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 September 30, 1995
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 November 9, 1995, the registrant had outstanding 8,968,758 shares
of common stock, par value $2.50 per share.
PART I
FINANCIAL INFORMATION
BANCORPSOUTH, INC.
Consolidated Condensed Balance Sheets
(Unaudited)
(In Thousands)
September 30 December 31
1995 1994
ASSETS
Cash and due from banks $137,276 $130,265
Interest bearing deposits with other banks 15,390 2,144
Held-to-maturity securities, at amortized cost 474,307 496,838
Federal funds sold 16,150 -
Loans 2,068,264 1,910,089
Less: Unearned discount 67,937 61,402
Allowance for credit losses 30,811 28,242
Net loans 1,969,516 1,820,445
Available-for-sale securities 140,129 160,378
Mortgages held for sale 30,128 10,471
Premises and equipment, net 75,127 67,351
Other assets 51,059 43,558
TOTAL ASSETS $2,909,082 $2,731,450
LIABILITIES
Deposits:
Demand: Non-interest bearing $333,620 $371,367
Interest bearing 633,662 581,078
Savings 310,506 397,004
Time 1,258,323 1,011,115
Total deposits 2,536,111 2,360,564
Federal funds purchased and securities
sold under repurchase agreements 39,718 63,314
Long-term debt 45,566 48,028
Other liabilities 37,935 31,828
TOTAL LIABILITIES 2,659,330 2,503,734
SHAREHOLDERS' EQUITY
Common stock 22,548 22,279
Capital surplus 79,172 74,249
Unrealized gain (loss) on
available-for-sale securities, net 1,603 (878)
Retained earnings 147,463 133,100
Less cost of shares held in treasury (1,034) (1,034)
TOTAL SHAREHOLDERS' EQUITY 249,752 227,716
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,909,082 $2,731,450
<FN>
See accompanying notes to consolidated condensed financial statements.
BANCORPSOUTH, INC.
Consolidated Condensed Statements of Income
(Unaudited)
(In thousands except for per share amounts)
Three months ended Nine months ended
September 30 September 30
1995 1994 1995 1994
INTEREST REVENUE:
Interest & fees on loans $47,059 $38,429 $134,488 $108,070
Deposits with other banks 198 146 438 349
Interest on federal funds sold 776 384 1,777 1,444
Interest on held-to-maturity securities:
U. S. Treasury 991 819 2,940 1,031
U. S. Government agencies & corporations 4,883 4,340 15,146 10,038
Obligations of states & political subdivisions 1,315 1,702 4,770 4,941
Other 5 67 246
Interest and dividends on
available-for-sale securities 2,154 2,255 5,879 8,703
Interest on mortgages held for sale 562 297 1,042 2,191
Total interest revenue 57,938 48,377 166,547 137,013
INTEREST EXPENSE:
Interest on deposits 24,717 18,191 69,716 51,831
Interest on federal funds purchased & securities
sold under repurchase agreements 571 377 1,486 848
Other interest expense 922 899 2,803 2,621
Total interest expense 26,210 19,467 74,005 55,300
Net interest revenue 31,728 28,910 92,542 81,713
Provision for credit losses 1,762 1,644 4,132 4,105
Net interest revenue, after provision for
credit losses 29,966 27,266 88,410 77,608
OTHER REVENUE:
Mortgage lending 922 617 2,747 123
Trust income 654 499 1,604 1,395
Service charges 3,817 3,527 10,933 9,934
Security gains (losses), net (674) 21 (714) (90)
Life insurance income 731 710 2,098 2,071
Other 1,149 1,165 4,352 3,531
Total other revenue 6,599 6,539 21,020 16,964
OTHER EXPENSES:
Salaries and employee benefits 11,863 10,815 36,957 32,535
Net occupancy expense 1,831 1,783 5,373 5,215
Equipment expense 2,118 1,785 5,820 5,003
Deposit insurance premiums 12 1,280 2,642 3,743
Other 8,143 7,266 23,733 20,541
Total other expenses 23,967 22,929 74,525 67,037
Income before income taxes 12,598 10,876 34,905 27,535
Income tax expense 3,847 3,580 11,018 8,009
8,751 7,296 23,887 19,526
Net income per share $0.97 $0.82 $2.66 $2.21
Dividends declared per share $0.30 $0.27 $0.90 $0.81
<FN>
See accompanying notes to consolidated condensed financial statements.
BANCORPSOUTH, INC.
