<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (Fee Required)
For the fiscal year ended December 31, 1995 or
-----------------
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (No Fee Required)
For the transition period from to
---------- -----------
Commission file number 0-10826
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BancorpSouth, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Mississippi 64-0659571
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One Mississippi Plaza
Tupelo, Mississippi 38801
- ---------------------------------------- ------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (601) 680-2000
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
- ---------------------------------------- ------------------------------------
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $2.50 PAR VALUE
- --------------------------------------------------------------------------------
(Title of Class)
(Cover Page Continues on Next Page)
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(Continued from Cover Page)
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 periods 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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendments to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates
of the registrant as of January 31, 1996, was approximately $485,419,000 based
on the closing sale price as reported on the Nasdaq Stock Market.
On March 15, 1996, the registrant had outstanding 21,008,526 shares of
Common Stock, par value $2.50 per share.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the
fiscal year ended December 31, 1995, are incorporated by reference into Part II
of this Report.
Portions of the definitive Proxy Statement used in connection with
Registrant's Annual Meeting of Shareholders to be held April 23, 1996, are
incorporated by reference into Part III of this Report.
2
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<TABLE>
<S> <C> <C>
BANCORPSOUTH, INC.
FORM 10-K
For the Fiscal Year Ended December 31, 1995
CONTENTS
PART I
Item 1. Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Item 2. Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Item 4. Submission of Matters to a Vote of Security
Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
PART II
Item 5. Market for the Registrant's Common Stock
and Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operation. . . . . . . . . . . . . . . . . . . . 22
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . 22
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . 22
PART III
Item 10. Directors and Executive Officers of the
Registrant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Item 12. Security Ownership of Certain Beneficial
Owners and Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . 25
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
</TABLE>
3
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PART I
Item 1. - Business
General
The Company is a bank and thrift holding company with commercial
banking and savings and loan operations in Mississippi and commercial
banking operations in Tennessee. Its principal subsidiaries are Bank
of Mississippi ("BOM"), Volunteer Bank ("VOL") and Laurel Federal
Savings and Loan Association ("LFSL"). The Company's principal
office is located at One Mississippi Plaza, Tupelo, Mississippi 38801
and its telephone number is (601) 680-2000.
Description of Business
BOM has its principal office in Tupelo, Lee County, Mississippi,
and conducts a general commercial banking and trust business through
90 offices in 43 municipalities or communities in 26 counties
throughout Mississippi. BOM has grown through the acquisition of
other banks, the purchase of assets from federal regulators and
through the opening of new branches and offices. In addition, BOM
operates consumer finance and credit life insurance subsidiaries. At
December 31, 1995, BOM was the fourth largest commercial bank in
Mississippi with total deposits of approximately $2.03 billion and
total assets of approximately $2.34 billion.
VOL has its principal office in Jackson, Madison County,
Tennessee, and conducts a general commercial banking and trust
business through 31 offices in 16 municipalities or communities in 12
counties in west Tennessee. VOL has grown through the acquisition of
other banks and through the opening of new branches and offices. In
addition, VOL operates consumer finance and credit life insurance
subsidiaries. At December 31, 1995, VOL was the thirteenth largest
commercial bank in Tennessee with total deposits of approximately
$671 million and total assets of approximately $788 million.
LFSL has its principal office in Laurel, Jones County,
Mississippi, and provides mortgage, consumer and commercial lending
and traditional thrift deposit services, including checking accounts
through 8 offices in 6 municipalities or communities in 5 counties in
southeast Mississippi. At December 31, 1995, LFSL had total deposits
of approximately $166 million and total assets of approximately $187
million.
The Company, through its subsidiaries, provides a range of financial
services to individuals and small-to-medium size businesses. Various types of
checking accounts, both interest bearing and non-interest bearing, are
available. Savings accounts and certificates of deposit with a range of
maturities and interest rates are available to meet the needs of customers.
Other services include safe deposit and night depository facilities. Limited
24-hour banking with automated teller machines is provided in most of its
principal markets. BOM is an issuing bank for MasterCard and overdraft
protection is available to approved MasterCard holders maintaining checking
accounts with the Company's subsidiary banks.
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<PAGE> 5
The Company offers a variety of services through the trust
departments of its subsidiary banks, including personal trust and
estate services, certain employee benefit accounts and plans,
including individual retirement accounts, and limited corporate trust
functions.
At December 31, 1995, the Company and its subsidiaries employed
approximately 1,880 persons. The Company and its subsidiaries are not
a party to any collective bargaining agreements, and employee
relations are deemed to be good.
Competition
Vigorous competition exists in all major areas where the Company
is engaged in business. The Company's subsidiary banks and savings
and loan association compete for available loans and depository
accounts not only with state and national commercial banks in their
respective areas but also with savings and loan associations,
insurance companies, credit unions, money market mutual funds,
automobile finance companies and financial services companies. None
of these competitors is dominant in the whole area served by the
Company's subsidiary banks.
The principal areas of competition in the banking industry
center on a financial institution's ability and willingness to
provide credit on a timely and competitively priced basis, to offer a
sufficient range of deposit and investment opportunities at a
competitive price and maturity, and to offer personal and other
services of sufficient quality and at competitive prices. The Company
and its subsidiaries believe they can compete effectively in all
these areas.
Regulation and Supervision
The following is a brief summary of the regulatory environment
in which the Registrant and the subsidiaries operate and is not
designed to be a complete discussion of all statutes and regulations
affecting such operations, including those statutes and regulation
specifically mentioned herein.
The Company is a bank and thrift holding company and is
registered as such with the Board of Governors of the Federal Reserve
System (the "FRB") and the Office of Thrift Supervision (the "OTS")
and is subject to regulation and supervision by the FRB and the OTS.
The Company is required to file with the FRB and the OTS annual reports
and such other information as they may require. The FRB and OTS may also
conduct examinations of the Company.
The Company is a legal entity which is separate and distinct
from its subsidiaries. There are various legal limitations on the
extent to which the subsidiary banks and savings and loan association
may extend credit, pay dividends or otherwise supply funds to the
Company or its affiliates. In particular, the subsidiary banks and
savings and loan association are subject to certain restrictions
imposed by federal law on any extensions of credit to the Company or,
with certain exceptions, other affiliates. Dividends to shareholders
can be paid only from dividends paid to the Company by its
subsidiaries which are subject to approval by the applicable
regulatory authorities.
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BOM and VOL are incorporated under the banking laws of the
States of Mississippi and Tennessee, respectively, and accordingly
are subject to the applicable provisions of state banking laws rather
than the National Bank Act. BOM is subject to the supervision of the
Mississippi Department of Banking and Consumer Finance and to regular
examinations by that department. VOL is subject to the supervision
of the Tennessee Department of Financial Institutions and to regular
examinations by that Department. The deposits in BOM and VOL are
insured by the Federal Deposit Insurance Corporation (the "FDIC")
and, therefore, each bank is subject to the provisions of the Federal
Deposit Insurance Act and to examination by the FDIC. Neither bank
is a member of the Federal Reserve System.
LFSL is a stock federally chartered savings association whose
deposits are insured by the FDIC. As a federally-chartered savings
association, LFSL is subject to regulation and examination by the
OTS. LFSL must file reports with the OTS concerning its activities and
financial condition, in addition to obtaining regulatory approvals
prior to entering into certain transactions such as mergers with or
acquistions of other savings associations. The regulatory structure
gives the OTS extensive discretion in connection with its supervisory
and enforcement activities and examination policies with respect to
the classification of assets and the establishment of adequate credit
loss reserves for regulatory purposes.
The Financial Institutions Reform, Recovery and Enforcement Act
of 1989 ("FIRREA") permits among other things the acquisition by bank
holding companies of savings associations, irrespective of their
financial condition, and increased the deposit insurance premiums for
banks and savings associations. FIRREA also provides that commonly
controlled federally insured financial institutions must reimburse
the FDIC for losses incurred by the FDIC in connection with the
default of another commonly controlled financial institution or in
connection with the provision of FDIC assistance to such a commonly
controlled financial institution in danger of default. Reimbursement
liability under FIRREA is superior to any obligations to shareholders of
such federally insured institutions (including a bank holding company
such as the Company if it were to acquire another federally insured
financial institution), arising as a result of their status as a shareholder
of a reimbursing financial institution.
The Company and its subsidiary banks and savings and loan
association are subject to the provisions of the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA"). This
statute provides for increased funding for the FDIC's deposit
insurance fund and expanded the regulatory powers of federal banking
agencies to permit prompt corrective actions to resolve problems of
insured depository institutions through the regulation of banks and
their affiliates, including bank holding companies. The provisions
are designed to minimize the potential loss to depositors and to FDIC
insurance funds if financial institutions default on their
obligations to depositors or become in danger of default. Among
other things, FDICIA provides a framework for a system of supervisory
actions based primarily on the capital levels of financial
institutions. FDICIA also provides for a risk-based deposit
insurance premium structure. The FDIC charges an annual assessment
for the insurance of deposits based on the risk a particular
institutions poses to its deposit insurance fund. While most of the
Company's deposits are in the Bank Insurance Fund (BIF), the deposits
of LFSL and certain other of the Company's deposits which were
acquired from thrifts over the years remain in the Savings
Association Insurance Fund (SAIF). Deposit insurance rates for 1996
for the Company's deposits in BIF have been assessed at zero
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while deposits insurance rates for 1996 for the Company's deposits
in SAIF will continue at the rate of 23 cents per $100 of insured
deposits. Also, Congress is currently considering a special, one-time
assessment on SAIF insured deposits and if enacted, this assessment
could result in a one-time pre-tax charge of up to $2.7 million.
The Company is required to comply with the risk-based capital
guidelines which the FRB adopted in January 1989, and to other tests
relating to capital adequacy which the FRB adopts from time to time.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Capital Resources," on pages 19 and 20 of the
Company's 1995 Annual Report to Shareholders incorporated herein by
reference.
In September 1994, President Clinton signed into law the
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
("IBBEA"). Beginning September 29, 1995, IBBEA permits adequately
capitalized and managed bank holding companies to acquire control of
banks in states other than their home states, subject to federal
regulatory approval, without regard to whether such a transaction is
prohibited by the laws of any state. IBBEA permits states to
continue to require that an acquired bank have been in existence for
a certain minimum time period which may not exceed five years. A
bank holding company may not, following an interstate acquisition ,
control more than 10% of the nation's total amount of bank deposits
or 30% of bank deposits in the relevant state (unless the state
enacts legislation to raise the 30% limit). States retain the
ability to adopt legislation to effectively lower the 30% limit.
Beginning June 1, 1997, federal banking regulators may approve merger
transactions involving banks located in different states, without
regard to laws of any state prohibiting such transactions; except
that, mergers may not be approved with respect to banks located in
states that, prior to June 1, 1997, enacted legislation prohibiting
mergers by banks located in such state with out-of-state
institutions. Federal banking regulators may permit an out-of-state
bank to open new branches in another state if such state has enacted
legislation permitting interstate branching. Affiliated institutions
are authorized to accept deposits for existing accounts, renew time
deposits and close and service loans for affiliated institutions
without being deemed an impermissible branch of the affiliate.
7
<PAGE> 8
Selected Statistical Information
Set forth below is certain selected statistical information
relating to the Company's business.
Distribution of Assets, Liabilities and Shareholders' Equity;
Interest Rates and Interest Differentials
Net Interest Revenue, the difference between Interest Revenue
and Interest Expense, is the most significant component of the Company's
earnings. For internal analytical purposes, management adjusts Net
Interest Revenue to a "taxable equivalent" basis using an effective
tax rate of 35% on tax exempt items (primarily interest on municipal
securities).
Another significant statistic in the analysis of Net Interest
Revenue is the effective interest differential, also called the net
yield on earning assets. The net yield on earning assets is net
interest divided by total interest-earning assets. Recognizing the
importance of interest differential to total earnings, management
places great emphasis on managing interest rate spreads. Although
interest differential is affected by national, regional and local
economic conditions, including the level of credit demand and
interest rates, there are significant opportunities to influence
interest differential through appropriate loan and investment
policies which are designed to maximize interest differential while
maintaining sufficient liquidity and availability of "incremental
funds" for purposes of meeting existing commitments and for
investment in lending and other investment opportunities that may
arise.
The following table sets forth the average balances of assets
and liabilities and the average rates earned and paid for the three
years ended December 31, 1995. The table shows the various
components of earning assets and the sources used to fund these
assets which are included in the effective interest differential.
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Distribution of Assets, Liabilities and Shareholders' Equity;
Interest Rates and Interest Differential
<TABLE>
<CAPTION>
1995 1994 1993
------------------------------- ------------------------- -----------------------------
(Taxable equivalent basis) Average Yield/ Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate Balance Interest Rate
------- -------- ------- ------- -------- ------ ------- -------- ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest bearing deposits in
other banks $15,974 $ 857 5.36% $ 11,112 $ 660 5.94% $ 14,799 $ 833 5.63%
Held-to-maturity securities:
U.S. treasury and agencies 398,194 28,152 7.07% 315,429 18,642 5.91% 368,762 22,505 6.10%
State and political
subdivisions (1) 118,493 10,517 8.88% 107,774 10,325 9.58% 132,328 11,862 8.96%
Other securities 4,228 168 3.97% 4,556 270 5.93% 8,906 596 6.69%
Available-for-sale securities (2) 183,396 8,902 4.85% 266,370 13,974 5.25% 141,496 6,852 4.84%
Federal funds sold 39,451 2,205 5.59% 43,437 1,756 4.04% 48,780 1,487 3.05%
Loans (net of unearned
discount) (3) (4) (6) 2,146,967 204,397 9.52% 1,881,922 163,902 8.71% 1,675,048 150,707 9.00%
Mortgages held for sale 20,805 1,433 6.89% 33,620 2,400 7.14% 54,833 3,382 6.17%
---------- -------- ---------- -------- ---------- --------
Total interest earning
assets and revenue 2,927,508 256,631 8.77% 2,664,220 211,929 7.95% 2,444,952 198,224 8.11%
Other assets 256,363 249,064 240,138
Less: alowance for credit losses (32,574) (28,745) (25,305)
---------- ---------- ----------
Total $3,151,297 $2,884,539 $2,659,785
========== ========== ==========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits:
Demand - interest bearing $654,151 $ 17,733 2.71% $ 618,929 $ 16,320 2.64% $563,372 $ 14,553 2.58%
Savings 300,278 11,916 3.97% 292,908 9,515 3.25% 250,203 7,724 3.09%
Time 1,416,901 77,516 5.47% 1,237,205 53,435 4.32% 1,201,022 52,474 4.37%
Federal funds purchased and
securities under
repurchase agreements 40,845 2,084 5.10% 36,685 1,338 3.65% 35,166 982 2.79%
Other short-term borrowings (5) 4,706 299 6.35% 23,584 1,346 5.71% 2,836 88 3.10%
Long term debt 68,452 4,909 7.17% 38,234 3,075 8.04% 35,143 2,894 8.23%
---------- -------- ---------- -------- ---------- --------
Total interest bearing
liabilities and expense 2,485,333 114,457 4.61% 2,247,546 85,029 3.78% 2,087,742 78,715 3.77%
Demand deposits -
non-interest bearing 361,120 364,451 327,540
Other liabilities 36,449 31,613 25,999
---------- ---------- ----------
Total liabilities 2,882,902 2,643,610 2,441,281
Shareholders' equity 268,395 240,929 218,504
---------- ---------- ----------
Total $3,151,297 $2,884,539 $2,659,785
========== ========== ==========
Net interest revenue $142,174 $126,900 $119,509
======== ======== ========
Net yield on interest earning
assets 4.86% 4.76% 4.89%
==== ===== =====
</TABLE>
1. Includes taxable equivalent adjustments of $1,411,000, $2,651,000 and
$3,112,000 in 1995, 1994 and 1993, respectively, using an effective tax
rate of 35%.
2. Includes taxable equivalent adjustment of $581,000, $747,000 and $591,000 in
1995, 1994 and 1993 using an effective ax rate of 35%.
3. Includes fees on loans of $4,249,000, $3,348,000 and $3,207,000 in 1994,
1993 and 1992, respectively.
4. Includes taxable equivalent adjustment of $597,000, $175,000 and $756,000 in
1995, 1994 and 1993, respectively, using an effective tax rate of 35%.
5. Interest expense includes interest paid on liabilities not included in
averages.
6. Non-accrual loans are immaterial for each of the years presented.
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Analysis of Changes in Effective Interest Differential
Net interest revenue may also be analyzed by segregating the rate and volume
components of interest revenue and interest expense. The table which follows
presents an analysis of rate and volume change in net interest from 1994 to
1995 and 1993 to 1994. Changes which are not solely due to volume or rate are
allocated to volume.
<TABLE>
<CAPTION>
1995 OVER 1994 - INCREASE (DECREASE) 1994 OVER 1993 - INCREASE (DECREASE)
------------------------------------ -----------------------------------
(Taxable equivalent basis) Volume Rate Total Volume Rate Total
---------- ------- -------- --------- -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
INTEREST REVENUE
Due from banks - interest bearing $ 261 ($64) $ 197 ($219) $ 46 ($173)
Held-to-maturity securities:
U.S. Government agencies 5,851 3,659 9,510 (3,152) (711) (3,863)
State and political subdivisions 951 (759) 192 (2,352) 815 (1,537)
Other securities (13) (89) (102) (258) (68) (326)
Available-for-sale securities (4,028) (1,044) (5,072) 6,551 571 7,122
Federal funds sold (223) 672 449 (216) 485 269
Loans (net of unearned discount) 25,233 15,262 40,495 18,017 (4,822) 13,195
Mortgages held for sale (884) (83) (967) (1,514) 532 (982)
------- ------- ------- ------- ------- -------
Total 27,148 17,554 44,702 16,857 (3,152) 13,705
------- ------- ------- ------- ------- -------
INTEREST EXPENSE
Demand deposits - interest bearing 955 458 1,413 1,465 302 1,767
Savings deposits 292 2,109 2,401 1,387 404 1,791
Time deposits 9,831 14,250 24,081 1,563 (602) 961
Federal funds purchased and
securities under
repurchase agreements 212 554 746 55 301 356
Other short-term borrowings (1,067) - (1,047) 1,184 74 1,258
Long-term debt 2,167 (333) 1,834 249 (68) 181
------- ------- ------- ------- ------- -------
Total 12,390 17,038 29,428 5,903 411 6,314
------- ------- ------- ------- ------- -------
Increase (Decrease) in Effective
Interest Differential $14,759 $ 516 $15,274 $10,954 ($3,563) $ 7,391
======= ======= ======= ======= ======= =======
</TABLE>
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Investment Portfolio
Held-to-Maturity Securities
The following table shows the amortized cost of held-to-maturity
securities at December 31, 1995, 1994 and 1993:
<TABLE>
<CAPTION>
December 31
----------------------------
1995 1994 1993
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
U. S. Treasury securities $ 33,355 $ 59,793 5,142
U. S. Government agency
securities 293,831 376,708 252,866
Taxable obligations of states
and political subdivisions 500 - -
Tax exempt obligations of states
and political subdivisions 110,830 112,915 125,093
Other securities 787 3,416 6,552
-------- -------- --------
TOTAL $439,303 $552,832 $389,653
======== ========= ========
</TABLE>
The following table shows the maturities and weighted average
yields as of the end of the latest period for each investment
category presented above:
<TABLE>
<CAPTION>
December 31, 1995
------------------------------------------------------------------
U.S.
U.S. GOVERMENT STATES & WEIGHTED
TREASURY AGENCY POLITICAL OTHER AVERAGE
SECURITIES SECURITIES SUBDIVISIONS SECURITIES YIELD
---------- ---------- ------------ ---------- --------
(In thousands)
<S> <C> <C> <C> <C> <C>
PERIOD TO MATURITY:
Maturing within
one year $ 250 $ 22,739 $ 9,352 $600 6.16%
Maturing after one
year but within
five years 31,122 151,962 39,518 187 6.72%
Maturing after five
years but within
ten years 1,983 115,448 50,685 - 7.88%
Maturing after ten
years - 3,682 11,775 - 8.93%
------- -------- -------- ----
TOTAL $33,355 $293,831 $111,330 $787
======= ======== ======== ====
</TABLE>
The yield on tax-exempt obligations of states and political
subdivisions has been adjusted to a taxable equivalent basis using a
35% tax rate.
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Available-for-Sale Securities
The following table shows the book value of
available-for-sale securities at December 31, 1995, 1994 and 1993:
<TABLE>
<CAPTION>
December 31
----------------------------
1995 1994 1993
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
U. S. Treasury securities $ 51,241 $ 30,429 $ 73,787
U. S. Government agency
securities 127,488 67,607 114,295
Taxable obligations of states
and political subdivisions 3,337 - -
Tax exempt obligations of states
and political subdivisions 20,000 30,234 15,409
Other securities 37,689 65,759 71,597
-------- -------- --------
TOTAL $239,755 $194,029 $275,088
======== ======== ========
</TABLE>
The following table shows the maturities and weighted average
yields as of the end of the latest period for each investment
category presented above:
<TABLE>
<CAPTION>
December 31, 1995
-----------------------------------------------------------------
U.S.
