-----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, AysLB/aJJq3DhKCYpyYsuloFwranEOQbbRVS3CMByK/Z76BKvVA5hkk99SpYHvLK PWa1fDTuz67AngyjTuCO5A== /in/edgar/work/0000701853-00-000005/0000701853-00-000005.txt : 20001115 0000701853-00-000005.hdr.sgml : 20001115 ACCESSION NUMBER: 0000701853-00-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BANCORPSOUTH INC CENTRAL INDEX KEY: 0000701853 STANDARD INDUSTRIAL CLASSIFICATION: [6022 ] IRS NUMBER: 640659571 STATE OF INCORPORATION: MS FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12991 FILM NUMBER: 763870 BUSINESS ADDRESS: STREET 1: ONE MISSISSIPPI PL CITY: TUPELO STATE: MS ZIP: 38804 BUSINESS PHONE: 6626802000 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 1 0001.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------------------------- FORM 10-Q (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, 2000 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 Identification No.) incorporation or organization) One Mississippi Plaza, Tupelo, Mississippi 38804 (Address of principal executive offices) (Zip Code) (662) 680-2000 (Registrant's telephone number, including area code) NOT APPLICABLE (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, 2000, the Registrant had outstanding 84,153,060 shares of common stock, par value $2.50 per share. BANCORPSOUTH, INC. CONTENTS PART I. Financial Information Page ITEM 1. Financial Statements (unaudited) Consolidated Condensed Balance Sheets September 30, 2000 and December 31, 1999 3 Consolidated Condensed Statements of Income Three and Nine Months Ended September 30, 2000 and 1999 4 Consolidated Condensed Statements of Cash Flows Nine Months Ended September 30, 2000 and 1999 5 Notes to Consolidated Condensed Financial Statements 6 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 19 PART II. Other Information ITEM 2. Changes in Securities and Use of Proceeds 20 ITEM 4. Matters Submitted to a Vote of Security Holders 20 ITEM 6. Exhibits and Reports on Form 8-K 20 FORWARD-LOOKING STATEMENTS Certain statements contained in this Report may not be based on historical facts and are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1993, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements may be identified by reference to a future period(s) or by the use of forward- looking terminology, such as "anticipate," "believe," "estimate," "expect," "may," "might," "will," "intend" and "would." These forward-looking statements include, without limitation, those relating to the Company's liquidity, allowance for credit losses, lending policy and capital resources. We caution you not to place undue reliance on the forward-looking statements contained in this Report, in that actual results could differ materially from those indicated in such forward-looking statements due to a variety of factors. These factors include, but are not limited to, changes in economic conditions and prevailing interest rates, government fiscal and monetary policies, prevailing interest rates, effectiveness of the Company's interest rate hedging strategies, changes in laws and regulations affecting financial institutions, ability of the Company to effectively service loans, ability of the Company to identify and integrate acquisitions and investment opportunities, changes in the Company's operating or expansion strategy, geographic concentrations of assets, availability of and costs associated with obtaining adequate and timely sources of liquidity, dependence on existing sources of funding, changes in consumer preferences, competition from other financial services companies, and other risks detailed from time to time in the Company's press releases and filings with the Securities and Exchange Commission. We undertake no obligation to update these forward- looking statements to reflect events or circumstances that occur after the date of this Report. PART I FINANCIAL INFORMATION Item 1. Financial Statements
BANCORPSOUTH, INC. Consolidated Condensed Balance Sheets (Unaudited) September 30, December 31, 2000 1999 ------------ -------------- (In thousands) ASSETS Cash and due from banks $260,218 $329,553 Interest bearing deposits with other banks 13,089 12,058 Held-to-maturity securities, at amortized cost 1,169,635 1,031,062 Available-for-sale securities, at fair market value 1,505,148 1,080,063 Federal funds sold 75,000 110,875 Loans 5,990,074 5,626,043 Less: Unearned discount 67,510 84,082 Allowance for credit losses 78,100 74,232 ------------ -------------- Net loans 5,844,464 5,467,729 Mortgages held for sale 34,105 37,513 Premises and equipment, net 186,577 171,867 Other assets 213,366 200,977 ------------ -------------- TOTAL ASSETS $9,301,602 $8,441,697 ============ ============== LIABILITIES Deposits: Demand: Non-interest bearing $1,007,326 $966,491 Interest bearing 1,671,883 1,589,155 Savings 883,474 937,508 Time 3,825,389 3,573,491 ------------ -------------- Total deposits 7,388,072 7,066,645 Short-term borrowings 868,035 346,427 Long-term debt 165,803 166,247 Other liabilities 112,865 105,267 ------------ -------------- TOTAL LIABILITIES 8,534,775 7,684,586 ------------ -------------- SHAREHOLDERS' EQUITY Common stock 214,484 214,405 Capital surplus 70,464 71,777 Accumulated other comprehensive income (7,055) (14,149) Retained earnings 515,086 486,540 Less cost of shares held in treasury (26,152) (1,462) ------------ -------------- TOTAL SHAREHOLDERS' EQUITY 766,827 757,111 ------------ -------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $9,301,602 $8,441,697 ============ ============== See accompanying notes to consolidated condensed financial statements.