Consolidated Condensed Statements of Cash Flows
(Unaudited)
(In Thousands)
Nine Months Ended
September 30 1995
1995 1994
Net cash provided by operating activities $19,336 $124,571
Investing activities:
Proceeds from calls and maturities of
held-to-maturity securities 96,539 40,894
Proceeds from calls and maturities of
available-for-sale securities 225,871 371,209
Proceeds from sales of
held-to-maturity securities 994
Proceeds from sales of
available-for-sale securities 7,798 4,000
Purchases of held-to-maturity securities (85,389) (186,462)
Purchases of available-for-sale securities (198,021) (317,696)
Net increase in short-term investments (16,150) (13,628)
Net increase in loans (154,719) (165,192)
Purchases of premises and equipment (13,506) (5,720)
Other (3,512) (8,340)
Net cash used by investing activities (141,089) (279,941)
Financing activities:
Net increase in deposits 175,547 128,394
Net increase (decrease) in short-term
borrowings and other liabilities (24,197) 8,715
Increase (decrease) in long-term debt (2,462) 24,501
Payment of cash dividends (7,376) (4,725)
Issuance of common stock 119 332
Other 379 260
Net cash provided by financing activities 142,010 157,477
Increase in cash and cash equivalents 20,257 2,107
Cash and cash equivalents at beginning of
period 132,409 125,706
Cash and cash equivalents at end of period $152,666 $127,813
<FN>
See accompanying notes to consolidated condensed financial statements
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, 1994, 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 and nine-month periods ended
September 30, 1995 are not necessarily indicative of the results to be
expected for the full year.
2. On March 31, 1995, the Company merged with LF Bancorp, Inc. ("LF
Bancorp"), the parent company of Laurel Federal Savings and Loan Association,
headquartered in Laurel, Mississippi. The consolidated total assets of LF
Bancorp were $189.5 million at the merger date. Each share of outstanding LF
Bancorp common stock was exchanged for 1.013 shares of the Company's common
stock. A total of 832,101 shares of the Company's common stock were issued to
effect the transaction. This business combination was accounted for by the
pooling-of-interests method and financial statements for periods prior to the
merger have been restated.
3. On July 31, 1995, First Federal Bank for Savings of Starkville,
Mississippi ("First Federal") was merged with and into Bank of Mississippi, a
subsidiary of the Company. The total assets of First Federal were $24.6
million at the date of the merger. Each share of outstanding First Federal
common stock was exchanged for 0.698 shares of the Company's common stock. A
total of 109,827 shares of the Company's common stock were issued to effect
the transaction. This business combination was accounted for by the pooling-
ofinterests method and financial statements for periods prior to the merger
have been restated.
4. On September 1, 1995, Volunteer Bank, a subsidiary of the Company,
completed the purchase of substantially all the assets and the assumption of
certain liabilities of the Shelby Bank of Bartlett, Tennessee. The Company
issued 78,409 shares of its common stock to effect this transaction.
5. Comparative net income per share amounts have been restated to reflect
the acquisition of LF Bancorp and First Federal which was accounted for as a
pooling-of-interests. The computation of net income per share is based upon
weighted average number of shares outstanding (9,000,022 and 8,875,390 for the
three months ended September 30, 1995 and 1994, respectively; 8,964,490 and
8,855,032 for the nine months ended September 30, 1995 and 1994,
respectively).
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion provides certain information concerning the
consolidated financial condition and results of operations of BancorpSouth,
Inc. (the "Company"), a -bank and thrift holding company and the parent of
Bank of Mississippi ("BOM"), Volunteer Bank ("VOL") and Laurel Federal Savings
and Loan Association ("Laurel"). This discussion should be read in conjunction
with the unaudited consolidated condensed financial statements for the periods
ended September 30, 1995 and 1994. Reference is also made to Notes 2, 3 and 4
to those unaudited consolidated condensed financial statements for additional
discussion regarding business combinations. All the information regarding the
financial condition and results of operations on which this discussion is
based reflects the combined results of the Company and those business
combinations accounted for by the pooling-of-interests method for the periods
analyzed.
RESULTS OF OPERATIONS
Net Income
The Company's net income for the third quarter of 1995 was $8.75
million, compared to $7.30 million from the third quarter of 1994. For the
first nine months of 1995, net income was $23.89 million, an increase of
22.3% from $19.53 million for the same period of 1994. Net income per common
share was $0.97 and $0.82 for the third quarters of 1995 and 1994,
respectively. For the first nine months of 1995, primary earnings per common
share were $2.66, an increase of 20.4% from $2.21 for the first nine months of
1994. The annualized returns on average assets for the third quarter of 1995
and 1994 were 1.22% and 1.11%, respectively. For the nine months ended
September 30, the annualized returns on average assets were 1.14% and 1.01%
for 1995 and 1994, 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 $32.49 million for the three months ended
September 30, 1995, compared to $29.88 million for the same period in 1994.
For the nine months ended September 30, 1995 and 1994, net interest revenue
was $95.16 million and $84.57 million, respectively. Earning assets averaged
$2.62 billion in the third quarter and $2.43 billion for the first nine months
of 1995, compared with $2.58 billion and $2.38 billion in the respective
periods in 1994. Average interest-bearing liabilities were $2.26 billion in
the third quarter and $2.19 billion for the first nine months of 1995,
compared with $2.04 billion and $2.00 billion in the respective periods in
1994.
Net interest revenue, expressed as a percentage of average earning
assets, was 4.86% for the third quarter of 1995 as compared to 4.88% for the
same period of 1994 and 4.93% for the first nine months of 1995 as compared to
4.75% for the same period of 1994.
