<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-10826
BancorpSouth, Inc.
(Exact name of registrant as specified in its charter)
Mississippi 64-0659571
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Mississippi Plaza, Tupelo, Mississippi 38801
(Address of principal executive offices) (Zip Code)
601/680-2000
(Registrant's telephone number, including area code)
(Former name, former address, and former fiscal year,
if changed since last year)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No ___
On June 30, 1997, the registrant had outstanding 22,230,107 shares of
common stock, par value $2.50 per share.
<PAGE> 9
Item 2 has been amended to include the table on page 12 that allocates the
allowance for credit losses by loan category.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion provides certain information concerning the
consolidated financial condition and results of operations of the Company. This
discussion should be read in conjunction with the unaudited consolidated
condensed financial statements for the periods ended June 30, 1997 and 1996,
found elsewhere in this report.
RESULTS OF OPERATIONS
Net Income
The Company's net income for the second quarter of 1997 was $12.25 million
compared to $11.2 million in the second quarter of 1996. For the first six
months of 1997, net income was $23.89 million, an increase of 15.7% from $20.65
million for the same period of 1996. Net income per share was $0.55 for the
second quarter of 1997 compared to $0.53 in 1996. For the first six months of
1997, earnings per share were $1.06, an increase of 9.3% from $0.97 for the
first six months of 1996. The annualized returns on average assets for the
second quarter of 1997 and 1996 were 1.29% and 1.31%, respectively. For the
six months ended June 30, the annualized returns on average assets were 1.27%
and 1.22% for 1997 and 1996, respectively.
Net Interest Revenue
Net interest revenue, the difference between interest earned on assets and
the cost of interest-bearing liabilities, is the largest component of the
Company's net income. For purposes of this discussion, all interest revenue
has been adjusted to a fully taxable equivalent basis. The primary items of
concern in managing net interest revenue are the mix and maturity balance
between interest-sensitive assets and liabilities.
Net interest revenue was $41.78 million for the three months ended June
30, 1997, compared to $38.14 million for the same period in 1996. For the six
months ended June 30, 1997 and 1996, net interest revenue was $81.92 million
and $75.38 million, respectively. Earning assets averaged $3.56 billion in the
second quarter and $3.52 billion for the first six months of 1997, compared
with $3.19 billion and $3.13 billion in the respective periods in 1996.
Average interest-bearing liabilities were $3.00 billion in the second quarter
and $2.97 billion for the first six months of 1997, compared with $2.70 billion
and $2.67 billion in the respective periods in 1996.
Net interest revenue, expressed as a percentage of average earning assets,
was 4.71% for the second quarter of 1997 as compared to 4.80% for the same
period of 1996 and 4.70% for the first six months of 1997 as compared to 4.84%
for the same period of 1996.
Provision for Credit Losses
The provision for credit losses charged to operating expense is an amount
which, in the judgment of management, is necessary to maintain the allowance
for credit losses at a level that is adequate to meet the present and potential
risks of losses on the Company's current portfolio of loans.
<PAGE> 10
The provision for credit losses totaled $2.17 million for the second
quarter of 1997 compared to $3.06 million for the same period of 1996. For the
six-month periods ended June 30, 1997 and 1996, the provision for credit losses
totaled $3.65 million and $4.50 million, respectively.
Other Revenue
Other revenue for the quarter ended June 30, 1997, totaled $10.70 million
compared to $10.06 million for the same period of 1996, a 6.4% increase. For
the six months ended June 30, 1997 and 1996, other revenue was $21.45 million
and $18.91 million, respectively, a 13.4% increase. The most significant
change in other revenue was in mortgage lending where revenue of $3.78 million
was recorded during the first six months of 1997 compared to $3.46 million in
the same period of 1996. Service charges on deposit accounts for the first six
months increased 6.9%. Net security gains were $211,000 for the first six
months of 1997 compared to $278,000 for the same period in 1996.