BANCORPSOUTH, INC. Consolidated Condensed Statements of Income (Unaudited)
Three months ended Nine months ended September 30 September 30 ------------------------- ------------------------- 2000 1999 2000 1999 ----------- ----------- ----------- ----------- (In thousands except for per share amounts) INTEREST REVENUE: Loans receivable $134,283 $115,514 $385,828 $335,801 Deposits with other banks 260 246 970 957 Federal funds sold 691 859 3,308 4,970 Held-to-maturity securities: U. S. Treasury 574 1,152 2,191 4,351 U. S. Government agencies & corporations 11,152 8,953 31,996 23,929 Obligations of states & political subdivisions 4,109 3,656 12,159 11,371 Other 64 61 269 162 Available-for-sale securities 21,564 18,360 56,448 54,471 Mortgages held for sale 628 884 2,471 2,667 ----------- ----------- ----------- ----------- Total interest revenue 173,325 149,685 495,640 438,679 ----------- ----------- ----------- ----------- INTEREST EXPENSE: Deposits 81,031 63,245 225,656 188,715 Short-term borrowings 4,531 2,484 11,415 5,625 Other 7,195 4,451 14,216 10,906 ----------- ----------- ----------- ----------- Total interest expense 92,757 70,180 251,287 205,246 ----------- ----------- ----------- ----------- Net interest revenue 80,568 79,505 244,353 233,433 Provision for credit losses 10,656 4,798 20,669 12,643 ----------- ----------- ----------- ----------- Net interest revenue, after provision for credit losses 69,912 74,707 223,684 220,790 ----------- ----------- ----------- ----------- OTHER REVENUE: Mortgage lending 2,493 3,727 8,973 14,823 Trust income 1,794 1,602 5,075 4,607 Service charges 10,213 9,295 29,545 26,497 Life insurance income 1,107 1,016 3,184 2,960 Security gains (losses), net (254) 118 (83) 4,332 Insurance service fees 3,717 3,293 11,189 10,293 Other 4,496 4,367 17,643 12,710 ----------- ----------- ----------- ----------- Total other revenue 23,566 23,418 75,526 76,222 ----------- ----------- ----------- ----------- OTHER EXPENSE: Salaries and employee benefits 34,069 30,234 100,010 91,682 Net occupancy expense 4,647 4,317 13,504 12,375 Equipment expense 6,124 5,469 17,177 16,137 Telecommunications 1,868 1,573 5,193 5,078 Contribution to charitable foundation 4,146 Restructuring and merger-related 7,101 (150) 8,327 1,102 Other 22,798 17,781 60,350 56,156 ----------- ----------- ----------- ----------- Total other expense 76,607 59,224 204,561 186,676 ----------- ----------- ----------- ----------- Income before income taxes 16,871 38,901 94,649 110,336 Income tax expense 7,379 12,729 32,528 34,344 ----------- ----------- ----------- ----------- Net income $9,492 $26,172 $62,121 $75,992 =========== =========== =========== =========== Earnings per share: Basic $0.11 $0.31 $0.73 $0.89 =========== =========== =========== =========== Diluted $0.11 $0.30 $0.73 $0.88 =========== =========== =========== =========== Dividends declared per common share $0.13 $0.12 $0.39 $0.36 =========== =========== =========== =========== See accompanying notes to consolidated condensed financial statements.
BANCORPSOUTH, INC. Consolidated Condensed Statements of Cash Flows (Unaudited) Nine Months Ended September 30 2000 1999 ------------ ----------- (In thousands) Net cash provided by operating activities $97,366 $109,074 Investing activities: Proceeds from calls and maturities of held-to-maturity securities 200,682 204,072 Proceeds from calls and maturities of available-for-sale securities 564,487 1,094,952 Proceeds from sales of held-to-maturity securities - 9,040 Proceeds from sales of available-for-sale securities 25,042 52,356 Purchases of held-to-maturity securities (290,928) (379,118) Purchases of available-for-sale securities (1,129,426) (1,030,678) Net increase in short-term investments 35,875 82,370 Net increase in loans (484,171) (488,491) Proceeds from sale of student loans 90,483 - Purchases of premises and equipment (31,222) (17,006) Proceeds from sale of premises and equipment 3,124 1,193 Other, net 75,107 (27,575) ------------ ----------- Net cash used by investing activities (940,947) (498,885) ------------ ----------- Financing activities: Net increase in deposits 321,427 238,539 Net (decrease) increase in short-term borrowings and other liabilities 503,745 185,505 Advances on long-term debt 17,150 - Repayment of long-term debt (17,595) (29,503) Acquisition of treasury stock (28,310) (857.00) Payment of cash dividends (22,042) (28,811) Exercise of stock options 902 51 ------------ ----------- Net cash provided by financing activities 775,277 364,924 ------------ ----------- Decrease in cash and cash equivalents (68,304) (24,887) Cash and cash equivalents at beginning of period 341,611 293,601 ------------ ----------- Cash and cash equivalents at end of period $273,307 $268,714 ============ =========== See accompanying notes to consolidated condensed financial statements.