U.S. GOVERMENT STATES & WEIGHTED
TREASURY AGENCY POLITICAL OTHER AVERAGE
SECURITIES SECURITIES SUBDIVISIONS SECURITIES YIELD
---------- ---------- ------------ ---------- --------
<S> <C> <C> <C> <C> <C>
(In thousands)
PERIOD TO MATURITY:
Maturing within
one year $10,223 $ 9,357 $ 5,929 $24,513 5.59%
Maturing after one
year but within
five years 38,986 76,646 13,797 256 6.49%
Maturing after five
years but within
ten years 2,032 18,362 2,078 12,294 7.37%
Maturing after ten
years - 23,123 1,533 626 7.26%
------- -------- ------- -------
TOTAL $51,241 $127,488 $23,337 $37,689
======= ======== ======= =======
</TABLE>
The yield on tax-exempt obligations of states and political
subdivisions has been adjusted to a taxable equivalent basis using a
35% tax rate.
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Loan Portfolio
The Company's loans are widely diversified by borrower and
industry. The following table shows the composition of loans of the
Company at December 31 for the years indicated.
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------------------------------------
1995 1994 1993 1992 1991
--------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
(In thousands)
Commercial &
agricultural (1)(2) $ 223,225 $ 211,988 $ 203,798 $ 382,233 $ 359,557
Consumer & installment 695,127 633,692 510,538 501,627 474,222
Real estate mortgage 1,314,935 1,151,666 1,013,446 692,467 671,018
Lease financing 121,617 81,816 60,781 51,325 43,912
Other 16,780 11,913 52,692 22,594 12,358
---------- ---------- ---------- ---------- ----------
Total gross loans $2,371,684 $2,091,075 $1,841,255 $1,650,246 $1,561,067
========== ========== ========== ========== ==========
</TABLE>
(1) Including $17,338,000, $15,247,000, $15,588,000, $18,197,000
and $17,787,000 in 1995, 1994, 1993, 1992 and 1991,
respectively, of loans classified as agricultural.
(2) Including $36,054,000, $29,838,000, $27,048,000, $20,364,000
and $20,074,000 in 1995, 1994, 1993, 1992 and 1991,
respectively, of loans secured by or relating to agricultural
land.
Maturity Distribution of Loans
The maturity distribution of the Company's loan portfolio is one
factor in management's evaluation of the risk characteristics of the
loan portfolio. The following table shows the maturity distribution
of gross loans of the Company as of December 31, 1995.
<TABLE>
<CAPTION>
ONE YEAR ONE TO AFTER
OR LESS FIVE YEARS FIVE YEARS
-------- ---------- ----------
(In thousands)
<S> <C> <C> <C>
Commercial
& agricultural $126,872 $ 80,308 $ 16,045
Consumer & installment 194,563 477,819 22,745
Real estate mortgages 526,240 563,796 224,899
Lease financing 38,932 78,954 3,731
Other 10,040 4,046 2,694
-------- ---------- --------
Total gross loans $896,647 $1,204,923 $270,114
======== ========== ========
</TABLE>
13
<PAGE> 14
Sensitivity of Loans to Changes in Interest Rates
The interest sensitivity of the Company's loans is important in
the management of effective interest differential. The Company
attempts to manage the relationship between the rate sensitivity of
its assets and liabilities to produce an effective interest
differential that is not significantly impacted by the level of
interest rates. The following table shows the interest sensitivity
of the Company's gross loans as of December 31, 1995.
<TABLE>
<CAPTION>
December 31, 1995
--------------------------
FIXED VARIABLE
RATE RATE
----- --------
<S> <C>
(In thousands)
Loan Portfolio
Due after one year $1,187,421 $287,616
</TABLE>
Nonaccrual, Past Due and Restructured Loans
See Note 6 of Notes to Consolidated Financial Statements on page
29 of the Company's 1995 Annual Report to Shareholders incorporated
herein by reference. The aggregate principal balance of non-accrual
loans was $1,592,000, $3,029,000, $4,072,000, $10,742,000 and
$11,288,000 at December 31, 1995, 1994, 1993, 1992 and 1991,
respectively. The aggregate principal balance of restructured loans
was $7,000, $1,448,000, $4,018,000, $2,045,000 and $912,000 at
December 31, 1995, 1994, 1993, 1992 and 1991, respectively. Accruing
loans which were contractually past due 90 days or more for years
ended December 31, 1995, 1994, 1993, 1992 and 1991, amounted to
$5,148,000, $3,614,000, $4,277,000, $8,523,000 and $8,069,000,
respectively.
The Company's policy provides that loans are placed in
non-accrual status if any of the following criteria are met: (1) a
loan is determined to be a loss of any amount as to principal or
interest; (2) a loan has a deficiency balance; (3) receipt of notice
of bankruptcy with regards to a borrower; or (4) a loan involves
repossession of property and it is reasonably assumed that there will
be a loss.
In the normal course of business, management becomes aware of
possible credit problems in which borrowers exhibit potential for the
inability to comply with the contractual terms of their loans, but
which do not currently meet the criteria for disclosure as problem
loans. Historically, some of these loans are ultimately
restructured or placed in non-accrual status. At December 31, 1995,
no loans were known to be potential problem loans.
At December 31, 1995, the Company did not have any concentration
of loans in excess of 10% of total loans outstanding. Loan
concentrations are considered to exist when there are amounts loaned
to a multiple number of borrowers engaged in similar activities which
would cause them to be similarly impacted by economic or other
conditions.
14
<PAGE> 15
Summary of Loan Loss Experience
In the normal course of business, the Company assumes risks in
extending credit. The Company manages these risks through its
lending policies, loan review procedures and the diversification of
its loan portfolio. Although it is not possible to predict loan
losses with any certainty, management constantly reviews the
characteristics of the loan portfolio to determine its overall risk
profile and quality.
Constant attention to the quality of the loan portfolio is
achieved by a formal loan review process. Throughout this on-going
process, management is advised of the condition of individual loans
and of the quality profile of the entire loan portfolio. Any loan or
portion thereof which is classified as "loss" by regulatory examiners
or which is determined by management to be uncollectible because of
such factors as the borrower's failure to pay interest or principal,
the borrower's financial condition, economic conditions in the
borrower's industry, or the inadequacy of underlying collateral, is
charged off.
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 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. Such
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.
Management does not believe the allowance for credit losses can
be fragmented by category of loans with any precision that would be
useful to investors but is doing so in this report only in an attempt
to comply with disclosure requirements of regulatory agencies. The
breakdown of the allowance by loan category is based in part on
evaluations of specific loans' past history and on economic
conditions within specific industries or geographical areas.
Accordingly, since all of these conditions are subject to change, the
allocation is not necessarily indicative of the breakdown of any
future losses.
15
<PAGE> 16
The following table presents (a) the breakdown of the allowance
for credit losses by loan category and (b) the percentage of each
category in the loan portfolio to total loans at
December 31 for the years presented:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
ALLOWANCE % OF ALLOWANCE % OF ALLOWANCE % OF
FOR LOANS TO FOR LOANS TO FOR LOANS TO
CREDIT LOSS TOTAL LOANS CREDIT LOSS TOTAL LOANS CREDIT LOSS TOTAL LOANS
---------------- ----------- ---------------- ----------- ---------------- -----------
<S> <C> <C> <C> <C> <C> <C>
(In thousands)
Commercial & agricultural $3,290 9.41% $ 3,100 10.14% $ 3,020 11.07%
Consumer & installment 10,413 29.31% 9,350 30.30% 7,620 27.73%
Real estate mortgage 19,500 55.44% 17,090 55.08% 16,123 55.04%
Lease financing 1,433 5.13% 1,290 3.91% 705 3.30%
Other - 0.71% - 0.57% - 2.86%
------- ------- ------- ------- ------- -------
TOTAL $34,636 100.00% $30,830 100.00% $27,468 100.00%
======= ======= ======= ======= ======= =======
<CAPTION>
1992 1991
---------------- ----------------
ALLOWANCE % OF ALLOWANCE % OF
FOR LOANS TO FOR LOANS TO
CREDIT LOSS TOTAL LOANS CREDIT LOSS TOTAL LOANS
---------------- ----------- ---------------- -----------
(In thousands)
<S> <C> <C> <C> <C>
Commercial & agricultural $ 5,550 23.16% $ 4,855 23.03%
Consumer & installment 7,355 30.40% 6,420 30.38%
Real estate mortgage 10,426 41.96% 9,325 42.99%
Lease financing 785 3.11% 506 2.81%
Other - 1.37% - 0.79%
------- ------- ------- -------
TOTAL $24,116 100.00% $21,106 100.00%
======= ======= ======= =======
</TABLE>
16
<PAGE> 17
The following table sets forth certain information with respect
to the Company's loans (net of unearned discount) and the allowance
for credit losses for the five years ended December 31, 1995.
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
(In thousands)
<S> <C> <C> <C> <C> <C>
LOANS
Average loans for the
period $2,146,967 $1,881,922 $1,675,048 $1,550,745 $1,451,562
========= ========== ========== ========== ==========
ALLOWANCE FOR CREDIT
LOSSES
Balance, beginning
of period 30,830 27,468 24,116 21,106 19,479
Loans charged off:
Commercial & agricultural (448) (1,479) (374) (1,662) (2,139)
Consumer & installment (3,550) (3,146) (5,030) (5,214) (5,090)
Real estate mortgage (715) (1,217) (2,128) (4,810) (2,782)
Lease financing (1) (19) (144) (169) (175)
---------- ---------- ---------- ---------- ----------
Total loans charged off (4,714) (5,861) (7,676) (11,855) (10,186)
---------- ---------- ---------- ---------- ----------
Recoveries:
Commercial & agricultural 99 1,539 169 348 293
Consumer & installment 1,084 1,271 1,326 1,409 1,283
Real estate mortgage 366 412 325 169 427
Lease financing 18 55 176 96 48
---------- ---------- ---------- ---------- ----------
Total recoveries 1,567 3,277 1,996 2,022 2,051
---------- ---------- ---------- ---------- ----------
Net charge-offs (3,147) (2,584) (5,680) (9,833) (8,135)
Provision charged to
operating expense 6,206 5,946 9,032 12,843 9,446
Acquisitions 747 316
---------- ---------- ---------- ---------- ----------
Balance, end of period $ 34,636 $ 30,830 $ 27,468 $ 24,116 $ 21,106
========== ========== ========== ========== ==========
RATIOS
Net charge-offs to
average loans 0.15% 0.14% 0.34% 0.63% 0.56%
========== ========== ========== ========== ==========
</TABLE>
17
<PAGE> 18
Deposits
Deposits represent the principal source of funds for the
Company. The distribution and market share of deposits by type of
deposit and by type of depositor are important considerations in the
Company's assessment of the stability of its funds sources and its
access to additional funds. Furthermore, management shifts the mix
and maturity of the deposits depending on economic conditions and
loan and investment policies in an attempt, within set policies, to
minimize cost and maximize effective interest differential.
The following table shows the classification of deposits on an
average basis for the three years ended December 31, 1995.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-------------------------------------------------------------
1995 1994 1993
-------------------------------------------------------------
Average Average Average Average Average Average
Amount Rate Amount Rate Amount Rate
---------- ------- ---------- ------- ---------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Non-interest bearing
demand deposits $ 361,120 - $ 364,451 - $ 327,540 -
Interest bearing
demand deposits 654,151 2.35% 618,929 2.64% 563,372 2.58%
Savings 300,278 4.76% 292,908 3.25% 250,203 3.09%
Time 1,416,901 5.47% 1,237,205 4.32% 1,201,022 4.37%
---------- ---------- ----------
TOTAL DEPOSITS $2,732,450 $2,513,493 $2,342,137
========== ========== ==========
</TABLE>
Time deposits of $100,000 and over including certificates of
deposits of $100,000 and over at December 31, 1995, had maturities as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-----------------
(In thousands)
<S> <C>
Three months or less $ 98,934
Over three months through six months 107,598
Over six months through twelve months 60,524
Over twelve months 67,859
--------
TOTAL $334,915
========
</TABLE>
18
<PAGE> 19
Return on Equity and Assets
Return on average common equity, average assets, and the
dividend payout ratio are based on net income for the three years
ended December 31, 1995, as presented below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Return on average equit 13.23% 12.75% 15.07%
Return on average asset 1.13 1.07 1.24
Dividend payout ratio 34.37 32.69 25.70
</TABLE>
The Company's average equity as a percent of average assets was 8.52%,
8.35% and 8.22% for 1995, 1994 and 1993, respectively.
Short-Term Borrowings
See Note 9 of Notes to Consolidated Financial Statements on page 9 of
the Company's 1995 Annual Report to Shareholders incorporated herein by
reference.
Item 2. - Properties
The physical properties of the Registrant are held in its subsidiaries
as follows:
a.
Bank of Mississippi - The main office of the BOM is
located at One Mississippi Plaza in the central business
district of Tupelo in a seven-floor modern glass, concrete,
and steel office building owned by BOM. BOM occupies
approximately 75% of the rentable space in the building with
the remainder leased to various unaffiliated tenants.
BOM owns 68 of its 90 branch banking facilities. The
remaining 22 branch banking facilities are occupied under
leases varying in length from one to 12 years. BOM also
owns several buildings in the Hattiesburg, Mississippi,
area (which provide space for certain of BOM's Southern
Region activities including warehouse requirements,
mortgage lending, trust services, lease servicing and
central operations), an operations center near the Tupelo
Municipal Airport (which provides operational support for
VOL and LFSL as well), and an office building in downtown
Jackson, Mississippi (which has approximately 86,000
square feet of space, of which BOM uses approximately
two-thirds for banking activities while leasing or holding
for lease the remaining 28,000 square feet).
BOM considers all its buildings and leased premises to be
in good condition. BOM also owns several parcels of property
acquired under foreclosure. Ownership of and rentals on other
real property by BOM are not material.
b. Volunteer Bank - The main office of VOL is located at One
Jackson Place in the central business district of Jackson,
Tennessee in a building owned by VOL.
19
<PAGE> 20
VOL owns 20 of its 31 branch banking facilities. The
remaining 11 branch banking facilities are occupied under
leases varying in length from one to 30 years.
VOL considers all its building and leased premises to be
in good condition. VOL also owns several parcels of
property acquired under foreclosure. Ownership of and
rentals on other real property by VOL are not material.
c. LFSL - The main office of LFSL is located at 317 5th Avenue
in the central business district of Laurel, Mississippi in a
building owned by LFSL.
LFSL owns its other seven branch locations and considers
all its buildings to be in good condition.
d. Personal Finance Company - This wholly-owned subsidiary of
BOM occupies 36 leased offices, with the unexpired terms
varying in length from one to six years. The average size of these
leased offices is approximately 1,000 square feet with
average annual rent of approximately $8,000. All these
premises are considered to be in good condition.
e. TC Finance, Inc.- This wholly-owned subsidiary of VOL
occupies 7 leases offices with the unexpired terms varying
in length from one to five years.
Item 3. - Legal Proceedings
The Company and its subsidiaries are defendants in various
lawsuits arising in the ordinary course of business. In the opinion
of management, after consultation with outside legal counsel, the
outcome of these actions should not have a material adverse effect on
the financial condition of the Company and its subsidiaries, taken as
a whole.
Item 4. - Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders during the
fourth quarter of 1995.
20
<PAGE> 21
PART II
Item 5. - Market for the Registrant's Common Stock and Related
Stockholder Matters
Market for Common Stock
The common stock of the Company trades on The Nasdaq Stock
Market under the symbol BOMS. The following table sets forth the
range of closing sale prices of the Company's common stock as
reported on The Nasdaq Stock Market. The prices have been restated
to reflect the effect of the two-for-one stock split effected in the
form of a 100% stock dividend paid November 20, 1995.
<TABLE>
<CAPTION>
1995: High Low
------- ------
<S> <C> <C>
4th quarter $23.875 $20.25
3rd quarter 20.875 19.375
2nd quarter 20.00 18.00
1st quarter 18.00 16.25
<CAPTION>
1994:
<S> <C> <C>
4th quarter $17.125 $15.50
3rd quarter 18.125 17.00
2nd quarter 16.625 14.50
1st quarter 16.50 14.50
</TABLE>
Holders of Record
As of February 29, 1996, there were 7,357 shareholders of record
of the Company's common stock.
Dividends
The Company declared cash dividends totaling $0.62 per share
during 1995, $0.555 during 1994 and $0.54 during 1993. Future
dividends, if any, will vary depending on the Company's profitability
and anticipated capital requirements.
Item 6. - Selected Financial Data
The information under the caption "Selected Financial
Information" on page 11 of the Company's 1995 Annual Report to
Shareholders is incorporated herein by reference. The Company's
long-term debt at December 31, 1995, totaled $73,624,000, at December
31, 1994, totaled $67,416,000, at December 31, 1993, totaled
$32,541,000, at December 31, 1992, totaled $33,309,000 and totaled
$39,896,000 at December 31, 1991.
21
<PAGE> 22
Item 7. - Management's Discussion and Analysis of Financial
Condition and Results of Operations
The information under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on pages
13 through 20 of the Company's 1995 Annual Report to Shareholders is
incorporated herein by reference.
Item 8. - Financial Statements and Supplementary Data
The following consolidated financial statements of the Company
and its subsidiaries, the report of independent auditors thereon, and
the quarterly data (unaudited), appearing in the Company's 1995
Annual Report to Shareholders, are incorporated herein by reference.
Consolidated Balance Sheets on page 21.
Consolidated Statements of Income on page 22.
Consolidated Statements of Shareholders' Equity on page 23.
Consolidated Statements of Cash Flows on page 24.
Notes to Consolidated Financial Statements on pages 25 through 39.
Report of Independent Auditors on page 40.
Summary of Quarterly Results (Unaudited) on page 12.
Item 9. - Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
There have been no disagreements with the Company's independent
accountants and auditors on any matter of accounting principles or
practices or financial statement disclosure.
22
<PAGE> 23
PART III
Item 10. - Directors and Executive Officers of the Registrant
Information concerning the directors and nominees of the Company
appears under the caption "Election of Directors" on pages 1 through
4 of the Company's definitive Proxy Statement for its 1996 annual
meeting, and is incorporated herein by reference.
Executive Officers of Registrant
Information follows concerning the executive officers of the
Company who are subject to the reporting requirements of Section 16
of the Securities Exchange Act of 1934.
<TABLE>
<CAPTION>
Name Offices Held Age
---- ------------ ---
<S> <C> <C>
Aubrey Burns Patterson Chairman of the Board of 53
Directors and Chief
Executive Officer
of the Company and Bank
of Mississippi; Director of
the Company; Director of
Volunteer Bank
Charles J. McKee Executive Vice President 64
of the Company; Vice
Chairman, Lending,
Bank of Mississippi;
Director of Bank of
Mississippi and Volunteer
L. Nash Allen, Jr. Treasurer, and Chief 51
Financial Officer of
the Company; Executive
Vice President, Bank of
Mississippi, Director of
Laurel Federal Savings and
Loan Association
Kenneth R. Wilburn Executive Vice President, 49
Loan Administration
of the Company and
Bank of Mississippi
</TABLE>
23
<PAGE> 24
<TABLE>
<CAPTION>
<S> <C> <C>
Harry R. Baxter Executive Vice President 51
and Director of Marketing
of the Company and Bank of
Mississippi Director of
Laurel Federal Savings and
Loan Association
Gary R. Harder Senior Vice President, 51
Audit and Loan Review of
the Company and Bank of
Mississippi
Michael W. Weeks Chairman of the Board of 47
Directors and Chief Executive
Officer of Volunteer Bank;
Executive Vice President of
the Company
</TABLE>
None of the executive officers of the Company are related by blood,
marriage, or adoption. There are no arrangements or understandings between any
of the executive officers and any other person pursuant to which the individual
named above was or is to be selected as an officer. The executive officers of
the Company are elected by the Board of Directors at its first meeting
following the annual meeting of shareholders, and they hold office until the
next annual meeting or until their successors are duly elected and qualified.
Mr. Patterson served as President of the Bank of Mississippi from 1983
until April 1990 when he was named Chief Executive Officer of the Bank of
Mississippi and the Company. He has served as Chairman of the Board and Chief
Executive Officer of the Bank of Mississippi and the Company since April 1993.
Following the merger with VBS on August 31, 1993, he served as a director of
VBS and he has served as a director of Volunteer Bank since its formation on
December 31, 1993.
Mr. McKee has served as Vice Chairman and as Executive Vice President
of the Bank of Mississippi during the last five years and as Executive Vice
President of the Company since April, 1986. He has served as a director of
Bank of Mississippi since 1993, as a director of VBS from August 31 to December
31, 1992, and as a director of Volunteer Bank since its formation on December
31, 1992.
