<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, 1996 or
-----------------
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996)
For the transition period from to
---------- -----------
Commission file number 0-10826
BancorpSouth, Inc.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Mississippi 64-0659571
- -------------------------------- ------------------------------------
(State or other jurisdiction of (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)
<PAGE> 2
(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, 1997, was approximately $532,909,000 based
on the closing sale price as reported on the Nasdaq Stock Market.
On March 14, 1997, the registrant had outstanding 22,227,705 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, 1996, 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 22, 1997, are
incorporated by reference into Part III of this Report.
2
<PAGE> 3
BANCORPSOUTH, INC.
FORM 10-K
For the Fiscal Year Ended December 31, 1996
CONTENTS
<TABLE>
<CAPTION>
PART I
<S> <C> <C> <C>
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. . . . . . . . . . . . . . . . . .26
Item 13. Certain Relationships and Related Transactions . . . . . .26
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K. . . . . . . . . . . . . . . . . . .27
</TABLE>
3
<PAGE> 4
PART I
Item 1. - Business
General
The Company is a bank holding company with commercial banking in
Mississippi and Tennessee. Its principal subsidiaries are Bank of Mississippi
("BOM") and Volunteer Bank ("VOL"). 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 101 offices in
50 municipalities or communities in 32 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, 1996, BOM had total deposits of approximately $2.45 billion and
total assets of approximately $2.80 billion.
VOL has its principal office in Jackson, Madison County, Tennessee, and
conducts a general commercial banking and trust business through 30 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, 1996, VOL had total deposits of
approximately $720 million and total assets of approximately $828 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.
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, 1996, the Company and its subsidiaries employed 1,932
persons. The Company and its subsidiaries are not a party to any collective
bargaining agreements, and employee relations are deemed to be good.
Competition
4
<PAGE> 5
Vigorous competition exists in all major areas where the Company is
engaged in business. The Company's subsidiary banks 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 its 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 holding company and is registered as such with
the Board of Governors of the Federal Reserve System (the "FRB") and is subject
to regulation and supervision by the FRB. The Company is required to file with
the FRB annual reports and such other information as they may require. The FRB
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 may extend credit, pay dividends or otherwise supply funds to
the Company or its affiliates. In particular, the subsidiary banks 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 are paid from dividends paid to the Company by its subsidiaries
which are subject to approval by the applicable regulatory authorities.
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.
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
5
<PAGE> 6
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 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), 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 1997 for the
Company's deposits in BIF have been assessed at zero while deposits insurance
rates for 1997 for the Company's deposits in SAIF will continue at the rate of
23 cents per $100 of insured deposits.
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 Note 17 of Notes to
Consolidated Financial Statements on page 37 of the Company's 1996 Annual Report
to Shareholders incorporated herein by reference.
In September 1994, the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 ("IBBEA") was signed into law. 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
6
<PAGE> 7
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.
The Company has applied for permission from the various regulators to merge BOM
and VOL into one bank as soon as practicable after the June 1, 1997 effective
date of the law which allows such transactions.
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, 1996. 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.
8
<PAGE> 9
Distribution of Assets, Liabilities and Shareholders' Equity;
Interest Rates and Interest Differential
<TABLE>
<CAPTION>
1996 1995
--------------------------- --------------------------
(Taxable equivalent basis) Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
---------- -------- ------ ------- -------- -------
ASSETS (Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest bearing deposits in
other banks $ 12,313 $ 646 5.25% $ 15,974 $ 857 5.36%
Held-to-maturity securities:
U.S. treasury and agencies 361,649 23,823 6.59% 398,194 28,152 7.07%
State and political
subdivisions (1) 118,458 9,709 8.20% 118,493 10,517 8.88%
Other securities 84 2 2.38% 4,228 168 3.97%
Available-for-sale securities (2) 231,040 14,400 6.23% 183,396 8,902 4.85%
Federal funds sold 60,868 3,289 5.40% 39,451 2,205 5.59%
Loans (net of unearned
discount) (3) (4) (6) 2,410,746 227,920 9.45% 2,146,967 204,397 9.52%
Mortgages held for sale 27,729 1,917 6.91% 20,805 1,433 6.89%
---------- --------- ---------- --------
Total interest earning
assets and revenue 3,222,887 281,706 8.74% 2,927,508 256,631 8.77%
Other assets 266,537 256,363
Less: alowance for credit losses (36,503) (32,574)
---------- ----------
Total $3,452,921 $3,151,297
========== ==========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits:
Demand - interest bearing $ 700,863 $ 20,426 2.91% $654,151 $ 17,733 2.71%
Savings 371,514 14,930 4.02% 300,278 11,916 3.97%
Time 1,526,564 83,390 5.46% 1,416,901 77,516 5.47%
Federal funds purchased and
securities under
repurchase agreements 40,880 1,954 4.78% 40,845 2,084 5.10%
Other short-term borrowings (5) 3,359 158 4.70% 4,706 299 6.35%
Long term debt 80,619 5,647 7.00% 68,452 4,909 7.17%
---------- --------- ---------- --------
Total interest bearing
liabilities and expense 2,723,799 126,505 4.64% 2,485,333 114,457 4.61%
Demand deposits -
non-interest bearing 383,897 361,120
Other liabilities 45,476 36,449
---------- ----------
Total liabilities 3,153,172 2,882,902
Shareholders' equity 299,749 268,395
---------- ----------
Total $3,452,921 $3,151,297
========== ==========
Net interest revenue $ 155,201 $142,174
========= ========
Net yield on interest earning
assets 4.81% 4.86%
===== =====
<CAPTION>
1994
-------------------------
(Taxable equivalent basis) Average Yield/
Balance Interest Rate
------- -------- ------
ASSETS (Dollars in thousands)
<S> <C> <C> <C>
Interest bearing deposits in
other banks $ 11,112 $ 660 5.94%
Held-to-maturity securities:
U.S. treasury and agencies 315,429 18,642 5.91%
State and political
subdivisions (1) 107,774 10,325 9.58%
Other securities 4,556 270 5.93%
Available-for-sale securities (2) 266,370 13,974 5.25%
Federal funds sold 43,437 1,756 4.04%
Loans (net of unearned
discount) (3) (4) (6) 1,881,922 163,902 8.71%
Mortgages held for sale 33,620 2,400 7.14%
---------- --------
Total interest earning
assets and revenue 2,664,220 211,929 7.95%
Other assets 249,064
Less: alowance for credit losses (28,745)
----------
Total $2,884,539
==========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits:
Demand - interest bearing $ 618,929 $ 16,320 2.64%
Savings 292,908 9,515 3.25%
Time 1,237,205 53,435 4.32%
Federal funds purchased and
securities under
repurchase agreements 36,686 1,338 3.65%
Other short-term borrowings (5) 15,145 968 6.39%
Long term debt 46,673 3,453 7.40%
---------- --------
Total interest bearing
liabilities and expense 2,247,546 85,029 3.78%
Demand deposits -
non-interest bearing 364,451
Other liabilities 31,613
----------
Total liabilities 2,643,610
Shareholders' equity 240,929
----------
Total $2,884,539
==========
Net interest revenue $126,900
========
Net yield on interest earning
assets 4.76%
=====
</TABLE>
1. Includes taxable equivalent adjustments of $2,755,000, $3,026,000 and
$3,112,000 in 1996, 1995 and 1994, respectively, using an effective tax
rate of 35%.
2. Includes taxable equivalent adjustment of $281,000, $581,000 and $747,000
in 1996, 1995 and 1994 using an effective ax rate of 35%.
3. Includes fees on loans of $4,249,000 in 1994.
4. Includes taxable equivalent adjustment of $751,000, $597,000 and $175,000
in 1996, 1995 and 1994, respectively, using an effective tax rate of 35%.
5. Interest expense includes interest paid on liabilities not included in
averages.
6. Non-accrual loans are immaterial for each of the years presented.
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<PAGE> 10
Analysis of Changes in Effective Interest Differential
Net interest revenue may also be analyzed by segregating the rate and volume
components of interest revenue and interest expense. The table which follows
presents an analysis of rate and volume change in net interest from 1995 to 1996
and 1994 to 1995. Changes which are not solely due to volume or rate are
allocated to volume.
<TABLE>
<CAPTION>
1996 OVER 1995 - INCREASE (DECREASE) 1995 OVER 1994 - INCREASE (DECREASE)
------------------------------------ ------------------------------------
(Taxable equivalent basis) Volume Rate Total Volume Rate Total
----------- ---------- ---------- ----------- ----------- ----------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
INTEREST REVENUE
Due from banks - interest bearing ($ 192) ($ 19) ($ 211) $ 261 ($ 64) $ 197
Held-to-maturity securities:
U.S. Government agencies (2,407) (1,922) (4,329) 5,851 3,659 9,510
State and political subdivisions (3) (805) (808) 951 (759) 192
Other securities (99) (67) (166) (13) (89) (102)
Available-for-sale securities 2,970 2,528 5,498 (4,028) (1,044) (5,072)
Federal funds sold 1,157 (73) 1,084 (223) 672 449
Loans (net of unearned discount) 24,939 (1,4160 23,523 25,233 15,262 40,495
Mortgages held for sale 479 5 484 (883) (840 (967)
------- ------- ------- ------- ------- -------
Total 26,844 (1,769) 25,075 27,149 17,553 44,702
------- ------- ------- ------- ------- -------
INTEREST EXPENSE
Demand deposits - interest bearing 1,361 1,331 2,693 955 458 1,413
Savings deposits 2,883 151 3,014 292 2,109 2,401
Time deposits 5,900 (116) 5,874 9,831 14,250 24,081
Federal funds purchased and
securities under
repurchase agreements 2 (132) (130) 212 534 746
Other short-term borrowings 963) (79) (141) (663) (6) (669)
Long-term debt 852 (114) 738 1,562 (106) 1,456
------- ------- ------- ------- ------- -------
Total 11,005 1,043 12,048 12,169 17,239 29,428
------- ------- ------- ------- ------- -------
Increase (Decrease) in Effective
Interest Differential $ 15,839 ($ 2,812) $ 13,027 $ 14,960 $ 314 $ 15,274
======= ======= ======= ======= ======= =======
</TABLE>
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<PAGE> 11
Investment Portfolio
Held-to-Maturity Securities
The following table shows the amortized cost of held-to-maturity
securities at December 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
December 31
-------------------------------------
1996 1995 1994
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
U. S. Treasury securities $ 91,340 $ 33,355 $ 59,793
U. S. Government agency
securities 292,930 293,831 376,708
Taxable obligations of states
and political subdivisions 1,375 500 -
Tax exempt obligations of states
and political subdivisions 144,406 110,830 112,915
Other securities 15 787 3,416
-------- -------- --------
TOTAL $530,066 $439,303 $552,832
======== ======== ========
</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, 1996
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 $ 1,437 $130,803 $ 21,406 $ - 7.00%
Maturing after one
year but within
five years 87,919 146,847 66,749 15 6.89%
Maturing after five
years but within
ten years 1,984 12,208 47,797 - 7.22%
Maturing after ten
years - 3,072 9,829 - 8.36%
------- -------- -------- -------
TOTAL $91,340 $292,930 $145,781 $ 15
======= ======== ======== =======
</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.