Provision and Allowance for Credit Losses
The provision for credit losses charged to operating expense is an
amount which, in the judgment of management, is necessary to maintain the
allowance for credit losses at a level that is adequate to meet the present
and potential risks of losses on the Company's current portfolio of loans.
Management's judgment is based on a variety of factors which include the
Company's experi ence 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 $1.76 million for the third
quarter of 1995 compared to $1.64 million for the same period of 1994. For
the nine month periods ended September 30, 1995 and 1994, the provision for
credit losses totaled $4.13 million and $4.11 million, respectively. The
quality of the Company's loan portfolio is evidenced by the low levels of
charge-offs experienced in the first nine months of 1995. The allowance for
credit losses as a percent of loans outstanding was 1.54% at the end of the
third quarter 1995 and 1.50% at December 31, 1994.
Other Revenue
Other revenue for the quarter ended September 30, 1995, totaled $6.60
million compared to $6.54 million for the same period of 1994. For the nine
months ended September 30, 1995 and 1994, other revenue was $21.02 million
and $16.96 million, respectively, a 23.9% increase. The most significant
change in other revenue was in mortgage lending where income of $2.74 million
was recorded during the first nine months of 1995 versus $0.12 million in the
same period of 1994. 1994's results were primarily attributable to realized
and unrealized losses on mortgage loans held for sale during the rising rate
environment of the first half of 1994. Trust income increased significantly
and life insurance premiums showed a modest increase. Service charges on
deposit accounts for the first nine months increased 10.1%.
Other Expenses
Other expenses totaled $23.97 million for the third quarter of 1995, a
4.5% increase over 1994's expense for the same period. For the nine months
ended September 30, 1995, other expenses totaled $74.53 million , a 11.17%
increase over 1994's other expenses for the same period. The components of
other expenses reflect normal increases for personnel related expenses and
general inflation in the cost of services and supplies purchased by the
Company. Deposit insurance premium expense was reduced significantly in the
third quarter of 1995. This reflects the adjustment in the assessment rates
for the third quarter plus the recovery of $332,000 expensed during the second
quarter of 1995.
Income Tax
Income tax expense was $3.85 million and $3.58 million for the third
quarters of 1995 and 1994, respectively. For the nine month period ended
September 30, 1995, income tax expense was $11.02 million compared to $8.01
million for the same period in 1994. The relative level of the Company's
investment portfolio in assets whose earnings are afforded favorable tax
treatment continues to decrease and as such, the Company's taxable net income
continues to increase.
FINANCIAL CONDITION
Loans
The loan portfolios of the subsidiary banks is the largest single component of
the Company's earning assets. These portfolios, net of unearned discount,
totaled $2.00 billion at September 30, 1995, which represents an 8.2% increase
from December 31, 1994's total of $1.85 billion. Non-performing loans were
0.42% of loans, net of unearned discounts, outstanding at September 30,
1995, compared to 0.48% at the end of 1994.
Investment Securities and Other Earning Assets
The investment securities portfolio is used to make various term invest
ments, to provide a source of liquidity and to serve as collateral to secure
certain types of deposits. Held-to-maturity securities at September 30, 1995
were $474.3 million, compared to $496.8 million at the end of 1994.
Available for sale securities were $140.1 million at September 30, 1995,
compared to $160.4 million at December 31, 1994.
Deposits
Total deposits at the end of the third quarter were $2.54 billion as
compared to $2.36 billion at December 31, 1994, representing a 7.4% 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 bor
rowers, 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 September 30,
1995, the Company's Tier 1 ratio and total capital to risk-adjusted total
assets were 11.90% and 14.07%, respectively, both of which exceed the FRB's
minimum ratio of 4.0% and 8.0%, respectively (of which at least 50% must be
Tier 1 capital). The Company's Tier 1 leverage ratio at September 30, 1995
was 8.48%, which is in excess of the FRB minimum level for Tier 1 capital to
total assets 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.
ITEM 5. OTHER INFORMATION
On October 24, 1995 the Company's Board of Directors declared a two-for-one
stock split effected in the form of a stock dividend through which each
eligible holder of the Company's common stock will receive an additional
share of the Company's common stock. The shares will be issued on November
20, 1995 to shareholders of record as of November 1, 1995.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) (27) Financial Data Schedule
(b) On July 14, 1995, the Company filed a Current Report on Form 8-K with the
Securities and Exchange Commission which described under Item 5 the proposed
merger of Wes-Tenn Bancorp, Inc. ("Wes-Tenn") with and into the Company and
the acquisition of the assets , and assumption of certain liabilities, of
Shelby Bank by VOL. Included with such reports were consolidated financial
statements of Wes-Tenn for 1994, 1993 and 1992 and the first quarters of 1995
and 1994 and pro forma condensed consolidated financial statements of the
Company for 1994, 1993 and 1992 and the first quarters of 1995 and 1994.
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: November 10, 1995 _____________________________________
L. Nash Allen, Jr.
Treasurer and
Chief Financial Officer