BancorpSouth Announces Third Quarter 2010 Financial Results

Oct 25, 2010, 16:05 ET from BancorpSouth, Inc.

TUPELO, Miss., Oct. 25 /PRNewswire-FirstCall/ -- BancorpSouth, Inc. (NYSE: BXS) today announced financial results for the quarter ended September 30, 2010.  The Company had net income of $11.3 million, or $0.13 per diluted share, for the quarter compared with $21.5 million, or $0.26 per diluted share, for the third quarter of 2009.

Aubrey Patterson, Chairman and Chief Executive Officer of BancorpSouth, remarked, "BancorpSouth's financial results for the third quarter of 2010 continued to reflect a challenging credit environment, with weak loan demand and significant growth in non-performing loans. Our results included a $9.8 million income tax benefit, which reflected a change in the estimate of income tax expense for 2010 and was based on the estimated income tax benefit attributable to the results of operations through September 30, 2010.  

"The decline in earnings for the third quarter of 2010 from the third quarter of 2009 was primarily due to a $32.3 million increase in the provision for credit losses to $54.9 million compared with $22.5 million for the third quarter of 2009.  

"BancorpSouth's non-performing loans and leases (NPLs) increased by $107.1 million during the third quarter of 2010 to $409.4 million at quarter-end, which was 4.3 percent of total net loans and leases.  Contributing to the increase in NPLs were increases in non-performing construction, acquisition and development (CAD) loans of $65.0 million, commercial and real estate mortgage loans of $10.3 million and real estate secured commercial and industrial loans of $20.6 million.  NPLs from all other loan types increased $11.2 million.

"The Alabama, Nashville and Greater Memphis, Tennessee markets continue to be affected by a slow housing market, and collectively contributed $47.2 million of the total increase in NPLs during the third quarter.  NPLs in our Missouri Region increased by $30.5 million during the third quarter of 2010, primarily as a result of three large loans being placed on non-performing status.  This amount includes one credit totaling $12.2 million that is a troubled debt restructuring, but is still accruing.

"We believe that we are appropriately reserved for losses inherent in our loan portfolio.  At September 30, 2010, approximately 70 percent of our non-accrual loans had been determined to be collaterally dependent and had either been charged down or had a specific reserve to reflect values obtained from appraisals. As a result of these write-downs and reserves, the remaining net book balance of impaired loans was 64 percent of the unpaid principal balance. The allowance for credit losses that was not specifically allocated to impaired loans represented 154 percent of the remaining unimpaired non-accrual loan balance.

"Our operations produced increased pre-tax, pre-provision income on a comparable and sequential-quarter basis due in part to the strong performance of our mortgage production and servicing operations.  With mortgage originations for the third quarter totaling $490 million, mortgage lending revenue, excluding the MSR valuation adjustment, for the third quarter of 2010 more than doubled compared with the third quarter of 2009 and the second quarter of 2010.  This growth contributed to the increase in noninterest revenue for the third quarter of 2010 to 38.9% of total revenue.  The financial results of other areas of our business remained relatively stable on a comparable and sequential-quarter basis, and we continued to manage our costs well.  As a result, our pre-tax, pre-provision earnings were $56.3 million for the third quarter of 2010 compared with $51.5 million for the third quarter of 2009 and $46.4 million for the second quarter of 2010.

"As this performance indicates, we remain positioned to produce stronger financial results as our credit metrics stabilize. While our third quarter results show that we have not yet reached that inflection point, we believe that our credit issues are at manageable levels and we continue to have strong capital and liquidity.  In short, we are continuing to manage effectively in the current difficult environment, and we are confident of BancorpSouth's long-term growth potential."

Net Interest Revenue

Net interest revenue was $109.7 million for the third quarter of 2010, a decrease of 1.8 percent from $111.7 million for the third quarter of 2009 and a 0.3 percent increase from $109.3 million for the second quarter of 2010.  The fully taxable equivalent net interest margin was 3.64 percent for the third quarter of 2010, compared with 3.77 percent for the third quarter of 2009 and 3.71 percent for the second quarter of 2010.

The decline in net interest margin reflected the higher average level of NPLs for the third quarter of 2010.  In addition, the combination of increased deposits and weak loan demand resulted in higher levels of short-term investments with relatively low yields.