11
<PAGE> 12
Available-for-Sale Securities
The following table shows the book value of available-for-sale
securities at December 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
December 31
-------------------------------------
1996 1995 1994
-------- --------- --------
(In thousands)
<S> <C> <C> <C>
U. S. Treasury securities $ 43,864 $ 51,241 $ 30,429
U. S. Government agency
securities 129,515 127,488 67,607
Taxable obligations of states
and political subdivisions 503 3,337 -
Tax exempt obligations of states
and political subdivisions 12,567 20,000 30,234
Other securities 44,290 37,689 65,759
-------- -------- --------
TOTAL $230,739 $239,755 $194,029
======== ======== ========
</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, 1996
-----------------------------------------------------------------
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 $11,427 $65,789 $4,518 $22,000 5.93%
Maturing after one
year but within
five years 32,437 52,627 6,613 7,748 6.39%
Maturing after five
years but within
ten years - 1,672 503 14,542 6.54%
Maturing after ten
years - 9,427 1,436 - 7.57%
------- -------- ------- -------
TOTAL $43,864 $129,515 $13,070 $44,290
======= ======== ======= =======
</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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<PAGE> 13
Loan Portfolio
The Company's loans are widely diversified by borrower and industry.
The following table shows the composition of loans by collateral type of the
Company at December 31 for the years indicated.
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ----------- ---------- ----------
(In thousands)
<S> <C> <C> <C> <C> <C>
Commercial &
agricultural (1)(2) $238,246 $223,225 $211,988 $203,798 $382,233
Consumer & installment 744,456 695,127 633,692 510,538 501,627
Real estate mortgage 1,407,841 1,314,935 1,151,666 1,013,446 692,467
Lease financing 149,104 121,617 81,816 60,781 51,325
Other 14,471 16,780 11,913 52,692 22,594
---------- ---------- ---------- ---------- ----------
Total gross loans $2,554,118 $2,371,684 $2,091,075 $1,841,255 $1,650,246
========== ========== ========== ========== ==========
</TABLE>
(1) Including $14,580,000, $17,388,000, $15,247,000, $15,588,000 and
$18,197,000 in 1996, 1995, 1994, 1993 and 1992, respectively, of loans
classified as agricultural.
(2) Including $38,406,000, $36,054,000, $29,838,000, $27,048,000 and
$20,364,000 in 1996, 1995, 1994, 1993 and 1992, 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, 1996.
<TABLE>
<CAPTION>
ONE YEAR ONE TO AFTER
OR LESS FIVE YEARS FIVE YEARS
----------- ------------- ----------
(In thousands)
<S> <C> <C> <C>
Commercial
& agricultural $135,694 $ 83,425 $ 19,127
Consumer & installment 188,123 549,052 7,281
Real estate mortgages 526,681 656,907 224,253
Lease financing 48,385 100,716 3
Other 10,049 4,422 0.00
-------- ---------- --------
Total gross loans $908,932 $1,394,522 $250,664
======== ========== ========
</TABLE>
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<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, 1996.
December 31, 1996
FIXED VARIABLE
RATE RATE
----- --------
(In thousands)
Loan Portfolio
Due after one year $1,281,961 $363,225
========== ========
Nonaccrual, Past Due and Restructured Loans
See Note 5 of Notes to Consolidated Financial Statements on page 28 of
the Company's 1996 Annual Report to Shareholders incorporated herein by
reference. The aggregate principal balance of non-accrual loans was $3,940,000,
$1,592,000, $3,029,000, $4,072,000 and $10,742,000 at December 31, 1996, 1995,
1994, 1993 and 1992, respectively. The aggregate principal balance of
restructured loans was $77,000, $7,000, $1,448,000, $4,018,000 and $2,045,000 at
December 31, 1996, 1995, 1994, 1993 and 1992, respectively. Accruing loans which
were contractually past due 90 days or more for years ended December 31, 1996,
1995, 1994, 1993 and 1992, amounted to $4,811,000, $5,148,000, $3,614,000,
$4,277,000 and $8,523,000, 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, 1996,
no loans were known to be potential problem loans.
At December 31, 1996, 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. However, the Company does conduct
business in a geographically concentrated area. The ability of the Company's
borrowers to repay loans is to some extent dependent upon the economic
conditions prevailing in the market area.
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>
1996 1995 1994
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
=========== =========== =========== =========== =========== ===========
(In thousands)
<S> <C> <C> <C> <C>
Commercial & agricultural $3,570 9.33% $3,290 9.41% $3,100 10.14%
Consumer & installment 11,100 29.15% 10,413 29.31% 9,350 30.30%
Real estate mortgage 20,532 55.12% 19,500 55.44% 17,090 55.08%
Lease financing 2,070 5.84% 1,433 5.13% 1,290 3.91%
Other - 0.56% - 0.71% - 0.57%
------ ------ ------ ------ ------ ------
TOTAL $37,272 100.00% $34,636 100.00% $30,830 100.00%
====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
1993 1992
ALLOWANCE % OF ALLOWANCE % OF
FOR LOANS TO FOR LOANS TO
CREDIT LOSS TOTAL LOANS CREDIT LOSS TOTAL LOANS
=========== ----------- ----------- -----------
<S> <C> <C> <C> <C>
Commercial & agricultural $3,020 11.07% $5,550 23.16%
Consumer & installment 7,620 27.73% 7,355 30.40%
Real estate mortgage 16,123 55.04% 10,426 41.96%
Lease financing 705 3.30% 785 3.11%
Other - 2.86% - 1.37%
------ ------ ------ ------
TOTAL $27,468 100.00% $24,116 100.00%
====== ====== ====== ======
</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, 1996.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C> <C>
LOANS
Average loans for the
period $ 2,410,746 $ 2,146,967 $ 1,881,922 $ 1,675,048 $ 1,550,745
=========== =========== =========== =========== ===========
ALLOWANCE FOR CREDIT
LOSSES
Balance, beginning
of period 34,636 30,830 27,468 24,116 21,106
Loans charged off:
Commercial & agricultural (1,197) (448) (1,479) (374) (1,662)
Consumer & installment (5,969) (3,550) (3,146) (5,030) (5,214)
Real estate mortgage (808) (715) (1,217) (2,128) (4,810)
Lease financing (30) (1) (19) (144) (169)
----------- ----------- ----------- ----------- -----------
Total loans charged off (8,004) (4,714) (5,861) (7,676) (11,855)
----------- ----------- ----------- ----------- -----------
Recoveries:
Commercial & agricultural 427 99 1,539 169 348
Consumer & installment 1,163 1,084 1,271 1,326 1,409
Real estate mortgage 241 366 412 325 169
Lease financing 5 18 55 176 96
----------- ----------- ----------- ----------- -----------
Total recoveries 1,836 1,567 3,277 1,996 2,022
----------- ----------- ----------- ----------- -----------
Net charge-offs (6,168) (3,147) (2,584) (5,680) (9,833)
Provision charged to
operating expense 8,804 6,206 5,946 9,032 12,843
Acquisitions -- 747 -- -- --
----------- ----------- ----------- ----------- -----------
Balance, end of period $ 37,272 $ 34,636 $ 30,830 $ 27,468 $ 24,116
=========== =========== =========== =========== ===========
RATIOS
Net charge-offs to
average loans 0.26% 0.15% 0.14% 0.34% 0.63%
=========== =========== =========== =========== ===========
</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, 1996.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------------------------------------------------------------
1996 1995 1994
--------------------------------------------------------------------------------
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 $ 383,897 -- $ 361,120 -- $ 364,451 --
Interest bearing
demand deposits 700,863 2.91% 654,151 2.71% 618,929 2.64%
Savings 371,514 4.02% 300,278 3.97% 292,908 3.25%
Time 1,526,564 5.46% 1,416,901 5.47% 1,237,205 4.32%
---------- ---------- ----------
TOTAL DEPOSITS $2,982,838 $2,732,450 $2,513,493
========== ========== ==========
</TABLE>
Time deposits of $100,000 and over including certificates of deposits
of $100,000 and over at December 31, 1996, had maturities as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
(In thousands)
<S> <C>
Three months or less $111,204
Over three months through six months 96,670
Over six months through twelve months 54,377
Over twelve months 136,872
--------
TOTAL $399,123
========
</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,
1996, as presented below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Return on average common equity 14.31% 13.23% 12.75%
Return on average assets 1.24 1.13 1.07
Dividend payout ratio 34.65 34.37 32.69
</TABLE>
The Company's average common equity as a percent of average assets was
8.68%, 8.52% and 8.35% for 1996, 1995 and 1994, respectively.
Short-Term Borrowings
See Note 8 of Notes to Consolidated Financial Statements on pages 29
and 30 of the Company's 1996 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 78 of its 101 branch banking facilities. The
remaining 23 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 as well), 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) and an
office building in downtown Gulfport, Mississippi (which has
approximately 85,000 square feet of space, of which BOM uses
approximately 7,500 square feet for banking activities while
leasing or holding for lease the remaining portion of the
building).
19
<PAGE> 20
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.
VOL owns 22 of its 30 branch banking facilities. The remaining
8 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. Personal Finance Company - This wholly-owned subsidiary of BOM
occupies 36 leased offices, with the unexpired terms varying
in length from one to five 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.
d. TC Finance, Inc.- This wholly-owned subsidiary of VOL occupies
9 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 1996.
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>
1996: High Low
---- ---
<S> <C> <C> <C>
4th quarter $ 28.25 $ 23.75
3rd quarter 24.00 21.50
2nd quarter 25.00 21.50
1st quarter 25.50 21.125
1995:
4th quarter $23.875 $ 20.25
3rd quarter 20.875 19.375
2nd quarter 20.00 18.00
1st quarter 18.00 16.25
</TABLE>
Holders of Record
As of February 28, 1997, there were 7,655 shareholders of record of the
Company's common stock.