Mr. Allen has served as Senior Vice President and Executive Vice
President of the Bank of Mississippi during the past five years. He has served
as Treasurer of the Company during this same period. He has served as a
director of Laurel Federal Savings and Loan Association since its acquisition
on March 31, 1995.
Mr. Wilburn served as Senior Vice President-Loan Administration, Bank
of Mississippi, until January 1988, when his designation was changed to
Executive Vice President-Loan
24
<PAGE> 25
Administration. Since October 1992, he has also served as Executive Vice
President of the Company.
Mr. Baxter joined the Bank of Mississippi in July 1986, as Senior Vice
President and Director of Marketing. He was named Executive Vice President and
Director of Marketing in August 1989. Since October 1992, he has also served as
Executive Vice President of the Company. He has served as a director of Laurel
Federal Savings and Loan Association since its acquisition on March 31, 1995.
Mr. Harder served as First Vice President and Senior Vice
President-Loan Review, Bank of Mississippi during the last five years. Since
October, 1992 he has also served as First Vice President and then Senior Vice
President of the Company.
Mr. Weeks served as Vice-Chairman of the Board and Chief Executive
Officer of Volunteer Bank from January 24, 1995 to March 16, 1995 when he was
named Chairman of the Board and Chief Executive Officer of Volunteer Bank. He
has served as Executive Vice President of the Company since January 17, 1995.
Prior to his employment by the Company, Mr. Weeks served as a partner in the
accounting firm of KPMG Peat Marwick LLP.
Item 11. - Executive Compensation
Information concerning the remuneration of executive officers of the
Company appears under the caption "Executive Compensation" on pages 7 through
13 of the Company's definitive Proxy Statement for its 1996 annual meeting ,
and is incorporated herein by reference. Information concerning the
remuneration of directors of the Company appears under the caption
"Compensation of Directors" on page 4 of the Company's definitive Proxy
Statement for its 1996 annual meeting, and is incorporated herein by reference.
Item 12. - Security Ownership of Certain Beneficial Owners and Management
Information concerning the security ownership of certain beneficial
owners and directors and executive officers of the Company appears under the
caption "Security Ownership of Certain Beneficial Owners and Management" on
pages 5 and 6 of the Company's definitive Proxy Statement for its 1996 annual
meeting, and is incorporated herein by reference.
Item 13. - Certain Relationships and Related Transactions
Information concerning certain relationships and related transactions
with management and others appears under the caption "Certain Relationships and
Related Transactions" on page 15 of the Company's definitive Proxy Statement
for its 1996 annual meeting, and is incorporated herein by reference.
25
<PAGE> 26
PART IV
Item 14. - Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. Consolidated Financial Statements:
The following have been incorporated herein from the Company's
1995 Annual Report to Shareholders:
-Report of Independent Auditors
-Consolidated balance sheets as of December 31, 1995, and 1994.
-Consolidated statements of income for the three years ended
December 31, 1995.
-Consolidated statements of shareholders' equity for the
three years ended December 31, 1995.
-Consolidated statements of cash flows for the three years ended
December 31, 1995.
-Notes to consolidated financial statements for the three years
ended December 31, 1995.
(a) 2. Consolidated Financial Statement Schedules:
All schedules are omitted as the required information is
inapplicable or the information is presented in the financial
statements or related notes.
(a) 3. Exhibits:
(3) (a) Articles of incorporation, as amended. (1)
(b) Bylaws. (2)
(4) (a) Specimen Common Stock Certificate. (3)
(b) The Company has outstanding certain long-term debt. None
of such debt exceeds 10% of the total assets of the
Company and its consolidated subsidiaries. Copies of
instruments defining the rights of holders of the debt
will be furnished to the Securities and Exchange
Commission upon request.
(10)(a) Stock Bonus Agreement between Bancorp of Mississippi,
Inc., and Aubrey B. Patterson, Jr., dated November 6,
1987, and Escrow Agreement between Bank Mississippi and
Aubrey B. Patterson, Jr., dated November 6, 1987. (4)(8)
(b) Form of deferred compensation agreement between Bancorp
of Mississippi, Inc. and certain key executives. (5)(8)
(c) 1994 Stock Incentive Plan. (3)(8)
(d) 1995 Non-Qualified Stock Option Plan for Non-Employee
Directors. (3)(8)
(e) Stock Bonus Agreement between BancorpSouth, Inc. and
Michael W. Weeks, dated January 17, 1995 and Escrow
Agreement between Bank of Mississippi and Michael W.
Weeks dated January 17, 1995 (8)
(11) Statement re computation of per share earnings.
26
<PAGE> 27
(13)(a) Managements' Discussion and Analysis of Financial
Condition and Results of Operations on pages 13 through
20 of the 1995 Annual Report to Shareholders. (6)
(b) Consolidated Financial Statements and Notes thereto and
Independent Auditors Report on pages 21 through 40 of
the 1995 Annual Report to Shareholders. (6)
(c) Summary of Quarterly Results on page 12 of the 1995
Annual Report to Shareholders. (6)
(d) Selected Financial Information on page 11 of the 1995
Annual Report to Shareholders. (6)
(21) Subsidiaries of the Registrant.
(23) Consent of Independent Accountants.
(27) Financial Data Schedule. (SEC use only)
(28) Information regarding Bancorp of Mississippi, Inc.,
amended and restated Salary Deferral-Profit Sharing
Employee Stock Ownership Plan. (7)(8)
(1) Filed as exhibits 3.1 and 3.2 to the Company's registration statement
on Form S-4 filed on January 6, 1995 (Registration No. 33-88274) and
incorporated by reference thereto.
(2) Filed as an exhibit to the Company's Form 10-K for the year ended
December 31, 1985 (file number 0-10826), and incorporated by
reference thereto.
(3) Filed as an exhibit to the Company's Form 10-K for the year ended
December 31, 1994 (file number 0-10826), and incorporated by
reference thereto.
(4) Filed as an exhibit to the Company's Form 10-K for the year
ended December 31, 1987 (file number 0-10826), and incorporated
by reference thereto.
(5) Filed as an exhibit to the Company's Form 10-K for the year ended
December 31, 1988 (file number 0-10826), and incorporated
by reference thereto.
(6) Furnished for the information of the Commission only and not
deemed "filed" as part of this Report on Form 10-K except for
those portions which are specifically incorporated herein by
reference.
(7) Filed as an exhibit to the Company's Form 10-K for the year ended
December 31, 1990 (file number 0-10826), and incorporated by
reference thereto.
(8) Compensatory plans or arrangements.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended
December 31, 1995.
27
<PAGE> 28
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
/s/ Aubrey Burns Patterson
DATE: March 27, 1996 -----------------------------
Aubrey Burns Patterson
Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Chairman of the Board, Chief Executive
/s/ Aubrey Burns Patterson Officer (Principal Executive Officer)
- ----------------------------- and Director March 27, 1996
Aubrey Burns Patterson
/s/ L. Nash Allen, Jr. Treasurer (Principal Financial and
- ----------------------------- Accounting Officer) March 27, 1996
L. Nash Allen, Jr.
Director March , 1996
- -----------------------------
S. H. Davis
Director March , 1996
- -----------------------------
Hassell Franklin
/s/ J. Luis Griffin, Jr. Director March 27, 1996
- -----------------------------
J. Louis Griffin, Jr.
/s/ W. G. Holliman, Jr. Director March 27, 1996
- -----------------------------
W. G. Holliman, Jr.
/s/ Douglas Jumper Director March 27, 1996
- -----------------------------
Douglas Jumper
/s/ Turner O. Lashlee Director March 27, 1996
- -----------------------------
Turner O. Lashlee
28
<PAGE> 29
/s/ Alan W. Perry
- ----------------------------- Director March 27, 1996
Alan W. Perry
/s/ Frank A. Riley
- ----------------------------- Director March 27, 1996
Frank A. Riley
/s/ Travis E. Staub
- ----------------------------- Director March 27, 1996
Travis E. Staub
/s/ Andrew R. Townes, DDS
- ----------------------------- Director March 27, 1996
Andrew R. Townes, DDS
/s/ Lowery A. Woodall
- ----------------------------- Director March 27, 1996
Lowery A. Woodall
29
<PAGE> 1
EXHIBIT 10 (e)
Stock Bonus Agreement between BancorpSouth
and Michael W. Weeks and Escrow Agreement
between Bank of Mississippi and Michael W. Weeks
<PAGE> 2
STOCK BONUS AGREEMENT
AGREEMENT made as of January 17, 1995, between BANCORPSOUTH, INC.
("Bancorp" or, collectively with its subsidiaries, the "Company") and MICHAEL W.
WEEKS ("Weeks").
WHEREAS, the Company desires to retain the full-time, dedicated services
of Weeks as Vice Chairman of Volunteer Bank, or such other assigned positions
with the Company as the Board of Directors of Bancorp may determine, and to be
assured of its right to his services in said capacities; and
WHEREAS, Weeks is willing to serve in that capacity, or such other
senior officer capacities as may be assigned;
The parties, in consideration of the premises and other mutual
agreements hereinafter set forth, agree as follows:
1. Services to be Provided by Weeks. Weeks agrees to serve as Vice
Chairman of Volunteer Bank, or in any other senior officer capacity with the
Company assigned by the Board of Directors, pursuant to his employment
arrangement with the Company and agrees to devote substantially all his time to
performing such duties as may from time to time be assigned to him by the Board
of Directors of Bancorp and to grant the Company his undivided loyalty as long
as he continues to be employed by the Company.
2. Term. The term of this Agreement shall be from April 1, 1995, until
April 1, 2005. This Agreement is not an employment contract. The existence of
this Agreement shall not affect in any way the Company's right to discharge
Weeks.
3. Bonus Compensation; Stock Ownership. Simultaneously with the
execution of this Agreement, Bancorp shall deliver 15,000 shares of the $2.50
par value common stock of Bancorp ("Common Stock"), which may be either
authorized but unissued shares or shares held in the treasury of Bancorp, and
Weeks shall execute and deliver an Escrow Agreement in the form of Exhibit A
annexed hereto (the "Escrow Agreement"). Pursuant to the terms of the Escrow
Agreement and this Agreement, Weeks shall be entitled to receive notices of all
meetings of shareholders and vote the shares at such meetings and to receive
dividends paid with respect to the shares as set forth in Section 6 of the
Escrow Agreement. Weeks shall have no other right or interest in and to such
shares of Common Stock until such shares have been released to him by the Escrow
Agent upon the occurrence of the events specified in Section 2 and Section 3(b)
and Section 4 of the Escrow Agreement. In the event the Company does not
achieve either a .9% Return on Average Assets or a 11.29% Return on Average
Equity for any given year, no shares of Common Stock shall be released to Weeks
in the succeeding year.
<PAGE> 3
Such unreleased shares of Common Stock shall, however, remain in escrow and
shall be distributed in accordance with Section 2, 3(b) and 4 of the Escrow
Agreement.
In the event Weeks voluntarily terminates his employment with the
Company other than as provided in Section 6(b) hereof or if this Agreement is
terminated by the Company pursuant to Section 6(a)(i) hereof prior to April 1,
2005, Weeks shall retain full ownership of the shares of Common Stock that have
been released to him pursuant to the provisions of the Escrow Agreement and
Weeks shall forfeit all right, title and interest in and to any shares of Common
Stock still subject to the Escrow Agreement, which shares shall be delivered to
Bancorp to be held in treasury or to be cancelled as shall be determined by its
Board of Directors. In the event this Agreement is terminated pursuant to
Section 6(b) hereof prior to April 1, 2005, Weeks shall be entitled to receive
all shares of Common Stock held by the Escrow Agent as of such termination date
and shall be entitled to retain full ownership of all such shares of Common
Stock.
4. Covenants of Weeks. Weeks covenants that, as of the date of this
Agreement, he is not in violation of any agreement, covenant, court order,
consent decree, statute or other binding commitment of his to do, or refrain
from doing, any act, and that by entering into this Agreement he will not
thereby violate any such agreement, covenant, court order, consent decree,
statute or other binding commitment.
5. Noncompetition. Weeks agrees not to compete with the Company as
follows:
(a) Noncompetition. Weeks agrees that, upon termination of
this Agreement for any cause whatsoever other than a change in
control of the Company as defined in Section 6(b) hereof, he will
not directly or indirectly, as principal, agent, employee or in any
other capacity, for the term of two (2) years from the date of such
termination of employment, enter into or engage in the same
business now being carried on by the Company or as may be carried
on by the Company from the date hereof to the date of Weeks'
termination, or within any state in which the Company does
business. Furthermore, during that two-year period he will not,
directly or indirectly, divert or attempt to divert business from
the Company.
(b) Respect for employee relationships. Weeks agrees that
upon termination of this Agreement, he will not, without the prior
written consent of the Company, directly or indirectly, as
principal, agent, employee or in any other capacity, for the term
of two years from the date of such termination of employment, hire,
entice away
2
<PAGE> 4
or in any other manner persuade any employee of the Company to
discontinue his relationship with the Company.
(c) Return of documents. Weeks agrees that, upon termination
of this Agreement for any cause whatsoever, he shall deliver to the
Company all correspondence, agreements, contracts, books of
account, records, files, research, manuals or other documents, and
all copies thereof, relating to, concerning or arising out of the
business and operations of the Company.
(d) Reasonable nature of restrictions. Weeks represents and
admits that, in the event of the termination of his employment for
any reason whatsoever, his experience and capabilities are such
that he can obtain employment in business not in competition with
the Company, and that enforcement of a remedy by way of injunction
will not prevent him from earning a livelihood. Weeks further
represents and admits that the period of two years following
termination of his employment with the Company, during which time
he may not compete with the Company nor disturb the relationship
between the Company and its employees, is reasonably necessary to
protect the interests of the Company and would not unfairly or
unreasonably restrict Weeks.
6. Termination and Severance. It is the contemplation of the parties
hereto that this Agreement shall not be terminated prior to the expiration of
the initial term set forth in Section 2 hereof.
(a) Termination by the Company. Notwithstanding the
foregoing, the Company shall have the immediate right to terminate
this Agreement upon the happening of any of the following events:
(i) an act, in the good faith judgment of the Board of
Directors of Bancorp, of dishonesty, embezzlement or fraud
against the Company; Weeks' conviction of a misdemeanor
involving dishonesty or breach of trust; Weeks' conviction of
a felony; or the issuance of any order for Weeks' removal as
an employee of the Company by any state or federal regulatory
agency or court of competent jurisdiction; or
(ii) the death of Weeks or the mental or physical
illness, disability or incapacity of Weeks which, in the
reasonable and good faith judgment of the Board of Directors
of Bancorp, prevents Weeks from performing his duties
hereunder and the
3
<PAGE> 5
continuance of such illness, disability or incapacity for a
period of 90 substantially consecutive days.
(b) Termination by Weeks. Notwithstanding the foregoing,
Weeks shall have the immediate right to terminate this Agreement in
the event there is a change in control of the Company, as defined
in (c) below.
(c) Change in Control. Change in control of an entity shall
be deemed to have occurred if:
(i) any "person" as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended,
other than a trustee or other fiduciary holding securities
under an employee benefit plan of the entity or a corporation
controlling the entity or owned directly or indirectly by the
stockholders of the entity in substantially the same
proportions as their ownership of stock of such entity;
becomes the "beneficial owner" (as defined in Rule 13d-3
under said Act), directly or indirectly, of securities of
such entity representing more than 25% of the total voting
power represented by such entity's then outstanding Voting
Securities (as defined below), or
(ii) during any period of two consecutive years,
individuals who at the beginning of such period constitute
the Board of Directors of such entity and any new director
whose election by the Board of Directors or nomination for
election by such entity's stockholders was approved by a vote
of at least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of the
period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a
majority thereof, or
(iii) the stockholders of such entity approve a merger
or consolidation of such entity with any other corporation,
other than a merger or consolidation which would result in
the Voting Securities of such entity outstanding immediately
prior thereto continuing to represent (either by remaining
outstanding or by being converted into Voting Securities of
the surviving entity) more than 65% of the total voting power
represented by the Voting Securities of such entity or such
4
<PAGE> 6
surviving entity outstanding immediately after such merger or
consolidation, or the stockholders of such entity approve a
plan of complete liquidation of such entity or an agreement
for the sale or disposition by such entity of all or
substantially all of its assets.
For purposes of this section "Voting Securities" of an
entity shall mean any securities of the entity which vote
generally in the election of its directors.
7. Merger. Upon a merger or consolidation in which Bancorp is not the
surviving entity this Agreement shall continue unless terminated by Weeks
pursuant to Section 6(b), and the surviving corporation shall substitute its
common shares having a value equivalent to the value of the Common Stock for the
Common Stock required to be delivered after consummation of the merger.
8. Election. Upon receipt of Common Stock, Weeks may desire to make an
election under Section 83(b) of the Internal Revenue Code of 1986 ("Code")
regarding the timing and amount of compensation income to be recognized by him
on account of his receipt of Common Stock. The making of such an election shall
be wholly within the discretion of Weeks and it shall be the sole responsibility
of Weeks to see that such election, if desired, is properly made and timely
filed. If Weeks makes such an election, he shall inform the Company in writing
immediately thereafter.
9. Withholding. Whenever Weeks shall recognize compensation income as a
result of the receipt of Common Stock, he shall remit to the Company the minimum
amount of federal and state income and employment tax withholding which the Bank
or the Company is required to remit to the Internal Revenue Service or
applicable state department of revenue in accordance with the then current
provisions of the Code or applicable state law ("Withholding Tax"). The full
amount of the Withholding Tax shall be remitted simultaneously with the filing
of an election described in Section 7 or upon the occurrence of any other event
which results in the recognition of compensation income by Weeks. The
Withholding Tax may be paid by (i) cash, (ii) a certified check or (iii)
delivery of shares of Common Stock with a fair market value equal to the amount
of the Withholding Tax. (The fair market value of the Common Stock shall be
determined in accordance with the Treasury Regulations under Code Section 2031
as in effect on the date hereof.)
10. Nonassignment. No party hereto may assign any rights hereunder.
Any such purported delegation or assignment shall be void.
5
<PAGE> 7
11. Severability. It is the intention of the Company and Weeks that the
provisions of this Agreement shall be enforced to the fullest extent permissible
under the laws of the State of Mississippi, but that the unenforceability (or
the modification to conform with such laws or public policies) of any provisions
hereof shall not render unenforceable or impair the remainder of this Agreement.
Accordingly, if any provision of this Agreement shall be determined to be
invalid or unenforceable, either in whole or in part, this Agreement shall be
deemed amended to delete or modify, as necessary, the offending provisions and
to alter the balance of this Agreement in order to render the same valid and
enforceable to the fullest extent permissible as aforesaid.
12. Miscellaneous. (a) The existence of this Agreement shall not affect
in any way the right or power of Bancorp to make or authorize any adjustment,
reclassification, reorganization or other change in its capital or business
structure, any merger or consolidation of Bancorp, any issue of debt or equity
securities having preferences or priorities as to the Common Stock or the rights
thereof, the dissolution or liquidation of Bancorp, any sale or transfer of all
or any part of its business or assets, or any other corporate act or proceeding.
(b) This Agreement may only be amended or modified in writing as agreed
upon by all the parties hereto.
(c) All notices or other communications pursuant to this Agreement
shall be in writing and shall be deemed to have been duly given, if by hand
delivery, upon receipt thereof, or if mailed by certified or registered mail,
postage prepaid, three days following deposit in the United States mail, and
in any event, to be addressed to all of the parties as follows:
to the Company, at
One Mississippi Plaza
Tupelo, Mississippi 38801
to Weeks, at
Volunteer Bank
P. O. Box 549
Jackson, Tennessee 38302
or to such other address as shall hereafter be provided by proper notice to the
other parties.
(d) The captions and headings herein are for convenience of reference
only and shall not be deemed to be a part of the substance of this Agreement.
6
<PAGE> 8
(e) This Agreement shall be construed and interpreted according to the
laws of the State of Mississippi.
(f) The foregoing contains the entire and only agreement between the
parties respecting the subject matter hereof, and any representation, promise
or condition in connection therewith not incorporated herein shall not be
binding upon either party.
(g) The foregoing agreement shall be binding upon the parties hereto
and there respective heirs, successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
BANCORPSOUTH, INC.
By: /s/ Aubrey B. Patterson, Jr.
---------------------------------
Aubrey B. Patterson, Jr.
By: /s/ Michael W. Weeks
----------------------------------
MICHAEL W. WEEKS
7
<PAGE> 9
ESCROW AGREEMENT
AGREEMENT made as of January 17, 1995, among MICHAEL W. WEEKS ("Weeks"),
BANCORPSOUTH, INC. (the "Company") and BANK OF MISSISSIPPI as escrow agent
("Escrow Agent").
