
Purchases of held-to-maturity securities (147,481) (89,165)
Purchases of available-for-sale securities (135,590) (198,030)
Net increase in short-term investments (26,650) (9,116)
Net increase in loans (195,849) (209,388)
Purchases of premises and equipment (16,181) (14,438)
Other (5,205) (11,556)
Net cash used by investing activities (289,858) (186,502)
Financing activities:
Net increase in deposits 219,670 210,666
Net increase (decrease) in short-term
borrowings and other liabilities 6,761 (22,576)
Net increase in long-term debt 7,547 2,039
Payment of cash dividends (10,628) (8,062)
Issuance of common stock - 119
Exercise of stock options 123 610
Other (60) (19)
Net cash provided by financing activities 223,413 182,777
Increase in cash and cash equivalents (18,779) 20,771
Cash and cash equivalents at beginning of
period 165,815 144,693
Cash and cash equivalents at end of period $147,036 $165,464
<FN>
See accompanying notes to consolidated condensed financial statements
</TABLE>
<PAGE> 6
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, 1995, 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 and nine-month periods ended
September 30, 1996 are not necessarily indicative of the results to be expected
for the full year.
2. The computation of net income per share is based upon weighted average
number of shares outstanding (21,214,037 and 21,045,860 for the three months
ended September 30, 1996 and 1995, respectively; 21,228,361 and 20,971,541 for
the nine months ended September 30, 1996 and 1995, respectively).
<PAGE> 7
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"). This discussion should be read in
conjunction with the unaudited consolidated condensed financial statements
for the periods ended September 30, 1996 and 1995.
Certain of the information included in this discussion contains
forwardlooking statements and information that are based on management's belief
as well as certain assumptions made by, and information currently available to
management. When used in this discussion, the words "anticipate," "project,"
"expect," and similar expressions are intended to identify forward-looking
statements. Although management of the Company believes that the expectations
reflected in such forward-looking statements are reasonable, it can give no
assurance that such expectations and projections will prove to have been
correct. Such statements are subject to certain risks, uncertainties, and
assumptions. Should one or more of these risks materialize, or should such
underlying assumptions prove to be incorrect, actual results may vary
materially from those anticipated, estimated, projected or expected.
RESULTS OF OPERATIONS
Net Income
The Company's net income for the third quarter of 1996 was $10.56 million,
compared to $9.54 million from the third quarter of 1995. For the first nine
months of 1996, net income was $31.21 million, an increase of 18.6% from
$26.32 million for the same period of 1995. Net income per common share was
$0.50 and $0.45 for the third quarters of 1996 and 1995, respectively. For
the first nine months of 1996, primary earnings per common share were $1.47,
an increase of 17.6% from $1.25 for the first nine months of 1995. The
annualized returns on average assets for the third quarters of 1996 and 1995
were 1.21% and 1.19%, respectively. For the nine months ended September 30,
the annualized returns on average assets were 1.22% and 1.13% for 1996 and
1995, 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.
<PAGE> 8
Net interest revenue was $39.25 million for the three months ended
September 30, 1996, compared to $35.95 million for the same period in 1995.
For the nine months ended September 30, 1996 and 1995, net interest revenue
was $114.63 million and $104.86 million, respectively. Earning assets
averaged $3.28 billion in the third quarter and $3.18 billion for the first
nine months of 1996, compared with $2.97 billion and $2.89 billion in the
respective periods in 1995. Average interest-bearing liabilities were $2.76
billion in the third quarter and $2.70 billion for the first nine months of
1996, compared with $2.54 billion and $2.45 billion in the respective periods
in 1995.
Net interest revenue, expressed as a percentage of average earning assets,
was 4.75% for the third quarter of 1996 as compared to 4.85% for the same
period of 1995 and 4.83% for the first nine months of 1996 as compared to
4.85% for the same period of 1995.
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 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 $2.50 million for the third
quarter of 1996 compared to $2.06 million for the same period of 1995. For the
nine month periods ended September 30, 1996 and 1995, the provision for credit
losses totaled $7.00 million and $4.60 million, respectively. Provision for
credit losses increased in 1996 to provide for the continuing growth in loans
and to provide for a slight impairment in the quality of the Company's consumer
loan portfolio. The allowance for credit losses as a percent of loans
outstanding was 1.51% at the end of the third quarter 1996 and at December 31,
1995.
<PAGE> 9
Other Revenue
Other revenue for the quarter ended September 30, 1996, totaled $9.77
million compared to $7.14 million for the same period of 1995. For the nine
months ended September 30, 1996 and 1995, other revenue was $28.68 million and
$22.80 million, respectively, a 25.8% increase. The most significant change in
other revenue was in mortgage lending where income of $4.88 million was
recorded during the first nine months of 1996 versus $2.75 million in the
same period of 1995. Favorable interest rates during the first nine months
of 1996 contributed to significantly higher activity in the Company's
mortgage operation. Trust income and life insurance premiums both showed
significant increases. Service charges on deposit accounts for the first
nine months increased 11.0%. Net security gains were $311,000 for the first
nine months of 1996 compared to a net loss of $698,000 for the same period
in 1995.