BANCORPSOUTH, INC. Notes to Consolidated Condensed Financial Statements (Unaudited) NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION AND PRINCIPALS OF CONSOLIDATION The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with the accounting policies in effect as of December 31, 1999, 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 and nine month periods ended September 30, 2000 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 wholly-owned subsidiaries, Century Credit Life Insurance Company, Personal Finance Corporation, Valley Finance, Inc., Eagle Premium Assistance Corporation, BancorpSouth Insurance Services of Mississippi, Inc., BancorpSouth Insurance Services of Tennessee, Inc., BancorpSouth Insurance Services of Alabama, Inc. and BancorpSouth Investment Services, Inc. NOTE 2 - LOANS The composition of the loan portfolio by collateral type is detailed below:
September 30, December 31, ------------------------ ------------ 2000 1999 1999 ------------ ----------- ------------ (In thousands) Commercial and agricultural $767,791 $754,539 $712,799 Consumer and installment 1,090,682 1,181,800 1,197,277 Real estate mortgage: 1-4 Family 1,550,766 1,385,773 1,429,193 Other 2,262,232 1,928,305 2,014,979 Lease financing 281,453 225,659 258,811 Other 37,150 27,564 12,984 ------------ ----------- ------------ Total $5,990,074 $5,503,640 $5,626,043 ============ =========== ============
The following table presents information concerning non-performing loans:
September 30, December 31, 2000 1999 ------------- ------------ (In thousands) Non-accrual loans $21,171 $13,352 Loans 90 days or more past due 18,318 17,311 Restructured loans 913 1,125 ------------- ------------ Total non-performing loans $40,402 $31,788 ============= ============
NOTE 3 - ALLOWANCE FOR CREDIT LOSSES The following schedule summarizes the changes in the allowance for credit losses for the periods indicated:
Nine month periods Year ended ended September 30, December 31, ------------------- ------------ 2000 1999 1999 -------- --------- ------------ (In thousands) Balance at beginning of period $74,232 $68,385 $68,385 Provision charged to expense 20,669 12,643 17,812 Recoveries 3,485 2,638 3,637 Loans charged off (20,286) (10,820) (16,602) Acquisitions - 1,000 1,000 -------- --------- ------------ Balance at end of period $78,100 $73,846 $74,232 ======== ========= ============
NOTE 4 - PER SHARE DATA 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.
Three Months Ended September 30, -------------------------------------------------------------------------------- 2000 1999 -------------------------------------- ---------------------------------------- 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 $9,492 84,077 $0.11 $26,172 85,590 $0.31 ======== ======== Effect of dilutive stock options - 321 - 433 -------------- ------------ ---------------- ------------ Diluted EPS Income available to common shareholders plus assumed exercise $9,492 84,398 $0.11 $26,172 86,023 $0.30 ============== ============ ======== ================ ============ ========
Nine Months Ended September 30, -------------------------------------------------------------------------------- 2000 1999 -------------------------------------------------------------------------------- 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 $62,121 84,651 $0.73 $75,992 85,568 $0.89 ======== ======== Effect of dilutive stock options - 344 - 448 -------------- ------------ ---------------- ------------ Diluted EPS Income available to common shareholders plus assumed exercise $62,121 84,995 $0.73 $75,992 86,016 $0.88 ============== ============ ======== ================ ============ ========
NOTE 5 - COMPREHENSIVE INCOME The following table presents the components of other comprehensive income and the related tax effects allocated to each component for the periods indicated.