Dividends
The Company declared cash dividends totaling $0.70 per share during
1996, $0.62 during 1995 and $0.555 during 1994. 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 1996 Annual Report to Shareholders is incorporated
herein by reference. The Company's long-term debt at December 31, 1996, totaled
$55,778,000, at December 31, 1995, totaled $73,624,000, at December 31, 1994,
totaled $67,416,000, at December 31, 1993, totaled $24,508,000 and totaled
$32,541,000 at December 31, 1992.
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 1996 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 1996 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 1997 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 B. Patterson Chairman of the Board of 54
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 65
of the Company;
Vice Chairman,
Bank of Mississippi;
Director of Bank of
Mississippi and Volunteer Bank
L. Nash Allen, Jr. Treasurer, and Chief 52
Financial Officer of
the Company; Executive
Vice President, Bank of Mississippi
Kenneth R. Wilburn Executive Vice President, 50
Loan Administration
of the Company and
Bank of Mississippi
</TABLE>
23
<PAGE> 24
<TABLE>
<S> <C> <C>
Harry R. Baxter Vice Chariman and 52
Director of Marketing
of the Company and Bank of Mississippi
Gary R. Harder Senior Vice President, Audit 52
and Loan Review of the Company
and Bank of Mississippi
Michael W. Weeks Chairman of the Board of 48
Directors and Chief Executive
Officer of Volunteer Bank;
Executive Vice President of the Company
Michael L. Sappington Vice Chairman 47
Bank of Mississippi
Gregg Cowsert Vice Chairman and Chief 49
Lending Officer
Bank of Mississippi
James Threadgill Executive Vice President 42
Bank of Mississippi
</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
24
<PAGE> 25
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.
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 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 and named Vice Chariman in August 1996.
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.
Mr. Sappington joined First Mississippi National Bank in 1977 which was
later merged with Bank of Mississippi in 1987. He has served as Senior Vice
President and Executive Vice President. He was named Vice Chairman in August,
1996.
Mr. Cowsert joined the Bank of Mississippi in 1990 as Senior Vice
President. He has since served as Executive Vice President and was named Vice
Chairman in August, 1996.
Mr. Threadgill joined Bank of Mississippi in 1987 as Assistant Vice
President. He has since served as Vice President, Community Bank President and
was named Executive Vice President in August, 1996.
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 1997 annual meeting , and is
incorporated herein by reference. Information concerning the remuneration of
directors of the Company appears under the caption
25
<PAGE> 26
"Compensation of Directors" on page 3 of the Company's definitive Proxy
Statement for its 1997 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 1997 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 1997 annual meeting, and is incorporated herein by reference.
26
<PAGE> 27
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
1996 Annual Report to Shareholders:
-Report of Independent Auditors
-Consolidated balance sheets as of December 31, 1996, and
1995.
-Consolidated statements of income for the three years ended
December 31, 1996.
-Consolidated statements of shareholders' equity for the three
years ended December 31, 1996.
-Consolidated statements of cash flows for the three years
ended December 31, 1996.
-Notes to consolidated financial statements for the three
years ended December 31, 1996.
(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) Specimen Common Stock Certificate. (3)
(10)(a) Stock Bonus Agreement between Bancorp of Mississippi,
Inc., and Aubrey B. Patterson, Jr., dated November 6,
1987, and Escrow Agreement between Bank of
Mississippi and Aubrey B. Patterson, Jr., dated
November 6, 1987. (4)(9)
(b) Form of deferred compensation agreement between
Bancorp of Mississippi, Inc. and certain key
executives. (5)(9)
(c) 1995 Stock Incentive Plan. (3)(9)
(d) 1995 Non-Qualified Stock Option Plan for Non-Employee
Directors. (3)(9)
(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)(9)
(11) Statement re computation of per share earnings.
(13)(a) Managements' Discussion and Analysis of Financial
Condition and Results of Operations on pages 13
through 20 of the 1996 Annual Report to Shareholders.
(6)
(b) Consolidated Financial Statements and Notes thereto
and Independent Auditors Report on pages 21 through
40 of the 1996 Annual Report to Shareholders. (6)
27
<PAGE> 28
(c) Summary of Quarterly Results on page 12 of the 1996
Annual Report to Shareholders. (6)
(d) Selected Financial Information on page 11 of the 1996
Annual Report to Shareholders. (6)
(22) Subsidiaries of the Registrant.
(23) Consent of Independent Accountants.
(27) Financial Data Schedule (for SEC use only).
(28) Information regarding Bancorp of Mississippi, Inc.,
amended and restated Salary Deferral-Profit Sharing
Employee Stock Ownership Plan. (7)(9)
(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) Filed as an exhibit to the Company's Form 10-K for the year ended
December 31, 1995 (file number 0-1-826), and incorporated by reference
thereto.
(9) Compensatory plans or arrangements.
(b) Reports on Form 8-K:
A current report on Form 8-K dated October 8, 1996
was filed with the Securities and Exchange
Commission during the fourth quarter of 1996
reporting an event under Item 5-Other Events.
28
<PAGE> 29
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.
DATE: March 26, 1997 /s/ Aubrey B. Patterson
-----------------------------------
Aubrey B. 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.
<TABLE>
<S> <C> <C>
Chairman of the Board, Chief Executive
Officer (Principal Executive Officer)
/s/ Aubrey B. Patterson and Director March 26, 1997
- ------------------------------
Aubrey B. Patterson
Treasurer (Principal Financial and
/s/ Nash Allen, Jr. Accounting Officer) March 26, 1997
- ------------------------------
L. Nash Allen, Jr.
Director March 26, 1997
- ------------------------------
S. H. Davis
Director March 26, 1997
- ------------------------------
Hassell Franklin
Director March 26, 1997
- ------------------------------
Fletcher H. Goode, M.D.
Director March 26, 1997
- ------------------------------
J. Louis Griffin, Jr.
Director March 26, 1997
- ------------------------------
W. G. Holliman, Jr.
Director March 26, 1997
- ------------------------------
Douglas Jumper
</TABLE>
29
<PAGE> 30
<TABLE>
<S> <C> <C>
/s/ Turner O. Lashlee Director March 26, 1997
- ------------------------------
Turner O. Lashlee
/s/ Alan W. Perry Director March 26, 1997
- ------------------------------
Alan W. Perry
Director March 26, 1997
- ------------------------------
Frank A. Riley
Director March 26, 1997
- ------------------------------
Travis E. Staub
Director March 26, 1997
- ------------------------------
Andrew R. Townes, DDS
Director March 26, 1997
- ------------------------------
Lowery A. Woodall
</TABLE>
30
<PAGE> 1
EXHIBIT 11
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------
(Dollars in thousands except per share amounts.)
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
PRIMARY
- -------
Average common shares outstanding 21,027,669 20,874,336 10,158,346
Stock options-treasury stock method 185,735 141,070 28,361
2-for-1 stock split effected in the form of a
100% stock dividend paid November 20, 1995 -- -- 10,186,707
----------- ----------- -----------
Average primary shares outstanding 21,213,404 21,015,406 20,373,414
=========== =========== ===========
Net income $ 42,883 $ 35,504 $ 30,728
=========== =========== ===========
Per share amount $ 2.02 $ 1.69 $ 1.51
=========== =========== ===========
FULLY DILUTED
- -------------
Average common shares outstanding 21,027,669 20,874,336 10,158,346
Stock options-treasury stock method 239,051 141,070 36,661
2-for-1 stock split effected in the form of a
100% stock dividend paid November 20, 1995 -- -- 10,195,007
----------- ----------- -----------
Average fully diluted shares outstanding 21,266,720 21,015,406 20,390,014
=========== =========== ===========
Net income $ 42,883 $ 35,504 $ 30,728
=========== =========== ===========
Per share amount $ 2.02 $ 1.69 $ 1.51
=========== =========== ===========
</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 holding company with
commercial banking operations in Mississippi and 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. 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.
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.
THREE YEARS ENDED DECEMBER 31, 1996
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,
1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
(In thousands, except per share amounts)
<S> <C> <C> <C>
Net income $ 42,883 $ 35,504 $ 30,728
Net income per share: $ 2.02 $ 1.69 $ 1.51
Return on average assets 1.24% 1.13% 1.07%
Return on average shareholders' equity 14.31% 13.23% 12.75%
</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>
1996 1995 1994
------------------- ------------------- --------------------
AVERAGE % AVERAGE % AVERAGE %
BALANCE CHANGE BALANCE CHANGE BALANCE CHANGE
------- ------ ------- ------ ------- ------
Interest earning assets: (DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Deposits with other banks $ 12,313 -38.3% $ 19,970 +79.7% $ 11,112 -24.9%
Held-to-maturity securities 480,191 -7.1% 516,919 +20.8% 427,759 -16.1%
Available-for-sale securities 231,040 +26.0% 183,396 -31.1% 266,370 +88.3%
Federal funds sold 60,868 +54.3% 39,451 -9.2% 43,437 -11.0%
Loans and leases, net of unearned 2,410,746 +12.3% 2,146,967 +14.1% 1,881,922 +12.4%
Mortgages held for sale 27,729 +33.3% 20,805 -38.1% 33,620 -38.7%
---------- ----- ---------- ----- ---------- -----
Total interest earning assets $3,222,887 +10.1% $2,927,508 +9.9% $2,664,220 +9.0%
========== ===== ========== ===== ========== =====
Interest bearing liabilities:
Deposits $2,598,941 +9.6% $2,371,330 +10.3% $2,149,042 +6.7%
Federal funds purchased and
securities sold under
repurchase agreements 40,880 +0.1% 40,845 +11.3% 36,686 +4.3%
Long-term debt 80,619 +17.8% 68,452 +17.6% 58,191 +67.6%
Other 3,359 -28.6% 4,706 +29.7% 3,627 +11.1%
---------- ----- ---------- ----- ---------- -----
Total interest bearing liabilities $2,723,799 +9.6% $2,485,333 +10.6% $2,247,546 +7.7%
========== ===== ========== ===== ========== =====
Non-interest bearing deposits $ 383,897 +6.3% $ 361,120 -0.9% $ 364,451 +11.3%
========== ===== ========== ===== ========== =====
</TABLE>
In 1996 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 1996, 1995 and 1994; however, the Company's
other funding sources, non-interest bearing deposits, federal funds purchased
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, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Net interest margin 4.81% 4.86% 4.76%
</TABLE>
The Company experienced a decrease in net interest margin in 1996 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.