WHEREAS, Weeks has the right to acquire 15,000 shares of the Company's
Common Stock, $2.50 par value ("Common Stock"), and, pursuant to the terms of a
Stock Bonus Agreement, dated as of January 17, 1995, between Weeks and the
Company (the "Stock Agreement"), Weeks has agreed to place such shares of Common
Stock in escrow to be released to him upon the occurrence of certain events; and
WHEREAS, Escrow Agent is willing to act as escrow agent for the purposes
of holding such shares of Common Stock pending their release to Weeks or
forfeiture to the Company.
NOW, THEREFORE, the parties, in consideration of the premises and other
mutual agreements hereinafter set forth, agree as follows:
1. Weeks hereby agrees that upon the issuance of the Common Stock under the
Stock Agreement, he will cause the Company to issue ten stock
certificates, each for 1,500 shares of the Common Stock, registered in the
name of Michael W. Weeks. Weeks agrees that upon the issuance of any
Additional Installments, as defined in Section 2 of this Agreement, he
will cause the Company to issue a number of certificates equal to the
number of full years remaining in the term of the Stock Agreement on the
date the Additional Installment is made. Each such certificate shall be
for an equal number of shares; provided, however, that such certificates
may be for an unequal number of shares to the extent necessary to prevent
the issuance of fractional shares. (Certificates issued upon the
execution of the Stock Agreement and Additional Installments are referred
to herein as "Certificates"). Each Certificate will bear a legend
substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
THE TERMS OF AN ESCROW AGREEMENT, DATED JANUARY 17, 1995,
AMONG MICHAEL W. WEEKS, BANCORPSOUTH, INC. AND BANK OF
MISSISSIPPI, AS ESCROW AGENT, AND MAY NOT BE SOLD OR
TRANSFERRED EXCEPT IN COMPLIANCE WITH SUCH AGREEMENT. A
COPY OF THE ESCROW AGREEMENT IS AVAILABLE AT THE PRINCIPAL
OFFICES OF BANCORPSOUTH, INC.
Upon issuance Weeks will, or will cause the Company to, deposit the
Certificates with the Escrow Agent, together with
<PAGE> 10
one stock power for each Certificate, duly executed in blank, to be held
by the Escrow Agent in accordance with the terms of this Agreement.
2. The Escrow Agent will hold the Certificates until they are released. A
Certificate, and the attendant stock power, shall be released to Weeks
upon April 1, 1996, and upon each succeeding April 1 while he is employed
by the Company, until all Certificates have been released.
Notwithstanding the foregoing, upon receipt, prior to April 1 of any
year, of a Certificate signed by the majority of the Company's Board of
Directors and the Company's Secretary certifying that according to the
Company's annual report for the Company's year ending on the preceding
December 31, the Company's Return on Average Assets was less than .9% and
its Return on Average Equity was less than 11.2%, the Escrow Agent will
complete the stock powers relating to the Certificates to be delivered to
Weeks on April 1 of the year that follows such December 31 and shall then
deliver those Certificates, together with the accompanying stock powers,
to the Company. Upon such April 1 the Company shall deliver to the
Escrow Agent, as an additional installment ("Additional Installment"),
new Certificates, and accompanying stock powers, for a number of shares
equal to the number of shares returned to the Company.
3. Notwithstanding the provisions of Section 2 hereof, upon receipt of a
certificate signed by the majority of the Company's Board of Directors and
the Company's Secretary certifying that:
(a) Weeks' employment with the Company or a
subsidiary of the Company has been terminated in accordance
with the provisions of Section 6(a) of the Stock Agreement or
that Weeks has voluntarily terminated his employment with the
Company or a subsidiary of the Company, the Escrow Agent will
complete the stock powers relating to all Certificates held
by it and deliver such Certificates, together with the
accompanying stock powers, to the Company; or
(b) Weeks' employment with the Company and/or its
subsidiaries has been terminated in accordance with the
provisions of Section 6(b) of the Stock Agreement, the Escrow
Agent will deliver to Weeks all Certificates held by it with
the accompanying stock powers.
4. Notwithstanding the provisions of Section 2 hereof on April 1, 2005, the
Escrow Agent shall deliver to Weeks all Certificates
2
<PAGE> 11
in its possession, together with the accompanying stock powers.
5. Upon delivery of the Certificates to Weeks, they will bear appropriate
state and federal securities legends as directed by the Company and
appropriate stop transfer instructions will be noted in the stock records
of the Company.
6. During the period that the Escrow Agent holds any of the Certificates,
Weeks shall be entitled to notice of all meetings, annual or special, of
stockholders of the Company at which stockholders have the right to vote
and Weeks shall be entitled to vote all shares represented by such
Certificates held by the Escrow Agent at any such meeting upon any matter
upon which stockholders of the Company have the right to vote. Weeks
shall not be entitled to any of the other attributes of ownership of the
shares subject to escrow, nor shall he have the right to pledge,
hypothecate or otherwise encumber such shares; provided, however, that
Weeks shall be entitled to receive cash dividends paid with respect to any
shares held in escrow. In the event the Company increases or decreases
the number of shares of Common Stock outstanding by means of a stock
split, stock dividend or recapitalization, certificates representing any
additional shares which Weeks would be entitled to receive as the record
holder of any shares of Common Stock subject to escrow shall automatically
be delivered by the Company to the Escrow Agent and such shares shall be
subject to the terms of this Agreement as if they were part of the
Certificates in respect of which they were received.
7. (a) The Escrow Agent shall not be liable to any person for any act by it
except for gross negligence or willful misconduct by the Escrow Agent.
Each of Weeks and the Company, severally, agrees to indemnify and hold
harmless the Escrow Agent for all liabilities of the Escrow Agent arising
from the doing of any act or the failure to do any act except conduct
constituting gross negligence or willful misconduct by the Escrow Agent.
(b) The Escrow Agent shall be obligated only for the performance of such
duties as are specifically set forth herein and shall be protected in
acting or refraining from acting in reliance on any instrument reasonably
believed by it to be genuine and to have been signed or presented by the
proper party or parties. Except as set forth in Section 7(a), the Escrow
Agent shall not be personally liable for any act it may do or omit to do
hereunder as Escrow Agent while acting in good faith and in the exercise
of its own good judgment, and any act done or omitted by it pursuant to
the advice of its own attorneys shall be conclusive evidence of such good
faith.
3
<PAGE> 12
(c) In case the Escrow Agent obeys or complies with any order, judgment
or decree of any court, it shall not be liable to any of the parties
hereto or to any other person, firm or corporation by reason of such
compliance, notwithstanding any such order, judgment or decree being
subsequently reversed, modified, annulled, set aside, vacated or found to
have been entered without jurisdiction.
(d) The Escrow Agent shall be entitled to employ such legal counsel and
other experts as it may deem necessary properly to advise it in
connection with its obligations hereunder. The Escrow Agent may rely
upon the advice of such counsel, and may pay such counsel reasonable
compensation therefor.
(e) The Company agrees to reimburse Escrow Agent for all expenses
incurred by it in the performance of its services under this Agreement.
The Escrow Agent agrees to maintain adequate records and in such form and
detail to support any claim for reimbursement hereunder and to furnish
such records or copies to the Company as it may request.
8. If the Escrow Agent reasonably requires other or further instruments in
connection with this Agreement or its obligations in respect hereto,
Weeks, and the Company each agree that he or it shall furnish such
instruments.
9. It is understood and agreed that should any dispute arise with respect to
the delivery and/or ownership or right of possession of the securities
held by the Escrow Agent hereunder, the Escrow Agent is authorized and
directed to retain in its possession without liability to anyone all or
any part of said securities until such dispute shall have been settled
either by mutual written agreement of the parties concerned or by a final
order, decree or judgment of a court of competent jurisdiction after the
time for appeal has expired and no appeal has been perfected, but the
Escrow Agent shall be under no duty whatsoever to institute or defend any
such proceedings, whether by interpleader or otherwise.
10. Miscellaneous.
(a) This Agreement may only be amended or modified in writing executed by
the parties hereto.
(b) All notices or other communications pursuant to this Agreement shall
be in writing and shall be deemed to have been duly given, if by hand
delivery, upon receipt thereof, or if mailed by certified or registered
mail, postage prepaid, three days following deposit in the United States
mail, and in any event, to be addressed to:
4
<PAGE> 13
the Company, at
One Mississippi Plaza
Tupelo, Mississippi 38801
Weeks, at
Volunteer Bank
P. O. Box 549
Jackson, Tennessee 38302
Escrow Agent, at
One Mississippi Plaza
Tupelo, Mississippi 38801
or to such other address as shall hereafter be provided by proper notice
to the other parties.
(c) This Agreement shall be construed and interpreted according to the
laws of the State of Mississippi.
(d) The foregoing, in conjunction with the Stock Agreement, contains the
entire and only agreement between the parties respecting the subject
matter hereof, and any representation, promise or condition in connection
therewith not incorporated herein or therein shall not be binding upon
either party.
5
<PAGE> 14
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
WITNESS:
<TABLE>
<CAPTION>
<S> <C>
/s/ Cathy M. Robertson /s/ Michael W. Weeks
---------------------- -------------------------
MICHAEL W. WEEKS
BANCORPSOUTH, INC.
Attest:
/s/ Cathy M. Robertson By: /s/ Aubrey B. Patterson,
---------------------- -------------------------
Secretary
BANK OF MISSISSIPPI
Attest:
/s/ Cathy M. Robertson By: /s/ Aubrey B. Patterson, Jr.
------------------------ ---------------------------
Secretary
</TABLE>
6
<PAGE> 1
EXHIBIT 11
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------
(Dollars in thousands except per share amounts.)
1995 1994 1993
PRIMARY ---- ---- ----
- -------
<S> <C> <C> <C>
Average common shares outstanding 20,874,336 10,158,346 9,885,375
Stock options-treasury stock method 141,070 28,361 43,634
2-for-1 stock split effected in the form of a
100% stock dividend paid November 20, 1995 - 10,186,707 9,929,009
----------- ----------- -----------
Average primary shares outstanding 21,015,406 20,373,414 19,858,018
=========== =========== ===========
Adjusted net income $ 35,504 $ 30,728 $ 32,935
=========== =========== ===========
Per share amount $ 1.69 $ 1.51 $ 1.66
=========== =========== ===========
FULLY DILUTED
- -------------
Average common shares outstanding 20,874,336 10,158,346 9,885,375
Stock options-treasury stock method 141,070 36,661 43,634
Convertible subordinated debentures
assumed converted - - 96,675
2-for-1 stock split effected in the form of a
100% stock dividend paid November 20, 1995 - 10,195,007 10,025,684
----------- ----------- -----------
Average fully diluted shares outstanding 21,015,406 20,390,014 20,051,368
=========== =========== ===========
Net income $ 35,504 $ 30,728 $ 32,935
Add: Interest on convertible subordinated
debentures, after taxes - - 116
----------- ----------- -----------
Adjusted net income $ 35,504 $ 30,728 $ 33,051
=========== =========== ===========
Per share amount $ 1.69 $ 1.51 $ 1.65
----------- ----------- -----------
</TABLE>
<PAGE> 1
EXHIBIT 13 (a)
Managements' Discussion and Analysis of Financial
Condition and Results of Operations
<PAGE> 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BancorpSouth, Inc. (the Company) is a bank and thrift holding company with
commercial banking and savings and loan operations in Mississippi and
commercial banking operations in Tennessee. Bank of Mississippi (BOM), the
Company's Mississippi banking subsidiary is headquartered in Tupelo,
Mississippi. Volunteer Bank (VOL), the Company's Tennessee banking subsidiary
is headquartered in Jackson, Tennessee. Laurel Federal Savings and Loan
Association (Laurel Federal), the Company's Mississippi thrift subsidiary, is
headquartered in Laurel, Mississippi. BOM and its consumer finance and credit
life insurance subsidiaries provide commercial banking, leasing, mortgage
origination and servicing and trust services to corporate customers, local
governments, individuals and other financial institutions through an extensive
network of branches and offices located throughout the State of Mississippi.
VOL and its consumer finance and credit life insurance subsidiaries provide
similar banking services in West Tennessee. Laurel Federal provides mortgage,
consumer and commercial lending and traditional thrift deposit services,
including checking accounts.
During 1995, the Company acquired LF Bancorp, Inc.(LF Bancorp),
headquartered in Laurel, Mississippi; First Federal Bank for Savings (First
Federal), headquartered in Starkville, Mississippi; Wes-Tenn Bancorp, Inc.
(Wes-Tenn), headquartered in Covington, Tennessee and the assets and certain
liabilities of Shelby Bank, located in Bartlett, Tennessee, a component of the
suburban Memphis market. Laurel Federal, the principal subsidiary of LF
Bancorp, is operated as a subsidiary of the Company. First Federal and
Wes-Tenn's principal subsidary, Tennessee Community Bank (TCB), were merged
with and into the Company's banking subsidiaries, BOM and VOL, respectively.
The assets and certain liabilities of Shelby Bank were combined with those of
VOL upon acquistion. For a more detailed discussion of these acquisitions,
reference is made to Note 3 of Notes to Consolidated Financial Statements.
The following discussion provides certain information concerning the
consolidated financial condition and results of operations of the Company. For
a complete understanding of the following discussion, reference is made to the
Consolidated Financial Statements and Notes thereto presented elsewhere in this
Annual Report.
Two graphs appear on this page in the Annual Report. The following is a
description of the graphs.
RETURN ON AVERAGE ASSETS
<TABLE>
<S> <C> <C> <C> <C>
.091% .091% 1.24% 1.07% 1.13%
1991 1992 1993 1994 1995
</TABLE>
RETURN ON AVERAGE EQUITY
<TABLE>
<S> <C> <C> <C> <C>
13.15% 12.30% 15.07% 12.75% 13.23%
1991 1992 1993 1994 1995
</TABLE>
THREE YEARS ENDED DECEMBER 31, 1995
RESULTS OF OPERATIONS
Summary
The table below summarizes the Company's net income and returns on average
assets and average shareholders' equity for the years ended December 31, 1995,
1994 and 1993:
<TABLE>
<CAPTION>
1995 1994 1993
-------------- -------------- --------------
<S> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Net income before effect of accounting change $35,504 $30,728 $29,506
Net income $35,504 $30,728 $32,935
Net income per share: $1.69 $1.51 $1.66
Return on average assets 1.13% 1.07% 1.24%
Return on average shareholders' equity 13.23% 12.75% 15.07%
</TABLE>
NET INTEREST REVENUE
Net interest revenue, principally interest earned on assets less interest
costs on liabilities, provides the Company with its principal source of income.
Since net interest revenue is affected by changes in the levels of interest
rates and the amount and composition of interest earning assets and interest
bearing liabilities, one of management's primary tasks is to balance these
interest sensitive components of assets and liabilities for the purpose of
maximizing net interest revenue while at the same time minimizing interest rate
risk to the Company.
<PAGE> 3
The following table presents the average components of interest earning
assets and interest bearing liabilities for each year and their change,
expressed as a percentage, from each of the prior years.
<TABLE>
<CAPTION>
1995 1994 1993
------------------ ------------------ ------------------
AVERAGE % AVERAGE % AVERAGE %
BALANCE CHANGE BALANCE CHANGE BALANCE CHANGE
---------- ------ ---------- ------ ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Interest earning assets: (DOLLARS IN THOUSANDS)
Deposits with other banks $ 19,970 +79.7% $11,112 -24.9% $ 14,799 -27.2%
Held-to-maturity securities 516,919 +20.8% 427,759 -16.1% 509,996 -17.7%
Available-for-sale securities 183,396 -31.1% 266,370 +88.3% 141,496 -
Federal funds sold 39,451 -9.2% 43,437 -11.0% 48,780 -3.7%
Loans and leases, net of unearned 2,146,967 +14.1% 1,881,922 +12.4% 1,675,048 +8.0%
Mortgages held for sale 20,805 -38.1% 33,620 -38.7% 54,833 -1.5%
---------- ---------- ----------
Total interest earning assets $2,927,508 +9.9% $2,664,220 +9.0% $2,444,952 +6.4%
========== ========== ==========
Interest bearing liabilities:
Deposits $2,371,330 +10.3% $2,149,042 +6.7% $2,014,597 +4.6%
Federal funds purchased and
securities sold under
repurchase agreements 40,845 +11.3% 36,686 +4.3% 35,166 +15.6%
Long-term debt 68,452 +17.6% 58,191 +67.6% 34,713 -16.1%
Other 4,706 +29.7% 3,627 +11.1% 3,266 -42.3%
---------- ---------- ----------
Total interest bearing liabilities $2,485,333 +10.6% $2,247,546 +7.7% $2,087,742 +4.2%
========== ========== ==========
Non-interest bearing deposits $361,120 -0.9% $364,451 +11.3% $327,540 +14.8%
========== ========== ==========
</TABLE>
In 1995 loans and leases continued as the most significant growth
components of interest earning assets. Loans and leases grew at faster rates
than interest bearing deposits in 1995, 1994 and 1993; however, the Company's
other funding sources, non-interest bearing deposits, federal funds and Federal
Home Loan Bank advances, were adequate to fund its asset growth.
The changes in the components of interest earning assets, interest bearing
liabilities, and non-interest bearing deposits resulted in the following tax
equivalent net interest revenue expressed as a percent of average earning
assets for the years ended December 31, 1995, 1994 and 1993:
<TABLE>
<S> <C> <C> <C>
1995 1994 1993
----- ----- -----
Net interest margin 4.86% 4.76% 4.89%
</TABLE>
The Company experienced a decrease in net interest margin in 1994 as
interest rates stabilized. As short-term interest rates began to rise in 1995,
the net interest margin stabilized and then increased. The Company began in
1994 to utilize short-term, intermediate-term and long-term borrowings from the
Federal Home Loan Bank for the purpose of funding asset growth. The Company
has sought to lengthen the maturity of deposits by actively seeking four and
five-year certificates of deposit with interest rates slightly above the
relative market for such funds, thereby reducing the net interest margin in all
three years presented. While net interest margin has been reduced in the
short-term, a stable deposit base has been the result of placing emphasis on
intermediate-term deposits.
2
<PAGE> 4
INTEREST RATE SENSITIVITY
The interest sensitivity gap is the difference between the maturity or
repricing scheduling of interest sensitive assets and interest sensitive
liabilities for a given period of time. A prime objective of asset/liability
management is to maximize net interest margin while maintaining a reasonable
mix of interest sensitive assets and liabilities. The following table sets
forth the Company's interest rate sensitivity at December 31, 1995.
<TABLE>
<CAPTION>
INTEREST RATE SENSITIVITY
DECEMBER 31, 1995
MATURING OR REPRICING
-------------------------------------------------
91 DAYS OVER 1
0 TO 90 TO YEAR TO OVER
DAYS 1 YEAR 5 YEARS 5 YEARS
-------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Interest earning assets:
Interest bearing deposits due from banks $ 15,892 $ - $ - $ -
Federal funds sold 35,450 - - -
Held-to-maturity securities 19,668 48,338 227,273 144,024
Available-for-sale securities 36,084 42,365 107,023 54,283
Loans & leases, net of unearned 744,221 389,734 1,080,083 81,128
Mortgages held for sale 25,168 - - -
-------- --------- ---------- --------
Total interest earning assets 876,483 480,437 1,414,379 279,435
-------- --------- ---------- --------
Interest bearing liabilities:
Interest bearing demand deposits & savings 337,432 212,980 448,337 -
Time deposits 402,670 734,733 330,557 3,486
Federal funds purchased & securities
sold under repurchase agreements 34,944 904 - -
Long-term debt 829 2,463 33,006 37,326
Other 1,435 130 730 451
-------- --------- ---------- --------
Total interest bearing liabilities 777,310 951,210 812,630 41,263
-------- --------- ---------- --------
Interest sensitivity gap $ 99,173 $(470,773) $ 601,749 $238,172
======== ========= ========== ========
Cumulative interest sensitivity gap $ 99,173 $(371,600) $ 230,149 $468,321
======== ========= ========== ========
</TABLE>
Two graphs appear on this page in the Annual Report. The following is a
description of the graphs.
NET INTEREST INCOME
TAX EQUIVALENT BASIS
IN MILLIONS
<TABLE>
<S> <C> <C> <C> <C>
$101.13 $115.4 $119.5 $126.9 $142.1
1991 1992 1993 1994 1995
</TABLE>
ALLOWANCE FOR CREDIT LOSSES
AS A PERCENT OF LOANS,
NET OF UNEARNED DISCOUNT
<TABLE>
<S> <C> <C> <C> <C>
1.39% 1.51% 1.54% 1.52% 1.51%
1991 1992 1993 1994 1995
</TABLE>
In the event interest rates decline after 1995, it is likely that the
Company will experience a slightly negative effect on net interest income, as
the cost of funds will decrease at a less rapid rate than interest income on
interest bearing assets. Conversely, in periods of increasing interest rates,
based on the current interest sensitivity gap, the Company will experience
increased net interest income.