Three months ended September 30, ------------------------------------------------------------- 2000 1999 ------------------------------ ----------------------------- Before Tax Net Before Tax Net tax (expense) of tax tax (expense) of tax amount benefit amount amount benefit amount ---------- --------- --------- --------- --------- ---------- (In thousands) Unrealized gains on securities Unrealized gains (losses) arising during holding period $18,652 ($7,134) $11,518 ($7,056) $2,699 ($4,357) Less: Reclassification adjustment for gains realized in net income (137) 52 (85) (31) 12 (19) ---------- --------- --------- --------- --------- ---------- Other comprehensive income (loss) $18,515 ($7,082) 11,433 ($7,087) $2,711 ($4,376) ========== ========= ========= ========= Net income 9,492 26,172 ---------- ---------- Comprehensive income $20,925 $21,796 ========== ==========
Nine months ended September 30, ------------------------------------------------------------- 2000 1999 ------------------------------ ----------------------------- Before Tax Net Before Tax Net tax (expense) of tax tax (expense) of tax amount benefit amount amount benefit amount ---------- --------- --------- --------- --------- ---------- (In thousands) Unrealized gains on securities Unrealized gains (losses) arising during holding period $11,469 ($4,387) $7,082 ($6,060) $2,318 ($3,742) Less: Reclassification adjustment for gains realized in net income 20 (8) 12 (4,176) 1,597 (2,579) ---------- --------- --------- --------- --------- ---------- Other comprehensive income (loss) $11,489 ($4,395) 7,094 ($10,236) $3,915 ($6,321) ========== ========= ========= ========= Net income 62,121 75,992 ---------- ---------- Comprehensive income $69,215 $69,671 ========== ==========
NOTE 6 - BUSINESS COMBINATIONS On February 26, 1999, the Company completed its merger with The HomeBanc Corporation. The Company issued approximately 2.1 million shares of common stock in the merger that was accounted for as a pooling of interests. The Company's financial statements for all periods presented include the consolidated accounts of The HomeBanc Corporation. On June 30, 1999, the Company completed its merger with the Stewart Sneed Hewes Group. The Company issued approximately 1.3 million shares of common stock in the merger that was accounted for as a pooling of interests. The Company's financial statements for all periods presented include the consolidated accounts of the Stewart Sneed Hewes Group. On August 31, 2000, the Company completed its merger with First United Bancshares, Inc. The Company issued approximately 28.5 million shares of common stock in the merger that was accounted for as a pooling of interests. The Company's financial statements for all periods presented include the consolidated accounts of First United Bancshares, Inc. NOTE 7 - RECENT PRONOUNCEMENTS Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 137, established accounting and reporting standards for derivative instruments and hedging activities and requires recognition of all derivatives as either assets or liabilities measured at fair value. This statement will be adopted for the year 2001. The impact of adopting the provisions of this statement on the Company's financial position, results of operations and cash flow subsequent to the effective date is not currently estimable and will depend on the financial position of the Company and the nature and purpose of the derivative instruments in use by management at that time. NOTE 8 - SEGMENT REPORTING The Company's principal activity is community banking, which includes providing a full range of deposit products, commercial loans and consumer loans. General corporate and other includes leasing, mortgage lending, trust services, credit card activities, insurance services, investment services and other activities not allocated to community banking. Results of operations and selected financial information by operating segment for the three month periods ended September 30, 2000 and 1999 are presented below:
General Community Corporate Banking and Other Total ----------- ----------- ------------- (In thousands) Three Months Ended September 30, 2000 Results of Operations Net interest revenue $66,752 $13,816 $80,568 Provision for credit losses 9,996 660 10,656 - ------------------------------------------------------------------------------------------- Net interest income after provision for credit losses 56,756 13,156 69,912 Other revenue 13,832 9,734 23,566 Other expense 64,258 12,349 76,607 - ------------------------------------------------------------------------------------------- Income before income taxes 6,330 10,541 16,871 Income taxes 2,769 4,610 7,379 - ------------------------------------------------------------------------------------------- Net income $3,561 $5,931 $9,492 Selected Financial Information Identifiable assets $8,699,321 $602,281 $9,301,602 Depreciation & amortization 5,210 529 5,739 Three Months Ended September 30, 1999 Results of Operations Net interest revenue $66,018 $13,487 $79,505 Provision for credit losses 3,552 1,246 4,798 - ------------------------------------------------------------------------------------------- Net interest income after provision for credit losses 62,466 12,241 74,707 Other revenue 13,981 9,437 23,418 Other expense 48,421 10,803 59,224 - ------------------------------------------------------------------------------------------- Income before income taxes 28,026 10,875 38,901 Income taxes 9,171 3,558 12,729 - ------------------------------------------------------------------------------------------- Net income $18,855 $7,317 $26,172 Selected Financial Information Identifiable assets $7,725,948 $619,915 $8,345,863 Depreciation & amortization 4,785 417 5,202