Other Expenses
Other expenses totaled $30.04 million for the third quarter of 1996, a
13.8% increase over 1995's expense for the same period. For the nine months
ended September 30, 1996, other expenses totaled $86.49 million , a 5.72%
increase over 1995's other expenses for the same period. Deposit insurance
reflects a special assessment of $1.9 million imposed in the third quarter of
1996 on the Company's deposits in the Savings Association Insurance Fund
(SAIF). This non-recurring assessment reduced year-to-date and third quarter
1996 earnings per share by $0.05. 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.
Income Tax
Income tax expense was $5.03 million and $4.20 million for the third
quarters of 1996 and 1995, respectively. For the nine month period ended
September 30, 1996, income tax expense was $15.79 million compared to $11.98
million for the same period in 1995. The increase in the Company's effective
tax rate (33.6% for the first nine months of 1996 versus 31.3% for comparable
period of 1995) reflects the decrease in the relative level of the Company's
investment in assets with respect to which earnings are afforded favorable tax
treatment.
<PAGE> 10
FINANCIAL CONDITION
Loans
The loan portfolios of the subsidiary banks is the largest single
component of the Company's earning assets. These portfolios, net of unearned
discount, totaled $2.48 billion at September 30, 1996, which represents an
8.2% increase from December 31, 1995's total of $2.30 billion.
Non-performing loans were 0.51% of loans, net of unearned discounts,
outstanding at September 30, 1996, compared to 0.41% at the end of 1995.
Investment Securities and Other Earning Assets
The investment securities portfolio is 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 September 30, 1996
were $504.4 million, compared to $439.3 million at the end of 1995. Available-
for-sale securities were $219.4 million at September 30, 1996, compared to
$239.8 million at December 31, 1995.
Deposits
Total deposits at the end of the third quarter were $3.09 billion as
compared to $2.86 billion at December 31, 1995, representing a 7.7% 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.
On October 23, 1996, the Company announced that it will call for
redemption all of its outstanding 9% Subordinated Capital Debentures due
1999 (the Debentures). The Debentures will be redeemed at par on January 15,
1997. At September 30, 1996, $24,508,000 of the Debentures were
outstanding. Cash dividends from the Company's subsidiary banks will be used
to fund this redemption.
<PAGE> 11
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 September 30, 1996,
the Company's Tier 1 ratio and total capital to risk-adjusted total assets
were 11.98% and 13.81%, respectively, both of which exceed the FRB's minimum
ratio of 4.0% and 8.0%, respectively (of which at least 50% must be Tier 1
capital). The Company's Tier 1 leverage ratio at September 30, 1996 was
8.55%, which is in excess of the FRB minimum level for Tier 1 capital to
total assets 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.
<PAGE> 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(b) No reports on Form 8-K were filed during the quarter ended
September 30, 1996.
<PAGE> 13
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: November 12, 1996 L. Nash Allen, Jr.
_____________________________________
L. Nash Allen, Jr.
Treasurer and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> SEP-30-1996
<CASH> 135,266
<INT-BEARING-DEPOSITS> 11,770
<FED-FUNDS-SOLD> 62,100
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 219,356
<INVESTMENTS-CARRYING> 219,356
<INVESTMENTS-MARKET> 219,356
<LOANS> 2,484,445
<ALLOWANCE> 37,628
<TOTAL-ASSETS> 3,560,014
<DEPOSITS> 3,083,282
<SHORT-TERM> 37,612
<LIABILITIES-OTHER> 50,557
<LONG-TERM> 81,171
<COMMON> 52,887
0
0
<OTHER-SE> 254,505
<TOTAL-LIABILITIES-AND-EQUITY> 3,560,014
<INTEREST-LOAN> 167,748
<INTEREST-INVEST> 22,647
<INTEREST-OTHER> 14,764
<INTEREST-TOTAL> 205,159
<INTEREST-DEPOSIT> 87,549
<INTEREST-EXPENSE> 93,349
<INTEREST-INCOME-NET> 111,810
<LOAN-LOSSES> 7,004
<SECURITIES-GAINS> 311
<EXPENSE-OTHER> 86,488
<INCOME-PRETAX> 46,998
<INCOME-PRE-EXTRAORDINARY> 31,213
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31,213
<EPS-PRIMARY> 1.47
<EPS-DILUTED> 1.47
<YIELD-ACTUAL> 4.83
<LOANS-NON> 3,672
<LOANS-PAST> 6,714
<LOANS-TROUBLED> 76
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 34,636
<CHARGE-OFFS> 5,514
<RECOVERIES> 1,502
<ALLOWANCE-CLOSE> 37,628
<ALLOWANCE-DOMESTIC> 37,628
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