PROVISIONS FOR CREDIT LOSSES
The Company has an asset quality review staff which, with a committee of
senior officers, reviews the adequacy of the allowance for credit losses in
each accounting period. An amount is provided as a charge against current
income, based on this group's recommendation and senior management's approval,
to maintain the allowance for credit losses at a level sufficient to absorb
possible losses inherent in the existing loan and lease portfolios. This
provision is determined after examining potential losses in specific credits
and considering the general risks associated with lending functions such as
current and anticipated economic conditions, historical experience as related
to losses, changes in the mix of the loan portfolio and credits which bear
substantial risk of
3
<PAGE> 5
loss but which cannot be readily quantified. The process of determining the
adequacy of the provision requires that management make material estimates and
assumptions which are particularly susceptible to significant change in the
near-term.
The provision for credit losses, the allowance for credit losses as a
percent of loans and leases outstanding at the end of each year and net charge
offs are shown in the following table:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Provision for credit losses $6,206 $5,946 $9,032
Allowance for credit losses as
a percent of loans and leases
outstanding at year end 1.51% 1.52% 1.54%
Net charge offs $3,147 $2,584 $5,680
Net charge offs as a percent
of average loans .15% .14% .34%
</TABLE>
The 1995 provision for credit losses increased from 1994's level by 4.4%
as a result of the growth in loans. The 1994 provision for credit losses
decreased 34.2% from 1993's level as a result of an improvement in general
economic conditions as evidenced by the lowest level of net loans charged off
in recent history. The provision for credit losses for 1993 was 29.6% less
than the provision for the previous year principally as a result of conforming
in 1992 the loan, litigation and real estate valuation policies of VOL to make
them consistent with those applied at BOM. Net charge offs were abnormally
high in 1993 as a result of actions taken at VOL to conform the quality of its
loan portfolio on a basis consistent with BOM.
The provisions for credit losses in 1995 and 1994 have been at reduced
levels from 1993's provision as a result of an improvement in the Company's
loan portfolio as evidenced by the decline in non-performing assets as set
forth in the discussion of Loans in the Financial Condition section of this
presentation.
OTHER REVENUE
The components of other revenue for the years ended December 31, 1995,
1994 and 1993 and the percent of change from the prior year are shown in the
following table:
<TABLE>
<CAPTION>
1995 1994 1993
----------------------- ---------------------- ----------------------
AMOUNT % CHANGE AMOUNT % CHANGE AMOUNT % CHANGE
------- --------- ------ --------- ------ ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Mortgage lending $ 3,723 +333.9% $ 858 -72.1% $ 3,075 +143.1%
Service charges 15,965 +10.6% 14,439 +9.4% 13,199 +4.3%
Life insurance premiums 3,345 +1.4% 3,300 +7.9% 3,057 -1.4%
Trust income 2,237 +19.4% 1,873 +5.5% 1,776 +0.1%
Securities gains (losses), net (765) +161.1% (293) -140.1% 731 +246.4%
Other revenue 6,735 +15.4% 5,835 +18.2% 4,938 +3.6%
------- ------- -------
Total other revenue $31,240 +20.1% $26,012 -2.9% $26,776 +12.7%
======= ======= =======
</TABLE>
The revenue produced by mortgage lending activities rebounded in 1995
primarily as a result of stable interest rates and growth in servicing income.
In 1994, mortgage lending revenue was impacted by losses incurred on the sale
of mortgages in an unfavorable secondary market. The revenue produced by
mortgage lending activities in 1993 increased because of declining interest
rates which stimulated refinancing activity by borrowers and a favorable
secondary mortgage market. The Company's mortgage loan servicing portfolio has
continued to increase as indicated in the following table:
<TABLE>
<CAPTION>
1995 1994 1993
------------------- ------------------ -----------------
AMOUNT % CHANGE AMOUNT % CHANGE AMOUNT % CHANGE
------ -------- ------ -------- ------ --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Mortgage loans serviced $876.0 +8.0% $811.3 +11.4% $728.4 +24.4%
</TABLE>
4
<PAGE> 6
Service charges on deposit accounts increased in 1995 because of higher
volumes of items processed as a result of increased economic activity. Life
insurance premiums decreased slightly in 1995. Growth in life insurance
premiums has not kept pace with loan growth because much of the Company's loan
growth has occurred in indirect automobile financing which does not present the
opportunity to sell credit life insurance. Trust income in 1995 increased
19.4% over 1994. The trust business experienced steady growth as evidenced by
increases in the number of trust accounts and the value of assets under care
(either managed or in custody). Security losses in 1995 and 1994 were
primarily the result of securities being called before their maturity dates.
Security gains in 1993 were primarily the result of certain taxable municipal
securities being sold after losses considered by management to be other than
temporary were recognized in prior periods. Other revenue increased 15.4% and
18.2% in 1995 and 1994, respectively, principally as a result of increases in
fees for non-deposit related services.
OTHER EXPENSES
The components of other expense for the years ended December 31, 1995,
1994 and 1993 and the percent change from the prior year are shown in the
following table:
<TABLE>
<CAPTION>
1995 1994 1993
----------------------- ---------------------- ------------------
AMOUNT % CHANGE AMOUNT % CHANGE AMOUNT % CHANGE
------ --------- ------ --------- ------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Salary and employee benefits $ 54,739 +13.1% $48,413 +5.3% $45,971 +7.2%
Occupancy net of rental income 8,022 +5.3% 7,616 +0.9% 7,548 +7.6%
Equipment 8,860 +18.7% 7,463 +15.6% 6,457 +5.5%
Deposit insurance premiums 3,412 -39.3% 5,621 +9.4% 5,140 +3.4%
Other 36,717 +21.3% 30,259 +7.8% 28,060 -1.0%
-------- ------- -------
Total other expenses $111,750 +12.5% $99,372 +6.6% $93,176 +4.3%
======== ======= =======
</TABLE>
Increases in salary and employee benefits are primarily attributable to
incentives and salary increases, additional employees to staff the banking
locations added in each of the three years and the increased cost of employee
health care benefits. Occupancy and equipment expenses have increased
principally as a result of additional branch offices and upgrades to the
Company's internal operating systems.
Deposit insurance premiums decreased substantially in 1995 as a result of
lower rates in the insurance assessment rate of the Federal Deposit Insurance
Corporation (FDIC). The Federal Deposit Insurance Corporation Improvement Act
of 1991 (FDICIA) requires that deposit premiums be assessed based on the risk
inherent in and the financial soundness of a bank. Effective January 1, 1994,
the actual assessment rate for premiums applicable to a particular institution
depends upon the risk assessment classification assigned to it by the FDIC. As
a result of the financial condition of the Company's subsidiary banks, under
the FDIC's current risk-based premium policy, deposit insurance rates for 1996
for the Company's deposits in the Bank Insurance Fund (BIF) have been assessed
at zero. However, Laurel Federal, the Company's thrift subsidiary, and certain
other of the Company's deposits which were acquired from thrifts over the years
remain in the Savings Association Insurance Fund (SAIF) and will continue to
experience assessments for 1996 at the rate of 23 cents per $100 of insured
deposits, the same rate experienced in all three years in the above table.
Also, Congress is currently considering a special, one-time assessment on SAIF
insured deposits and if enacted, this assessment could result in a one-time,
pre-tax charge of up to $2.7 million.
Other expenses increased 21.3% in 1995 principally as a result of merger
expenses related to the Company's acquisitions. The expansion of the Company's
branch banking network also contributed to increases in all years presented.
5
<PAGE> 7
FINANCIAL CONDITION
LOANS
The Company's loan portfolio represents the largest single component of
its earning asset base. The following table indicates the average loans, year
end balances of the loan portfolio and the percent of increases for the years
presented:
Two graphs appear on this page in the Annual Report. the following is a
description of the graphs.
NONACCRUAL AND RESTRUCTURED LOANS
AS A PERCENT OF LOANS,
NET OF UNEARNED DISCOUNT
<TABLE>
<S> <C> <C> <C> <C>
.081% .081% .45% .22% .07%
1991 1992 1993 1994 1995
</TABLE>
TOTAL SHAREHOLDER'S EQUITY
IN MILLIONS
<TABLE>
<S> <C> <C> <C> <C>
$173.6 $199.9 $233.2 $252.9 $288.1
1991 1992 1993 1994 1995
</TABLE>
<TABLE>
<CAPTION>
1995 1994 1993
------------------ -------------------- -----------------
AMOUNT % CHANGE AMOUNT % CHANGE AMOUNT % CHANGE
------ -------- ------ -------- ------ --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Loans, net of unearned - average $2,147 +14.1% $1,882 +12.4% $1,675 +8.0%
Loans, net of unearned - year end $2,295 +13.3% $2,026 +13.4% $1,786 +11.8%
</TABLE>
The Company's loan portfolio continued to grow in 1995 in both its
Mississippi and Tennessee markets. The increase in 1994 occurred principally
in the Company's Mississippi market. The Company strives to maintain a
high-quality loan portfolio, forsaking growth for quality. The Company's
non-performing assets which were significantly reduced in 1994 and continued to
decline in 1995 and which are carried either in the loan account or other
assets on the consolidated balance sheets, were as follows at the end of each
year presented.
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------------
1995 1994 1993
------ ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
Foreclosed properties $2,662 $1,757 $ 1,652
Non-accrual loans 1,592 3,029 4,072
Loans 90 days or more past due 5,148 3,614 4,277
Restructured loans 7 1,448 4,018
------ ------ -------
Total non-performing assets $9,409 $9,848 $14,019
====== ====== =======
</TABLE>
The Company has not as a matter of policy participated in any highly
leveraged transactions nor made any loans or investments relating to corporate
transactions such as leveraged buyouts or leveraged recapitalizations.
SECURITIES AND OTHER EARNING ASSETS
The securities portfolio is used to make various term investments, provide
a source of liquidity and to serve as collateral to secure certain types of
deposits. A portion of the Company's securities portfolio continues to be
tax-exempt. Investments in tax-exempt securities totaled $134.5 million at
December 31, 1995, compared to $144.3 million at the end of 1994. The Company
invests only in investment grade securities, with the exception of obligations
of Mississippi and Tennessee counties and municipalities, and avoids other high
yield non-rated securities and investments.
At December 31, 1995, the Company's available-for-sale securities totaled
$239.8 million. These securities, which are subject to possible sale, are
recorded at fair value. At December 31, 1995, the Company held no securities
whose decline in fair value was considered other than temporary.
Net unrealized gains on investment securities as of December 31, 1995
totaled $12.6 million. Net unrealized gains on held-to-maturity securities
comprised $8.8 million of that total while net unrealized gains on
available-for-sale securities were $3.8 million.
Net unrealized losses on investment securities as of December 31, 1994,
amounted to $22.6 million. Of that total, $19.8 million was attributable to
held-to-maturity securities and $2.8 million available-for-sale securities.
These unrealized losses were a direct result of the strong upward movement in
interest rates during the 1994. While these interest rate movements presented
buying opportunities, they also resulted in lower market values on existing
investments. Because the average maturity of securities owned is relatively
short, market value fluctuations due to interest rate changes are softened and
the impact of foregone earnings is reduced.
6
<PAGE> 8
DEPOSITS
The following table presents the Company's average deposit mix and percent
of change for the years indicated:
<TABLE>
<CAPTION>
1995 1994 1993
---------------- ----------------- -----------------
AVERAGE % AVERAGE % AVERAGE %
BALANCE CHANGE BALANCE CHANGE BALANCE CHANGE
------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Interest bearing deposits $2,371.3 +10.3% $2,149.0 +6.7% $2,014.6 +4.6%
Non-interest bearing deposits $ 361.1 +0.9% $ 364.5 +11.3% $ 327.5 +14.8%
</TABLE>
The Company's deposit mix continued to experience change in 1995. By year
end 1995, other time deposits showed an increase of 11.9% from the end of 1994,
while interest bearing demand deposits decreased slightly by 0.6% and other
short-term savings accounts increased 4.6%. Non-interest bearing demand
deposits decreased 0.5% from year end 1994 to year end 1995. Management
believes that significant declines in interest rates in 1993 and early 1994
caused depositors to reduce the period over which they were willing to commit
their funds and shifted their deposits from longer term, fixed rate instruments
to daily savings and demand accounts, or even to seek alternative non-bank
investments. As interest rates began to rise in mid-1994, funds began to move
into longer term certificates of deposits as depositors sought higher yields on
their deposits. That trend continued into 1995. Deposits are the Company's
primary source of funds to support its earning assets. The Company's primary
market areas provide the sources of all deposits for all periods presented.
LIQUIDITY
The Company's goal is to provide adequate funds to meet changes in loan
demand or any potential increase in the normal level of deposit withdrawals.
This goal is accomplished primarily by maintaining sufficient short-term liquid
assets coupled with consistent growth in core deposits in order to fund earning
assets and to maintain the availability of unused capacity to acquire funds in
national and local capital markets. The Company's traditional sources of
maturing loans, investment securities, mortgages held for sale, purchased
federal funds and base of core deposits seem adequate to meet liquidity needs
for normal operations. In 1994, the Company's two subsidiary banks initiated
relationships with the Federal Home Loan Bank which provided an additional
source of liquidity to fund term loans with borrowings of matched maturities.
The matching of these assets and liabilities has had the effect of reducing the
Company's net interest margin.
CAPITAL RESOURCES
The Company is required to comply with the risk-based capital guidelines
established by the Board of Governors of the Federal Reserve System (FRB).
These guidelines apply a variety of weighting factors which vary according to
the level of risk associated with the assets. Capital is measured in two
"Tiers": Tier I consists of paid-up share capital, including common stock and
disclosed reserves (retained earnings and related surplus in the case of common
stock), and Tier II consists of general allowance for losses on loans and
leases, "hybrid" debt capital instruments, and all or a portion of other
subordinated capital debt, depending upon remaining term to maturity (such as
the Company's 9% subordinated debentures due 1999). The Company's Tier I
capital and total capital, as a percentage of total risk-adjusted assets, was
12.11% and 13.97%, respectively at December 31, 1995, compared to 11.31% and
13.49% at December 31, 1994. Both ratios exceed the required minimum levels
for these ratios of 4% and 8% respectively. In addition, the Company's
leverage capital ratio (Tier I capital divided by total assets, less goodwill)
was 8.56% at December 31, 1995 and 8.33% at December 31, 1994, compared to the
required minimum leverage capital ratio of 3%.
The FDIC's capital-based supervisory system for insured financial
institutions categorizes the capital position for banks into five categories,
ranging from well capitalized to critically undercapitalized. For a bank to
classify as "well capitalized", the Tier I risk-based capital, total risk-based
capital and leverage capital ratios must be at least 6%, 10% and 5%,
respectively. Each of the Company's bank subsidiaries meet the criteria for
the "well capitalized" category at December 31, 1995.
7
<PAGE> 9
The Office of Thrift Supervision (OTS) establishes capital requirements
for savings associations. These requirements include a tangible capital
requirement, a leverage limit and a risk-based capital requirement. The
tangible capital requirement requires a savings association to maintain
tangible capital in an amount no less than 1.5% of adjusted total assets, the
leverage limit requires an association to maintain core capital of no less than
3% of adjusted assets and the risk-based capital requirement requires an
association to have total capital equal to 8% of risk-weighted assets, which
must include core capital equal to at least 4% of risk-weighted assets. The
Company's thrift subsidiary met each of these capital requirements at December
31, 1995.
The Company has determined to pursue acquisition transactions of
depository institutions and businesses closely related to banking which further
the Company's business strategies. The Company anticipates that the
consideration for substantially all of these transactions, if completed, will
be shares of the Company's Common Stock.
8
<PAGE> 1
EXHIBIT 13 (b)
Consolidated Financial Statements and Notes
thereto and Report of Independent Auditors
33
<PAGE> 2
CONSOLIDATED BALANCE SHEETS
BANCORPSOUTH, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------
1995 1994
---------- ----------
(In thousands)
<S> <C> <C>
ASSETS
Cash and due from banks (Note 19) $ 149,923 $ 138,230
Interest bearing deposits with other banks 15,892 6,463
Held-to-maturity securities (Note 4) (fair value
of $448,075 and $532,985) 439,303 552,832
Available-for-sale securities (Note 5) (amortized cost
of $235,909 and $196,760) 239,755 194,029
Federal funds sold 35,450 3,275
Loans (Notes 6, 7 and 17) 2,371,684 2,091,075
Less: Unearned discount 76,518 65,461
Allowance for credit losses 34,636 30,830
---------- ----------
Net loans 2,260,530 1,994,784
Mortgages held for sale 25,168 10,471
Premises and equipment, net (Note 8) 81,240 71,458
Accrued interest receivable 28,992 22,950
Other assets (Note 11 and 18) 25,775 24,626
---------- ----------
Total assets $3,302,028 $3,019,118
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand:
Non-interest bearing $ 393,417 $ 395,416
Interest bearing 665,313 630,832
Savings 333,436 303,881
Other time (Note 9) 1,471,446 1,268,540
---------- ----------
Total deposits 2,863,612 2,598,669
Federal funds purchased and securities sold under
repurchase agreements (Note 9) 35,848 63,314
Accrued interest payable 13,695 9,623
Other liabilities (Notes 11 and 12) 27,154 27,244
Long-term debt (Note 10) 73,624 67,416
---------- ----------
Total liabilities 3,013,933 2,766,266
---------- ----------
Shareholders' equity (Notes 2, 14, 15 and 16)
Common stock, $2.50 par value
Authorized - 500,000,000 shares; Issued - 21,105,664 (reflects the
1995 2-for-1 stock split effected as a dividend) and 10,328,460
shares at December 31, 1995 and 1994, respectively 52,764 25,819
Capital surplus 84,391 79,008
Unrealized gain (loss) on available-for-sale securities, net of tax 2,480 (1,702)
Retained earnings 149,494 152,655
Treasury stock at cost (108,384 and 165,356 shares
at December 31, 1995 and 1994, respectively) (1,034) (2,928)
---------- ----------
Total shareholders' equity 288,095 252,852
---------- ----------
Commitments and contingent liabilities (Notes 6 and 19)
Total liabilities and shareholders' equity $3,302,028 $3,019,118
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
CONSOLIDATED STATEMENTS OF INCOME
BANCORPSOUTH, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
----------------------------------------
1995 1994 1993
-------- -------- --------
(In thousands, except per share amounts)
<S> <C> <C> <C>
INTEREST REVENUE:
Loans receivable $203,800 $163,727 $149,951
Deposits with other banks 857 660 833
Federal funds sold 2,205 1,756 1,487
Held-to-maturity securities:
U.S. Treasury 3,977 2,063 4,550
U.S. Government agencies and corporations 24,175 16,579 17,955
Obligations of states and political subdivisions 7,491 7,213 8,854
Other 168 270 596
Available-for-sale securities 8,321 13,227 6,261
Mortgages held for sale 1,433 2,400 3,382
-------- -------- --------
Total interest revenue 252,427 207,895 193,869
-------- -------- --------
INTEREST EXPENSE:
Deposits 107,165 79,270 74,751
Federal funds purchased and securities sold
under repurchase agreements (Note 9) 2,084 1,338 982
Other (Note 10) 5,208 4,421 2,982
-------- -------- --------
Total interest expense 114,457 85,029 78,715
-------- -------- --------
Net interest revenue 137,970 122,866 115,154
Provision for credit losses (Note 7) 6,206 5,946 9,032
-------- -------- --------
Net interest revenue, after provision for credit losses 131,764 116,920 106,122
-------- -------- --------
OTHER REVENUE:
Mortgage lending 3,723 858 3,075
Service charges 15,965 14,439 13,199
Life insurance premiums 3,345 3,300 3,057
Trust income 2,237 1,873 1,776
Securities gains (losses), net (765) (293) 731
Other 6,735 5,835 4,938
-------- -------- --------
Total other revenue 31,240 26,012 26,776
-------- -------- --------
OTHER EXPENSES:
Salaries and employee benefits (Notes 12 and 14) 54,739 48,413 45,971
Occupancy net of rental income 8,022 7,616 7,548
Equipment 8,860 7,463 6,457
Deposit insurance premiums 3,412 5,621 5,140
Other 36,717 30,259 28,060
-------- -------- --------
Total other expenses 111,750 99,372 93,176
-------- -------- --------
Income before income taxes and effect
of accounting change 51,254 43,560 39,722
Income tax expense (Note 11) 15,750 12,832 10,216
-------- -------- --------
Income before effect of accounting change 35,504 30,728 29,506
Cumulative effect on prior years of change
in accounting for income taxes (Note 1) - - 3,429
-------- -------- --------
Net income $ 35,504 $ 30,728 $ 32,935
======== ======== ========
EARNINGS PER SHARE (Note 16):
Before effect of accounting change $1.69 $1.51 $1.49
======== ======== ========
After effect of accounting change $1.69 $1.51 $1.66
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
BANCORPSOUTH, INC. AND SUBSIDIARIES
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
COMMON STOCK UNREALIZED
--------------------- CAPITAL GAINS RETAINED TREASURY
SHARES AMOUNT SURPLUS (LOSSES), NET EARNINGS STOCK TOTAL
----------- ------- ------- ------------- -------- ---------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1992 8,580,313 $21,575 $35,221 - $144,041 $(1,041) $199,796
Shares issued:
Conversion of debentures (Note 10) 316,382 791 6,989 - - - 7,780
15% stock dividend (Note 15) 1,025,107 2,580 33,543 - (36,199) - (76)
Conversion of warrants 59,540 148 452 - - - 600
Other shares issued 119,909 301 1,313 - - - 1,614
Recognition of stock compensation - - - - 32 - 32
Purchase of treasury stock (70,061) - - - - (1,026) (1,026)
Purchase of stock warrants - - (25) - - - (25)
Net income - - - - 32,935 - 32,935
Cash dividends declared:
BancorpSouth, at $.54 per share (1) - - - - (7,585) - (7,585)
Pooled acquisitions - - - - (878) - (878)
---------- ------- ------- ------ -------- ------- --------
BALANCE, DECEMBER 31, 1993 10,031,190 25,395 77,493 - 132,346 (2,067) 233,167
Impact at January 1, 1994 of change in
accounting principle, net of tax (Note 1) - - - 2,573 - - 2,573
Shares issued:
Employee stock bonus plan (Note 14) 25,000 63 750 - (813) - -
Conversion of warrants 119,665 299 908 - - - 1,207
Other shares issued 25,103 62 341 - - - 403
Recognition of stock compensation - - - - 438 - 438
Purchase of treasury stock (37,854) - - - - (861) (861)
Purchase of stock warrants - - - - (484) - (484)
Change in market valuation of
available-for-sale securities, net of tax - - - (4,275) - - (4,275)
Net income - - - - 30,728 - 30,728
Cash dividends declared:
BancorpSouth, at $.555 per share (1) - - - - (8,754) - (8,754)
Pooled acquisitions - - - - (1,290) - (1,290)
--------- ------ ------ ------ -------- -------- ---------
BALANCE, DECEMBER 31, 1994 10,163,104 25,819 79,008 (1,702) 152,655 (2,928) 252,852
Shares issued:
Employee stock bonus plan (Note 14) 15,000 37 476 - (513) - -
Purchase business acquisitions (Note 3) 259,285 370 4,530 - - 1,894 6,794
Other shares issued 61,883 154 404 - - - 558
Recognition of stock compensation - - - - 436 - 436
Fractional shares redeemed in poolings (797) (1) (21) - - - (22)
Purchase stock warrants - - - (6) - - (6)
Change in market valuation of
available-for-sale securities, net of tax - - - 4,182 - - 4,182
Net income - - - - 35,504 - 35,504
Stock split effected in the form
of a stock dividend (Note 2) 10,498,805 26,385 - - (26,385) - -
Cash dividends declared:
BancorpSouth, at $.62 per share (1) - - - - (11,278) - (11,278)
Pooled acquisitions - - - - (925) - (925)
----------- -------- ------- ------ -------- ------- --------
BALANCE, DECEMBER 31, 1995 20,997,280 $52,764 $84,391 $2,480 $149,494 $(1,034) $288,095
=========== ======== ======= ====== ======== ======= ========
</TABLE>
(1) Cash dividends declared per share have been adjusted for the two-for-one
stock split in the form of a stock dividend paid November 20, 1995.
