<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 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 March 31, 1997, the registrant had outstanding 22,220,805 shares of common
stock, par value $2.50 per share.
<PAGE> 2
BANCORPSOUTH, INC.
CONTENTS
PAGE
PART I. Financial Information
ITEM 1 Financial Statements (unaudited)
Consolidated Condensed Balance Sheets
March 31, 1997, and December 31, 1996........... 3
Consolidated Condensed Statements of Income
Three Months Ended March 31, 1997 and 1996...... 4
Consolidated Condensed Statements of Cash Flows
Three Months Ended March 31, 1997 and 1996...... 5
Notes to Consolidated Condensed Financial
Statements...................................... 6
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations... 7
PART II. Other Information
ITEM 6. Exhibits and Reports on Form 8-K .............. 11
<PAGE> 3
PART I
FINANCIAL INFORMATION
BANCORPSOUTH, INC.
Consolidated Condensed Balance Sheets
<TABLE>
<CAPTION>
(Unaudited)
March 31 December 31
1997 1996
(In Thousands)
<S> <C> <C>
ASSETS
Cash and due from banks $135,688 $150,920
Interest bearing deposits with other banks 4,576 18,715
Held-to-maturity securities, at amortized cost 593,510 530,066
Federal funds sold 117,900 70,300
Loans 2,602,087 2,554,118
Less: Unearned discount 85,082 84,784
Allowance for credit losses 38,127 37,272
Net loans 2,478,878 2,432,062
Available-for-sale securities 275,694 230,739
Mortgages held for sale 25,601 25,728
Premises and equipment, net 92,655 90,939
Other assets 85,416 67,770
TOTAL ASSETS $3,809,918 $3,617,239
LIABILITIES
Deposits:
Demand: Non-interest bearing $416,266 $450,470
Interest bearing 778,457 724,871
Savings 452,343 408,380
Time 1,678,403 1,577,657
Total deposits 3,325,469 3,161,378
Federal funds purchased and securities
sold under repurchase agreements 32,163 33,636
Long-term debt 55,038 56,078
Other liabilities 61,194 50,823
TOTAL LIABILITIES 3,473,864 3,301,915
SHAREHOLDERS' EQUITY
Common stock 55,990 52,911
Capital surplus 95,869 84,616
Unrealized gain on
available-for-sale securities 1,220 2,280
Retained earnings 186,116 177,741
Less cost of shares held in treasury (3,141) (2,224)
TOTAL SHAREHOLDERS' EQUITY 336,054 315,324
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $3,809,918 $3,617,239
<FN>
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<PAGE> 4
BANCORPSOUTH, INC.
Consolidated Condensed Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31
1997 1996
(In thousands except for per share amounts)
<S> <C> <C>
INTEREST REVENUE
Interest & fees on loans $58,199 $54,509
Deposits with other banks 94 231
Interest on federal funds sold 1,368 607
Interest on held-to-maturity securities:
U. S. Treasury 1,707 605
U. S. Government agencies & corporations 5,549 5,026
Obligations of states & political subdivision 2,152 1,763
Other 18
Interest and dividends on available-for-sale se 3,612 3,623
Interest on mortgages held for sale 411 432
Total interest revenue 73,092 66,814
INTEREST EXPENSE:
Interest on deposits 32,657 28,707
Interest on federal funds purchased & securities
sold under repurchase agreements 399 455
Other interest expense 847 1,396
Total interest expense 33,903 30,558
Net interest revenue 39,189 36,256
Provision for credit losses 1,481 1,444
Net interest revenue, after provision for
credit losses 37,708 34,812
OTHER REVENUE:
Mortgage lending 1,829 1,290
Trust income 754 587
Service charges 4,430 4,079
Security gains (losses), net 55 221
Life insurance income 1,050 933
Other 2,634 1,746
Total other revenue 10,752 8,856
OTHER EXPENSE:
Salaries and employee benefits 15,603 15,699
Occupancy, net 2,036 2,033
Equipment 2,808 2,317
Deposit insurance premiums 48 211
Other 10,666 9,406
Total other expense 31,161 29,666
Income before income taxes 17,299 14,002
Income tax expense 5,663 4,553
Net income $11,636 $9,449
Net income per share $0.52 $0.45
Dividends declared per share $0.19 $0.17
<FN>
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<PAGE> 5
BANCORPSOUTH, INC.