Asset, Deposit and Loan Activity

Total assets at September 30, 2010 were $13.6 billion, an increase of 2.3 percent compared with $13.3 billion at September 30, 2009. Total deposits were $11.2 billion at September 30, 2010, an increase of 8.7 percent from $10.3 billion at September 30, 2009.  Loans and leases, net of unearned income, were $9.5 billion at September 30, 2010, a decrease of 2.5 percent from $9.8 billion at September 30, 2009.

Loan demand continued to be relatively weak during the third quarter, resulting in a somewhat larger percentage decline in the loan portfolio at September 30, 2010 than experienced at June 30, 2010.  Of the $243.0 million decrease in the portfolio at September 30, 2010 compared to September 30, 2009, $226.4 million were CAD loans.

Deposits increased by $899.8 million at September 30, 2010 compared to September 30, 2009.  This growth was comprised of increases of 12.5 percent in savings deposits, 11.2 percent in noninterest bearing demand deposits, 14.0 percent in interest bearing demand deposits and 1.2 percent in time deposits.  While total deposits remained essentially unchanged from the end of the second quarter of 2010, interest bearing demand accounts and time accounts decreased 2.2 percent and 0.6 percent, respectively, during the three-month period while noninterest bearing demand deposits increased 3.7 percent and savings deposits rose 4.0 percent.

Provision for Credit Losses and Allowance for Credit Losses

For the third quarter of 2010, the provision for credit losses was $54.9 million, compared with $22.5 million for the third quarter of 2009 and $62.4 million for the second quarter of 2010. Annualized net charge-offs were 2.10 percent of average loans and leases for the third quarter of 2010, compared with 0.68 percent for the third quarter of 2009 and 2.08 percent for the second quarter of 2010.

NPLs increased to $409.4 million, or 4.30 percent of net loans and leases, at September 30, 2010 from $111.6 million, or 1.14 percent of net loans and leases, at September 30, 2009 and $302.3 million, or 3.13 percent of net loans and leases, at June 30, 2010.  The allowance for credit losses increased to 2.16 percent of net loans and leases at September 30, 2010, compared with 1.48 percent at September 30, 2009 and 2.08 percent at June 30, 2010.

Total NPLs at September 30, 2010 consisted of: $347.2 million of loans on nonaccrual status, an increase from $263.8 million at June 30, 2010; $9.9 million of loans 90 days or more past due and still accruing, a decrease from $17.7 million at June 30, 2010; and restructured loans still accruing of $52.3 million, an increase from $20.8 million at June 30, 2010.  Loans and leases 30-89 days past due decreased 43.6 percent to $73.8 million at September 30, 2010 from $130.9 million at June 30, 2010.

At the end of the third quarter, $137.3 million of NPLs were residential CAD loans, $91.5 million were other CAD loans, $56.8 million were commercial real estate mortgage loans, $52.7 million were consumer mortgages, and NPLs from all other loan types totaled $71.1 million.

Noninterest Revenue

Noninterest revenue was $69.8 million for the third quarter of 2010, compared with $62.5 million for the third quarter of 2009 and $57.1 million for the second quarter of 2010.  This growth resulted primarily from an increase in mortgage lending activity.  Mortgage origination volume was $490 million for the third quarter of 2010 and gross mortgage lending revenue was $13.5 million.  This was offset by a $4.6 million negative MSR fair value adjustment, resulting in net mortgage lending revenue of $8.9 million for the quarter.  For the third quarter of 2009, mortgage origination volume was $296 million and gross mortgage lending revenue was $4.7 million, offset by a $2.7 million negative MSR fair value adjustment, and for the second quarter of 2010, mortgage origination volume was $291 million and gross mortgage lending revenue was $6.0 million, offset by an $8.3 million negative MSR fair value adjustment.

Noninterest revenue for the third quarter of 2010 from credit and debit card fees and trust income increased on a comparable and sequential quarter basis, while insurance commission revenue increased from the comparable quarter in the previous year for the second consecutive quarter.  The Company benefited from security gains of $2.3 million for the third quarter of 2010, compared with no gains or losses for the third quarter of 2009 and losses of $0.6 million for the second quarter of 2010.  Service charges for the third quarter of 2010 decreased 2.2 percent from the third quarter of 2009 and 1.8 percent from the second quarter of 2010.