See accompanying notes to consolidated financial statements.
<PAGE> 5
CONSOLIDATED STATEMENTS OF CASH FLOWS
BANCORPSOUTH, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-------------------------------------------------
1995 1994 1993
----------- --------- ---------
(In thousands)
<S> <C> <C> <C>
Operating activities:
Net income $ 35,504 $ 30,728 $ 32,935
Adjustment to reconcile net income to net
cash (used) provided by operating activities:
Provision for credit losses 6,206 5,946 9,032
Depreciation and amortization 8,448 6,952 6,081
Deferred taxes 74 3,313 (416)
Amortization of intangibles 726 583 315
Amortization of debt securities premium
and discount, net (663) 1,483 2,343
Decrease in trading securities, net - - 2,019
Security losses (gains), net 765 293 (731)
Net deferred loan origination expense (2,624) (2,087) (2,880)
(Increase) decrease in interest receivable (6,042) (4,699) 1,848
Increase (decrease) in interest payable 4,072 2,119 (497)
Proceeds from mortgages sold 150,572 266,911 216,069
Origination of mortgages for sale (163,415) (182,192) (266,335)
Other, net 4,457 (46) (2,136)
-------- -------- --------
Net cash provided by (used) in operating activities 38,080 129,304 (2,353)
-------- -------- --------
Investing activities:
Proceeds from calls and maturities of held-
to-maturity securities 145,071 72,358 247,968
Proceeds from calls and maturities of available-
for-sale securities 290,404 498,144 -
Proceeds from sales of held-to-maturity securities 931 994 12,139
Proceeds from sales of available-for-sale securities 11,708 19,070 -
Purchases of held-to-maturity securities (111,875) (253,423) (297,535)
Purchases of available-for-sale securities (261,322) (423,712) -
Net increase (decrease) in short-term investments (32,175) 27,676 50,070
Net increase in loans (269,328) (240,538) (188,207)
Purchases of premises and equipment (18,695) (10,050) (12,828)
Proceeds from sale of premises and equipment 480 103 2,575
Other, net (5,268) (2,914) (5,091)
-------- -------- --------
Net cash used in investing activities (250,069) (312,292) (190,909)
-------- -------- --------
Financing activities:
Net increase in deposits 264,943 132,384 156,117
Net increase (decrease) in short-term debt and other
liabilities (28,478) 26,448 (2,328)
Advances on long-term debt 21,000 43,093 8,025
Repayment of long-term debt (14,792) (9,432) (1,878)
Issuance of common stock 506 404 1,522
Acquisition of treasury stock - (861) (1,026)
Purchase of stock warrants (6) (484) (25)
Proceeds from warrant conversion, net - 1,207 600
Payment of cash dividends (10,062) (7,669) (10,253)
-------- -------- --------
Net cash provided by financing activities 233,111 185,090 150,754
-------- -------- --------
Increase (decrease) in cash and cash equivalents 21,122 2,102 (42,508)
Cash and cash equivalents at beginning of year 144,693 42,591 185,099
-------- -------- --------
Cash and cash equivalents at end of year $165,815 $144,693 $142,591
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BANCORPSOUTH, INC. AND SUBSIDIARIES
DECEMBER 31, 1995, 1994 AND 1993
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements of BancorpSouth, Inc. (the
Company) have been prepared in conformity with generally accepted accounting
principles and prevailing practices within the banking industry. In preparing
the financial statements, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities as of
the date of the balance sheet and revenues and expenses for the period
reported. Actual results could differ significantly from those estimates.
The Company and its subsidiaries are engaged in the business of banking and
activities closely related to banking. The Company and its subsidiaries are
subject to the regulations of certain federal and state agencies and undergo
periodic examinations by those regulatory agencies. The following is a summary
of the more significant accounting and reporting policies.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries, Bank of Mississippi (BOM), Volunteer Bank
(VOL) and Laurel Federal Savings and Loan Association (Laurel Federal). All
significant intercompany accounts and transactions have been eliminated in
consolidation. Certain 1994 and 1993 amounts have been reclassified to
conform with the 1995 presentation.
CASH FLOW STATEMENTS
Cash equivalents include cash and amounts due from banks including
interest bearing deposits with other banks. The Company paid interest of
$110,385,000, $82,910,000 and $79,213,000 and income taxes of $15,480,000,
$8,505,000 and $8,487,000 for the years ended December 31, 1995, 1994 and 1993,
respectively. During 1994, the Company implemented Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" issued by the Financial Accounting Standards Board
(FASB), increasing shareholders' equity by $2,573,000. See Note 4 regarding
the reclassification from held-to-maturity securities to available-for-sale
securities during 1995 which resulted in increasing shareholders' equity by
$390,000. See Notes 10, 14 and 15 related to the conversion of convertible
subordinated capital debentures, the stock bonus plan and the stock dividend
paid.
SECURITIES
The Company adopted SFAS 115 effective January 1, 1994. Under SFAS 115,
securities are classified as either held-to-maturity, trading or
available-for-sale.
Held-to-maturity securities are debt securities that the Company has the
ability and management has the positive intent to hold to maturity. They are
reported at amortized cost.
Trading securities are debt and equity securities that are bought and held
principally for the purpose of selling them in the near term. They are
reported at fair value, with unrealized gains and losses included in earnings.
The Company had no trading securities at December 31, 1995 and 1994.
Available-for-sale securities are debt and equity securities not
classified as either held-to-maturity securities or trading securities. They
are reported at fair value, with unrealized gains and losses excluded from
earnings and reported, net of tax, in a separate component of shareholders'
equity until realized. Prior to the adoption by the Company on January 1,
1994, of SFAS 115, these securities were held for sale and carried at the lower
of aggregate amortized cost or market.
Gains and losses on securities are determined on the identified
certificate basis. Amortization of premium and accretion of discount are
computed using the interest method. Changes in the valuation of securities
which are considered other than temporary are recorded as losses in the period
recognized.
<PAGE> 7
LOANS
Loans are recorded at the face amount of the notes reduced by collections
of principal. Loans include net unamortized deferred origination costs. Unearned
discount on discount-basis consumer loans is recognized as income using a method
which approximates the level yield method. Interest is recorded monthly as
earned on all other loans. Where doubt exists as to the collectibility of the
loans, interest income is recorded as payment is received.
PROVISION AND ALLOWANCE FOR CREDIT LOSSES
The provision for credit losses charged to 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
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. Such 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.
MORTGAGES HELD FOR SALE
Mortgages held for sale are recorded at lower of aggregate cost or market
as determined by outstanding commitments from investors or current investor
yield requirements.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost, less accumulated depreciation
and amortization. Provisions for depreciation and amortization, computed using
straight-line and accelerated methods, are charged to expense over the shorter
of the lease term or the estimated useful lives of the assets. Costs of major
additions and improvements are capitalized. Expenditures for maintenance and
repairs are charged to expense as incurred.
OTHER REAL ESTATE OWNED
Real estate acquired in settlement of loans is carried at the lower of
cost or fair value, less selling cost. Fair value is based on independent
appraisals and other relevant factors. At the time of acquisition, any excess
of cost over fair value is charged to the allowance for credit losses. Gains
and losses realized on sale are included in other revenue.
PENSION EXPENSE
The Company maintains a non-contributory defined benefit pension plan that
covers all employees who qualify as to age and length of service. Net
periodic pension expense is actuarially determined.
INCOME TAXES
Effective January 1, 1993, the Company adopted the provisions of SFAS
No. 109, "Accounting for Income Taxes", resulting in a $3,429,000 benefit and
reported the cumulative effect of that change in the method of accounting for
income taxes in the 1993 consolidated statement of income. Under the asset and
liability method of SFAS No. 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under SFAS No. 109, the
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. The
Company, with the exception of BOM's credit life insurance subsidiary and VOL's
credit life insurance subsidiary, files a consolidated federal income tax
return.
<PAGE> 8
RECENT PRONOUNCEMENTS
SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of", issued in March 1995, provides guidance
for recognition of impairment losses related to long-lived assets, and certain
intangibles and related goodwill. This Statement is effective for fiscal
beginning after December 15, 1995.
SFAS No. 123 "Accounting for Stock-Based Compensation" was issued in
October 1995, and provides for a fair value method of accounting for
stock-based compensation arrangements rather than the intrinsic value method
now followed. Adoption of the fair value method for purposes of preparing
basic financial statements is not required although disclosure or the effect of
such adoptions is. The Statement is effective for stock-based compensation
arrangements awarded after December 15, 1995.
Management believes the adoption of the above-mentioned Statements will
not have a material impact on the Company's consolidated financial statement.
OTHER
Trust income is recorded on the cash basis as received, which does not
differ materially from the accrual basis.
(2) STOCK SPLIT
On November 20, 1995, the Company's two-for-one stock split effected in
the form of a 100% stock dividend resulted in the issuance of 10,495,805 new
shares of common stock. Information relating to earnings per share, dividends
per share and other share data has been retroactively adjusted to reflect this
stock split.
(3) ACQUISITIONS
On March 31, 1995, LF Bancorp, Inc. (LF Bancorp), a $190 million thrift
holding company and parent of Laurel Federal, merged with and into the Company
and Laurel Federal became a subsidiary of the Company. Pursuant to the merger,
each share of common stock of LF Bancorp was converted into 2.026 shares of the
Company's common stock, or a total of 1,664,202 common shares. This
transaction was accounted for as a pooling of interests and the Company's
financial statements for all periods presented include the consolidated
accounts of LF Bancorp.
On July 31, 1995, First Federal Bank for Savings (First Federal), a $25
million savings and loan association, merged with and into the Company.
Pursuant to the merger, First Federal was merged into BOM. Each share of
common stock of First Federal was converted into 1.396 shares of the Company's
common stock, or a total of 219,654 common shares. This transaction was
accounted for as a pooling of interests. The result of operations of First
Federal are included in the Company's financial statements for all periods
presented but are not presented separately in the table below because they are
not material.
On September 1, 1995, the Company, issued 156,818 shares of common stock
to effect the purchase of substantially all of the assets and the assumption of
certain liabilities of the Shelby Bank (Shelby). The purchase price was
allocated to the acquired assets and liabilities at their respective estimated
fair value at the date of acquisition.
On November 30, 1995, Wes-Tenn Bancorp, Inc. (Wes-Tenn), a $340 million
bank holding company, merged with and into the Company. Pursuant to the
merger, Wes-Tenn's subsidiary bank, Tennessee Community Bank (TCB), was merged
into VOL and TCB's wholly-owned subsidiaries, TC Finance, Inc. and West
Tennessee Life Insurance Company, became subsidiaries of VOL. Each share of
common stock of Wes-Tenn was converted into 1.214702 shares of the Company's
common stock, or a total of 3,059,764 common shares. This transaction was
accounted for as a pooling of interests and the Company's financial statements
for all periods presented include the consolidated accounts of Wes-Tenn. Prior
to its merger with the Company, Wes-Tenn on April 3, 1995, acquired West
Tennessee Financial Corporation (WTFC), a $38 million bank holding company and
parent of Community Bank of West Tennessee (CBWT). WTFC and CBWT were merged
into Wes-Tenn and TCB, respectively. This acquisition was accounted for as a
purchase and the purchase price was allocated to the acquired assets and
liabilities at their respective estimated fair value at the date of acquisition.
<PAGE> 9
Details of the results of operations of the previously separate companies
for the period before the combinations were consummated that are included in
the current consolidated net income follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1995 DECEMBER 31, 1994
------------------ ---------------------------
LF
COMPANY WES-TENN COMPANY WES-TENN BANCORP
------- -------- ------- -------- -------
(In thousands except per share data)
<S> <C> <C> <C> <C> <C>
Net interest revenue.................. $92,542 $9,362 $103,876 $11,770 $6,278
Provision for credit losses........... 4,132 464 5,652 285 -
Other revenue......................... 21,020 1,760 23,421 1,631 926
Other expense......................... 74,525 7,266 85,799 8,540 5,872
Income tax expense.................... 11,018 961 10,400 1,354 476
------- ------ -------- ------- ------
Net income............................ $23,887 $2,431 $ 25,446 $ 3,222 $ 856
------- ------ -------- ------- ------
Earnings per share.................... $ 1.33 $ 1.01 $ 1.605 $ 1.44 $ 2.30
Dividend declared per share........... 0.45 0.37 0.555 0.37 0.60
</TABLE>
(4) HELD-TO-MATURITY SECURITIES
A comparison of amortized cost and estimated fair values of
held-to-maturity securities as of December 31, 1995 and 1994 follows:
<TABLE>
<CAPTION>
1995
----------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ----------
(In thousands)
<S> <C> <C> <C> <C>
U.S. Treasury $33,355 $ 1,698 $ 10 $ 35,043
U.S. Government agencies and corporations 293,831 5,603 771 298,663
Tax exempt obligations of states and political subdivisions 111,330 3,297 1,052 113,575
Other 787 7 - 794
-------- ------- ------ --------
Total $439,303 $10,605 $1,833 $448,075
======== ======= ====== ========
</TABLE>
<TABLE>
<CAPTION>
1994
---------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
U.S. Treasury $ 59,793 $ 35 $ 2,124 $ 57,704
U.S. Government agencies and corporations 376,708 192 18,166 358,734
Tax exempt obligations of states and political subdivisions 112,915 3,194 2,979 113,130
Other 3,416 1 - 3,417
-------- ------ ------- --------
Total $552,832 $3,422 $23,269 $532,985
======== ====== ======= ========
</TABLE>
Gross gains of $123,000 and gross losses of $389,000 were recognized in
1995, gross gains of $67,000 and gross losses of $181,000 were recognized in
1994 and gross gains of $588,000 and gross losses of $585,000 were recognized
in 1993 on held-to-maturity securities. These gains and losses were primarily
the result of held-to-maturity securities being called prior to maturity.
Held-to-maturity securities with a carrying value of approximately
$279,000,000 at December 31, 1995, were pledged to secure public and trust
funds on deposit and for other purposes.
On November 15, 1995, the FASB issued a special report pertaining to the
implementation of SFAS No. 115, "Accounting for Certain Investments in Debt and
Equity Securities". Concurrent ith the issuance of the report but not later
than December 31, 1995, the FASB allowed for a reassessment of the
appropriateness of the classification of securities held at that time and to
account for any resulting reclassification at fair value. Reclassifications
from the held-to-maturity category that were a result of this
<PAGE> 10
one-time assessment would not call into question the intent of the Company to
hold other debt securities until maturity in the future. Based upon this
guidance, the Company transferred securities with an amortized cost of
$59,069,000 and an estimated fair value of $59,698,000 to the
available-for-sale category with a resulting unrealized gain of $629,000.
The amortized cost and estimated fair value of held-to-maturity
securities at December 31, 1995 by contractual maturity are shown below.
Actual maturities may differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
1995
---------------------
ESTIMATED
AMORTIZED FAIR
COST VALUE
---------------------
(In thousands)
<S> <C> <C>
Due in one year or less $ 32,941 $ 32,863
Due after one year through five years 222,789 226,700
Due after five years through ten years 168,116 173,154
Due after ten years 15,457 15,358
-------- --------
Total $439,303 $448,075
======== ========
</TABLE>
(5) AVAILABLE-FOR-SALE SECURITIES
A comparison of amortized cost and estimated fair values of
available-for-sale securities as of December 31, 1995 and 1994 follows:
<TABLE>
<CAPTION>
1995
--------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
(In thousands)
<S> <C> <C> <C> <C>
U.S. Treasury $ 50,626 $ 683 $ 68 $ 51,241
U.S. Government agencies and corporations 127,087 1,143 742 127,488
Tax exempt obligations of states and political subdivisions 23,212 444 315 23,341
Preferred stock 19,500 - - 19,500
Other 15,484 2,756 55 18,185
-------- ------ ------ --------
Total $235,909 $5,026 $1,180 $239,755
======== ====== ====== ========
</TABLE>
<TABLE>
<CAPTION>
1994
--------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
(In thousands)
<S> <C> <C> <C> <C>
U.S. Treasury $ 31,642 $ 30 $1,248 $ 30,424
U.S. Government agencies and corporations 70,205 101 2,699 67,607
Tax exempt obligations of states and political subdivisions 31,377 339 1,482 30,234
Preferred stock 53,000 - - 53,000
Other 10,536 2,283 55 12,764
-------- ------ ------ --------
Total $196,760 $2,753 $5,484 $194,029
======== ====== ====== ========
</TABLE>
Gross gains of $900,000 and gross losses of $1,399,000 were recognized in
1995, gross gains of $170,000 and gross losses of $349,000 were recognized in
1994 and gross gains of $807,000 and gross losses of $180,000 were recognized
in 1993 on available-for-sale securities. Gross gains of $101,000 were
recognized in 1993 from sales of trading securities.
<PAGE> 11
Available-for-sale securities with a carrying value of approximately
$82,000,000 at December 31, 1995, were pledged to secure public and trust funds
on deposit and for other purposes.
The amortized cost and estimated fair value of available-for-sale
securities at December 31, 1995 by contractual maturity are shown below. Actual
maturities may differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalities.