Consolidated Condensed Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
1997 1996
(In Thousands)
<S> <C> <C>
Net cash provided (used) by operating activit $18,378 ($5,721)
Investing activities:
Proceeds from calls and maturities of
held-to-maturity securities 17,783 38,736
Proceeds from calls and maturities of
available-for-sale securities 45,255 53,378
Proceeds from sales of
available-for-sale securities 1,450 176
Purchases of held-to-maturity securities (37,224) (61,057)
Purchases of available-for-sale securities (85,098) (69,668)
Net increase in short-term
investments (18,500) (11,600)
Net increase in loans (17,391) (48,571)
Purchases of premises and equipment (4,264) (3,642)
Other (9,340) (1,607)
Net cash used by investing activities (107,329) (103,855)
Financing activities:
Net increase in deposits 62,305 89,828
Net increase (decrease) in short-term
borrowings and other liabilities 3,547 10,305
Increase (decrease) in long-term debt (1,040) 8,884
Payment of cash dividends (3,997) (3,566)
Issuance of common stock 80 28
Purchase of treasury stock (1,315) -
Net cash provided by financing activities 59,580 105,479
Increase in cash and cash
equivalents (29,371) (4,097)
Cash and cash equivalents at beginning of
period 169,635 165,815
Cash and cash equivalents at end of period $140,264 $161,718
<FN>
See accompanying notes to consolidated condensed financial statements
</TABLE>
<PAGE> 6
BANCORPSOUTH, INC.
Notes to Consolidated Condensed Financial Statements
(Unaudited)
1. The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with the accounting policies in effect as of
December 31, 1996, as set forth in the annual consolidated financial statements
of BancorpSouth, Inc. (the "Company"), as of such date. In the opinion of
management, all adjustments necessary for a fair presentation of the
consolidated financial statements have been included. The results of operations
for the three-month period ended March 31, 1997 are not necessarily indicative
of the results to be expected for the full year.
2. The computation of net income per share is based upon the weighted average
number of common shares outstanding (22,484,671 and 21,230,110 for the three
months ended March 31, 1997 and 1996, respectively).
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion provides certain information concerning the
consolidated financial condition and results of operations of BancorpSouth,
Inc. (the "Company"), a bank holding company and the parent of Bank of
Mississippi ("BOM") and Volunteer Bank ("VOL"). This discussion should be
read in conjunction with the unaudited consolidated condensed financial
statements for the periods ended March 31, 1997 and 1996.
RESULTS OF OPERATIONS
Net Income
The Company's net income for the first quarter of 1997 was $11.64 million, an
increase of 23.2% from $9.45 million in the first quarter of 1996. Net income
per common share for the first quarter of 1997 was $0.52, an increase of 15.6%
from $0.45 for the same period in 1996. The annualized returns on average
assets for the first quarter of 1997 and 1996 were 1.25% and 1.13%,
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 $40.1 million for the three months ended March 31,
1997, compared to $37.2 million for the same period in 1996. Earning assets
averaged $3.49 billion in the first quarter of 1997, compared with $3.08 billion
in the respective period in 1996. Average interest-bearing liabilities were
$2.94 billion in the first quarter of 1997, compared with $2.63 billion for the
same period of 1996.
Net interest revenue, expressed as a percentage of average earning assets,
was 4.68% for the first quarter of 1997, as compared to 4.86% for the same
period of 1996. This decrease in net interest margin is primarily due to the
fact that the average rate paid on interest-sensitive liabilities rose at a
faster pace than did the average yield earned on interest-earning assets.
Provision and Allowance for Credit Losses
The provision for credit losses charged to operating expense is an amount
which, in the judgment of management, is necessary to maintain the allowance for
credit losses at a level that is adequate to meet the present and potential
risks of losses in the Company's current portfolio of loans. Management's
<PAGE> 8
judgment is based on a variety of factors which include the Company's experience
related to loan balances, charge-offs and recoveries, scrutiny of individual
loans and risk factors, results of regulatory agency reviews of loans, and
present and anticipated future economic conditions of the Company's market area.
Material estimates that are particularly susceptible to significant change in
the near term are a necessary part of this process. Future additions to the
allowance may be necessary based on changes in economic conditions. In addition,
various regulatory agencies, as an integral part of their examination process,
periodically review the Company's allowance for credit losses. These agencies
may require the Company to recognize additions to the allowance based on their
judgments about information available to them at the time of their examination.
The provision for credit losses totaled $1.48 million for the first quarter
of 1997, compared to $1.44 million for the same period of 1996. This increase is
due to the growth in the Company's loan portfolio. The allowance for credit
losses as a percent of loans outstanding was 1.51% at the end of the first
quarter 1997 and at December 31, 1996.
Other Revenue
Other revenue for the quarter ended March 31, 1997 totaled $10.75 million,
compared to $8.86 million for the same period of 1996, a 21.4 % increase.
Mortgage lending revenue of $1,829,000 was reported in the first quarter of
1997, compared to $1,290,000 in the same period of 1996. Trust income
increased 28.5% and life insurance income increased 12.5% in the first
quarter of 1997 compared to the same period in 1996. Service charges on
deposit accounts increased 8.61%. Net security gains were $55,000 in first
quarter 1997 compared to a net gain of $221,000 in 1996.