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, 1996:
<TABLE>
<CAPTION>
INTEREST RATE SENSITIVITY
DECEMBER 31, 1996
MATURING OR REPRICING
--------------------------------------------------------------
91 DAYS OVER 1
0 TO 90 TO YEAR TO OVER
DAYS 1 YEAR 5 YEARS 5 YEARS
---------- --------- -------- --------
(IN THOUSANDS)
Interest earning assets:
<S> <C> <C> <C> <C>
Interest bearing deposits due from banks $ 18,715 $ - $ - $ -
Federal funds sold 70,300 - - -
Held-to-maturity securities 31,054 122,594 303,517 72,901
Available-for-sale securities 46,651 57,081 99,427 27,580
Loans & leases, net of unearned 823,938 338,850 1,201,638 104,908
Mortgages held for sale 25,728 - - -
---------- --------- -------- --------
Total interest earning assets 1,016,386 518,525 1,604,582 205,389
---------- --------- --------- --------
Interest bearing liabilities:
Interest bearing demand deposits & savings 440,575 215,968 476,708 -
Time deposits 393,463 588,461 592,260 3,473
Federal funds purchased & securities
sold under repurchase agreements 32,753 883 - -
Long-term debt 812 7,726 31,648 15,592
Other 947 44 300 371
---------- --------- --------- --------
Total interest bearing liabilities 868,550 813,082 1,100,916 19,436
---------- --------- --------- --------
Interest sensitivity gap $ 147,836 ($294,557) $ 503,666 $185,953
========== ========= ========= ========
Cumulative interest sensitivity gap $ 147,836 ($146,721) $ 356,945 $542,898
========== ========= ========= ========
</TABLE>
In the event interest rates decline after 1996, it is likely that the
Company will experience a slightly positive effect on net interest income in the
following one year period, as the cost of funds will decrease at a more 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 decreased 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 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.
3
<PAGE> 5
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>
1996 1995 1994
---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Provision for credit losses $ 8,804 $ 6,206 $ 5,946
Allowance for credit losses as
a percent of loans and leases
outstanding at year end 1.51% 1.51% 1.52%
Net charge offs $ 6,168 $ 3,147 $ 2,584
Net charge offs as a percent
of average loans .26% .15% .14%
</TABLE>
The 1996 provision for credit losses increased from 1995's level by
41.9% as a result of the growth in loans and an increase in loan losses,
primarily in consumer based loans. The 1995 provision for credit losses
increased 4.4% from 1994's level as a result of the growth in the loan
portfolio. The provision for credit losses for 1994 was 34.2% less than the
provision for the previous year principally as a result of an improvement in
general economic conditions as evidenced by the lowest level of net loans
charged off in recent history.
OTHER REVENUE
The components of other revenue for the years ended December 31, 1996,
1995 and 1994 and the percentage change from the prior year are shown in the
following table:
<TABLE>
<CAPTION>
1996 1995 1994
------------------- ------------------- ------------------
AMOUNT % CHANGE AMOUNT % CHANGE AMOUNT % CHANGE
------ -------- ------- --------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Mortgage lending $ 8,460 +127.2% $ 3,723 +333.9% $ 858 -72.1%
Service charges 17,828 +11.7% 15,965 +10.6% 14,439 +9.4%
Life insurance premiums 4,337 +29.7% 3,345 +1.4% 3,300 +7.9%
Trust income 2,606 +16.5% 2,237 +19.4% 1,873 +5.5%
Securities gains (losses), net 262 +134.2% (765) -161.1% (293) -140.1%
Other revenue 7,252 +7.7% 6,735 +15.4% 5,835 +18.2%
-------- -------- --------
Total other revenue $ 40,745 +30.4% $ 31,240 +20.1% $ 26,012 -2.9%
======== ======== ========
</TABLE>
Mortgage lending revenue in 1996 represents $4,235,000 gain on sale of
mortgage loans and $4,225,000 from servicing mortgage loans. The revenue
produced by mortgage lending activities increased in 1996 primarily as a result
of declining interest rates and growth in servicing income. In 1995, mortgage
lending revenue rebounded from 1994's level as a result of stable interest rates
and growth in servicing income. In 1994, mortgage lending was impacted by losses
incurred on the sale of mortgages in an unfavorable secondary market. The
Company's mortgage loan servicing portfolio has continued to increase as
indicated in the following table:
<TABLE>
<CAPTION>
1996 1995 1994
------------------- ------------------ -----------------
AMOUNT % CHANGE AMOUNT % CHANGE AMOUNT % CHANGE
------ -------- ------ -------- ------ --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Mortgage loans serviced at year-end $1,033.9 +18.0% $ 876.0 +8.0% $ 811.3 +11.4%
</TABLE>
Service charges on deposit accounts increased in 1996 and 1995 because
of higher volumes of items processed as a result of increased economic activity.
Trust income increased 16.5% in 1996, 19.4% in 1995 and 5.5% in 1994. The trust
business experienced steady growth as evidenced by increases in the number of
trust
4
<PAGE> 6
accounts and the value of assets under care (either managed or in custody).
Other revenue increased 7.7% and 15.4% in 1996 and 1995, respectively,
principally as a result of increases in fees for non-deposit related services.
OTHER EXPENSE
The components of other expense for the years ended December 31, 1996,
1995 and 1994 and the percentage change from the prior year are shown in the
following table:
<TABLE>
<CAPTION>
1996 1995 1994
------------------- ------------------ -----------------
AMOUNT % CHANGE AMOUNT % CHANGE AMOUNT % CHANGE
------ -------- ------ -------- ------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Salary and employee benefits $ 57,806 +5.6% $ 54,739 +13.1% $ 48,413 +5.3%
Occupancy net of rental income 8,331 +3.9% 8,022 +5.3% 7,616 +0.9%
Equipment 9,752 +10.1% 8,860 +18.7% 7,463 +15.6%
Deposit insurance premiums 2,601 -23.8% 3,412 -39.3% 5,621 +9.4%
Other 39,982 +8.9% 36,717 +21.3% 30,259 +7.8%
-------- -------- --------
Total other expense $118,472 +6.0% $111,750 +12.5% $ 99,372 +6.6%
======== ======== ========
</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 1996 and 1995 as
a result of lower rates in the insurance assessment rate of the Federal Deposit
Insurance Corporation (FDIC) which were based upon the risk assessment
classification assigned to it by the FDIC. Deposit insurance rates for 1996 for
the Company's deposits in the Bank Insurance Fund (BIF) were assessed at zero.
Certain other of the Company's deposits, which were acquired from thrifts,
remained in the Savings Association Insurance Fund (SAIF) and continued 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 1996, a one-time
assessment on SAIF insured deposits was imposed which resulted in a pre-tax
payment of $1.9 million and reduced 1996 after-tax net income per share $0.05.
Other expenses increased 8.9% in 1996 as a result of expanded
telecommunications, systems enhancements, and credit card interchange fees, all
of which related to providing higher levels of convenient consumer oriented
banking services. Additionally, approximately $500,000 of unamortized expense
relating to the issuance of the Company's 9% Subordinated Capital Debentures was
charged against 1996 earnings as a result of the early extinguishment of the
debt issue in December 1996.
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 percentage increases for the years
presented:
<TABLE>
<CAPTION>
1996 1995 1994
-------------------- -------------------- ------------------
AMOUNT % CHANGE AMOUNT % CHANGE AMOUNT % CHANGE
-------- -------- -------- -------- ------ --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Loans, net of unearned - average $ 2,411 +12.3% $ 2,147 +14.1% $ 1,882 +12.4%
Loans, net of unearned - year end $ 2,469 +7.6% $ 2,295 +13.3% $ 2,026 +13.4%
</TABLE>
The Company's loan portfolio continues to grow. The Company strives to
maintain a high-quality loan portfolio, forsaking growth for quality. The
Company's non-performing assets, which were less than 0.5% of net loans for all
years presented 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>
1996 1995 1994
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Foreclosed properties $ 1,835 $2,662 $1,757
Non-accrual loans 3,940 1,592 3,029
Loans 90 days or more past due 4,811 5,148 3,614
Restructured loans 77 7 1,448
------- ------ ------
Total non-performing assets $10,663 $9,409 $9,848
======= ====== ======
</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. At
December 31, 1996 and 1995, the Company did not have any concentration of loans
in excess of 10% of loans outstanding. Loan concentrations are considered to
exist when there are amounts loaned to multiple borrowers engaged in similar
activities which would cause them to be similarly impacted by economic or other
conditions.
Included in non-performing assets above were loans the Company
considered impaired totaling $4,164,000, $1,774,000 and $3,029,000 in 1996, 1995
and 1994, respectively.
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 $157.0 million at
December 31, 1996, compared to $134.7 million at the end of 1995. 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, 1996, the Company's available-for-sale securities
totaled $230.7 million. These securities, which are subject to possible sale,
are recorded at fair value. At December 31, 1996, the Company held no securities
whose decline in fair value was considered other than temporary.
Net unrealized gains on investment securites as of December 31, 1996
totaled $10.7 million. Net unrealized gains on held-to-maturity securities
comprised $7.0 million of that total while net unrealized gains on
available-for-sale securities were $3.7 million.
Net unrealized gains on investment securities as of December 31, 1995,
amounted to $12.6 million. Of that total, $8.8 million was attributable to
held-to-maturity securities and $3.8 million available-for-sale securities.
6
<PAGE> 8
These unrealized gains were a direct result of relatively stable intermediate
term interest rates during 1996 and 1995. 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.
DEPOSITS
The following table presents the Company's average deposit mix and
percentage change for the years indicated:
<TABLE>
<CAPTION>
1996 1995 1994
------------------- ------------------ -----------------
AVERAGE
BALANCE % CHANGE AMOUNT % CHANGE AMOUNT % CHANGE
------- -------- ------ -------- ------ --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Interest bearing deposits $2,598.9 +9.6% $2,371.3 +10.3% $2,149.0 +6.7%
Non-interest bearing deposits $ 383.9 +6.3% $ 361.1 -0.9% $ 364.5 +11.3%
</TABLE>
The Company's deposit mix continued to experience change in 1996. By
year end 1996, other time deposits showed an increase of 7.2% from the end of
1995, while interest bearing demand deposits increased by 9.0% and other
short-term savings accounts increased 22.5%. Non-interest bearing demand
deposits increased 14.5% from year end 1995 to year end 1996. Management is of
the opinion that the low interest rates paid on deposit accounts in 1996 and
1995 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. While that trend continued into 1996, the Company has
countered with a strategy of paying slightly above market rates for intermediate
term deposits. Deposits are the Company's primary source of funds to support its
earning assets. The Company's primary market areas provide the sources of
substantially 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.
