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, 1998
-------------------------------------------------
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
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BancorpSouth, Inc.
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(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
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(Registrant's telephone number, including area code)
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(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, 1998, the registrant had outstanding 22,337,048 shares of common
stock, par value $2.50 per share.
2
BANCORPSOUTH, INC.
CONTENTS
PAGE
PART I. Financial Information
ITEM 1 Financial Statements (unaudited)
Consolidated Condensed Balance Sheets
March 31, 1998, and December 31, 1997 .................... 3
Consolidated Condensed Statements of Income
Three Months Ended March 31, 1998 and 1997................ 4
Consolidated Condensed Statements of Cash Flows
Three Months Ended March 31, 1998 and 1997................ 5
Notes to Consolidated Condensed Financial Statements...... 6
ITEM 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations............. 9
ITEM 3 Quantitative and Qualitative Disclosures About Market Risk 13
PART II. Other Information
ITEM 6 Exhibits and Reports on Form 8-K......................... 14
FORWARD-LOOKING STATEMENTS
Statements contained in this Report, which are not historical in
nature, are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements
include statements in the "Management's Discussion and Analysis of Financial
Conditional and Results of Operations" regarding liquidity and capital
resources. Such forward-looking statements involve certain risks and
uncertainties that could cause actual results to differ materially from
anticipated results. These risks and uncertainties include regulatory
constraints, changes in interest rates, competition from other financial
services companies, changes in the Company's operation or expansion strategy,
the general economy of the United States and the specific markets in which
the Company operates, and other factors as may be identified from time to
time in the Company's filings with the Securities and Exchange Commission or
in the Company's press releases.
3
PART I
FINANCIAL INFORMATION
BANCORPSOUTH, INC.
Consolidated Condensed Balance Sheets
(Unaudited)
March 31 December 31
1998 1997
---------- ----------
ASSETS (In Thousands)
Cash and due from banks $122,571 $286,307
Interest bearing deposits with other banks 4,914 6,465
Held-to-maturity securities, at amortized cost 770,541 533,419
Federal funds sold 53,000 0
Loans 2,911,348 2,852,885
Less: Unearned discount 94,065 93,858
Allowance for credit losses 40,908 39,877
Net loans 2,776,375 2,719,150
---------- ----------
Available-for-sale securities, at fair value 386,722 406,212
Mortgages held for sale 56,292 39,134
Premises and equipment, net 102,067 101,373
Other assets 92,036 88,083
---------- ----------
TOTAL ASSETS $4,364,518 $4,180,143
========== ==========
LIABILITIES
Deposits:
Demand: Non-interest bearing $447,185 $467,962
Interest bearing 826,065 840,009
Savings 583,371 548,683
Time 1,867,305 1,683,601
---------- ----------
Total deposits 3,723,926 3,540,255
Federal funds purchased and securities
sold under repurchase agreements 34,150 177,450
Long-term debt 171,733 47,539
Other liabilities 65,044 54,477
---------- ----------
TOTAL LIABILITIES 3,994,853 3,819,721
---------- ----------
SHAREHOLDERS' EQUITY
Common stock 55,990 55,990
Capital surplus 96,005 95,699
Unrealized gain on
available-for-sale securities 5,478 4,482
Retained earnings 213,283 206,570
Less cost of shares held in treasury (1,091) (2,319)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 369,665 360,422
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $4,364,518 $4,180,143
========== ==========
<FN>
See accompanying notes to consolidated condensed financial statements.
4
BANCORPSOUTH, INC.