Other Expense
Other expense totaled $31.16 million for the first quarter of 1997, a 5.0 %
increase over 1996's expense for the same period. Occupancy expense showed a
modest increase for the first quarter compared to prior year. Deposit
insurance was $48,000 for the quarter ended March 31, 1996 compared to
$211,000 for the same period last year. The decrease is the result of lower
assessment rates for 1997 for the Company's deposits. Expense of $6,000 related
to outstanding stock appreciation rights is included in other expense for the
first quarter of 1997 compared to expense of $1,134,000 for the same quarter
of 1996. The components of other expense reflect normal increases for
personnel related expenses and general inflation in the cost of services and
supplies purchased by the Company.
Income Tax
Income tax expense was $5.66 million for the first quarter of 1997 (an
effective tax rate of 32.7%) and $4.55 million for the first quarter 1996 (an
effective tax rate of 32.5%). The relative level of the Company's investment
in assets with respect to which earnings are afforded favorable tax treatment
<PAGE> 9
continues to decrease while the Company's taxable net income continues to
increase.
FINANCIAL CONDITION
Loans
The loan portfolios of the Company's bank subsidiaries make up the largest
single component of the Company's earning assets. The portfolio, net of
enearned discount, totaled $2.48 billion at March 31, 1997, which represents a
1.92% increase from $2.43 billion at December 31, 1996. Non-performing loans
were 0.49 % of all loans outstanding at March 31, 1997 compared to 0.43% at
December 31, 1996.
Securities and Other Earning Assets
The securities portfolios are used to make various term investments, to
provide a source of liquidity and to serve as collateral to secure certain
types of deposits. Held-to-maturity securities at March 31, 1997 were $593.5
million, compared with $530.0 million at the end of 1996, a 11.97% increase.
Available-for-sale securities were $275.7 million at March 31, 1997, compared
to $230.7 million at December 31, 1996, a 19.48% increase.
Deposits
Total deposits at the end of the first quarter were $3.33 billion as
compared to $3.16 billion at December 31, 1996, representing a 5.19% increase.
Deposits continue to be the Company's primary source of funds with which to
support its earning assets.
LIQUIDITY
Liquidity is the ability of the Company to fund the need of its borrowers,
depositors and creditors. The Company's traditional sources of liquidity
include maturing loans and investment securities, purchased federal funds and
its base of core deposits. Management believes these sources are adequate
to meet liquidity needs for normal operations.
The Company continues to pursue a lending policy stressing adjustable rate
loans, in furtherance of its strategy for matching interest sensitive assets
with an increasingly interest sensitive liability structure.
CAPITAL RESOURCES
The Company is required to comply with the risk-based capital requirements
of the Board of Governors of the Federal Reserve System (FRB). These
requirements apply a variety of weighting factors which vary according to
the level of risk associated with the particular assets. At March 31, 1997,
the Company's Tier 1 capital and total capital, as a percentage of total
risk-adjusted assets, was
<PAGE> 10
12.26% and 13.51%, 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 8.56% at March 31, 1997, compared to the required minimum leverage
capital ratio of 3%.
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> 11
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended March 31, 1997.
<PAGE> 12
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: May 13, 1997 ____________________________________
L. Nash Allen, Jr.
Treasurer and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> MAR-31-1997
<CASH> 135,688
<INT-BEARING-DEPOSITS> 4,576
<FED-FUNDS-SOLD> 117,900
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 275,694
<INVESTMENTS-CARRYING> 275,694
<INVESTMENTS-MARKET> 275,694
<LOANS> 2,517,005
<ALLOWANCE> 38,127
<TOTAL-ASSETS> 3,809,918
<DEPOSITS> 3,325,469
<SHORT-TERM> 32,163
<LIABILITIES-OTHER> 61,194
<LONG-TERM> 55,038
<COMMON> 55,990
0
0
<OTHER-SE> 280,064
<TOTAL-LIABILITIES-AND-EQUITY> 3,809,918
<INTEREST-LOAN> 58,199
<INTEREST-INVEST> 9,408
<INTEREST-OTHER> 5,485
<INTEREST-TOTAL> 73,092
<INTEREST-DEPOSIT> 32,657
<INTEREST-EXPENSE> 33,903
<INTEREST-INCOME-NET> 38,189
<LOAN-LOSSES> 1,481
<SECURITIES-GAINS> 55
<EXPENSE-OTHER> 31,161
<INCOME-PRETAX> 17,299
<INCOME-PRE-EXTRAORDINARY> 17,299
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,636
<EPS-PRIMARY> 0.52
<EPS-DILUTED> 0.52
<YIELD-ACTUAL> 4.68
<LOANS-NON> 4,067
<LOANS-PAST> 4,809
<LOANS-TROUBLED> 72
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 37,868
<CHARGE-OFFS> 1,766
<RECOVERIES> 544
<ALLOWANCE-CLOSE> 38,127
<ALLOWANCE-DOMESTIC> 38,127
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
