<PAGE> 1
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, 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 June 30, 1996, the registrant had outstanding 21,033,313 shares
of common stock, par value $2.50 per share.
<PAGE> 2
PART I
FINANCIAL INFORMATION
BANCORPSOUTH, INC.
Consolidated Condensed Balance Sheets
<TABLE>
<CAPTION>
(Unaudited)
(In Thousands)
30-Jun 31-Dec
1996 1995
<S> <C> <C>
ASSETS
Cash and due from banks $167,582 $149,923
Interest bearing deposits with other banks 3,345 15,892
Held-to-maturity securities, at amortized cost 492,303 439,303
Federal funds sold 6,200 35,450
Loans 2,495,113 2,371,684
Less: Unearned discount 80,525 76,518
Allowance for credit losses 36,637 34,636
Net loans 2,377,951 2,260,530
Available-for-sale securities 245,381 239,755
Mortgages held for sale 26,092 25,168
Premises and equipment, net 89,293 81,240
Other assets 62,002 54,767
TOTAL ASSETS $3,470,149 $3,302,028
LIABILITIES
Deposits:
Demand: Non-interest bearing $403,530 $393,417
Interest bearing 711,251 665,313
Savings 376,577 333,436
Time 1,506,866 1,471,446
Total deposits 2,998,224 2,863,612
Federal funds purchased and securities
sold under repurchase agreements 45,650 35,848
Long-term debt 81,688 73,624
Other liabilities 44,216 40,849
TOTAL LIABILITIES 3,169,778 3,013,933
SHAREHOLDERS' EQUITY
Common stock 52,860 52,764
Capital surplus 84,496 84,391
Unrealized gain (loss) on
available-for-sale securities 1,026 2,480
Retained earnings 163,083 149,494
Less cost of shares held in treasury (1,094) (1,034)
TOTAL SHAREHOLDERS' EQUITY 300,371 288,095
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $3,470,149 $3,302,028
</TABLE>
<PAGE> 3
BANCORPSOUTH, INC.
Consolidated Condensed Statements of Income
<TABLE>
<CAPTION>
(Unaudited)
(In thousands except for per share amounts)
Three months ended Six months ended
June 30 June 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
INTEREST REVENUE:
Interest & fees on loans $55,477 $50,103 $109,986 $96,890
Deposits with other banks 105 204 336 350
Interest on federal funds sold 644 630 1,251 1,025
Interest on held-to-maturity securities:
U. S. Treasury 1,006 972 1,611 1,949
U. S. Government agencies & corporations 4,856 6,181 9,882 12,486
Obligations of states & political subdivisions 1,682 2,161 3,445 4,038
Other - 79 2 239
Interest and dividends on available-for-sale securities 3,725 1,866 7,364 3,725
Interest on mortgages held for sale 613 318 1,045 480
Total interest revenue 68,108 62,514 134,922 121,182
INTEREST EXPENSE:
Interest on deposits 28,878 26,925 57,585 50,791
Interest on federal funds purchased & securities
sold under repurchase agreements 591 513 1,046 979
Other interest expense 1,456 1,293 2,852 2,569
Total interest expense 30,925 28,731 61,483 54,339
Net interest revenue 37,183 33,783 73,439 66,843
Provision for credit losses 3,060 1,240 4,504 2,538
Net interest revenue, after provision for
credit losses 34,123 32,543 68,935 64,305
OTHER REVENUE:
Mortgage lending 2,173 938 3,463 1,844
Trust income 660 485 1,247 950
Service charges 4,409 4,045 8,488 7,749
Security gains (losses), net 57 (17) 278 (32)
Life insurance income 1,057 621 1,990 1,367
Other 1,702 1,902 3,448 3,781
Total other revenue 10,058 7,974 18,914 15,659
OTHER EXPENSES:
Salaries and employee benefits 12,988 13,619 28,687 27,663
Net occupancy expense 2,090 2,198 4,123 4,247
Equipment expense 2,400 1,890 4,717 3,702
Deposit insurance premiums 148 1,314 359 2,630
Other 9,153 8,563 18,559 17,165
Total other expenses 26,779 27,584 56,445 55,407
Income before income taxes 17,402 12,933 31,404 24,557
Income tax expense 6,202 4,064 10,755 7,783
Net income $11,200 $8,869 $20,649 $16,774
Net income per share $0.53 $0.42 $0.97 $0.80
Dividends declared per common share $0.17 $0.15 $0.34 $0.30
<FN>
See accompanying notes to consolidated condensed financial
statements.
</TABLE>
<PAGE> 4
BANCORPSOUTH, INC.