<TABLE>
<CAPTION>
1995
---------------------
ESTIMATED
AMORTIZED FAIR
COST VALUE
--------- ---------
(In thousands)
<S> <C> <C>
Due in one year or less $ 49,946 $ 50,022
Due after one year through five years 128,564 129,684
Due after five years through ten years 31,986 34,767
Due after ten years 25,413 25,282
-------- --------
Total $235,909 $239,755
======== ========
</TABLE>
(6) LOANS
A summary of loans classified by collateral type at December 31, 1995 and
1994 follows:
<TABLE>
<CAPTION>
1995 1994
--------- ----------
(In thousands)
<S> <C> <C>
Commercial and agricultural $ 223,225 $ 211,988
Consumer and installment 695,127 633,692
Real estate mortgage 1,314,935 1,151,666
Lease financing 121,617 81,816
Other 16,780 11,913
---------- ----------
Total $2,371,684 $2,091,075
========== ==========
</TABLE>
Non-performing loans consist of both non-accrual loans and loans which
have been restructured (primarily in the form of reduced interest rates) because
of the borrower's weakened financial condition. The aggregate principal balance
of non-accrual loans was $1,592,000 and $3,029,000 at December 31, 1995 and
1994, respectively. Restructured loans totaled $7,000 and $1,448,000 at
December 31, 1995 and 1994, respectively.
The recorded investment in loans considered impaired at December 31,
1995, under SFAS No. 114 was $30,875,000 with a valuation reserve of
$3,279,000. Interest income of approximately $2,740,000 was recognized on
these impaired loans. There were no impaired loans without a valuation
reserve at December 31, 1995.
The total amount of interest earned on non-performing loans was
approximately $70,000, $214,000 and $277,000 in 1995, 1994 and 1993,
respectively. The gross interest income which would have been recorded under
the original terms of those loans amounted to $105,000, $353,000 and $611,000 in
1995, 1994 and 1993, respectively.
<PAGE> 12
(7) ALLOWANCE FOR CREDIT LOSSES
The following schedule summarized the changes in the allowance for
credit losses for the years ended December 31, 1995, 1994 and 1993:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
(In thousands)
<S> <C> <C> <C>
Balance at beginning of year $30,830 $27,468 $24,116
Provision charged to expense 6,206 5,946 9,032
Recoveries 1,567 3,277 1,996
Loans charged off (4,714) (5,861) (7,676)
Acquisitions 747 - -
------- ------- -------
Balance at end of year $34,636 $30,830 $27,468
======= ======= =======
</TABLE>
(8) PREMISES AND EQUIPMENT
A summary by asset classification at December 31, 1995 and 1994 follows:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE
YEARS 1995 1994
----------- -------- --------
(In thousands)
<S> <C> <C> <C>
Cost:
Land $ 12,756 $ 11,125
Buildings and improvements 20-50 61,943 57,475
Leasehold improvements 10-20 1,608 2,103
Equipment, furniture and fixtures 3-12 48,486 46,333
Construction in progress 5,044 2,309
-------- --------
129,837 119,345
Accumulated Depreciation and Amortization 48,597 47,887
-------- --------
Premises and Equipment, net $ 81,240 $ 71,458
======== ========
</TABLE>
(9) TIME DEPOSITS AND SHORT-TERM DEBT
Certificates of deposit and other time deposits of $100,000 or more
amounting to approximately $334,915,000 and $264,486,000 were outstanding at
December 31, 1995 and 1994, respectively. Total interest expense relating to
certificate and other time deposits of $100,000 or more totaled approximately
$17,386,000, $10,582,000 and $13,314,000 for the years ended December 31, 1995,
1994 and 1993, respectively.
<PAGE> 13
Presented below is information relating to short-term debt for the years
ended December 31, 1995 and 1994.
<TABLE>
<CAPTION>
END OF PERIOD DAILY AVERAGE MAXIMUM
---------------------- ------------------------ OUTSTANDING
INTEREST INTEREST AT ANY
BALANCE RATE BALANCE RATE MONTH END
------------------------ ------------------------ --------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
1995:
Federal funds purchased $ 3,850 5.2% $ 5,747 6.7% $11,474
Securities sold under repurchase agreements 31,998 4.8% 33,996 5.0% 39,345
------- ------- -------
Total $35,848 $39,743 $50,819
======= ======= =======
1994:
Federal funds purchased $34,350 6.3% $ 8,403 4.0% $35,700
Securities sold under repurchase agreements 28,964 4.6% 28,398 3.5% 32,410
------- ------- -------
Total $63,314 $36,801 $68,110
======= ======= =======
</TABLE>
Federal funds purchased generally mature the day following the date of
purchase while securities sold under repurchase agreements generally mature
within 30 days from the date of sale. At December 31, 1995, the Company's
subsidiary banks had established informal federal funds borrowing lines of
credit aggregating $173,500,000.
(10) LONG-TERM DEBT
SUBORDINATED CAPITAL DEBENTURES
On May 21, 1986, the Company issued $10,000,000 of 7.25% convertible
subordinated capital debentures due May 1, 1998. The 7.25% debentures were
convertible at or before maturity at a conversion price of $11.01 principal
amount of debentures for one share of the Company's common stock, $2.50 par
value per share, subject to adjustment. On March 12, 1993, the Company called
for redemption on April 27, 1993, of the remaining $7,996,000 in outstanding
debentures. Prior to the redemption date, substantially all of the outstanding
debentures were converted into an aggregate of 727,678 shares of the Company's
common stock (316,382 shares prior to adjusting for the 15% stock dividend and
2-for-1 stock split, see Notes 2 and 15), and on April 27, 1993, the remaining
$22,000 principal amount of the debentures were redeemed. Interest of $116,000
on the 7.25% debentures is included in interest expense for 1993.
On November 22, 1989, the Company issued $25,000,000 of 9% subordinated
capital debentures due November 1, 1999. At December 31, 1995 and 1994,
$24,508,000 of the debentures were outstanding. At December 31, 1995, the
9% debentures were redeemable at the option of the Company in whole or in part
at the redemption price of 101.5% of par and will be redeemable at par on or
after November 1, 1996. Up to $25,000 of 9% debentures per holder and a
maximum of $250,000 of 9% debentures in the aggregate may be tendered for
prepayment in the event of a holder's death in each 12-month period ending
October 31. If aggregate redemptions are less than $250,000 in any such
12-month period, the unused portion will be carried forward to succeeding
periods. No debentures were prepaid during 1993, 1994 or 1995. Interest of
$2,206,000 on the 9% debentures is included in interest expense for 1995, 1994
and 1993, respectively.
<PAGE> 14
FEDERAL HOME LOAN BANK ADVANCES
BOM has entered into a blanket floating lien security agreement with the
Federal Home Loan Bank (FHLB) of Dallas. Under the terms of this agreement,
BOM is required to maintain sufficient collateral to secure borrowings in an
aggregate amount of the lessor of 65 percent of the book value (unpaid
principal balance) of the borrower's first mortgage collateral or 35 percent of
the borrower's assets.
VOL has entered into a blanket floating lien security agreement with the
FHLB of Cincinnati. Under the terms of this agreement, VOL is required to
maintain unencumbered, quality first mortgage loans in an amount equal to
150 percent of outstanding advances as collateral for those advances.
At December 31, 1995, the following FHLB fixed term advances were
repayable in monthly installments as follows:
<TABLE>
<CAPTION>
FINAL DUE DATE INTEREST RATE AMOUNT
--------------- ------------- ------
(In thousands)
<S> <C> <C>
1997 5.95% $ 5,000
1998 5.63% 5,000
2000 5.82% - 6.55% 10,000
Thereafter 5.21% - 8.95% $29,116
-------
Total $49,116
=======
</TABLE>
(11) INCOME TAXES
Total income taxes for the year ended December 31, 1995, 1994 and 1993
were allocated as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- ------------ ----------
(In thousands)
<S> <C> <C> <C>
Income from continuing operations $15,750 $12,832 $10,216
Cumulative effect of accounting change - - (3,429)
Shareholders' equity for unrealized gain (loss)
on available-for-sale securities 2,395 (1,139) -
------- ------- -------
Total $18,145 $11,693 $ 6,787
======= ======= =======
</TABLE>
The components of income tax expense (credit) attributable to continuing
operations are as follows for the years ended December 31, 1995, 1994 and 1993:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ----------- --------
(In thousands)
<S> <C> <C> <C>
Current:
Federal $14,118 $ 8,224 $ 9,702
State 1,558 1,295 930
Deferred:
Federal 13 3,002 (330)
State 61 311 (86)
------- ------- -------
Total $15,750 $12,832 $10,216
======= ======= =======
</TABLE>
<PAGE> 15
Income tax expense differs from the amount computed by applying the U.S.
federal income tax rate of 35% to income before income taxes due to the
following:
<TABLE>
<CAPTION>
1995 1994 1993
-------- ----------- --------
(In thousands)
<S> <C> <C> <C>
Tax expense at statutory rate $17,939 $15,246 $13,903
Increase (reduction) in taxes resulting from:
State income taxes net of federal tax benefit 1,052 1,044 549
Tax exempt interest revenue (2,718) (2,796) (3,022)
Dividend received deduction (378) (497) (418)
Tax over book loss on security transactions (520) (100) (268)
Non-deductible merger expenses 490 41 -
Other, net (115) (106) (528)
------- ------- -------
Total $15,750 $12,832 $10,216
======= ======= =======
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
(In thousands)
<S> <C> <C>
Deferred tax assets:
Loans receivable, principally due to allowance
for credit losses $13,196 $10,843
Deferred liabilities principally due to
compensation arrangements and vacation accruals 2,939 2,453
Unrealized losses on available-for-sale securities - 1,029
Other, net 105 199
Net operating loss carryforwards 395 460
Alternative minimum tax credit carryforwards - 756
------- -------
Total gross deferred tax assets $16,635 $15,740
Less: valuation allowance - -
------- -------
Deferred tax assets $16,635 $15,740
======= =======
Deferred tax liabilities:
Bank premises and equipment, principally due
to differences in depreciation and lease transactions $10,439 $ 8,168
Loans and lease receivables, principally due to deferral of
loan origination costs and interest income recognition 1,342 1,959
Deferred assets, principally due to the capitalization
of excess servicing rights for financial reporting purposes 2,432 1,617
Investments, principally due to interest income recognition 767 1,035
Unrealized gains on available-for-sale securities 1,366 -
Other, net 18 221
------- -------
Total gross deferred liabilities 16,364 13,000
------- -------
Net deferred tax assets (liabilities) $ 271 $ 2,740
======= =======
</TABLE>
<PAGE> 16
Based upon the level of historical taxable income and projections for
future taxable income over the periods which the deferred tax assets are
deductible, management believes it is more likely than not the Company will
realize the benefits of these deductible differences existing at
December 31, 1995.
At December 31, 1995 the Company has net operating loss carryforwards for
federal income tax purposes of approximately $1,127,000 that are available to
offset future federal taxable income, subject to various limitations, through
2001.
At December 31, 1995 the Company has capital loss carryforwards for
federal income tax purposes of approximately $202,000 that are available to
offset future capital gains, if any. The capital loss carryforwards will
expire in 1997 and 1998. Based on the Company's historical and current pretax
earnings, management believes that it is more likely than not that the Company
will realize the benefits of the capital loss carryforwards existing at
December 31, 1995.
Tax bad debt reserves at Laurel Federal in the amount of $5,857,000 have
not been tax-effected and represent a potential deferred tax liability.
(12) PENSION AND PROFIT SHARING PLANS
The Company maintains a noncontributory and trusteed defined benefit
pension plan covering substantially all full-time employees who have at least
one year of service and have attained the age of twenty-one. Benefits are
based on years of service and the employee's compensation. The Company's
funding policy is to contribute to the pension plan the amount required to
fund benefits expected to be earned for the current year and to amortize
amounts related to prior years using the projected unit credit cost method.
The difference between the pension cost included in current income and the
funded amount is included in other assets or other liabilities, as appropriate.
Actuarial assumptions are evaluated periodically.
Pension expense for the years ended December 31, 1995, 1994 and 1993
included the following components:
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
(In thousands)
<S> <C> <C> <C>
Service cost $ 785 $1,035 $ 992
Interest cost 1,001 1,081 1,032
Actual return on plan assets (3,637) 31 (1,079)
Net amortization and deferral 2,510 (1,200) 67
Cost of special termination benefits 464 - -
------ ------ ------
Pension expense $1,123 $ 947 $1,012
====== ====== ======
</TABLE>
The funded status of the Company's plan at December 31, 1995 and 1994 was as
follows:
<TABLE>
<CAPTION>
1995 1994
------- -------
(In thousands)
<S> <C> <C>
Plan assets at fair value (primarily in listed bonds and commingled funds) $19,234 $14,857
Actuarial present value of projected benefit obligations 17,433 13,515
------- -------
Projected benefit obligation less than plan assets 1,801 1,342
Unrecognized net gain (1,507) (2,670)
Unrecognized prior service cost (1,341) (527)
Unrecognized net obligation at January 1 (10) (12)
------- -------
Accrued pension expense recorded in the financial statements $(1,057) $(1,867)
======= =======
Actuarial present value of vested benefit obligations $ 7,412 $ 7,482
======= =======
Accumulated benefit obligations $11,285 $ 8,769
======= =======
</TABLE>
<PAGE> 17
The discount rate used in determining the actuarial present value of the
projected benefit obligation was 7.5% for 1995 and 1994. The rate of increase
in future compensation levels used in determining the actuarial present value
of the projected benefit obligation was 5% for 1995 and 5.5% for 1994. The
expected long-term rate of return on assets during 1995 and 1994 was 7.5%.
The Company has a non-qualified supplemental retirement plan for certain
key employees. Benefits commence when the employee retires and are payable
over a period of ten years. The amount accrued under the plan was $111,000 in
1995, $93,000 in 1994 and $90,000 in 1993.
The Company has a deferred compensation plan (commonly referred to as a
401(k) Plan), whereby employees may contribute a portion of their compensation,
as defined, subject to the limitation as established in Section 415 of the
Internal Revenue Code. Employee contributions (up to five percent of defined
compensation) are matched dollar-for-dollar by the Company. Under the terms of
the plan, contributions matched by the Company are used to purchase Company
common stock at prevailing market prices. Plan expense for the years ended
December 31, 1995, 1994 and 1993 was $1,495,000, $1,402,000 and $1,353,000,
respectively.
In December 1993, the Company adopted the BancorpSouth, Inc. Restoration
Plan (Restoration Plan) to provide for the payment of retirement benefits to
certain participants in the BancorpSouth, Inc. Retirement Plan (Basic Plan).
The Restoration Plan covers any employee whose benefit under the Basic Plan is
limited by the provisions of the Internal Revenue Code of 1986 and any employee
who elects to participate in the BancorpSouth, Inc. Deferred Compensation Plan,
thereby reducing his benefit under the Basic Plan. Restoration Plan expense
was $48,000 in 1995 and $36,000 in 1994.
(13) FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS 107, "Disclosures about Fair Value of Financial Instruments",
requires that the Company disclose estimated fair values for its financial
instruments. Fair value estimates, methods, and assumptions are set forth
below for the Company's financial instruments.
SECURITIES
The carrying amounts for short-term securities approximate fair value
because of their short-term maturity (90 days or less) and present no
unexpected credit risk. The fair value of most longer-term securities is
estimated based on market prices or dealer quotes. See Note 4,
Held-to-Maturity Securities, and Note 5, Available-for-Sale Securities for
fair values.
LOANS
Fair values are estimated for portfolios of loans with similar financial
characteristics. Loans are segregated by type such as commercial, consumer and
installment and real estate mortgage. The fair value of performing loans is
calculated by discounting scheduled cash flows through the estimated maturity
using estimated market discount rates that reflect the credit and interest rate
risk inherent in the loan. Assumptions regarding credit risk, cash flows and
discount rates are judgmentally determined using available market information
and specific borrower information.
The following table presents information for loans at December 31, 1995
and 1994:
<TABLE>
<CAPTION>
1995 1994
-------------------------- --------------------------
BOOK FAIR BOOK FAIR
VALUE VALUE VALUE VALUE
---------- ---------- ---------- ----------
(In thousands)
<S> <C> <C> <C> <C>
Commercial $ 223,225 $ 224,129 $ 211,988 $ 207,837
Consumer and installment 695,127 708,100 633,692 647,177
Real estate mortgage 1,314,935 1,295,090 1,151,666 1,126,932
All other 16,780 16,780 11,913 11,913
---------- ---------- ---------- ----------
Total $2,250,067 $2,244,099 $2,009,259 $1,993,859
========== ========== ========== ==========
</TABLE>
<PAGE> 18
Average maturity represents the expected average cash flow period, which
in some instances is different than the stated maturity. Management has made
estimates of fair value discount rates that is believed to be reasonable.
However, because there is no market for many of these financial instruments,
management has no basis to determine whether the fair value presented above
would be indicative of the value negotiated in an actual sale. New loan rates
were used as the discount rate on new loans of the same type, credit quality
on maturity. For lower graded loans, the discount rate was based on yields of
bonds of similar credit risk and maturity.
DEPOSIT LIABILITIES
Under SFAS 107, the fair value of deposits with no stated maturity, such
as non-interest bearing demand deposits, savings, and NOW accounts, and money
market and checking accounts, is equal to the amount payable on demand as of
December 31, 1995 and 1994. The fair value of fixed-rate certificates of
deposit is based on the discounted value of contractual cash flows. The
discount rate is estimated using the rates currently offered for deposits of
similar maturities. The following table presents information for certificates
of deposit at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
------------------------ ------------------------
BOOK FAIR BOOK FAIR
VALUE VALUE VALUE VALUE
---------- ---------- ---------- ----------
(In thousands)
<S> <C> <C> <C> <C>
Certificates of deposit:
Maturing in six months or less $ 755,204 $ 757,639 $ 597,947 $ 597,358
Maturing between six months and one year 345,987 347,679 215,342 215,855
Maturing between one and three years 288,709 292,169 339,008 339,820
Maturing beyond three years 81,546 84,766 116,243 115,249
---------- ---------- ---------- ----------
Total $1,471,446 $1,482,253 $1,268,540 $1,268,282
========== ========== ========== ==========
</TABLE>
LONG-TERM DEBT
The fair value of the Company's subordinated capital debentures is
estimated based on quoted market prices. The following table presents
information at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
------------------- ------------------
BOOK FAIR BOOK FAIR
VALUE VALUE VALUE VALUE
------- ------- ------- -------
(In thousands)
<S> <C> <C> <C> <C>
Subordinated Capital Debentures $24,508 $24,265 $24,508 $24,018
======= ======= ======= =======
</TABLE>
<PAGE> 19
The fair value of the Company's FHLB advances is based on the discounted
value of contractual cash flows. The discount rate is estimated using the
rates currently available for advances of similar maturities. The following
table presents information on the FHLB advances at December 31, 1995 and 1994.
<TABLE>
<CAPTION>
1995 1994
------------------- ------------------
BOOK FAIR BOOK FAIR
VALUE VALUE VALUE VALUE
------- ------- ------- -------
(In thousands) (In thousands)
<S> <C> <C> <C> <C>
Final due date
- --------------
1997 $ 5,000 $ 5,024 $ - $ -
1998 5,000 5,001 - -
2000 10,000 10,257 - -
Thereafter 29,116 29,548 42,908 38,334
------- ------- ------- -------
Total $49,116 $49,830 $42,908 $38,334
======= ======= ======= =======
</TABLE>
(14) STOCK INCENTIVE AND STOCK OPTION PLANS
During 1987, the Company issued 34,500 shares of common stock (15,000
shares prior to adjusting for the 15% stock dividend and the 2-for-1 stock
split effected in the form of a dividend, see Notes 2 and 15) to a key
employee. The shares vest over a 10-year period subject to the Company meeting
certain performance goals. The unearned shares are held in escrow and totaled
6,900 at December 31, 1995. The compensation associated with this award is
being recognized over the 10-year period.
During 1994, the Company issued 50,000 shares of common stock (25,000
shares prior to adjusting for the 2-for-1 stock split effected in the form of
a dividend, see Note 2) to a key employee; 25,000 shares were awarded upon
issuance and 25,000 shares were awarded on November 21, 1995. The stock bonus
agreement provides for a cash bonus to the employee in an amount equal to the
state and federal income and employment tax liabilities incurred by the
employee as a result of this stock bonus award. The Company recorded
compensation expense of $905,000 and $753,000 in 1995 and 1994, respectively,
with regard to this stock bonus.
In 1995, the Company issued 30,000 shares of common stock (15,000 shares
prior to adjusting for the 2-for-1 stock split effected in the form of a
dividend, see Note 2) to a key employee. The shares vest over a 10-year period
subject to the Company meeting certain performance goals. The unearned shares
are held in escrow and totaled 30,000 at December 31, 1995. The compensation
associated with this award is being recognized over the 10-year period.
Key employees and directors of the Company and its subsidiaries have been
granted stock options and stock appreciation rights (SARs) under the Company's
1990, 1994 and 1995 stock incentive plans. All options and SARs granted
pursuant to these plans have been at market value on the date of the grant and
are exercisable over periods of one to ten years. The Company recorded
$947,000, $106,000 and $213,000 in compensation expense in 1995, 1994 and 1993,
respectively, related to the SARs because of the increase in market value of
its common stock. In 1995, pursuant to certain acquisitions, incentive and
non-qualified stock options were granted to employees and directors of the
companies being acquired in exchange for stock options that were outstanding
at the time those mergers were consummated. The number of shares and option
prices of shares authorized under the various stock option plans have been
adjusted for the two-for-one stock split effected in the form of a dividend
discussed in Note 2.