On October 23, 1996 the Company announced that it would call for
redemption all of its outstanding 9% Subordinated Capital Debentures due in
1999. On December 30, 1996 the Company extinguished the debt by irrevocably
depositing with the trustee $24,508,000 in cash plus accrued and unpaid interest
from November 1, 1996 to redeem the debentures on January 15, 1997.
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. The Company's Tier I
capital and total capital, as a percentage of total risk-adjusted assets, was
12.14% and 13.39%, respectively at December 31, 1996, compared to 12.11% and
13.97% at December 31, 1995. 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, 1996 and 8.56% at December 31, 1995, compared to the required
minimum leverage capital ratio of 3%.
7
<PAGE> 9
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, 1996.
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; however, transactions involving cash
consideration or other forms of consideration will not be excluded.
On August 28, 1996 the Company announced that it would purchase up to
$2.5 million of its outstanding common stock within the next year. As of
December 31, 1996 the Company had purchased 43,566 shares at a cost of $1.2
million. The shares were held as treasury stock except those shares re-issued to
satisfy the exercise of options to purchase common stock.
8
<PAGE> 1
EXHIBIT 13(b)
Consolidated Financial Statements and Notes
thereto and Report of Independent Auditors
<PAGE> 2
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
BANCORPSOUTH, INC. AND SUBSIDIARIES DECEMBER 31
----------------------------
1996 1995
----------- -----------
ASSETS (IN THOUSANDS)
<S> <C> <C>
Cash and due from banks (Note 18) $ 153,148 $ 149,923
Interest bearing deposits with other banks 18,715 15,892
Held-to-maturity securities (Note 3) (fair value
of $537,119 and $448,075) 530,066 439,303
Available-for-sale securities (Note 4) (amortized cost
of $227,044 and $235,909) 230,739 239,755
Federal funds sold 70,300 35,450
Loans (Notes 5, 6 and 15) 2,554,118 2,371,684
Less: Unearned discount 84,784 76,518
Allowance for credit losses 37,272 34,636
------------ ------------
Net loans 2,432,062 2,260,530
Mortgages held for sale 25,728 25,168
Premises and equipment, net (Note 7) 90,939 81,240
Accrued interest receivable 31,855 28,992
Other assets (Notes 10 and 16) 33,687 29,906
------------ ------------
TOTAL ASSETS $ 3,617,239 $ 3,306,159
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand:
Non-interest bearing $ 450,470 $ 393,417
Interest bearing 724,872 665,313
Savings 408,380 333,436
Other time (Note 8) 1,577,657 1,471,446
------------ ------------
Total deposits 3,161,379 2,863,612
Federal funds purchased and securities sold under
repurchase agreements (Note 8) 33,636 35,848
Accrued interest payable 14,488 13,695
Other liabilities (Notes 10 and 11) 36,634 31,285
Long-term debt (Note 9) 55,778 73,624
------------ ------------
TOTAL LIABILITIES 3,301,915 3,018,064
------------ ------------
SHAREHOLDERS' EQUITY (Notes 2, 13, and 14)
Common stock, $2.50 par value
Authorized - 500,000,000 shares; Issued - 21,164,265 and
21,105,664 shares at December 31, 1996 and 1995, respectively 52,911 52,764
Capital surplus 84,616 84,391
Unrealized gain on available-for-sale securities, net of tax 2,280 2,480
Retained earnings 177,741 149,494
Treasury stock at cost (150,784 and 108,384 shares
at December 31, 1996 and 1995, respectively) (2,224) (1,034)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 315,324 288,095
------------ ------------
Commitments and contingent liabilities (Notes 5 and 18) -- --
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,617,239 $ 3,306,159
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE> 3
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
BANCORPSOUTH, INC. AND SUBSIDIARIES YEARS ENDED DECEMBER 31
--------------------------------------------
1996 1995 1994
------------ ------------ ------------
INTEREST REVENUE (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Loans receivable $ 227,169 $ 203,800 $ 163,727
Deposits with other banks 646 857 660
Federal funds sold 3,289 2,205 1,756
Held-to-maturity securities:
U.S. Treasury 4,268 3,977 2,063
U.S. Government agencies and corporations 19,555 24,175 16,579
Obligations of states and political subdivisions 6,954 7,491 7,213
Other 2 168 270
Available-for-sale securities 14,119 8,321 13,227
Mortgages held for sale 1,917 1,433 2,400
----------- ----------- -----------
Total interest revenue 277,919 252,427 207,895
----------- ----------- -----------
INTEREST EXPENSE
Deposits 118,746 107,165 79,270
Federal funds purchased and securities sold
under repurchase agreements 1,954 2,084 1,338
Other 5,805 5,208 4,421
----------- ----------- -----------
Total interest expense 126,505 114,457 85,029
----------- ----------- -----------
Net interest revenue 151,414 137,970 122,866
Provision for credit losses (Note 6) 8,804 6,206 5,946
----------- ----------- -----------
Net interest revenue, after provision for credit losses 142,610 131,764 116,920
----------- ----------- -----------
Other Revenue
Mortgage lending 8,460 3,723 858
Service charges 17,828 15,965 14,439
Life insurance premiums 4,337 3,345 3,300
Trust income 2,606 2,237 1,873
Securities gains (losses), net 262 (765) (293)
Other 7,252 6,735 5,835
----------- ----------- -----------
Total other revenue 40,745 31,240 26,012
----------- ----------- -----------
OTHER EXPENSE
Salaries and employee benefits (Notes 11 and 13) 57,806 54,739 48,413
Occupancy net of rental income 8,331 8,022 7,616
Equipment 9,752 8,860 7,463
Deposit insurance premiums 2,601 3,412 5,621
Other 39,982 36,717 30,259
----------- ----------- -----------
Total other expense 118,472 111,750 99,372
----------- ----------- -----------
Income before income taxes 64,883 51,254 43,560
Income tax expense (Note 10) 22,000 15,750 12,832
----------- ----------- -----------
Net Income $ 42,883 $ 35,504 $ 30,728
=========== =========== ===========
NET INCOME PER SHARE (Note 14) $ 2.02 $ 1.69 $ 1.51
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 4
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
BANCORPSOUTH, INC. AND SUBSIDIARIES
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
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, 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 13) 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 -- -- -- -- (8,754) -- (8,754)
Pooled acquistions -- -- -- -- (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 13) 15,000 37 476 -- (513) -- --
Purchase business acquisitions 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 of 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 -- -- -- -- (,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
Shares issued 62,151 147 225 -- -- 52 424
Recognition of stock compensation -- -- -- -- 83 -- 83
Purchase of treasury stock (45,950) -- -- -- -- (1,242) (1,242)
Change in market valuation of
available-for-sale securities, net of tax -- -- -- (200) -- -- (200)
Net income -- -- -- -- 42,883 -- 42,883
Cash dividends declared:
BancorpSouth, at $.70 per share -- -- -- -- (14,719) -- (14,719)
----------- -------- -------- ------- --------- ------- ---------
BALANCE, DECEMBER 31, 1996 21,013,481 $ 52,911 $ 84,616 $ 2,280 $ 177,741 ($2,224) $ 315,324
=========== ======== ======== ======= ========= ======= =========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 5
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
BANCORPSOUTH, INC. AND SUBSIDIARIES YEARS ENDED DECEMBER 31
-----------------------------------------------
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES: (IN THOUSANDS)
Net income $ 42,883 $ 35,504 $ 30,728
Adjustment to reconcile net income to net
cash (used) provided by operating activities:
Provision for credit losses 8,804 6,206 5,946
Depreciation and amortization 9,630 8,448 6,952
Deferred taxes 1,016 74 3,313
Amortization of intangibles 1,232 726 583
Amortization of debt securities premium
and discount, net (47) (663) 1,483
Security losses (gains), net (262) 765 293
Net deferred loan origination expense (3,138) (2,624) (2,087)
Increase in interest receivable (2,863) (6,042) (4,699)
Increase in interest payable 793 4,072 2,119
Proceeds from mortgages sold 258,255 150,572 266,911
Origination of mortgages for sale (258,815) (163,415) (182,192)
Other, net (3,760) 4,457 (46)
----------- ----------- -----------
Net cash provided by in operating activities 53,728 38,080 129,304
----------- ----------- -----------
INVESTING ACTIVITIES:
Proceeds from calls and maturities of held-
to-maturity securities 105,464 145,071 72,358
Proceeds from calls and maturities of available-
for-sale securities 186,863 290,404 498,144
Proceeds from sales of held-to-maturity securities 755 931 994
Proceeds from sales of available-for-sale securities 26,855 11,708 19,070
Purchases of held-to-maturity securities (196,696) (111,875) (253,423)
Purchases of available-for-sale securities (203,969) (261,322) (423,712)
Net increase (decrease) in short-term investments (34,850) (32,175) 27,676
Net increase in loans (177,198) (269,328) (240,538)
Purchases of premises and equipment (20,877) (18,695) (10,050)
Proceeds from sale of premises and equipment 791 480 103
Other, net (4,775) (5,268) (2,914)
----------- ----------- -----------
Net cash used in investing activities (317,637) (250,069) (312,292)
----------- ----------- -----------
FINANCING ACTIVITIES:
Net increase in deposits 297,766 264,943 132,384
Net increase (decrease) in short-term debt and other
liabilities 4,702 (28,478) 26,448
Advances on long-term debt 10,300 21,000 43,093
Repayment of long-term debt (27,846) (14,792) (9,432)
Issuance of common stock 217 506 404
Purchase of treasury stock (1,242) -- (861)
Purchase of stock warrants -- (6) (484)
Proceeds from warrant conversion, net -- -- 1,207
Payment of cash dividends (13,940) (10,062) (7,669)
----------- ----------- -----------
Net cash provided by financing activities 269,957 233,111 185,090
----------- ----------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS 6,048 21,122 2,102
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 165,815 144,693 142,591
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 171,863 $ 165,815 $ 144,693
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BANCORPSOUTH, INC. AND SUBSIDIARIES
DECEMBER 31, 1996, 1995 AND 1994
(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) and
Volunteer Bank (VOL). Prior to December 13, 1996, Laurel Federal Savings and
Loan Association (LF) was a wholly-owned subsidiary of the Company. On that date
LF was merged with and into BOM. All significant intercompany accounts and
transactions have been eliminated in consolidation. Certain 1995 and 1994
amounts have been reclassified to conform with the 1996 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
$125,712,000, $110,385,000 and $82,910,000 and income taxes of $20,277,000,
$15,480,000 and $8,505,000 for the years ended December 31, 1996, 1995 and 1994,
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 3 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 Note 13 related to the stock bonus plan.