Results of operations and selected financial information by operating segment for the nine month periods ended September 30, 2000 and 1999 are presented below:
General Community Corporate Banking and Other Total ----------- ----------- ------------- (In thousands) Nine Months Ended September 30, 2000 Results of Operations Net interest revenue $203,477 $40,876 $244,353 Provision for credit losses 19,215 1,454 20,669 - ------------------------------------------------------------------------------------------- Net interest income after provision for credit losses 184,262 39,422 223,684 Other revenue 42,778 32,748 75,526 Other expense 167,493 37,068 204,561 - ------------------------------------------------------------------------------------------- Income before income taxes 59,547 35,102 94,649 Income taxes 20,465 12,063 32,528 - ------------------------------------------------------------------------------------------- Net income $39,082 23,039 $62,121 Selected Financial Information Identifiable Assets $8,699,321 $602,281 $9,301,602 Depreciation & amortization 14,722 1,391 16,113 Nine Months Ended September 30, 1999 Results of Operations Net interest revenue $193,608 $39,825 $233,433 Provision for credit losses 10,185 2,458 12,643 - ------------------------------------------------------------------------------------------- Net interest income after provision for credit losses 183,423 37,367 220,790 Other revenue 45,114 31,108 76,222 Other expense 153,342 33,334 186,676 - ------------------------------------------------------------------------------------------- Income before income taxes 75,195 35,141 110,336 Income taxes 23,406 10,938 34,344 - ------------------------------------------------------------------------------------------- Net income $51,789 24,203 $75,992 Selected Financial Information Identifiable Assets $7,726,948 $618,915 $8,345,863 Depreciation & amortization 14,184 1,180 15,364
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 September 30, 2000 and 1999, found elsewhere in this Report. Financial information for all prior periods presented have been restated to include the results of operations and financial condition of entities acquired by the Company during 1999 and 2000 in mergers accounted for as poolings of interests. See Note 6 to the Company's consolidated condensed financial statements included elsewhere in the Report for additional information about these mergers. RESULTS OF OPERATIONS - --------------------- Net Income - ---------- The Company reported diluted year-to-date earnings per share (including restructuring, merger-related and other charges) of $0.73 and $0.88 for the nine months ended September 30, 2000 and 1999, respectively, on earnings of $62.12 million and $75.99 million, respectively. On a quarterly basis, diluted earnings per share (including restructuring, merger-related and other charges) were $0.11 and $0.30, respectively, for the quarters ended September 30, 2000 and 1999. The annualized returns on average assets for the nine months ended September 30, 2000 and 1999 were 0.96% and 1.26%, respectively. For the three months ended September 30, 2000 and 1999, the annualized returns on average assets were 0.43% and 1.27%, respectively. Diluted operating earnings per share were $0.86 and $0.89 for the nine month periods ended September 30, 2000 and 1999, respectively. Operating earnings, which consists of net income excluding restructuring, merger- related and other charges, totaled $73.75 million for the nine months ended September 30, 2000, a decrease of 4.18% from operating earnings of $76.97 million for the same period of 1999. Diluted operating earnings per share were $0.24 and $0.30 for the quarters ended September 30, 2000 and 1999, respectively. Operating earnings totaled $20.21 million for the third quarter of 2000, a decrease of 22.33% from $26.02 million in the third quarter of 1999. 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 $83.64 million for the three months ended September 30, 2000, compared to $82.21 million for the same period in 1999, representing an increase of 1.74%. For the first nine months of 2000 and 1999, net interest revenue was $253.37 million and $242.26 million, respectively, representing an increase of 4.59%. Earning assets averaged $8.35 billion in the third quarter of 2000, compared with $7.72 billion in the third quarter of 1999, representing an increase of 8.21%. Earning assets for the first nine months of 2000 averaged $8.09 billion, compared to $7.53 billion in 1999, representing an increase of 7.44%. Average interest-bearing liabilities were $7.09 billion in the third quarter of 2000, compared with $6.49 billion in the third quarter of 1999, representing an increase of 9.25%. Average interest-bearing liabilities were $6.84 billion for the first nine months of 2000 compared to $6.30 billion for the same period in 1999, representing an increase of 8.51%. Net interest revenue, expressed as a percentage of average earning assets, was 3.98% for the third quarter of 2000 as compared to 4.23% for the same period of 1999 and 4.18% for the first nine months of 2000, compared to 4.30% for the same period in 1999. Provision for Credit Losses - --------------------------- The provision for credit losses is the cost of providing an allowance or reserve for estimated probable losses on loans. The amount for each accounting period is dependent upon many factors, including loan growth, net