Noninterest Expense

Noninterest expense for the third quarter of 2010 was $123.1 million compared with $122.7 million for the third quarter of 2009 and $120.0 million for the second quarter of 2010.  Included in these results, FDIC insurance expense was $4.8 million for the third quarter of 2010 compared with $3.4 million for the third quarter of 2009 and $4.4 million for the second quarter of 2010. Foreclosed property expense increased to $4.9 million for the third quarter of 2010 compared with $3.7 million for the third quarter of 2009 and $3.8 million for the second quarter of 2010.  

Capital Management

BancorpSouth's commitment to a strong capital base is one of its fundamental strengths.  The Company's equity capitalization is 100 percent common stock.  This strong capital base has enabled BancorpSouth to forego participating in the Capital Purchase Program under TARP or raising new capital since the economic recession began.  BancorpSouth's ratio of shareholders' equity to assets was 9.10 percent at September 30, 2010, compared with 9.69 percent at September 30, 2009.  The ratio of tangible equity to tangible assets was 7.11 percent at September 30, 2010, compared with 7.64 percent at September 30, 2009.  BancorpSouth remains a "well capitalized" financial holding company, as defined by federal regulations, with Tier 1 risk-based capital of 10.56 percent at September 30, 2010 and total risk based capital of 11.82 percent, compared with required minimum levels of 6 percent and 10 percent, respectively, to be classified as "well capitalized."  

Summary

Patterson concluded, "Although we continued to deal with difficult credit issues during the third quarter of 2010, we are encouraged by the operating improvement indicated by the growth in our pre-tax, pre-provision income.  The long-term development of our noninterest revenue businesses was specifically designed to diversify our revenue, thereby reducing our exposure to the risks inherent in our interest rate spread dependent business.

"We have accomplished a tremendous amount, both in the third quarter and throughout 2010 as we work through our credit issues.  Through the process of determining current real estate valuations for collaterally dependent loans, we have charged certain loans down, or established specific reserves at levels that appropriately reflect these valuations.  As a result of this progress, we believe we can continue to manage our credit issues effectively.

"As we look forward, we remain cautious about the slow pace of economic growth, high unemployment and weak loan demand.  In this environment, we intend to continue building the value of our retail banking franchise through outstanding customer service and comprehensive products and services.  Based on our strong capital, diversified revenues and markets, customer-focused business model and conservative culture, we are confident of our ability to overcome our current challenges and re-establish BancorpSouth on a path of long-term growth and increased shareholder value."

Conference Call

BancorpSouth will conduct a conference call to discuss its third quarter 2010 results tomorrow, October 26, 2010, at 10:00 a.m. (Central Time).  Investors may listen via the Internet by accessing BancorpSouth's website at http://www.bancorpsouth.com.  A replay of the conference call will be available at BancorpSouth's website for at least two weeks following the call.

Forward-Looking Statements

Certain statements contained in this news release may not be based on historical facts and are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  These forward-looking statements may be identified by their reference to a future period or periods or by the use of forward-looking terminology such as "anticipate," "believe," "estimate," "expect," "may," "might," "will," "would," "could" or "intend."  These forward-looking statements include, without limitation, statements relating to our reserve for losses, our credit issues, the value of our retail banking franchise, our ability to overcome current challenges and our use of non-GAAP financial measures.

We caution you not to place undue reliance on the forward-looking statements contained in this news release in that actual results could differ materially from those indicated in such forward-looking statements because of a variety of factors.  These factors may include, but are not limited to, conditions in the financial markets and economic conditions generally, the soundness of other financial institutions, levels of market volatility, the availability of capital if the Company elects or is compelled to seek additional capital, liquidity risk, the credit risk associated with real estate construction, acquisition and development loans, estimates of costs and values associated with real estate construction, acquisition and development loans in the Company's loan portfolio, the adequacy of the Company's allowance for credit losses to cover actual credit losses, governmental regulation and supervision of the Company's operations, changes in interest rates, the impact of monetary policies and economic factors on the Company's ability to attract deposits or make loans, the impact of hurricanes or other adverse weather events, risks in connection with completed or potential acquisitions, dilution caused by the Company's issuance of any additional shares of its common stock to acquire other banks, bank holding companies, financial holding companies and insurance agencies, restrictions on the Company's ability to declare and pay dividends, the Company's growth strategy, diversification in the types of financial services the Company offers, competition with other financial services companies, interruptions or breaches in security of the Company's information systems, the Company's ability to improve its internal controls adequately, any requirement that the Company write down goodwill or other intangible assets, other factors generally understood to affect the financial results of financial services companies, and other factors described from time to time in BancorpSouth's 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 on which such statements were made.