SECURITIES
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, 1996 and 1995.
Available-for-sale securities are debt and equity securites 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.
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.
5
<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 interest 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
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. 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.
6
<PAGE> 8
RECENT PRONOUNCEMENTS
SFAS No. 125 "Accounting for Transfers and Servicing of Financial
Assets and Extinguishment of Liabilities", issued June 1996 and amended by SFAS
No. 127, issued December 1996, provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishment of liabilities.
This Statement is effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after December 31, 1996. Management
believes the adoption of the above-mentioned Statement 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) HELD-TO-MATURITY SECURITIES
A comparison of amortized cost and estimated fair values of
held-to-maturity securities as of December 31, 1996 and 1995 follows:
<TABLE>
<CAPTION>
1996
------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Treasury $ 91,340 $ 1,360 $ 3 $ 92,697
U.S. Government agencies and corporations 292,930 2,440 1,206 294,164
Tax exempt obligations of states and political subdivisions 144,406 5,075 612 148,869
Other 1,390 1 2 1,389
-------- -------- -------- --------
Total $530,066 $ 8,876 $ 1,823 $537,119
======== ======== ======== ========
</TABLE>
<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>
Gross gains of $267,000 and gross losses of $89,000 were recognized in
1996, gross gains of $123,000 and gross losses of $389,000 were recognized in
1995 and gross gains of $67,000 and gross losses of $181,000 were recognized in
1994 on held-to-maturity securities. Except for 1996, these gains and losses
were the result of held-to-maturity securities being called prior to maturity.
Included in the 1996 amounts is a gross gain of $1,000 and a gross loss of
$67,000 related to the sale of held-to-maturity securities with amortized cost
of $822,000. The decision to sell these securities was based on the
deteriorating credit quality of the issuer.
Held-to-maturity securities with a carrying value of approximately
$326,000,000 at December 31, 1996, 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 with the issuance of the report but
7
<PAGE> 9
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 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, 1996 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>
1996
------------------------------
ESTIMATED
AMORTIZED FAIR
COST VALUE
-------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Due in one year or less $ 153,646 $ 154,202
Due after one year through five years 301,530 305,102
Due after five years through ten years 61,989 62,861
Due after ten years 12,901 14,954
------------ ------------
Total $ 530,066 $ 537,119
============ ============
</TABLE>
8
<PAGE> 10
(4) AVAILABLE-FOR-SALE SECURITIES
A comparison of amortized cost and estimated fair values of
available-for-sale securities as of December 31, 1996 and 1995 follows:
<TABLE>
<CAPTION>
1996
------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- --------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Treasury $ 43,702 $ 229 $ 67 $ 43,864
U.S. Government agencies and corporations 129,620 413 518 129,515
Tax exempt obligations of states and political subdivisions 12,375 295 103 12,567
Preferred stock 22,000 -- -- 22,000
Other 19,347 3,459 13 22,793
-------- -------- -------- --------
Total $227,044 $ 4,396 $ 701 $230,739
======== ======== ======== ========
</TABLE>
<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>
Gross gains of $277,000 and gross losses of $193,000 were recognized in
1996, gross gains of $900,000 and gross losses of $1,399,000 were recognized in
1995 and gross gains of $170,000 and gross losses of $349,000 were recognized in
1994 on available-for-sale securities.
Available-for-sale securities with a carrying value of approximately
$96,000,000 at December 31, 1996, 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, 1996 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. Equity securities are considered as maturing after 10 years unless
they have a repricing feature. Securities which reprice periodically are
considered as maturing on the first repricing date subsequent to December 31,
1996.
<TABLE>
<CAPTION>
1996
-----------------------------
ESTIMATED
AMORTIZED FAIR
COST VALUE
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Due in one year or less $ 103,894 $ 103,734
Due after one year through five years 99,098 99,425
Due after five years through ten years 13,298 16,717
Due after ten years 10,754 10,863
------------ ------------
Total $ 227,044 $ 230,739
============ ============
</TABLE>
9
<PAGE> 11
(5) LOANS
A summary of loans classified by collateral type at December 31, 1996
and 1995 follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Commercial and agricultural $ 238,246 $ 223,225
Consumer and installment 744,456 695,127
Real estate mortgage 1,407,841 1,314,935
Lease financing 149,104 121,617
Other 14,471 16,780
------------ ------------
Total $ 2,554,118 $ 2,371,684
============ ============
</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 $3,940,000 and $1,592,000 at December 31, 1996 and
1995, respectively. Restructured loans totaled $77,000 and $7,000 at December
31, 1996 and 1995, respectively.
The total amount of interest earned on non-performing loans was
approximately $13,000, $70,000 and $214,000 in 1996, 1995 and 1994,
respectively. The gross interest income which would have been recorded under the
original terms of those loans amounted to $167,000, $105,000 and $353,000 in
1996, 1995 and 1994, respectively.
Loans considered impaired, under SFAS No.114, as amended by SFAS No.
118, are loans which, based on current information and events, it is probable
that the creditor will be unable to collect all amount due according to the
contractual terms of the loan agreement. The Company's recorded investment in
loans considered impaired at December 31, 1996 and 1995 was $4,164,000 and
$1,774,000, respectively, with a valuation reserve of $1,209,000 and $580,000,
respectively. The average recorded investment in impaired loans during 1996 and
1995 was $3,315,000 and $1,741,000, respectively.
10
<PAGE> 12
(6) ALLOWANCE FOR CREDIT LOSSES
The following schedule summarized the changes in the allowance for
credit losses for the years ended December 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of year $ 34,636 $ 30,830 $ 27,468
Provision charged to expense 8,804 6,206 5,946
Recoveries 1,836 1,567 3,277
Loans charged off (8,004) (4,714) (5,861)
Acquisitions -- 747 --
----------- ----------- -----------
Balance at end of year $ 37,272 $ 34,636 $ 30,830
=========== =========== ===========
</TABLE>
(7) PREMISES AND EQUIPMENT
A Summary by asset classification at December 31, 1996 and 1995
follows:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE
YEARS 1996 1995
----------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Cost
Land $ 12,273 $ 12,756
Buildings and improvements 20-50 69,074 61,943
Leasehold improvements 10-20 1,720 1,608
Equipment, furniture and fixtures 3-12 55,939 48,486
Construction in progress 7,262 5,044
-------- --------
146,268 129,837
Accumulated Depreciation and Amortization 55,329 48,597
-------- --------
Premises and Equipment, net $ 90,939 $ 81,240
======== ========
</TABLE>
(8) TIME DEPOSITS AND SHORT-TERM DEBT
Certificates of deposit and other time deposits of $100,000 or more
amounting to approximately $399,123,000 and $334,915,000 were outstanding at
December 31, 1996 and 1995, respectively. Total interest expense relating to
certificate and other time deposits of $100,000 or more totaled approximately
$19,728,000, $17,386,000 and $10,582,000 for the years ended December 31, 1996,
1995 and 1994, respectively.
For time deposits with a remaining maturity of more than one year at
December 31, 1996, the aggregate amount of maturities for each of the following
five years is presented in the following table:
<TABLE>
<CAPTION>
MATURING IN AMOUNT
- ----------- ---------
(IN THOUSANDS)
<S> <C>
1998 $324,963
1999 133,648
2000 134,966
2001 17,693
2002 986
Thereafter 2,494
--------
Total $614,750
--------
</TABLE>
11
<PAGE> 13
Presented below is information relating to short-term debt for the
years ended December 31, 1996 and 1995:
<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>
1996:
Federal funds purchased $ 1,750 5.8% $ 4,226 5.0% $ 5,950
Securities sold under repurchase agreements 31,886 4.8% 36,654 4.8% 40,030
------- ------- -------
Total $33,636 $40,880 $45,980
======= ======= =======
1995:
Federal funds purchased $ 3,850 5.2% $ 5,747 6.7% $11,474
Securities sold under repurchase agreements 31,998 4.8% 35,098 4.8% 39,345
------- ------- -------
Total $35,848 $40,845 $50,819
======= ======= =======
</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, 1996, the Company's
subsidiary banks had established informal federal funds borrowing lines of
credit aggregating $208,500,000.
(9) LONG-TERM DEBT
SUBORDINATED CAPITAL DEBENTURES
On November 22, 1989, the Company issued $25,000,000 of 9% subordinated
capital debentures due November 1, 1999. The 9% debentures were redeemable at
the option of the Company in whole or in part at par on or after November 1,
1996. On December 30, 1996, the Company extinguished the $24,508,000 of
outstanding 9% debentures by transferring the funds to an irrevocable trust for
the repayment of principal and interest on the debentures. The $489,000 loss on
early extinguishment of this debt is included in other expense for 1996.
Included in interest expense is $2,291,000 for 1996 and $2,206,000 for 1995 and
1994, respectively.