charge-offs, changes in the composition of the loan portfolio, delinquencies, management's assessment of loan portfolio quality, the value of collateral and general economic factors. The process of determining the adequacy of the provision requires that management make material estimates and assumptions that are particularly susceptible to significant change. Future additions to the allowance for credit losses may be necessary based upon 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 changes to the allowance based on their judgments about information available to them at the time of their examination. The provision for credit losses totaled $10.66 million for the third quarter of 2000 compared to $4.80 million for the same period of 1999, representing an increase of 122.09%. For the nine-month periods ended September 30, 2000 and 1999, the provision for credit losses totaled $20.67 million and $12.64 million, respectively, representing an increase of 63.48%. During 2000 the provision for credit losses increased primarily to reflect a charge of $6.11 million made in the third quarter of 2000 to provide for probable losses in the loan portfolio acquired in the merger of First United utilizing methodologies employed by the Company and as a result of the increase in non- performing assets at First United. Loans charged off, net of recoveries, increased approximately $10.24 million during the first nine months of 2000, when compared to the same period of 1999, as the credit policies of First United were conformed to those of the Company. Other Revenue - ------------- Other revenue for the quarter ended September 30, 2000 totaled $23.57 million, compared to $23.42 million for the same period of 1999, an increase of 0.63%. For the nine months ended September 30, 2000 and 1999, other revenue was $75.53 million and $76.22 million, respectively, a decrease of 0.91%. Revenue from mortgage lending activities decreased 33.11%, from $3.73 million to $2.49 million, during the three months ended September 30, 2000 when compared to the same period of 1999. The decrease was primarily due to higher mortgage interest rates during 2000, which resulted in decreased mortgage loan originations when compared to the same periods of 1999. Service charge revenue increased 9.88%, from $9.30 million to $10.21 million, for the third quarter of 2000 when compared to the third quarter of 1999 and increased 11.51%, from $26.50 million to $29.55 million for the nine months ended September 30, 2000 when compared to the same period of 1999. Insurance service fees increased 12.87%, from $3.29 million to $3.72 million, for the third quarter of 2000 when compared to the third quarter of 1999 and increased 8.70%, from $10.29 million to $11.19 million for the nine months ended September 30, 2000 when compared to the same period of 1999. The Company established a charitable foundation in the first quarter of 1999. Appreciated equity securities were contributed by the Company to initially fund the foundation. This transaction resulted in one-time securities gains of approximately $4.14 million, which are reflected in the results for the nine months ended September 30, 1999. Other revenue for the first nine months of 2000 includes a $2.6 million gain that resulted from the Bank's sale of $85.7 million in student loans in the first quarter of 2000. The Bank continues to originate student loans and intends to rebuild its portfolio of student loans. Other Expense - ------------- Other expense totaled $76.61 million for the third quarter of 2000, a 29.35% increase from $59.22 million for the same period of 1999. For the nine months ended September 30, 2000, other expense totaled $204.56 million, a 9.58% increase from $186.68 million for the same period in 1999. In the third quarter of 2000, the Company recorded restructuring, merger-related and other charges of approximately $9.28 million. This amount consisted of termination and change of control payments ($2.01 million), professional fees ($2.62 million), contract termination fees ($1.91 million) and other miscellaneous costs ($2.74 million). Restructuring, merger-related and other charges for the nine months ended September 30, 2000, totaled $10.50 million and consisted of termination and change of control payments ($2.01 million), professional fees ($3.67 million), contract termination fees ($1.91 million) and other miscellaneous costs ($2.91 million). The Company had merger-related expenses of $1.1 million during the nine months ended September 30, 1999. At September 30, 2000, the balance in accrued restructuring, merger-related and other charges was $3.83 million, which consisted of termination and change of control payments ($1.78 million), professional fees ($40 thousand), contract termination fees ($1.91 million) and other miscellaneous costs ($103 thousand). A significant component of other expense in the nine months ended September 30, 1999 was the contribution by the Company of appreciated equity securities with an aggregate market value of approximately $4.15 million in connection with the Company's establishment of a charitable foundation during the first quarter of 1999, as discussed in "Other Revenue" above. 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 $7.38 million and $12.73 million for the third quarter of 2000 and 1999, respectively, a decrease of 42.03%. For the nine month period ended September 30, 2000, income tax expense was $32.53 million compared to $34.34 million for the same period in 1999, representing a decrease of 5.27%. The effective tax rates for the third quarter of 2000 and 1999 were 43.74% and 32.72%, respectively, and 34.37% and 31.13% for the nine months ended September 30, 2000 and 1999, respectively. The increases in the effective tax rates were primarily due to nondeductible merger- related charges. 