Other Expense
Other expense totaled $31.14 million for the second quarter of 1997, a
16.3% increase from the same period of 1996. For the six months ended June 30,
1997, other expenses totaled $62.30 million, a 10.4% increase over 1996's other
expense. Salaries and employee benefits for the first six months of 1997 show a
6.9% increase over the same period of 1996 while the second quarter of 1997
showed an increase in salaries and employee benefits of 15.9% compared to 1996.
Deposit insurance was $197,000 for the six months ended 1997 compared to the
same period last year of $359,000.
Also included in other expense for the first six months of 1997 are
amounts totaling $11,000 related to merger and acquisition activity compared to
$577,000 in the same period for 1996. The other components of other expense
reflect normal increases and general inflation in the cost of services and
supplies purchased by the Company.
Income Tax
Income tax expense was $5.97 million and $6.20 million for the second
quarters of 1997 and 1996, respectively. For the six-month period ended June
30, 1997, income tax expense was $11.63 million compared to $10.76 million for
the same period in 1996.
FINANCIAL CONDITION
Earning Assets
The percentage of earning assets to total assets measures the
effectiveness of Management's efforts to invest available funds into the most
efficient and profitable uses. Earning assets at June 30, 1997 were $3.53
billion or 92.5% of total assets, compared with $3.34 billion, or 92.5% at
December 31, 1996.
The securities portfolio is used to make various term investments, to
provide a source of liquidity and to serve as collateral to secure certain
types of deposits. Held-to-maturity securities at June 30, 1997, were $574.3
million compared with $530.1 million at the end of 1996, an 8.4% increase.
Available for sale securities were $321.4 million at June 30, 1997, compared to
$230.7 million at December 31, 1996. Proceeds from maturing investment
securities have been used to fund the Company's loan growth.
<PAGE> 11
The loan portfolio of the Company's bank subsidiary makes up the largest
single component of the Company's earning assets. The Company's lending
activities include both commercial and consumer loans. Loan originations are
derived from a number of sources including direct solicitation by the Company's
loan officers, real estate broker referrals, mortgage loan companies, present
savers and borrowers, builders, attorneys, walk-in customers and, in some
instances, other lenders. The Company has established disciplined and
systematic procedures for approving and monitoring loans that vary depending on
the size and nature of the loan. Loans, net of unearned discount, totaled
$2.58 billion at June 30, 1997, which represents a 4.7% increase from the
December 31, 1996 total of $2.47 billion.
At June 30, 1997, the Company did not have any concentrations 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 that 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 its market area.
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.
The Company's policy provides that loans, other than installment loans,
are generally placed on non-accrual status if, in management's opinion, payment
in full of principal or interest is not expected, or when payment of principal
or interest is more than 90 days past due, unless the loans is both well
secured and in the process of collection. Non-performing loans were 0.32% of
all loans outstanding at June 30, 1997, compared to 0.36% at the end of 1996.
Allowance for credit losses
The Company attempts to maintain the allowance for credit losses at a
level which, in the opinion of management, is adequate to meet the present and
potential risks of losses on its current portfolio of loans. Management's
judgement is based on a variety of factors that include examining potential
losses in specific credits and considering the general risks associated with
lending functions such as current and anticipated economic conditions, business
trends in the Company's region and nationally, 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. 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 integral part of their examination process,
periodically review the Company's allowance for credit losses.
<PAGE> 12
These agencies may require the Company to recognize additions to the
allowance based on their judgments about information available to them at the
time of their examination.
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 allocation of 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.
The following table presents (a) the allocation of the allowance for credit
losses by loan category and (b) the percentage of each category in the loan
portfolio to total loans for the periods indicated.