Consolidated Condensed Statements of Income and Comprehensive Income
(Unaudited)
Three months ended
March 31
------------------------
1998 1997
--------- ---------
(In thousands except
for per share amounts)
INTEREST REVENUE:
Interest & fees on loans $64,008 $57,617
Deposits with other banks 97 94
Interest on federal funds sold 323 1,368
Interest on held-to-maturity securities:
U. S. Treasury 1,721 1,707
U. S. Government agencies & corporations 6,413 5,549
Obligations of states & political subdivisions 2,169 2,152
Interest and dividends on available-for-sale securities 5,853 3,612
Interest on mortgages held for sale 655 411
--------- ---------
Total interest revenue 81,239 72,510
INTEREST EXPENSE:
Interest on deposits 36,602 32,657
Interest on federal funds purchased & securities
sold under repurchase agreements 514 399
Other interest expense 2,290 847
--------- ---------
Total interest expense 39,406 33,903
--------- ---------
Net interest revenue 41,833 38,607
Provision for credit losses 2,922 1,481
--------- ---------
Net interest revenue, after provision for
credit losses 38,911 37,126
--------- ---------
OTHER REVENUE:
Mortgage lending 2,287 1,829
Trust income 735 754
Service charges 4,836 4,430
Security gains (losses), net 167 55
Life insurance income 818 1,050
Other 2,811 2,503
--------- ---------
Total other revenue 11,654 10,621
--------- ---------
OTHER EXPENSE:
Salaries and employee benefits 15,406 15,603
Occupancy, net 2,124 2,036
Equipment 3,249 2,808
Deposit insurance premiums 154 48
Other 10,172 9,953
--------- ---------
Total other expense 31,105 30,448
--------- ---------
Income before income taxes 19,460 17,299
--------- ---------
Income tax expense 6,459 5,663
--------- ---------
Net income $13,001 $11,636
--------- ---------
Other comprehensive income (loss) 996 (1,060)
--------- ---------
Comprehensive income $13,997 $10,576
========= =========
Earnings per share: Basic $0.58 $0.52
========= =========
Diluted $0.58 $0.52
========= =========
Dividends declared per share $0.22 $0.19
========= =========
<FN>
See accompanying notes to consolidated condensed financial statements.
5
BANCORPSOUTH, INC.
Consolidated Condensed Statements of Cash Flows
(Unaudited)
Three Months Ended
March 31
-------------------------
1998 1997
---------- ----------
(In Thousands)
Net cash provided by operating activities $5,650 $18,378
---------- ----------
Investing activities:
Proceeds from calls and maturities of
held-to-maturity securities 97,845 17,783
Proceeds from calls and maturities of
available-for-sale securities 59,204 45,255
Proceeds from sales of
available-for-sale securities 26,600 1,450
Purchases of held-to-maturity securities (332,425) (37,224)
Purchases of available-for-sale securities (64,446) (85,098)
Net increase in short-term
investments (53,000) (18,500)
Net increase in loans (59,381) (17,391)
Purchases of premises and equipment (4,017) (4,264)
Other (2,246) (11,568)
---------- ----------
Net cash used by investing activities (331,866) (109,557)
---------- ----------
Financing activities:
Net increase in deposits 183,671 62,305
Net increase (decrease) in short-term
borrowings and other liabilities (142,041) 3,547
Increase (decrease) in long-term debt 124,194 (1,040)
Payment of cash dividends (4,900) (3,997)
Issuance of common stock 5 80
Purchase of treasury stock 0 (1,315)
---------- ----------
Net cash provided by financing activities 160,929 59,580
---------- ----------
Decrease in cash and cash equivalents (165,287) (31,599)
Cash and cash equivalents at beginning of
period 292,772 171,863
---------- ----------
Cash and cash equivalents at end of period $127,485 $140,264
========== ==========
<FN>
See accompanying notes to consolidated condensed financial statements
6
BANCORPSOUTH, INC.
Notes to Consolidated Condensed Financial Statements
(Unaudited)
NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION AND PRINCIPLES OF
CONSOLIDATION
The accompanying unaudited consolidated condensed financial statements
have been prepared in accordance with the accounting policies in effect as of
December 31, 1997, 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 condensed financial statements have been included and all
such adjustments were of a normal recurring nature. The results of
operations for the three-month period ended March 31, 1998 are not
necessarily indicative of the results to be expected for the full year.
The consolidated condensed financial statements include the accounts of
the Company and its wholly-owned subsidiary, BancorpSouth Bank (the "Bank") and
the Bank's subsidiaries, Century Credit Life Insurance Company, Personal
Finance Corporation, BancorpSouth Insurance Services of Mississippi, Inc. and
BancorpSouth Insurance Services of Tennessee, Inc.
