-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WaqvlNGpbzNnsVbURxE1eYA7WoirSKvGJb0O8FgeZEpNRDQckmI+wa8K/xInopX+ OxH/WOgrUiFALjtTUjznSQ== 0000701853-97-000005.txt : 19970812 0000701853-97-000005.hdr.sgml : 19970812 ACCESSION NUMBER: 0000701853-97-000005 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970811 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BANCORPSOUTH INC CENTRAL INDEX KEY: 0000701853 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 640659571 STATE OF INCORPORATION: MS FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-12991 FILM NUMBER: 97655637 BUSINESS ADDRESS: STREET 1: ONE MISSISSIPPI PL CITY: TUPELO STATE: MS ZIP: 38801 BUSINESS PHONE: 6016802000 MAIL ADDRESS: STREET 1: PO BOX 789 CITY: TUPELO STATE: MS ZIP: 38802-0789 FORMER COMPANY: FORMER CONFORMED NAME: BANCORP OF MISSISSIPPI INC DATE OF NAME CHANGE: 19920703 10-Q/A 1 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. 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. 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. 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. 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.
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 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% ============= ============= ============= ============= ============= =============
13 The following table provides an analysis of the allowance for credit losses for the periods indicated.
For the Year Ended Six months ended June 30 December 31 ------------------------ ----------- 1997 1996 1996 (in thousands) 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% ========= ========= =========
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. 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. 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 -----END PRIVACY-ENHANCED MESSAGE-----