BancorpSouth, Inc. is a financial holding company headquartered in Tupelo, Mississippi, with $13.6 billion in assets.  BancorpSouth Bank, a wholly-owned subsidiary of BancorpSouth, Inc., operates approximately 312 commercial banking, mortgage, insurance, trust and broker/dealer locations in Alabama, Arkansas, Florida, Louisiana, Mississippi, Missouri, Tennessee and Texas.  BancorpSouth Bank also operates an insurance location in Illinois.

BancorpSouth, Inc.

Selected Financial Data

Three Months Ended

Nine Months Ended

September 30,

September 30,

2010

2009

2010

2009

(Dollars in thousands, except per share amounts)

Earnings Summary:

Net interest revenue

$109,678

$111,736

$330,889

$332,552

Provision for credit losses

54,850

22,514

160,723

55,053

Noninterest revenue

69,752

62,475

190,170

210,771

Noninterest expense

123,087

122,672

363,586

366,656

Income (loss) before income taxes

1,493

29,025

(3,250)

121,614

Income tax provision (benefit)

(9,767)

7,494

(10,346)

36,739

Net income

$11,260

$21,531

$7,096

$84,875

Earning per share:  Basic

$0.13

$0.26

$0.09

$1.02

                                 Diluted

$0.13

$0.26

$0.08

$1.02

Balance sheet data at September 30:

Total assets

$13,583,016

$13,271,873

Total earning assets

12,450,699

12,094,937

Loans and leases, net of unearned income

9,514,929

9,757,944

Allowance for credit losses

205,081

144,791

Total deposits

11,196,864

10,297,034

Common shareholders' equity

1,235,705

1,286,218

Book value per share

14.80

15.41

Average balance sheet data:

Total assets

$13,304,882

$13,167,057

$13,219,171

$13,250,329

Total earning assets

12,266,426

12,027,909

12,127,291

12,116,158

Loans and leases, net of unearned interest

9,601,142

9,750,159

9,689,886

9,729,050

Total deposits

11,177,626

10,200,211

11,044,948

10,057,028

Common shareholders' equity

1,229,146

1,265,099

1,246,647

1,251,769

Non-performing assets at September 30:

Non-accrual loans and leases

$347,181

$82,732

Loans and leases 90+ days past due, still accruing

9,910

20,699

Restructured loans and leases, still accruing

52,325

8,205

Other real estate owned

82,647

62,072

Total non-performing assets

492,063

173,708

Net charge-offs as a percentage

    of average loans (annualized)

2.10%

0.68%

1.81%

0.59%

Performance ratios (annualized):

Return on average assets

0.34%

0.65%

0.07%

0.86%

Return on common equity

3.63%

6.75%

0.76%

9.07%

Total shareholders' equity to total assets

9.10%

9.69%

9.10%

9.69%

Tangible shareholders' equity to tangible assets

7.11%

7.64%

7.11%

7.64%

Net interest margin

3.64%

3.77%

3.74%

3.75%

Average shares outstanding - basic

83,432,535

83,368,580

83,421,821

83,260,911

Average shares outstanding - diluted

83,473,138

83,512,826

83,529,579

83,398,142

Cash dividends per share

$0.22

$0.22

$0.66

$0.66

Tier I capital

10.56%

11.39%

10.56%

11.39%

Total Capital

11.82%

12.64%

11.82%

12.64%

Tier I leverage capital

8.26%

9.03%

8.26%

9.03%

BancorpSouth, Inc.