NOTE 2 - LOANS
The composition of the loan portfolio by collateral type is detailed
below:
March 31 December 31
--------------------------- -------------
1998 1997 1997
---------- ---------- ----------
(in thousands)
Commercial and agricultural $ 254,519 $ 232,024 $ 266,112
Consumer and installment 827,658 756,279 823,356
Real estate mortgage 1,634,481 1,447,644 1,571,137
Lease financing 179,489 149,909 172,436
Other 15,201 16,231 19,844
---------- ---------- ----------
Total $2,911,348 $2,602,087 $2,852,885
========== ========== ==========
7
The following table presents information concerning non-performing loans:
March 31 December 31
1998 1997
---------- ----------
(In thousands)
Non-accrual loans $ 4,352 $ 4,008
Loans 90 days or more past due 6,877 7,465
Restructured loans 650 659
---------- ----------
Total non-performing loans $ 11,879 $ 12,132
========== ==========
NOTE 3 - ALLOWANCE FOR CREDIT LOSSES
The following schedule summarizes the changes in the allowance for credit
losses for the periods indicated:
Three month period Year ended
ended March 31 December 31
----------------------- -------------
1998 1997 1997
---------- ---------- ----------
(In tousands)
Balance at beginning of period $39,877 $37,272 $37,272
Provision charged to expense 2,922 1,481 9,008
Recoveries 392 543 1,828
Loans charged off (2,283) (1,765) (8,827)
Acquisitions - 596 596
---------- ---------- ----------
Balance at end of period $40,908 $38,127 $39,877
========== ========== ==========
NOTE 4 - PER SHARE DATA
The Company adopted SFAS No. 128, "Earnings per Share", effective for
financial statements ending after December 15, 1997. All prior period EPS
data has been restated to conform with the provisions of this Statement.
The computation of basic earnings per share is based on the weighted
average number of common shares outstanding. The computation of diluted
earnings per share is based on the weighted average number of common shares
outstanding plus the shares resulting from the assumed exercise of all
outstanding stock options using the treasury stock method. The following
table provides a reconciliation of the numerators and denominators of the
basic and diluted earnings per share computations for the periods as shown.
8
Three Months Ended March 31,
----------------------------------------------------------------------------------------
1998 1997
----------------------------------------------------------------------------------------
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
------------- ------------- ------------- ------------- ------------- -------------
(In thousands, except per share amounts)
Basic EPS
Income available to
common shareholders $13,001 22,296 $0.58 $11,636 22,207 $0.52
============= =============
Effect of dilutive stock
options - 261 - 161
------------- ------------- ------------- -------------
Diluted EPS
Income available to
common shareholders
plus assumed exercise $13,001 22,557 $0.58 $11,636 22,368 $0.52
============= ============= ============= ============= ============= =============
NOTE 5 - COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income". This statement establishes standards for reporting
and display of comprehensive income and its components (revenues, expenses,
gains and losses) in a full set of general purpose financial statements and
is effective for fiscal years beginning after December 15, 1997. The purpose
of reporting comprehensive income is to report a measure of all changes in
equity of the Company that result from recognized transactions and other
economic events of the period other than transactions with owners in their
capacity as owners. Comprehensive income for the Company for the three
months ended March 31, 1998 and 1997 resulted from unrealized gains (losses)
on available-for-sale securities during the periods.
NOTE 6 - RECENT PRONOUNCEMENTS
In June 1997, SFAS No. 131, "Disclosures About Segments of an Enterprise
and Related Information" was issued. This statement requires that a public
business enterprise report financial and descriptive information about its
reportable operating segments. Operating segments are components of an
enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. This statement is effective
for fiscal years beginning after December 15, 1997. The Company intends to
comply with this statement in 1998.
In February 1998, SFAS No. 132, "Employers Disclosures about Pensions and
Other Postretirement Benefits" was issued. The statement standardizes the
disclosure requirements for pensions and other postretirement benefits to the
extent practicable. In addition, the new statement requires additional
information on changes in benefit obligations and fair value of plan assets
and eliminates certain disclosures that are no longer useful. This statement
is effective for fiscal years beginning after December 15, 1997. The Company
intends to comply with this statement in 1998.
NOTE 7 - STOCK SPLIT
On March 25, 1998, the Company's Board of Directors declared a two-for-one
stock split effected in the form of a 100% stock dividend payable on May 15,
1998 to shareholders of record on May 1, 1998. The number of shares and
option price of shares authorized under the Company's various stock option
plans will be adjusted for this dividend.