12
<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 lesser 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, 1996, 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 5.47% - 6.55% 15,000
2001 5.21% - 7.03% 6,554
Thereafter 5.70% - 8.95% 24,224
-------
Total $55,778
=======
</TABLE>
(10) INCOME TAXES
Total income taxes for the years ended December 31, 1996, 1995 and 1994
were allocated as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ------------ -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Income from continuing operations $ 22,000 $ 15,750 $ 12,832
Shareholders' equity for unrealized gain (loss)
on available-for-sale securities 49 2,395 (1,139)
----------- ------------ -----------
Total $ 22,049 $ 18,145 $ 11,693
=========== =========== ===========
</TABLE>
The components of income tax expense attributable to continuing
operations are as follows for the years ended December 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
Current: (IN THOUSANDS)
<S> <C> <C> <C>
Federal $ 18,944 $ 14,118 $ 8,224
State 2,040 1,558 1,295
Deferred:
Federal 824 13 3,002
State 192 61 311
----------- ------------ -----------
Total $ 22,000 $ 15,750 $ 12,832
=========== =========== ===========
</TABLE>
13
<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>
1996 1995 1994
------------ ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Tax expense at statutory rate $ 22,709 $ 17,939 $ 15,246
Increase (reduction) in taxes resulting from:
State income taxes net of federal tax benefit 1,451 1,052 1,044
Tax exempt interest revenue (2,556) (2,718) (2,796)
Dividend received deduction (183) (378) (497)
Tax over book loss on security transactions (132) (520) (100)
Non-deductible merger expenses 39 490 41
Other, net 672 (115) (106)
----------- ----------- -----------
Total $ 22,000 $ 15,750 $ 12,832
=========== =========== ===========
</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,
1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
------------ -------------
<S> <C> <C>
Deferred tax assets: (IN THOUSANDS)
Loans receivable, principally due to allowance
for credit losses $ 14,495 $ 15,985
Deferred liabilities principally due to
compensation arrangements and vacation accruals 3,839 2,939
Other, net -- 105
Net operating loss carryforwards 328 395
------------ ------------
Total gross deferred tax assets 18,662 19,424
Less: valuation allowance -- --
------------ ------------
Deferred tax assets $ 18,662 $ 19,424
============ ============
Deferred tax liabilities:
Bank premises and equipment, principally due
to differences in depreciation and lease transactions $ 10,881 $ 10,439
Deferred assets, principally due to the capitalization
of excess servicing rights for financial reporting purposes 1,294 2,432
Investments, principally due to interest income recognition 1,723 767
Unrealized gains on available-for-sale securities 1,415 1,366
Other, net 12 18
------------ ------------
Total gross deferred liabilities 15,325 15,022
------------ ------------
Net deferred tax assets $ 3,337 $ 4,402
============ ============
</TABLE>
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,
1996.
14
<PAGE> 16
At December 31, 1996 the Company has net operating loss carryforwards
for federal income tax purposes of approximately $939,000 that are available to
offset future federal taxable income, subject to various limitations, through
2001.
(11) 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, 1996, 1995 and 1994
included the following components:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost $ 1,127 $ 785 $ 1,035
Interest cost 1,290 1,001 1,081
Actual return on plan assets (3,532) (3,637) 31
Net amortization and deferral 1,983 2,510 (1,200)
Cost of special termination benefits -- 464 --
----------- ----------- -----------
Pension expense $ 868 $ 1,123 $ 947
=========== =========== ===========
</TABLE>
The funded status of the Company's plan at December 31, 1996 and 1995
was as follows:
<TABLE>
<CAPTION>
1996 1995
------------- ------------
(IN THOUSANDS)
<S> <C> <C>
Plan assets at fair value (primarily in listed bonds and commingled funds) $ 20,982 $ 19,234
Actuarial present value of projected benefit obligations 19,498 17,433
------------ ------------
Projected benefit obligation less than plan assets 1,484 1,801
Unrecognized net gain (1,213) (1,507)
Unrecognized prior service cost (1,252) (1,341)
Unrecognized net obligation at January 1 (9) (10)
------------ ------------
Accrued pension expense recorded in the financial statements ($ 990) ($ 1,057)
============ ============
Actuarial present value of vested benefit obligations $ 11,267 $ 7,214
============ ============
Accumulated benefit obligations $ 12,478 $ 11,285
============ ============
</TABLE>
The discount rate used in determining the actuarial present value of
the projected benefit obligation was 7.5% for 1996 and 1995. The rate of
increase in future compensation levels used in determining the actuarial present
value of the projected benefit obligation was 5% for 1996 and 1995. The expected
long-term rate of return on assets during 1996 and 1995 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
$124,000 in 1996, $111,000 in 1995 and $93,000 in 1994.
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
15
<PAGE> 17
Company common stock at prevailing market prices. Plan expense for the years
ended December 31, 1996, 1995 and 1994 was $1,555,000, $1,495,000 and
$1,402,000, 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 $62,000 in 1996, $48,000 in 1995 and $36,000 in
1994.
(12) 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 3, Held-to-Maturity Securities, and
Note 4, 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, 1996
and 1995: .
<TABLE>
<CAPTION>
1996 1995
------------------------- ---------------------------
BOOK FAIR BOOK FAIR
VALUE VALUE VALUE VALUE
----------- ----------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Commercial and agricultural $ 238,246 $ 235,086 $ 223,225 $ 224,129
Consumer and installment 744,456 760,947 695,127 708,100
Real estate mortgage 1,407,841 1,394,210 1,314,935 1,295,090
All other 14,471 14,233 16,780 16,780
----------- ----------- ----------- -----------
Total $ 2,405,014 $ 2,404,476 $ 2,250,067 $ 2,244,099
=========== =========== =========== ===========
</TABLE>
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 and
maturity. For lower graded loans, the discount rate was based on yields of bonds
of similar credit risk and maturity.
16
<PAGE> 18
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, 1996 and 1995. The fair value of 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, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
------------------------- --------------------------
BOOK FAIR BOOK FAIR
VALUE VALUE VALUE VALUE
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Certificates of deposit: (IN THOUSANDS)
Maturing or repricing in six months or less $ 704,344 $ 707,601 $ 755,204 $ 757,639
Maturing or repricing between six months and one year 278,496 280,089 345,987 347,679
Maturing or repricing between one and three years 438,806 445,561 288,709 292,169
Maturing or repricing beyond three years 156,011 159,455 81,546 84,766
----------- ----------- ----------- -----------
Total $ 1,577,657 $ 1,592,706 $ 1,471,446 $ 1,482,253
=========== =========== =========== ===========
</TABLE>
LONG-TERM DEBT
At December 31, 1995, subordinated capital debentures with a book value
of $24,508,000 had an estimated fair value of $24,265,000.
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, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
------------------------- --------------------------
BOOK FAIR BOOK FAIR
FINAL DUE DATE VALUE VALUE VALUE VALUE
- -------------- ----------- ------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1997 $ 5,000 $ 4,996 $ 5,000 $ 5,024
1998 5,000 4,968 5,000 5,001
2000 15,000 14,917 10,000 10,257
Thereafter 30,778 29,976 29,116 29,548
----------- ----------- ----------- -----------
Total $ 55,778 $ 54,857 $ 49,116 $ 49,830
=========== =========== =========== ===========
</TABLE>
(13) STOCK INCENTIVE AND STOCK OPTION PLANS
During 1987, the Company issued 34,500 shares of common stock 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
3,450 at December 31, 1996. 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 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 provided 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 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
27,000 at December 31, 1996. 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
17
<PAGE> 19
one to ten years. The Company recorded $1,907,000, $947,000 and $106,000 in
compensation expense in 1996, 1995 and 1994, 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.
A summary of the status of the Company's stock option plans as of
December 31, 1996, 1995 and 1994, and changes during the years ended on those
dates is presented below:
<TABLE>
<CAPTION>
1996 1995 1994
------------------- ---------------------- ---------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXCERCISE
OPTIONS SHARES PRICE SHARES PRICE SHARES PRICE
- -------- ------- --------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year 677,219 $15.65 542,442 $13.28 558,009 $12.99
Granted 148,991 26.14 178,000 20.83 24,150 14.88
Exercised (85,280) 11.68 (43,223) 7.17 (37,072) 10.09
Expired or cancelled - - - - (2,645) 13.09
------- ------- -------
Outstanding at end of year 740,930 18.22 677,219 15.65 542,442 13.28
======= ======= =======
Exerciseable at year-end 479,268 424,852 135,711
======= ======= =======
</TABLE>
The following table summarizes information about stock options at
December 31, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------------ -----------------------------------
RANGE OF NUMBER WEIGHTED-AVG WEIGHTED-AVG NUMBER WEIGHTED-AVG
EXERCISE PRICES OUTSTANDING REMAINING LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- ---------------------- --------------- ----------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C>
$4.94 to $7.16 26,031 6.3 years $ 5.88 26,031 $ 5.88
$8.21 to $12.99 146,808 4.9 10.95 146,808 10.95
$14.88 to $18.75 295,100 7.1 17.28 265,100 17.30
$22.13 to $26.50 272,991 9.5 24.32 41,329 22.13
------- -------
$4.94 to $26.50 740,930 7.5 18.22 479,268 15.15
======= =======
</TABLE>
The Company adopted SFAS No. 123, "Accounting for Stock Based
Compensation on January 1, 1996 and elected to continue to measure compensation
cost relative to its stock based compensation plans using Accounting Principles
Board Opinion No. 25. The pro forma net income and pro forma net income per
share is not materially different from net income and net income per share as
reported.
(14) 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. Common
stock and common stock equivalents have been adjusted for all periods presented
for the two-for-one stock split effected in the form of a 100% stock dividend
(see Note 2). 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 (21,213,404 in
1996, 21,015,406 in 1995 and 20,373,414 in 1994).
18
<PAGE> 20
Dividends to shareholders are paid from dividends paid to the Company
by its subsidiary banks which are subject to approval by the applicable state
regulatory authorities. At December 31, 1996, the Company's subsidiary banks
could have paid dividends to the Company aggregating $92,000,000 under current
regulatory guidelines.
(15) 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 at December 31, 1995 $ 17,275
New loans 15,458
Repayments (11,250)
Changes in directors and executive officers (48)
-----------
Loans outstanding at December 31, 1996 $ 21,435
===========
</TABLE>
(16) 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 morgage 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>
1996 1995
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Balance at beginning of year $ 5,051 $ 3,608
Mortgage servicing rights capitalized 5,721 2,100
Amortization expense (1,496) (657)
------------ ------------
Balance at end of year 9,276 5,051
Valuation allowance (200) (401)
------------ ------------
Fair value at end of year $ 9,076 $ 4,650
============ ============
</TABLE>
19
<PAGE> 21
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 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).
(17) REGULATORY MATTERS
A special assessment of $1.9 million was imposed in 1996 by the Federal
Deposit Insurance Corporation (FDIC) on the Company's deposits in the
Savings Association Insurance Fund (SAIF). This non-recurring assessment was
imposed by Federal Deposit Insurance Act of 1996 and was designed to
recapitalize the SAIF. Under the FDIC's current risk-based premium policy,
deposit insurance rates for 1997 for the Company's deposits in the Bank
Insurance Fund (BIF) have been assessed at zero. However, certain other of the
Company's deposits which were acquired from thrifts over the years remain in
the SAIF and will continue to be assessed for 1997 at the rate of $0.23 per
$100 of insured deposits, the same rate as 1996.