Consolidated Balance Sheets

(Unaudited)

Sep-10

Jun-10

Mar-10

Dec-09

Sep-09

(Dollars in thousands)

Assets

Cash and due from banks

$128,160

$370,499

$187,115

$222,741

$189,103

Interest bearing deposits with other banks

211,189

111,040

9,943

15,704

43,067

Held-to-maturity securities, at amortized cost

1,357,888

1,147,157

1,219,983

1,032,822

1,180,716

Available-for-sale securities, at fair value

915,877

962,692

891,221

960,772

958,158

Federal funds sold and securities

    purchased under agreement to resell

325,000

75,000

120,000

75,000

75,000

Loans and leases

9,556,962

9,691,623

9,756,081

9,822,986

9,803,235

 Less:  Unearned income

42,033

44,721

45,259

47,850

45,291

            Allowance for credit losses

205,081

200,744

188,884

176,043

144,791

Net loans and leases

9,309,848

9,446,158

9,521,938

9,599,093

9,613,153

Loans held for sale

125,815

95,987

80,312

80,343

80,053

Premises and equipment, net

335,618

336,645

339,860

343,877

346,931

Accrued interest receivable

63,797

63,862

69,022

68,651

74,589

Goodwill

270,097

270,097

270,097

270,097

270,097

Bank owned life insurance

192,459

190,828

189,022

187,770

189,043

Other assets

347,268

351,039

331,677

310,997

251,963

   Total Assets

$13,583,016

$13,421,004

$13,230,190

$13,167,867

$13,271,873

Liabilities

Deposits:

 Demand:  Noninterest bearing

$1,967,635

$1,897,977

$1,860,579

$1,901,663

$1,769,432

                 Interest bearing

4,623,103

4,725,457

4,589,029

4,323,646

4,055,395

 Savings

801,153

770,112

768,302

725,192

712,446

 Other time

3,804,973

3,827,095

3,776,251

3,727,201

3,759,761

Total deposits

11,196,864

11,220,641

10,994,161

10,677,702

10,297,034

Federal funds purchased and

   securities sold under agreement

   to repurchase

501,175

481,109

480,795

539,870

816,374

Short-term Federal Home Loan Bank borrowings

  and other short-term borrowing

152,738

3,500

2,500

203,500

200,000

Accrued interest payable

16,574

17,508

17,972

19,588

24,243

Junior subordinated debt securities

160,312

160,312

160,312

160,312

160,312

Long-term Federal Home Loan Bank borrowings

110,000

110,749

112,760

112,771

286,281

Other liabilities

209,648

186,926

196,806

177,828

201,411

Total Liabilities

12,347,311

12,180,745

11,965,306

11,891,571

11,985,655

Shareholders' Equity

Common stock

208,704

208,704

208,655

208,626

208,615

Capital surplus

224,170

223,922

223,307

222,547

222,135

Accumulated other comprehensive income (loss)

(2,705)

(5,008)

(10,645)

(8,409)

(18,568)

Retained earnings

805,536

812,641

843,567

853,532

874,036

Total Shareholders' Equity

1,235,705

1,240,259

1,264,884

1,276,296

1,286,218

Total Liabilities & Shareholders' Equity

$13,583,016

$13,421,004

$13,230,190

$13,167,867

$13,271,873

BancorpSouth, Inc.

Consolidated Condensed Statements of Income

(Dollars in thousands, except per share data)

(Unaudited)

Quarter Ended

Year To Date

Sep-10

Jun-10

Mar-10

Dec-09

Sep-09

Sep-10

Sep-09

INTEREST REVENUE:

Loans and leases

$ 123,533

$ 124,621

$ 126,956

$ 129,086

$ 129,455

$ 375,110

$ 387,927

Deposits with other banks

79

33

21

19

20

133

112

Federal funds sold and securities purchased

  under agreement to resell

213

143

82

43

27

438

31

Held-to-maturity securities:

   Taxable

9,010

9,363

9,415

10,128

11,690

27,788

36,829

   Tax-exempt

2,584

2,412

2,461

2,393

2,193

7,457

6,459

Available-for-sale securities:

   Taxable

7,782

8,030

8,385

8,675

8,592

24,197

26,351

   Tax-exempt

795

833

832

875

812

2,460

2,521

Loans held for sale

889

727

506

777

698

2,122

3,188

       Total interest revenue

144,885

146,162

148,658

151,996

153,487

439,705

463,418

INTEREST EXPENSE:

Interest bearing demand

8,582

9,751

9,392

9,023

9,038

27,725

31,024

Savings

881

915

889

900

937

2,685

2,800

Other time

21,108

21,535

21,529

23,445

25,534

64,172

77,863

Federal funds purchased and securities sold

  under agreement to repurchase

209

215

228

305

331

652

1,324

FHLB borrowings

1,543

1,553

1,880

3,012

2,877

4,976

8,585

Junior subordinated debt

2,880

2,862

2,855

2,863

2,884

8,597

8,767

Other

4

2

3

101

150

9

503

       Total interest expense

35,207

36,833

36,776

39,649

41,751

108,816

130,866

       Net interest revenue

109,678

109,329

111,882

112,347

111,736

330,889

332,552

 Provision for credit losses

54,850

62,354

43,519

62,271

22,514

160,723

55,053

       Net interest revenue, after provision for

         credit losses

54,828

46,975

68,363

50,076

89,222

170,166

277,499

NONINTEREST REVENUE:

Mortgage lending

8,898

(2,304)

5,025

8,602

2,012

11,619

23,623

Credit card, debit card and merchant fees

9,569

9,333

8,810

7,883

8,902

27,712

26,361

Service charges

18,621

18,953

16,262

18,689

19,049

53,836

54,175

Trust income

2,783

2,707

2,587

3,014

2,435

8,077

6,684

Security gains (losses), net

2,327

(585)

1,297

(102)

-

3,039

47

Insurance commissions

20,825

21,666

21,668

17,583

20,134

64,159

63,354

Other

6,729

7,316

7,683

8,836

9,943

21,728

36,527

       Total noninterest revenue

69,752

57,086

63,332

64,505

62,475

190,170

210,771

NONINTEREST EXPENSES:

Salaries and employee benefits

68,232

68,189

69,287

66,926

70,353

205,708

211,808

Occupancy, net of rental income

11,038

10,527

10,775

10,897

10,720

32,340

31,211

Equipment

5,523

5,877

5,739

5,578

5,853

17,139

17,930

Deposit insurance assessments

4,752

4,362

4,250

3,786

3,402

13,364

15,886

Other

33,542

31,061

30,432

36,174

32,344

95,035

89,821

       Total noninterest expenses

123,087

120,016

120,483

123,361

122,672

363,586

366,656

       Income (loss) before income taxes

1,493

(15,955)

11,212

(8,780)

29,025

(3,250)

121,614

Income tax expense (benefit)

(9,767)

(3,395)

2,816

(6,634)

7,494

(10,346)

36,739

       Net income (loss)

$11,260

($12,560)

$8,396

($2,146)

$ 21,531

$7,096

$ 84,875

Net income (loss) per share: Basic

$0.13

($0.15)

$0.10

($0.03)

$0.26

$0.09

$1.02

                                         Diluted

$0.13

($0.15)

$0.10

($0.03)

$0.26

$0.08

$1.02

BancorpSouth, Inc.

Selected Loan Data

(Dollars in thousands)

(Unaudited)

Quarter Ended

Sep-10

Jun-10

Mar-10

Dec-09

Sep-09

LOAN AND LEASE PORTFOLIO:

Commercial and industrial

$ 1,438,415

$ 1,483,335

$ 1,470,145

$ 1,466,569

$ 1,442,344

Real estate

  Consumer mortgages

2,001,077

2,019,187

2,014,085

2,017,067

2,046,433

  Home equity

552,095

555,281

549,924

550,085

540,875

  Agricultural

262,083

260,489

266,649

262,069

254,647

  Commercial and industrial-owner occupied

1,375,466

1,407,704

1,423,098

1,449,554

1,432,859

  Construction, acquisition and development

1,307,242

1,381,591

1,428,882

1,459,503

1,533,622

  Commercial

1,810,626

1,794,644

1,809,660

1,806,766

1,770,066

Credit cards

102,672

102,784

101,464

108,086

103,208

All other

665,253

641,888

646,915

655,437

633,890

    Total loans

$9,514,929

$9,646,903

$9,710,822

$9,775,136

$9,757,944

ALLOWANCE FOR CREDIT LOSSES:

Balance, beginning of period

$ 200,744

$ 188,884

$ 176,043

$ 144,791

$ 138,746

Loans and leases charged off:

Commercial and industrial

(2,822)

(5,106)

(2,169)

(3,404)

(3,913)

Real estate

  Consumer mortgages

(7,573)

(4,659)

(4,598)