9
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 March 31, 1998 and 1997
found elsewhere in this report.
RESULTS OF OPERATIONS
Net Income
The Company's net income for the first quarter of 1998 was $13.00 million,
an increase of 11.7% from $11.64 million in the first quarter of 1997. Basic
and diluted earnings per common share for the first quarter of 1998 were
$0.58, an increase of 11.5% from $0.52 for the same period in 1997. The
annualized returns on average assets for the first quarters of 1998 and 1997
were 1.23% and 1.25%, 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 $42.9 million for the three months ended
March 31, 1998, compared to $39.6 million for the same period in 1997.
Earning assets averaged $3.96 billion in the first quarter of 1998, compared
with $3.49 billion in the respective period in 1997. Average interest-bearing
liabilities were $3.37 billion in the first quarter of 1998, compared with
$2.94 billion for the same period of 1997.
Net interest revenue, expressed as a percentage of average earning assets,
was 4.40% for the first quarter of 1998, as compared to 4.62% for the same
period of 1997. 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 poten-
tial risks of losses in 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 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.
10
The provision for credit losses totaled $2.92 million for the first
quarter of 1998, compared to $1.48 million for the same period of 1997. This
increase is due to the growth in the Company's loan portfolio and an increase
in credit losses during the first quarter of 1998 when compared to the first
quarter of 1997. The allowance for credit losses as a percent of loans
outstanding was 1.45% at March 31, 1998 and at December 31, 1997.
Other Revenue
Other revenue for the quarter ended March 31, 1998 totaled $11.65 million,
compared to $10.62 million for the same period of 1997, a 9.7% increase.
Mortgage lending revenue of $2.29 million was reported in the first quarter
of 1998, compared to $1.83 million in the same period of 1997. Trust income
was basically unchanged in the first quarter of 1998 compared to the same
period in 1997. Service charges on deposit accounts in the first quarter of
1998 increased 9.16% from the same period in 1997. Net security gains were
$167,000 in the first quarter of 1998 compared to a net gain of $55,000 in
the first quarter of 1997.
Other Expense
Other expense totaled $31.11 million for the first quarter of 1998, a
2.16% increase over other expense for the same period during 1997. The most
significant change in a component of other expense relates to the Company's
stock option plans, expense for which is reported under the caption salaries
and employee benefits. Certain of the stock option plans contain a provision
for stock appreciation rights (SARs) which require the recognition of expense
for stock price appreciation. During the first quarter of 1997, expense
related to SARs was $6,000. During the first quarter of 1998, because of a
decline in the Company's stock price from December 31, 1997, expense recovery
of $780,000 was recorded. Occupancy expense showed a modest increase for the
first quarter of 1998 compared to the same period during the prior year.
Deposit insurance was $154,000 for the quarter ended March 31, 1998 compared
to $48,000 for the same period in 1997. Except as discussed above, 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 $6.46 million for the first quarter of 1998 (an
effective tax rate of 33.2%) and $5.66 million for the first quarter of 1997
(an effective tax rate of 32.7%). This increase resulted from decrease in
the relative level of the Company's investment in assets with respect to
which earnings are afforded favorable tax treatment and an increase in the
Company's taxable net income.
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 March 31, 1998 were $4.09
billion or 93.7% of total assets, compared with $3.74 billion, or 89.6% of
total assets at December 31, 1997.
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, 1998 were $770.5
million, compared with $533.4 million at the end of 1997, a 44.45% increase.
Available-for-sale securities were $386.7 million at March 31, 1998, compared
to $406.2 million at December 31, 1997, a 4.80% decrease.
11
The loan portfolios of the Company's bank subsidiary make 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, current savers and borrowers, builders, attorneys, walk-in
customers and, in some instances, other lenders. The Company has established
disciplines 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 $2.82 billion at March 31, 1998, which represents a 2.1%
increase from $2.76 billion at December 31, 1997.
At March 31, 1998, 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 are
both well secured and in the process of collection. Non-performing loans were
0.42% of all loans outstanding at March 31, 1998 compared to 0.44% at
December 31, 1997.
Allowance for Credit Losses
The Company attempts to maintain the allowance for credit losses at a
level that, 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 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 judgments by the agencies 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.