The company is subject to various regulatory capital requirements
administered by the federal and state banking agencies. failure to meet minimum
capital requirements can initiate certain mandatory-and possibly additional
discretionary-actions by regulators that, if undertaken, could have a direct
material effect on the company's financial statements. under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the
company must meet specific capital guidelines that involve quantitative measures
of the company's assets, liabilities and certain off-balance sheet items as
calculated under regulatory accounting practices. The company's capital amounts
and classification are also subject to qualitative judgments by the regulators
about components, risk weightings and other factors. Quantitative measures
established by the Federal Reserve Board (FRB) to ensure capital adequacy
require the company to maintain minimum capital amounts and ratios (risk-based
capital ratios). All banking companies are required to have core capital (Tier
1) of a least 4% of risk-weighted assets, total capital of at least 8% of
risk-weighted assets and a minimum Tier 1 leverage ratio of 3% of adjusted
average assets. the regulations also define well capitalized levels of Tier 1,
total capital and Tier 1 leverage as 6%, 10% and 5%, respectively. The Company
had Tier 1, total capital and leverage above the well capitalized levels at
December 31, 1996 and 1995, respectively, as set forth in the following table:
<TABLE>
<CAPTION>
1996 1995
------------------- --------------------
AMOUNT RATIO AMOUNT RATIO
------ ----- ------ -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Total Capital (to Risk-Weighted Assets) $337,728 13.39% $324,645 13.96%
Tier 1 Capital (to Risk-Weighted Assets) 306,135 12.14 281,355 12.11
Tier 1 Leverage Capital (to Average Assets) 306,135 8.56 281,355 8.56
</TABLE>
20
<PAGE> 22
(18) COMMITMENTS AND CONTINGENT LIABILITIES
LEASES
Rent expense was approximately $1,841,000 for 1996, $1,658,000 for 1995
and $1,717,000 for 1994. 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, 1996:
<TABLE>
<CAPTION>
AMOUNT
------
(IN THOUSANDS)
<S> <C>
1997 $2,108
1998 1,941
1999 1,395
2000 1,258
2001 469
Thereafter 556
------
Total future minimum lease payments $7,727
======
</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 $1.03 billion of loans
serviced for investors is approximately $299.1 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, 1996, 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 morgage
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, 1996, the
contractual or notional amount of these forward contracts was approximately
$39,836,000. 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, 1996, these included
approximately $26,117,000 for letters of credit, and approximately $514,314,000
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.
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 $2,032,000 were maintained to satisfy Federal regulatory requirements
at December 31, 1996.
21
<PAGE> 23
(19) 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
------------------------------
1996 1995
------------ -------------
Assets (IN THOUSANDS)
<S> <C> <C>
Cash on deposit with subsidiary banks $ 8,209 $ 5,718
Securities 1,210 1,233
Investment in subsidiaries 310,164 305,331
Other assets 3,717 1,375
------------ ------------
Total assets $ 323,300 $ 313,657
============ ============
Liabilities and shareholders' equity
Long-term debt $ -- $ 24,508
Other liabilities 7,976 1,054
------------ ------------
Total liabilities 7,976 25,562
Shareholders' equity 315,324 288,095
------------ ------------
Total liabilities and shareholders' equity $ 323,300 $ 313,657
============ ============
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
---------------------------------------------
CONDENSED STATEMENTS OF INCOME 1996 1995 1994
----------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Dividends from subsidiaries $ 41,582 $ 14,665 $ 12,279
Management fees from subsidiaries 628 603 1,282
Other operating income 57 60 60
----------- ----------- -----------
Total income 42,267 15,328 13,621
Operating expenses 4,280 3,243 3,128
----------- ----------- -----------
Income before equity in undistributed earnings
of subsidiaries 37,987 12,085 10,493
Equity in undistributed earnings of subsidiaries 4,896 23,419 20,235
----------- ----------- -----------
Net income $ 42,883 $ 35,504 $ 30,728
=========== =========== ===========
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------------------------
CONDENSED STATEMENTS OF CASH FLOWS 1996 1995 1994
----------- ------------ -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Operating Activities:
Net income $ 42,883 $ 35,504 $ 30,728
Adjustments to reconcile net income
to net cash provided by operating activities (919) (22,592) (25,589)
----------- ----------- -----------
Net cash provided by operating activities 41,964 12,912 5,139
Net cash provided by investing activities -- -- 900
Net cash used in financing activities (39,473) (9,649) (6,844)
----------- ----------- -----------
Increase (decrease) in cash and cash equivalents 2,491 3,263 (805)
Cash and cash equivalents at beginning of year 5,718 2,455 3,260
----------- ----------- -----------
Cash and cash equivalents at end of year $ 8,209 $ 5,718 $ 2,455
=========== =========== ===========
</TABLE>
22
<PAGE> 24
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, 1996 and 1995, 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, 1996. 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, 1996 and 1995, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1996, 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.
Memphis, Tennessee
January 24, 1997
<PAGE> 1
EXHIBIT 13(c)
Summary of Quarterly Results
<PAGE> 2
SUMMARY OF QUARTERLY RESULTS (UNAUDITED)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------
MAR 31 JUN 30 SEP 30 DEC 31
------- ------- ------- -------
<S> <C> <C> <C> <C>
1996:
Interest revenue $66,814 $68,108 $70,237 $72,760
Net interest revenue 36,256 37,183 38,371 39,604
Provision for credit losses 1,444 3,060 2,500 1,800
Income before income taxes 14,002 17,402 15,594 17,885
Net income 9,449 11,200 10,564 11,670
Earnings per share 0.45 0.53 0.50 0.55
Dividends per share 0.17 0.17 0.17 0.19
1995:
Interest revenue $58,668 $62,514 $64,921 $66,324
Net interest revenue 33,060 33,783 35,061 36,066
Provision for credit losses 1,298 1,240 2,057 1,611
Income before income taxes 11,624 12,933 13,740 12,957
Net income 7,905 8,869 9,544 9,186
Earnings per share 0.38 0.42 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
</TABLE>
<PAGE> 1
EXHIBIT 13 (d)
Selected Financial Information
<PAGE> 2
SELECTED FINANCIAL INFORMATION (UNAUDITED)
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
------------------------------------------------------
1996 1995 1994 1993 1992
-------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Earnings Summary:
Interest revenue $ 277,919 $252,427 $ 207,895 $ 193,869 $ 202,920
Interest expense 126,505 114,457 85,029 78,715 92,143
-------- ------- -------- -------- --------
Net interest revenue 151,414 137,970 122,866 115,154 110,777
Provision for credit losses 8,804 6,206 5,946 9,032 12,843
-------- ------- -------- -------- --------
Net interest revenue, after provision
for credit losses 142,610 131,764 116,920 106,122 97,934
Other revenue 40,475 31,240 26,012 26,776 23,767
Other expense 118,472 111,750 99,372 93,176 89,779
-------- ------- -------- -------- --------
Income before income taxes and
effect of accounting change 64,883 51,254 43,560 39,722 31,922
Applicable income taxes 22,000 15,570 12,832 10,216 9,048
--------- ------- -------- -------- --------
Income before effect of
accounting change 42,883 35,504 30,728 29,506 22,874
Cumulative effect of change in
accounting for income taxes - - - 3,429 -
--------- ------- --------- -------- --------
Net income $ 42,883 $ 35,504 $ 30,728 $ 32,935 $ 22,874
========= ======== ========= ======== ========
Per Share Data:
Net income $ 2.02 $ 1.69 $ 1.51 $ 1.49 $ 1.33
Cash dividends 0.70 0.62 0.555 0.54 0.51
Book value 15.01 13.72 12.44 11.82 10.56
Balance Sheet - Averages:
Total assets $3,452,921 $3,151,297 $2,884,539 $2,659,785 $2,503,499
Held-to-maturity securities 480,191 516,919 427,759 509,996 619,510
Available-for-sale securities 231,040 183,396 266,370 141,496 -
Loans, net of unearned discount 2,410,746 2,146,967 1,881,922 1,657,048 1,550,745
Total deposits 2,982,838 2,732,450 2,513,493 2,342,137 2,210,934
Total sharesholders' equity 299,749 268,395 240,929 218,504 185,925
Selected Ratios:
Return on average assets 1.24% 1.13% 1.07% 1.24% 0.91%
Return on average shareholders' equity 14.31% 13.23% 12.75% 15.07% 12.30%
</TABLE>
11
<PAGE> 1
EXHIBIT 22
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.
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 except West Tennessee Life
Insurance Company of which Volunteer Bank owns 96% of the outstanding voting
shares and 76% of the voting power and are included in the consolidated
financial statements of the registrant.
<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 24, 1997, relating to the
consolidated balance sheets of BancropSouth, Inc. and subsidiaries as of
December 31, 1996 and 1995, 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, 1996, which report is incorporated by reference in the
1996 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 28, 1997
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 153,148
<INT-BEARING-DEPOSITS> 18,715
<FED-FUNDS-SOLD> 70,300
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 530,066
<INVESTMENTS-CARRYING> 530,066
<INVESTMENTS-MARKET> 537,119
<LOANS> 2,469,334
<ALLOWANCE> 37,272
<TOTAL-ASSETS> 3,617,239
<DEPOSITS> 3,161,379
<SHORT-TERM> 33,636
<LIABILITIES-OTHER> 51,122
<LONG-TERM> 55,778
0
0
<COMMON> 52,911
<OTHER-SE> 262,413
<TOTAL-LIABILITIES-AND-EQUITY> 3,617,239
<INTEREST-LOAN> 227,169
<INTEREST-INVEST> 30,779
<INTEREST-OTHER> 19,971
<INTEREST-TOTAL> 277,919
<INTEREST-DEPOSIT> 118,746
<INTEREST-EXPENSE> 126,505
<INTEREST-INCOME-NET> 151,414
<LOAN-LOSSES> 8,804
<SECURITIES-GAINS> 262
<EXPENSE-OTHER> 118,472
<INCOME-PRETAX> 64,883
<INCOME-PRE-EXTRAORDINARY> 42,883
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42,883
<EPS-PRIMARY> 2.02
<EPS-DILUTED> 2.02
<YIELD-ACTUAL> 4.81
<LOANS-NON> 3,940
<LOANS-PAST> 4,811
<LOANS-TROUBLED> 77
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 34,636
<CHARGE-OFFS> 8,004
<RECOVERIES> 1,836
<ALLOWANCE-CLOSE> 37,272
<ALLOWANCE-DOMESTIC> 37,272
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