<PAGE> 20
Changes in options outstanding during 1995, 1994 and 1993 were as follows:
<TABLE>
<CAPTION>
PRICE RANGE
SHARES PER SHARE
------- ----------------
<S> <C> <C>
Outstanding, December 31, 1992 265,843 $ 9.44 to $14.94
Granted during 1993 250,700 $15.82 to $17.45
Exercised during 1993 (19,545) $ 8.26 to $12.99
Expired or cancelled during 1993 (3,680) $ 8.21 to $ 9.95
------- ----------------
Outstanding, December 31, 1993 493,318 $ 8.21 to $17.45
Granted during 1994 24,150 $14.88
Exercised during 1994 (37,071) $ 8.26 to $12.99
Expired or cancelled during 1994 (2,645) $ 8.26 to $15.82
------- ----------------
Outstanding, December 31, 1994 477,752 $ 8.21 to $17.45
Granted during 1995 178,000 $17.13 to $22.13
Additions due to acquistions 64,691 $ 4.94 to $ 7.16
Exercised during 1995 (42,073) $ 4.94 to $15.82
Expired or cancelled during 1995 (1,150) $14.88
------- ----------------
Outstanding, December 31, 1995 677,220 $ 4.94 to $22.13
------- ----------------
Exercisable, December 31, 1995 424,852 $ 4.94 to $17.45
------- ----------------
</TABLE>
(15) STOCK DIVIDEND
On December 1, 1993, the Company issued 2,050,214 new shares of common
stock (1,025,107 shares prior to adjusting for the 2-for-1 stock split, see
Note 2) to effect the payment of a 15% stock dividend. Shareholders who were
entitled to fractional shares were paid cash equal to the market value of the
fraction on the record date which amounted to $76,000. Information relating to
earnings per share has been retroactively adjusted to reflect this 15% stock
dividend.
(16) PER SHARE AND DIVIDEND DATA
Net income per share is based on the weighted average number of shares of
the Company's common stock and common stock equivalents outstanding. Net
income per share for all periods presented has been retroactively adjusted to
the reflect the acquisitions as discussed in Note 3. Common stock and common
stock equivalents have also been adjusted for all periods presented for the 15%
stock dividend and the two-for-one stock split effected in the form of a 100%
stock dividend (see Notes 2 and 15). The computation of earnings per share is
based on this adjusted weighted average number of common shares outstanding and
the assumed exercise of all outstanding stock options using the treasury stock
method (21,015,406 in 1995, 20,373,414 in 1994 and 19,858,018 in 1993).
Wes-Tenn had outstanding warrants to purchase shares of its common stock
all of which were exercised prior to its merger with the Company as discussed in
Note 3.
Dividends to shareholders can be paid only from dividends paid to the
Company by its subsidiary banks which are subject to approval by the applicable
state regulatory authorities.
<PAGE> 21
(17) RELATED PARTY TRANSACTIONS
The Company has made, and expects in the future to continue to make in the
ordinary course of business, loans to directors and executive officers of the
Company and their affiliates. In management's opinion, these transactions with
directors and executive officers were made on substantially the same terms as
those prevailing at the time for comparable transactions with other persons and
did not involve more than normal risk of collectibility or present any other
unfavorable features.
An analysis of such outstanding loans is as follows:
<TABLE>
<CAPTION>
AMOUNT
------
(In thousands)
<S> <C>
Loans outstanding December 31, 1994 $ 16,916
New loans 14,488
Repayments (13,543)
Changes in directors and executive officers (586)
--------
Loans outstanding December 31, 1995 $ 17,275
========
</TABLE>
(18) CAPITALIZED MORTGAGE SERVICING RIGHTS
In May 1995, SFAS No. 122, "Accounting for Mortgage Servicing Rights,"
was issued which is an amendment to SFAS No. 65, "Accounting for Certain
Mortgage Banking Activities." The Company elected in the fourth quarter to
adopt this statement as of January 1, 1995. The effect of implementing SFAS
No. 122 was not material to the consolidated financial statements.
The primary difference between SFAS No. 122 and SFAS No. 65, as they
relate to the Company, is the accounting treatment for in-house originated
mortgage servicing rights (OMSRs). Substantially all of the Company's
originations are in-house, whereby the underlying loans are funded and closed
by the Company. SFAS No. 122, among other provisions, requires the
recognitions of OMSRs, as well as purchased mortgage servicing rights (PMSRs),
as assets by allocating the total cost incurred between the loan and the
servicing rights based on their relative fair values. Under SFAS No. 65, the
cost of OMSRs was included with the cost of the related loans and written off
against income when the loans were sold. PMSRs were previously recorded as
assets under SFAS No. 65.
Also under the new Statement, all capitalized mortgage servicing rights
are evaluated for impairment based on the excess of the carrying amount of
the mortgage servicing rights over their fair value. In measuring impairment,
the carrying amount must be stratified based on one or more predominant risk
characteristics of the underlying loans. Impairment is recognized through a
valuation allowance for each individual stratum. Under SFAS No. 65, the
impairment evaluation could be made using either discounted or undiscounted
cash flows with no required level of disaggregation specified. Any impairment
was recorded directly against the asset. SFAS No. 122 does not change the
provisions of SFAS No. 65 related to the recognition and amortization of excess
servicing rights.
The following is a summary of capitalized mortgage servicing rights, net
of accumulated amortization, and a valuation allowance for impairment:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
December 31, 1994 $3,608
Mortgage servicing rights capitalized 2,100
Amortization expense (657)
------
December 31, 1995 5,051
Valuation allowance (401)
------
Fair value at December 31, 1995 $4,650
======
</TABLE>
The value of pre-SFAS No. 122 PMSRs is established using a discounted cash
flow analysis. These PMSRs are being amortized using an accelerated method
over the estimated life of the net servicing income. The value of post-SFAS
No. 122 PMSRs and OMSRs is established by allocating the total costs incurred
between the loan and the servicing rights based on their relative fair values.
To determine the fair value of the servicing rights created, the Company uses
a valuation model that calculates the present value of future cash flows. The
significant assumptions utilized by the valuation model are prepayment
assumptions based upon dealer consensus and discount rates based upon market
indices at the date of determination. Post-SFAS No. 122 implementation
<PAGE> 22
PMSRs and OMSRs are being amortized in proportion to and over the period of the
estimated net servicing income. A quarterly value impairment analysis is
performed using a discounted methodology that is disaggregated by predominant
risk characteristics. The Company has determined those risk characteristics
to include: note rate and term and loan type based on 1) loan guarantee (i.e.
conventional or government) and 2) interest characteristic (i.e. fixed-rate or
adjustable-rate).
(19) COMMITMENTS AND CONTINGENT LIABILITIES
LEASES
Rent expense was approximately $1,658,000 for 1995, $1,717,000 for 1994
and $1,623,000 for 1993. Future minimum lease payments for all non-cancelable
operating leases with initial or remaining terms of one year or more consisted
of the following at December 31, 1995:
<TABLE>
<CAPTION>
AMOUNT
------
(In thousands)
<S> <C>
1996 $1,300
1997 1,113
1998 918
1999 772
2000 483
Thereafter 1,001
------
Total future minimum lease payments $5,587
======
</TABLE>
MORTGAGE LOANS SERVICED FOR OTHERS
The Company services mortgage loans for others which are not included in
the accompanying financial statements. Included in the $876 million of loans
serviced for investors is approximately $299.5 million of primary recourse
servicing where the Company is responsible for any losses incurred in the event
of nonperformance by the mortgagor. The Company's exposure to credit loss in
the event of such nonperformance is the unpaid principal balance at the time
of default. This exposure is limited by the underlying collateral which
consists of single family residences and either federal or private mortgage
insurance.
FORWARD CONTRACTS
Forward contracts are agreements to purchase or sell securities at a
future specific date at a specific price or yield. Risks arise from the
possibility that counterparties may be unable to meet the term of their
contracts and from movements in securities values and interest rates. At
December 31, 1995, the Company had obligations under forward contracts
consisting of commitments to sell mortgage loans originated or purchased by
the Company into the secondary market at a future date. These obligations are
entered into by the Company in order to establish the interest rate at which
it can offer mortgage loans to its customers. Changes in the values of
mortgage loans held for sale by the Company for delivery into the secondary
market are recorded at the lower of cost or market. As of December 31, 1995,
the contractual or notional amount of these forward contracts was approximately
$34,988,000. The Company's exposure under these commitments to sell mortgage
loans in the future is not material.
LENDING COMMITMENTS
In the normal course of business, there are outstanding various
commitments and other arrangements for credit which are not reflected in the
consolidated balance sheets. As of December 31, 1995, these included
approximately $26,993,000 for letters of credit, and approximately
$453,069,000 for interim mortgage financing, construction credit, credit card
and revolving and line of credit arrangements. No significant credit losses
are expected from these commitments and arrangements.
REGULATORY MATTERS
Under the FDIC's current risk-based premium policy, deposit insurance
rates for 1996 for the Company's deposits in the Bank Insurance Fund (BIF)
have been assessed at zero. However, the Company's thrift subsidiary's
deposits and certain other of the Company's deposits which were acquired from
thrifts over the years remain in the Savings Association Insurance Fund (SAIF)
and will continue to be assessed for 1996
<PAGE> 23
at the rate of $0.23 per $100 of insured deposits, the same rate as 1995.
Also, Congress is currently considering a special one-time assessment on SAIF
insured deposits and if enacted, this assessment could result in a one-time
pre-tax charge of up to $2.7 million.
LITIGATION
Various legal claims have arisen in the normal course of business,
including claims against entities to which the Company is successor as a result
of business combinations. In the opinion of management and legal counsel, the
ultimate resolution of these claims will have no material effect on the
Company's consolidated financial position.
RESTRICTED CASH BALANCE
Aggregate reserves (in the form of deposits with the Federal Reserve Bank)
of $35,036,000 were maintained to satisfy Federal regulatory requirements at
December 31, 1995.
<PAGE> 24
(20) CONDENSED FINANCIAL STATEMENT INFORMATION OF BANCORPSOUTH, INC.
(PARENT COMPANY ONLY)
The following condensed unaudited financial information reflects the
accounts and transactions of BancorpSouth, Inc. (parent company only) for the
dates indicated:
<TABLE>
<CAPTION>
CONDENSED BALANCE SHEETS DECEMBER 31
---------------------
1995 1994
-------- --------
(In thousands)
<S> <C> <C>
Assets
Cash on deposit with subsidiary banks $ 5,718 $ 2,455
Securities 1,233 1,255
Investment in subsidiaries 305,331 270,155
Other assets 1,375 8,008
-------- --------
Total assets $313,657 $281,873
======== ========
Liabilities and shareholders' equity
Long-term debt $ 24,508 $ 24,508
Other liabilities 1,054 4,513
-------- --------
Total liabilities 25,562 29,021
Shareholders' equity 288,095 252,852
-------- --------
Total liabilities and shareholders' equity $313,657 $281,873
======== ========
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
---------------------------
CONDENSED STATEMENTS OF INCOME 1995 1994 1993
------- ------- -------
(In thousands)
<S> <C> <C> <C>
Dividends from subsidiaries $14,665 $12,279 $12,329
Management fees from subsidiaries 603 1,282 1,180
Other operating income 60 60 57
------- ------- -------
Total income 15,328 13,621 13,566
Operating expenses 3,243 3,128 4,629
------- ------- -------
Income before equity in undistributed earnings
of subsidiaries 12,085 10,493 8,937
Equity in undistributed earnings of subsidiaries 23,419 20,235 23,998
------- ------- -------
Net income $35,504 $30,728 $32,935
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
---------------------------
CONDENSED STATEMENTS OF CASH FLOWS 1995 1994 1993
------- ------- -------
(In thousands)
<S> <C> <C> <C>
Operating Activities:
Net income $35,504 $30,728 $32,935
Adjustments to reconcile net income
to net cash provided by operating activities (22,592) (25,589) (20,985)
------- ------- -------
Net cash provided by operating activities 12,912 5,139 11,950
Net cash provided by (used in) investing activities - 900 (1,037)
Net cash used in financing activities (9,649) (6,844) (11,962)
------- ------- -------
Increase (decrease) in cash and cash equivalents 3,263 (805) (1,049)
Cash and cash equivalents at beginning of year 2,455 3,260 4,309
------- ------- -------
Cash and cash equivalents at end of year $ 5,718 $ 2,455 $ 3,260
======= ======= =======
</TABLE>
<PAGE> 25
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
BancorpSouth, Inc.:
We have audited the consolidated balance sheets of BancorpSouth, Inc., and
subsidiaries as of December 31, 1995 and 1994, and the related consolidated
statements of income, shareholders' equity and cash flows for each of the years
in the three-year period ended December 31, 1995. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. Our audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
BancorpSouth, Inc., and subsidiaries at December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1995, in conformity with generally
accepted accounting principles.
As discussed in Note 1, the Company changed its method of accounting for
securities to adopt the provisions of Statement of Financial Accounting
Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and
Equity Securities", in 1994. As discussed in Notes 1 and 11, the Company
changed its method of accounting for income taxes to adopt the provisions of
SFAS No. 109, "Accounting for Income Taxes" in 1993.
KPMG Peat Marwick LLP
Memphis, Tennessee
January 26, 1996
<PAGE> 1
EXHIBIT 13 (c)
Summary of Quarterly Results
34
<PAGE> 2
SUMMARY OF QUARTERLY RESULTS
(In thousands, except per share amounts - unaudited)
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------
MAR 31 JUN 30 SEP 30 DEC 31
------- ------- ------- -------
<S> <C> <C> <C> <C>
1995:
Interest revenue $58,601 $62,525 $64,974 $66,327
Net interest revenue 33,022 33,805 35,077 36,066
Provision for credit losses 1,297 1,241 2,058 1,610
Income before income taxes 11,648 12,909 13,740 12,957
Net income 7,905 8,869 9,544 9,186
Earnings per share 0.35 0.46 0.45 0.43
Dividends per share 0.15 0.15 0.15 0.17
1994:
Interest revenue $48,000 $50,419 $53,261 $56,215
Net interest revenue 28,636 29,677 31,471 33,082
Provision for credit losses 1,114 1,479 1,822 1,531
Income before income taxes 9,398 9,663 11,926 12,573
Net income 6,789 7,070 8,003 8,866
Earnings per share 0.33 0.35 0.39 0.44
Dividends per share 0.135 0.135 0.135 0.15
1993:
Interest revenue $48,054 $48,883 $48,221 $48,711
Net interest revenue 28,379 29,188 28,628 28,959
Provision for credit losses 2,206 2,244 2,551 2,031
Income before income taxes and accounting change 9,018 10,326 10,738 9,640
Net income before accounting change 6,725 7,652 8,006 7,123
Net income 10,154 7,652 8,006 7,123
Earnings per share before accounting change 0.34 0.38 0.40 0.35
Dividends per share 0.135 0.135 0.135 0.135
</TABLE>
<PAGE> 1
EXHIBIT 13 (d)
Selected Financial Information
35
<PAGE> 2
SELECTED FINANCIAL INFORMATION
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-------------------------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Earnings Summary:
Interest revenue $ 252,427 $ 207,895 $ 193,869 $ 202,920 $ 220,319
Interest expense 114,457 85,029 78,715 92,143 121,386
---------- ---------- ---------- ---------- ----------
Net interest revenue 137,970 122,866 115,154 110,777 98,933
Provision for credit losses 6,206 5,946 9,032 12,843 9,446
---------- ---------- ---------- ---------- ----------
Net interest revenue, after provision
for credit losses 131,764 116,920 106,122 97,934 89,487
Other revenue 31,240 26,012 26,776 23,767 22,407
Other expense 111,750 99,372 93,176 89,348 83,496
---------- ---------- ---------- ---------- ----------
Income before income taxes and
effect of accounting change 51,254 43,560 39,722 32,353 28,398
Applicable income taxes 15,750 12,832 10,216 9,194 6,654
---------- ---------- ---------- ---------- ----------
Income before effect of accounting change
and extraordinary item 35,504 30,728 29,506 23,159 21,744
Extraordinary loss on early extinguishment of
debt, net of taxes - - - (285) -
Cummulative effect of change in
accounting for income taxes - - 3,429 - -
---------- ---------- ---------- ---------- ----------
Net income $ 35,504 $ 30,728 $ 32,935 $ 22,874 $21,744
========== ========== ========== ========== ==========
Per Share Data:
Earnings before accounting change
& extraordinary item $ 1.69 $ 1.51 $ 1.49 $ 1.33 $1.29
Cash dividends 0.62 0.555 0.54 0.51 0.47
Book value 13.72 12.44 11.82 10.56 9.50
Balance Sheet - Averages:
Total assets $3,151,297 $2,884,539 $2,659,785 $2,503,499 $2,379,517
Held-to-maturity securities 516,919 427,759 509,996 583,459 549,533
Available-for-sale securities 183,396 266,370 141,496 - -
Loans, net of unearned discount 2,146,967 1,881,922 1,675,048 1,550,745 1,451,562
Total deposits 2,732,450 2,513,493 2,342,137 2,210,934 2,092,052
Total shareholders' equity 268,395 240,929 218,504 185,925 165,321
Selected Ratios:
Return on average assets 1.13% 1.07% 1.24% 0.91% 0.91%
Return on average shareholders' equity 13.23% 12.75% 15.07% 12.30% 13.15%
</TABLE>
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
Jurisdiction Holder of
Name Of Incorporation Outstanding Stock
---- ---------------- -----------------
<S> <C> <C>
Bank of Mississippi Mississippi BancorpSouth, Inc.
Volunteer Bank Tennessee BancorpSouth, Inc.
Laurel Federal Savings and Loan Association Mississippi BancorpSouth, Inc.
Personal Finance Corporation Mississippi Bank of Mississippi
Century Credit Life Insurance Company Mississippi Bank of Mississippi
TC Finance, Inc. Tennessee Volunteer Bank
West Tennessee Life Insurance Company Tennessee Volunteer Bank
</TABLE>
All of the above subsidiaries are wholly owned and are included in the
consolidated financial statements of the registrant.
36
<PAGE> 1
EXHIBIT 23
ACCOUNTANTS' CONSENT
The Board of Directors
BancorpSouth, Inc.:
We consent to incorporation by reference in the Registration Statement (No.
33-3009) on Form S-3 and the Registration Statement (No. 2-88488) on Form S-8
of BancorpSouth, Inc. of our report dated January 26, 1996, relating to the
consolidated balance sheets of BancropSouth, Inc. and subsidiaries as of
December 31, 1995 and 1994, and the related consolidated statements of income,
shareholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1995, which report is incorporated by reference in
the 1995 annual report on Form 10-K of BancorpSouth, Inc.
Our report refers to a change in accounting principles related to the adoption
in 1994 of the provisions of Statement of Financial Accounting Standards (SFAS)
No. 115, Accounting for Certain Investments in Debt and Equity Securities.
KPMG Peat Marwick LLP
Memphis, Tennessee
March 25, 1996
37
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-1-1995
<PERIOD-END> DEC-31-1995
<CASH> 149,923
<INT-BEARING-DEPOSITS> 15,892
<FED-FUNDS-SOLD> 35,450
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 439,303
<INVESTMENTS-CARRYING> 439,303
<INVESTMENTS-MARKET> 448,075
<LOANS> 2,295,166
<ALLOWANCE> 34,636
<TOTAL-ASSETS> 3,302,028
<DEPOSITS> 2,863,612
<SHORT-TERM> 35,848
<LIABILITIES-OTHER> 40,849
<LONG-TERM> 73,624
0
0
<COMMON> 52,764
<OTHER-SE> 235,331
<TOTAL-LIABILITIES-AND-EQUITY> 3,302,028
<INTEREST-LOAN> 203,800
<INTEREST-INVEST> 35,811
<INTEREST-OTHER> 12,816
<INTEREST-TOTAL> 252,427
<INTEREST-DEPOSIT> 107,165
<INTEREST-EXPENSE> 114,457
<INTEREST-INCOME-NET> 137,970
<LOAN-LOSSES> 6,206
<SECURITIES-GAINS> (765)
<EXPENSE-OTHER> 111,750
<INCOME-PRETAX> 51,254
<INCOME-PRE-EXTRAORDINARY> 35,504
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 35,504
<EPS-PRIMARY> 1.69
<EPS-DILUTED> 1.69
<YIELD-ACTUAL> 4.86
<LOANS-NON> 1,592
<LOANS-PAST> 5,148
<LOANS-TROUBLED> 7
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 30,830
<CHARGE-OFFS> 4,714
<RECOVERIES> 1,567
<ALLOWANCE-CLOSE> 34,636
<ALLOWANCE-DOMESTIC> 34,636
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