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 September 30, 2000 were $8.72 billion, or 93.74% of total assets, compared with $7.81 billion, or 92.56% of total assets, at December 31, 1999. 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 September 30, 2000 were $1.17 billion, compared with $1.03 billion at the end of 1999, a 13.44% increase. Available-for-sale securities were $1.51 billion at September 30, 2000, compared to $1.08 billion at December 31, 1999, a 39.36% increase. The increase in the securities portfolio is part of the Company's plan to restructure its securities portfolio following the merger with First United. Approximately $600 million in securities were purchased in the third quarter of 2000 and funded with short-term borrowings from the Federal Home Loan Bank. In the fourth quarter of 2000, approximately $680 million in securities acquired from First United have been sold with a realized loss of approximately $15.6 million and the proceeds have been used to pay of the Federal Home Loan Bank borrowings. The Bank's loan portfolio makes up the largest single component of the Company's earning assets. The Bank's lending activities include both commercial and consumer loans. Loan originations are derived from a number of sources, including direct solicitation by the Bank'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 Bank 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 $5.92 billion at September 30, 2000, which represents a 6.87% increase from the December 31, 1999 total of $5.54 billion. At September 30, 2000, 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 the Company's 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 potential problem loans because management currently does not have serious doubt as to the borrowers' ability to comply with the loan terms. 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 loan is both well secured and in the process of collection. Non-performing loans were 0.68% of all loans outstanding at September 30, 2000 and 0.57% of all loans outstanding at December 31, 1999. 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 estimated probable losses on its current portfolio of loans. Management's judgement is based on a variety of factors that include examining probable losses in specific credits and considering the current risks associated with lending functions such as current 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 record changes 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 allowance or losses. The following table presents (a) the allocation of the allowance for credit losses by loan category and (b) the percentage of total loans for each category in the loan portfolio for the dates indicated.
September 30, December 31, ------------------------------------------------------- -------------------------- 2000 1999 1999 -------------------------- ---------------------------- -------------------------- ALLOWANCE ALLOWANCE ALLOWANCE FOR % OF FOR % OF FOR % OF CREDIT LOSSES TOTAL LOANS CREDIT LOSSES TOTAL LOANS CREDIT LOSSES TOTAL LOANS ------------- ------------- ------------- ------------- ------------- ------------ (Dollars in thousands) Commercial and agricultural $20,508 12.82% $11,095 13.71% $11,127 12.67% Consumer and installment 37,296 18.21% 25,075 21.47% 22,231 21.28% Real estate mortgage 19,283 63.66% 32,234 60.22% 32,897 61.22% Lease financing 686 4.70% 3,050 4.10% 3,196 4.60% Other 327 0.61% 2,392 0.50% 4,781 0.23% ------------- ------------- ------------- ------------- ------------- ------------ Total $78,100 100.00% $73,846 100.00% $74,232 100.00% ============= ============= ============= ============= ============= ============
The following table provides an analysis of the allowance for credit losses for the periods indicated.
Twelve months ended Nine months ended December 31, September 30, ------------------------- 2000 1999 1999 ----------- ------------ ----------------- (Dollars in thousands) Balance, beginning of period $74,232 $68,385 $68,385 Loans charged off: Commercial and agricultural (5,171) (1,350) (2,565) Consumer & installment (11,676) (8,169) (12,007) Real estate mortgage (3,263) (1,286) (1,936) Lease financing (176) (15) (94) ----------- ------------ ----------------- Total loans charged off (20,286) (10,820) (16,602) ----------- ------------ ----------------- Recoveries: Commercial and agricultural 888 616 833 Consumer & installment 1,948 1,681 2,411 Real estate mortgage 626 311 334 Lease financing 23 30 59 ----------- ------------ ----------------- Total recoveries 3,485 2,638 3,637 ----------- ------------ ----------------- Net charge-offs (16,801) (8,182) (12,965) Provision charged to operating expense 20,669 12,643 17,812 Acquisitions - 1,000 1,000 ----------- ------------ ----------------- Balance, end of period $78,100 $73,846 $74,232 =========== ============ ================= Average loans for period $5,707,257 $5,129,560 $ 5,211,539 =========== ============ ================= RATIOS: Net charge offs to average loans-annualized 0.39% 0.21% 0.25% =========== ============ =================