<TABLE>
<CAPTION>
June 30 December 31
----------------------------------------------------------------------------------------
1997 1996 1996
---------------------------- ---------------------------- ----------------------------
ALLOWANCE % OF ALLOWANCE % OF ALLOWANCE % OF
FOR LOANS TO FOR LOANS TO FOR LOANS TO
CREDIT LOSSES TOTAL LOANS CREDIT LOSSES TOTAL LOANS CREDIT LOSSES TOTAL LOANS
<S> <C> <C> <C> <C> <C> <C>
Commercial and agricultural 3,650 9.65% 3,481 10.04% 3,570 9.33%
Consumer and installment 11,616 28.68% 11,442 28.62% 11,100 29.15%
Real estate mortgage 21,684 55.50% 20,224 55.53% 20,532 55.12%
Lease financing 1,771 5.81% 1,491 5.32% 2,070 5.84%
Other - 0.36% - 0.49% - 0.56%
------------- ------------- ------------- ------------- ------------- -------------
Total 38,721 100.00% 36,638 100.00% 37,272 100.00%
============= ============= ============= ============= ============= =============
</TABLE>
<PAGE> 13
The following table provides an analysis of the allowance for credit
losses for the periods indicated.
<TABLE>
<CAPTION> For the
Year Ended
Six months ended June 30 December 31
------------------------ -----------
1997 1996 1996
(in thousands)
<S> <C> <C> <C>
Balance, beginning of period 37,272 34,636 34,636
Loans charged off:
Commercial and agricultural -221 -331 -1,197
Consumer & installment -167 -581 -5,969
Real estate mortgage -3,367 -2,609 -808
Lease financing -38 -4 -30
--------- --------- ---------
Total loans charged off -3,793 -3,525 -8,004
--------- --------- ---------
Recoveries:
Commercial and agricultural 260 134 427
Consumer & installment 171 343 1,163
Real estate mortgage 527 543 241
Lease financing 39 2 5
--------- --------- ---------
Total recoveries 997 1,022 1,836
--------- --------- ---------
Net charge-offs -2,796 -2,503 -6,168
Provsion charged to operating expense 3,649 4,504 8,804
Acquistions 596 0 0
--------- --------- ---------
Balance, end of period 38,721 36,637 37,272
========= ========= =========
Average loans for period 2,552,720 2,374,429 2,410,746
========= ========= =========
RATIOS:
Net charge offs to average loans 0.11% 0.11% 0.26%
========= ========= =========
</TABLE>
Deposits and Other Interest-bearing Liabilities
Deposits originating within the communities served by the Bank continue to
be the Company's primary source of funding its earning assets. Total deposits
at the end of the second quarter were $3.34 billion as compared to $3.16
billion at December 31, 1996, representing a 5.7% increase. Non-interest
bearing deposits declined by $20.4 million while interest bearing deposits grew
$201.8 million.
LIQUIDITY
Liquidity is the ability of the Company to fund the need of its borrowers,
depositors, and creditors. The Company's traditional sources of liquidity
include maturing loans and investment securities, purchased federal funds and
its base of core deposits. Management believes these sources are adequate to
meet liquidity needs for normal operations.
The Company continues to pursue a lending policy stressing adjustable rate
loans, in furtherance of its strategy for matching interest sensitive assets
with an increasingly interest sensitive liability structure.
<PAGE> 14
CAPITAL RESOURCES
The Company is required to comply with the risk-based capital requirements
of the Board of Governors of the Federal Reserve System (FRB). These
requirements apply a variety of weighting factors, which vary according to the
level of risk associated with the particular assets. At June 30, 1997, the
Company's Tier 1 capital and total capital, as a percentage of total risk-
adjusted assets, was 12.69% and 13.94%, respectively. Both ratios exceed the
required minimum levels for these ratios of 4.0% and 8.0%, respectively. In
addition, the Company's leverage capital ratio (Tier 1 capital divided by total
assets, less goodwill) was 8.87% at June 30, 1997, compared to the required
minimum leverage capital ratio of 4%.
The Company's current capital position continues to provide it with a
level of resources available for the acquisition of depository institutions and
businesses closely related to banking in the event opportunities arise.
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BancorpSouth, Inc.
--------------------------
(Registrant)
DATE: August 11, 1997 /S/ L. Nash Allen, Jr.
--------------------------
L. Nash Allen, Jr.
Treasurer and
Chief Financial Officer