Consolidated Condensed Statements of Cash Flows
<TABLE>
<CAPTION>
(Unaudited)
(In Thousands)
Six Months Ended
June 30
1996 1995
<S> <C> <C>
Net cash provided by operating activities $27,281 $14,153
Investing activities:
Proceeds from calls and maturities of
held-to-maturity securities 72,558 72,565
Proceeds from calls and maturities of
available-for-sale securities 105,356 160,784
Proceeds from sales of
available-for-sale securities 3,940 1,689
Purchases of held-to-maturity securities (125,019) (29,436)
Purchases of available-for-sale securities (116,590) (128,133)
Net (increase) decrease in short-term investments 29,250 (65,075)
Net increase in loans (123,540) (133,329)
Purchases of premises and equipment (13,585) (10,627)
Other (3,936) (7,604)
Net cash used by investing activities (171,566) (139,166)
Financing activities:
Net increase in deposits 134,612 166,489
Net increase (decrease) in short-term
borrowings and other liabilities 13,422 (27,961)
Increase (decrease) in long-term debt 8,064 1,475
Payment of cash dividends (6,737) (5,194)
Issuance of common stock - 119
Exercise of stock options 96 402
Other (60) (19)
Net cash provided by financing activities 149,397 135,311
Increase in cash and cash equivalents 5,112 10,298
Cash and cash equivalents at beginning of
period 165,815 144,693
Cash and cash equivalents at end of period $170,927 $154,991
<FN>
See accompanying notes to consolidated condensed financial statements
</TABLE>
<PAGE> 5
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 condensed financial statements have been included and
all such adjustments were of a normal recurring nature. The results
of operations for the threemonth and six-month periods ended June
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 (21,216,528 and
20,815,075 for the three months ended June 30, 1996, and 1995,
respectively; 21,015,540 and 20,807,097 for the six months ended
June 30, 1996, and 1995, 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"). This discussion should be read in
conjunction with the unaudited consolidated condensed financial
statements for the periods ended June 30, 1996 and 1995.
RESULTS OF OPERATIONS
Net Income
The Company's net income for the second quarter of 1996
was $11.20 million compared to $8.87 million in the second quarter
of 1995. For the first six months of 1996, net income was $20.65
million, an increase of 23.1% from $16.77 million for the same
period of 1995. Net income per share was $0.53 for the second
quarter of 1996 compared to $0.42 in 1995. For the first six months
of 1996, earnings per share were $0.97, an increase of 21.3% from
$0.80 for the first six months of 1995. The annualized returns on
average assets for the second quarter of 1996 and 1995 were 1.31%
and 1.14%, respectively. For the six months ended June 30, the
annualized returns on average assets were 1.22% and 1.09% 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.
Net interest revenue was $38.14 million for the three
months ended June 30, 1996, compared to $34.82 million for the same
period in 1995. For the six months ended June 30, 1996 and 1995,
net interest revenue was $75.38 million and $68.93 million,
respectively. Earning assets averaged $3.19 billion in the second
quarter and $3.13 billion for the first six months of 1996, compared
with $2.90 billion and $2.85 billion in the respective periods in
1995. Average interest-bearing liabilities were $2.70 billion in
the second quarter and $2.67 billion for the first six months of
1996, compared with $2.48 billion and $2.41 billion in the
respective periods in 1995.
Net interest revenue, expressed as a percentage of average
earning assets, was 4.80% for the second quarter of 1996 as compared
to 4.82% for the same period of 1995 and 4.84% for the first six
months of 1996 as compared to 4.88% 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 $3.06 million for
the second quarter of 1996 compared to $1.24 million for the same
period of 1995. For the six month periods ended June 30, 1996 and
1995, the provision for credit losses totaled $4.50 million and
$2.54 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 1.52% at the end of the second quarter 1996,
compared to 1.51% at December 31, 1995.
Other Revenue
Other revenue for the quarter ended June 30, 1996, totaled
$10.06 million compared to $7.97 million for the same period of
1995, a 26.1% increase. For the six months ended June 30, 1996 and
1995, other revenue was $18.91 million and $15.66 million,
respectively, a 20.8% increase. The most significant change in other
revenue was in mortgage lending where income of $3.46 million was
recorded during the first six months of 1996 compared to $1.84
million in the same period of 1995. Favorable interest rates during
the first six 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 six months increased 9.5%.
Net security gains were $278,000 for the first six months of 1996
compared to a net loss of $32,000 for the same period in 1995.
Other Expenses
Other expenses totaled $26.78 million for the second
quarter of 1996, a 2.9% decrease from the same period of 1995. For
the six months ended June 30, 1996, other expenses totaled $56.45
million , a 1.9% increase over 1995's other expenses. Salaries and
employee benefits for the first six months of 1996 show a modest
increase over the same period of 1995 while the second quarter of
1996 showed a decrease in salaries and employee benefits when
compared to 1995. The second quarter decrease is due to the
recapture of expense related to stock appreciation rights recorded
in the first quarter of 1996 and to staff reductions related to the
Company's acquisition of Wes-Tenn Bancorp, Inc. This merger took
place during the fourth quarter of 1995 but full integration of all
operations did not occur until the second quarter of 1996. Deposit
insurance was $359,000 for the six months ended 1996 compared to the
same period last year of $2,630,000. The decrease is the result of
lower assessment rated for 1996 for the Company's deposits in the
Bank Insurance Fund (BIF). The Company's deposits in the Savings
Association Insurance Fund (SAIF) will continue to experience
assessments for 1996 at the same rate as 1995.