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 September 30, 2000 were $7.39 billion as compared to $7.07 billion at December 31, 1999, representing a 4.55% increase. Non-interest bearing demand deposits increased by $40.84 million, or 4.23%, from $966.49 million to $1.01 billion, while interest-bearing demand, savings and time deposits grew $280.59 million, or 4.60%, from $6.10 billion to $6.38 billion, from December 31, 1999 to September 30, 2000. 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 the Company's 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. These requirements apply a variety of weighting factors, which vary according to the level of risk associated with the particular assets. At September 30, 2000, the Company's Tier 1 capital and total capital, as a percentage of total risk- adjusted assets, were 11.85% and 13.10%, respectively. Both ratios exceed the required minimum levels for these ratios of 4.0% and 8.0%, respectively. In addition, the Company's Tier 1 leverage capital ratio (Tier 1 capital divided by total assets, less goodwill) was 8.35% at September 30, 2000, compared to the required minimum Tier 1 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. RECENT DEVELOPMENTS - ------------------- On October 31, 2000, the Company acquired Texarkana First Financial Corporation ("FFC"), through a merger of FFC into the Company and a merger of FFC's subsidiary savings and loan association into the Bank, in exchange for an aggregate of $37.5 million in cash. FFC, which had approximately $216.0 million in total assets at June 30, 2000, was headquartered in Texarkana, Arkansas and was the parent company for First Federal Saving and Loan Association of Texarkana. The merger is being accounted for as a purchase. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK During the three months ended September 30, 2000, there were no material changes to the quantitative and qualitative disclosures about market risks presented in the Annual Reports on Form 10-K for the year ended December 31, 1999, of the Company and of First United Bancshares, Inc. ("First United"). First United merged into the Company on August 31, 2000. Management believes that the merger did not result in a material qualitative change in the Company's market risk exposures. PART II OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS - --------------------------------------------------- On October 10, 2000, the Company issued 95,000 shares of its common stock to the sole shareholder of Pittman Insurance and Bonding, Inc. (the "Pittman Agency"), an insurance agency operating in Jackson, Mississippi, in connection with the merger of the Pittman Agency into a subsidiary of the Company. These shares were offered and sold in reliance upon an exemption from registration contained in Section 4(2) of the Securities Act of 1933. No underwriters were used to accomplish this transaction. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------------------------------------------------------------- A special meeting of shareholders of the Company was held on Thursday, August 24, 2000. At this meeting, the Company's shareholders voted on and approved the Agreement and Plan of Merger, dated as of April 16, 2000, and amended as of May 15, 2000, between First United Bancshares, Inc. and the Company, which provided for the merger of First United Bancshares, Inc. with and into the Company. The results of the vote was a follows: Votes Cast Votes Cast Abstentions/ in Favor Against or Withheld Non Votes ---------- ------------------- ------------ 40,671,687 430,681 203,479 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - ------------------------------------------ (a) Exhibits (3.1) Restated Articles of Incorporation of the Company (filed as Exhibit 3.1 to the Company's Registration Statement on Form S-4 (Registration No. 33-88274) filed on January 5, 1995, and incorporated herein by reference) (3.2) Amendment to Restated Articles of Incorporation of the Company (filed as Exhibit 3.2 to the Company's Registration Statement on Form S-4 (Registration No. 33-88274) filed on January 5, 1995, and incorporated herein by reference) (3.3) Bylaws of the Company (filed as Exhibit 3(b) to the Company's Annual Report on Form 10-K for the year ended December 31, 1998 (file No. 0-10826) and incorporated herein by reference (27.1) Financial Data Schedule for the period ended September 30, 2000. (27.2) Restated Financial Data Schedule for the period ended September 30, 1999. (b) Reports on Form 8-K A report on Form 8-K was filed July 24, 2000 reporting under Item 5, "Other Events" and Item 7, "Financial Statements and Exhibits." A report on Form 8-K was filed August 31, 2000 reporting under Item 5, "Other Events" and Item 7, "Financial Statements and Exhibits." 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 13, 2000 /S/ L. Nash Allen, Jr. ---------------------------------- L. Nash Allen, Jr. Treasurer and Chief Financial Officer EX-27.1 2 0002.txt FINANCIAL DATA SCHEDULE - SEPTEMBER, 2000
9 1000 9-MOS DEC-31-2000 JAN-1-2000 SEP-30-2000 260,218 13,089 75,000 164 1,505,148 1,505,148 1,505,148 5,922,564 78,100 9,301,602 7,388,072 868,035 112,865 165,803 214,484 0 0 552,343 9,301,602 385,828 46,615 63,197 495,640 225,656 251,287 244,353 20,669 (83) 204,561 94,649 94,649 0 0 62,121 0.73 0.73 4.18 21,171 18,318 913 0 74,232 20,286 3,485 78,100 78,100 0 0
EX-27.2 3 0003.txt FINANCIAL DATA SCHEDULE - SEPTEMBER 1999
9 1000 9-MOS DEC-31-1999 JAN-1-1999 SEP-30-1999 246,682 22,032 129,207 14 1,178,616 1,178,616 1,178,616 5,420,582 73,846 8,345,863 6,959,348 338,544 116,587 184,131 214,405 0 0 532,848 8,345,863 335,801 39,813 63,065 438,679 188,715 205,246 233,433 12,643 4,332 186,676 110,336 110,336 0 0 75,992 0.89 0.88 4.30 16,779 14,254 1,133 0 68,385 10,820 2,638 73,846 73,846 0 0
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