12
March 31 December 31
-------------------------------------------------- ----------------------------
1998 1997 1997
-------------------------- ---------------------- ----------------------------
(Dollars in thousands)
ALLOWANCE % OF ALLOWANCE % OF ALLOWANCE % OF
FOR LOANS TO FOR LOANS TO FOR LOANS TO
CREDIT TOTAL CREDIT TOTAL CREDIT TOTAL
LOSSES LOANS LOSSES LOANS LOSSES LOANS
---------- ---------- ---------- ---------- ---------- ----------
Commercial and agricultural $ 2,990 8.74% $ 3,448 8.92% $ 2,985 9.33%
Consumer and installment 15,245 28.43% 12,175 29.06% 14,760 28.86%
Real estate mortgage 19,920 56.14% 20,254 55.64% 19,415 55.07%
Lease financing 2,601 6.17% 2,205 5.76% 2,592 6.04%
Other 152 0.52% 45 0.62% 125 0.70%
---------- ---------- ---------- ---------- ---------- ----------
Total $ 40,908 100.00% $ 38,127 100.00% $ 39,877 100.00%
========== ========== ========== ========== ========== ==========
The following table provides an analysis of the allowance for credit losses
for the periods indicated:
13
Year ended
Three months ended March 31 December 31
--------------------------- -------------
1998 1997 1997
---------- ---------- ----------
(in thousands)
Balance, beginning of period $ 39,877 $ 37,272 $ 37,272
Loans charged off:
Commercial and agricultural (166) (85) (678)
Consumer & installment (1,739) (1,587) (7,107)
Real estate mortgage (334) (87) (994)
Lease financing (44) (6) (48)
---------- ---------- ----------
Total loans charged off (2,283) (1,765) (8,827)
---------- ---------- ----------
Recoveries:
Commercial and agricultural 62 104 214
Consumer & installment 256 260 1,205
Real estate mortgage 56 171 352
Lease financing 18 8 57
---------- ---------- ----------
Total recoveries 392 543 1,828
---------- ---------- ----------
Net charge-offs (1,891) (1,222) (6,999)
Provsion charged to operating expense 2,922 1,481 9,008
Acquistions 596 596
---------- ---------- ----------
Balance, end of period $ 40,908 $ 38,127 $ 39,877
========== ========== ==========
Average loans for period $2,793,508 $2,505,720 $2,569,445
========== ========== ==========
RATIOS:
Net charge offs to average loans 0.07% 0.05% 0.27%
========== ========== ==========
Deposits and Other Interest-bearing Liabilities
Deposits originating within the communities served by the Company continue
to be the Company's primary source of funding its earning assets. Total
deposits at the end of the first quarter of 1998 were $3.72 billion as
compared to $3.54 billion at December 31, 1997, representing a 5.19%
increase. Included in the deposit growth is approximately $175 million of
public funds obtained in the first quarter of 1998 and scheduled to mature in
the third quarter of 1998. The Company also borrowed $125 million from the
Federal Home Loan Bank during the first quarter of 1998. Of these funds, $50
million matures in 10 years, $50 million matures in 15 years and $25 million
matures in 20 years. These borrowings were initially invested in short-term
securities and are to be used by the Company over time to fund loans of
similar maturities.
LIQUIDITY
Liquidity is the ability of the Company to fund the needs 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.
14
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, 1998, the
Company's Tier 1 capital and total capital, as a percentage of total risk-
adjusted assets, were 12.31% and 13.56%, 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 8.54% at March 31, 1998, 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
During the three months ended March 31, 1998, there were no material
changes to the quantitative and qualitative disclosures about market risks
presented in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997.
15
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(10.1) BancorpSouth, Inc. 1994 Stock Incentive Plan, as amended and
restated
(10.2) BancorpSouth, Inc. 1995 Non-Qualified Stock Option Plan for
Non-Employee Directors, as amended and restated
(27.1) Financial Data Schedule for the period ended March 31, 1998
(27.2) Restated Financial Data Schedule for the period ended
March 31, 1997
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended March 31, 1998.
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)
/s/ L. Nash Allen, Jr.
DATE: May 14, 1998 -------------------------------------
L. Nash Allen, Jr.
Treasurer and
Chief Financial Officer