Also included in other expenses for the first six months of
1995 are amounts totaling $577,000 related to merger and acquisition
activity compared to $38,000 in the same period for 1996. The other
components of other expenses reflect normal increases and general
inflation in the cost of services and supplies purchased by the
Company.
Income Tax
Income tax expense was $6.20 million and $4.06 million for
the second quarters of 1996 and 1995, respectively. For the six
month period ended June 30, 1996, income tax expense was $10.76
million compared to $7.78 million for the same period in 1995. The
increase in the Company's effective tax rate (34.2% for the first
six months of 1996 versus 31.7% 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.
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
$2.41 billion at June 30, 1996, which represents a 5.2% increase
from the December 31, 1995 total of $2.30 billion. Non-performing
loans were 0.40% of all loans outstanding at June 30, 1996, compared
to 0.41% at the end of 1995.
Investment 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-tomaturity
securities at June 30, 1996, were $492.3 million compared with
$439.3 million at the end of 1995, a 12.2% decrease. Available for
sale securities were $245.4 million at June 30, 1996, compared to
$239.8 million at December 31, 1995, a 2.3% increase. 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 $3.00
billion as compared to $2.86 billion at December 31, 1995,
representing a 4.7% 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.
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, 1996, the
Company's Tier 1 capital and total capital, as a percentage of total
risk-adjusted assets, was 12.07% and 13.91%, 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
8.44% at June 30, 1996, 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, 1996. At this meeting, the following matters
were voted upon by the Company's shareholders:
(a) Election of Class II Directors
A. Douglas Jumper, T. O. Lashlee, W. G. Holliman and Alan W. Perry
were elected to serve as Class II directors of the Company until the
annual meeting of shareholders in 1999 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
A. Douglas Jumper 17,007,228 103,965 0
T. O. Lashlee 16,999,191 112,002 0
W. G. Holliman, Jr. 17,007,050 104,143 0
Alan W. Perry 17,000,476 110,717 0
(b) Election of Class I Director
Fletcher H. Goode, M.D. was elected to serve as a Class I director
of the Company until the annual meeting of shareholders in 1997 or
until his respective successor is elected and qualified. The vote
was as follows:
Votes Cast Votes Cast Abstentions/
in Favor Against or Withheld Non Votes
Fletcher H. Goode, M.D. 17,003,648 107,545 0
The following directors continue in office following
the meeting:
NAME Term Expires
S. H. Davis 1997
Hassell H. Franklin 1997
Travis E. Staub 1997
Lowery A. Woodall 1997
Aubrey Burns Patterson 1998
Frank A. Riley 1998
Dr. Andrew R. Townes 1998
J. Louis Griffin, Jr. 1998
(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, 1996 by the following vote:
Votes Cast Votes Cast Abstentions/
in Favor Against or Withheld Non Votes
16,998,618 49,953 62,622
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(b) No reports on Form 8-K were filed during the quarter ended
June 30, 1996.
<PAGE>
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 9, 1996 L. Nash Allen, Jr.
----------------------------------
L. Nash Allen, Jr. Treasurer and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> JUN-30-1996
<PERIOD-TYPE> 6-MOS
<CASH> 167,582
<INT-BEARING-DEPOSITS> 3,345
<FED-FUNDS-SOLD> 6,200
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 245,381
<INVESTMENTS-CARRYING> 245,381
<INVESTMENTS-MARKET> 245,381
<LOANS> 2,414,588
<ALLOWANCE> 36,637
<TOTAL-ASSETS> 3,470,149
<DEPOSITS> 2,998,224
<SHORT-TERM> 45,650
<LIABILITIES-OTHER> 44,216
<LONG-TERM> 81,688
<COMMON> 52,860
0
0
<OTHER-SE> 247,511
<TOTAL-LIABILITIES-AND-EQUITY> 3,470,149
<INTEREST-LOAN> 109,986
<INTEREST-INVEST> 14,940
<INTEREST-OTHER> 9,996
<INTEREST-TOTAL> 134,922
<INTEREST-DEPOSIT> 57,585
<INTEREST-EXPENSE> 61,483
<INTEREST-INCOME-NET> 73,439
<LOAN-LOSSES> 4,504
<SECURITIES-GAINS> 278
<EXPENSE-OTHER> 56,445
<INCOME-PRETAX> 31,404
<INCOME-PRE-EXTRAORDINARY> 10,755
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,775
<EPS-PRIMARY> 0.97
<EPS-DILUTED> 0.97
<YIELD-ACTUAL> 4.84
<LOANS-NON> 1,923
<LOANS-PAST> 5,234
<LOANS-TROUBLED> 78
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 34,636
<CHARGE-OFFS> 3,525
<RECOVERIES> 1,022
<ALLOWANCE-CLOSE> 36,637
<ALLOWANCE-DOMESTIC> 36,637
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