(2,298)

(2,669)

  Home equity

(1,792)

(602)

(1,683)

(1,835)

(1,278)

  Agricultural

(33)

(473)

(207)

(401)

(407)

  Commercial and industrial-owner occupied

(1,231)

(3,845)

(2,465)

(753)

(1,795)

  Construction, acquisition and development

(34,342)

(31,655)

(15,769)

(20,766)

(3,160)

  Commercial

(2,887)

(2,593)

(2,278)

(568)

(2,135)

Credit cards

(1,046)

(1,363)

(1,160)

(1,118)

(1,204)

All other

(798)

(2,067)

(1,050)

(954)

(938)

    Total loans charged off

(52,524)

(52,363)

(31,379)

(32,097)

(17,499)

Recoveries:

Commercial and industrial

318

242

63

194

320

Real estate

  Consumer mortgages

143

818

64

209

132

  Home equity

23

43

52

76

28

  Agricultural

8

-

-

-

-

  Commercial and industrial-owner occupied

154

44

7

10

31

  Construction, acquisition and development

663

211

56

7

31

  Commercial

98

27

12

25

108

Credit cards

317

219

150

216

123

All other

287

265

297

341

257

    Total recoveries

2,011

1,869

701

1,078

1,030

Net charge-offs

(50,513)

(50,494)

(30,678)

(31,019)

(16,469)

Provision charged to operating expense

54,850

62,354

43,519

62,271

22,514

Other, net

-

-

-

-

-

Balance, end of period

$ 205,081

$ 200,744

$ 188,884

$ 176,043

$ 144,791

Average loans for period

$ 9,601,142

$ 9,703,253

$ 9,767,088

$ 9,750,989

$ 9,750,159

Ratios:

Net charge-offs to average loans (annualized)

2.10%

2.08%

1.26%

1.27%

0.68%

BancorpSouth, Inc.

Selected Loan Data

(Dollars in thousands)

(Unaudited)

Quarter Ended

Sep-10

Jun-10

Mar-10

Dec-09

Sep-09

NON-PERFORMING ASSETS

NON-PERFORMING LOANS AND LEASES:

 Nonaccrual Loans and Leases

   Commercial and industrial

$        12,339

$               6,280

$               6,306

$          4,852

$               7,048

   Real estate

      Consumer mortgages

40,962

37,514

24,047

20,731

12,433

      Home equity

1,361

1,565

761

1,642

1,879

      Agricultural

4,986

3,972

3,049

1,136

2,647

      Commercial and industrial-owner occupied

15,004

12,061

15,083

7,039

5,044

      Construction, acquisition and development

216,586

159,829

116,191

82,170

39,989

      Commercial

51,590

38,921

30,094

23,209

12,228

   Credit cards

724

726

1,072

1,044

850

   All other

3,629

2,890

3,034

2,190

614

        Total nonaccrual loans and leases

347,181

263,758

199,637

144,013

82,732

 Loans and Leases 90+ Days Past Due, Still Accruing:

   Commercial and industrial

1,571

7,093

1,405

1,797

1,062

   Real estate

      Consumer mortgages

6,241

4,754

10,984

9,905

14,189

      Home equity

146

-

320

810

707

      Agricultural

330

-

199

1,015

289

      Commercial and industrial-owner occupied

192

733

1,482

4,511

1,342

      Construction, acquisition and development

526

1,490

3,339

13,482

1,477

      Commercial

115

3,068

1,671

2,558

305

   Credit cards

396

228

296

355

373

   All other

393

330

756

1,868

955

        Total loans and leases 90+ past due, still accruing

9,910

17,696

20,452

36,301

20,699

 Restructured Loans and Leases, Still Accruing

52,325

20,813

15,576

6,161

8,205

    Total non-performing loans and leases

409,416

302,267

235,665

186,475

111,636

OTHER REAL ESTATE OWNED:

82,647

67,560

59,269

59,265

62,072

Total Non-performing Assets

$      492,063

$           369,827

$           294,934

$      245,740

$           173,708

 Loans and Leases 30-89 Days Past Due, Still Accruing:

   Commercial and industrial

$        10,581

$             10,081

$             17,248

$          7,220

$               7,391

   Real estate

      Consumer mortgages

22,490

30,286

22,917

24,263

21,802

      Home equity

3,088

2,664

2,568

2,000

2,068

      Agricultural

1,101

2,312

3,814

1,010

838

      Commercial and industrial-owner occupied

16,385

20,975

21,798

29,186

7,286

      Construction, acquisition and development

11,538

50,759

58,385

39,795

7,753

      Commercial

4,657

8,084

11,627

5,623

12,246

   Credit cards

799

1,220

1,185

1,457

1,566

   All other

3,143

4,472

3,240

3,061

3,758

        Total Loans and Leases 30-89 days past due, still accruing

$        73,782

$           130,853

$           142,782

$      113,615

$             64,708

Credit Quality Ratios:

Provision for credit losses to average loans and leases (annualized)

2.29%

2.57%

1.78%

2.55%

0.92%

Allowance for credit losses to net loans and leases

2.16%

2.08%

1.95%

1.80%

1.48%

Allowance for credit losses to non-performing assets

41.68%

54.28%

64.04%

71.64%

83.35%

Allowance for credit losses to non-performing loans and leases

50.09%

66.41%

80.15%

94.41%

129.70%

Non-performing loans and leases to net loans and leases

4.30%

3.13%

2.43%

1.91%

1.14%

Non-performing assets to net loans and leases

5.17%

3.83%

3.04%

2.51%

1.77%

BancorpSouth, Inc.

Selected Loan Data

(Dollars in thousands)

(Unaudited)

Quarter Ended

Sep-10

Jun-10

Mar-10

Dec-09

Sep-09

REAL ESTATE CONSTRUCTION, ACQUISITION AND DEVELOPMENT ("CAD") PORTFOLIO:

 Outstanding Balance

    Multi-family construction

$              28,540

$             22,091

$              28,598

$              25,009

$              28,371

    One-to-four family construction

210,861

229,629

242,209

255,026

284,466

    Recreation and all other loans

45,085

44,175

39,938

50,122

47,065

    Commercial construction

239,099

245,700

236,111

240,917

279,215

    Commercial acquisition and development

260,787

270,413

280,630

282,766

272,772

    Residential acquisition and development

522,870

569,583

601,396

605,663

621,733

        Total outstanding balance

$         1,307,242

$        1,381,591

$         1,428,882

$         1,459,503

$         1,533,622

 Nonaccrual CAD Loans

    Multi-family construction

$              10,668

$             11,705

$                9,071

$                9,247

$                        -

    One-to-four family construction

12,075

6,117

4,223

1,514

6,489

    Recreation and all other loans

1,020

685

-

-

-

    Commercial construction

28,712

24,723

12,650

6,684

-

    Commercial acquisition and development

34,438

15,558

463

2,527

4,304

    Residential acquisition and development

129,673

101,041

89,783

62,198

29,196

        Total nonaccrual CAD loans

216,586

159,829

116,190

82,170

39,989

 CAD Loans 90+ Days Past Due, Still Accruing:

    Multi-family construction

-

-

-

-

-

    One-to-four family construction

-

365

748

1,535

249

    Recreation and all other loans

-

-

146

496

-

    Commercial construction

-

141

16

-

-

    Commercial acquisition and development

150

77

678

4,500

83

    Residential acquisition and development

376

907

1,751

6,951

1,145

        Total CAD loans 90+ past due, still accruing

526

1,490

3,339

13,482

1,477

 Restructured CAD Loans, Still Accruing

    Multi-family construction

-

-

-

-

-

    One-to-four family construction

417

1,072

-

-

953

    Recreation and all other loans

-

-

-

-

-

    Commercial construction

2,244

-

-

1,606

-

    Commercial acquisition and development

1,735

460

-

-

-

    Residential acquisition and development

7,290

946

3,234

-

3,338

        Total restructured CAD loans, still accruing

11,686

2,478

3,234

1,606

4,291

       Total Non-performing CAD loans

$            228,798

$           163,797

$            122,763

$              97,258

$              45,757

 CAD NPL as a % of Outstanding CAD Balance

    Multi-family construction

37.4%

53.0%

31.7%

37.0%

- %

    One-to-four family construction

5.9%

3.3%

2.1%

1.2%

2.7%

    Recreation and all other loans

2.3%

1.6%

0.4%

1.0%

- %

    Commercial construction

12.9%

10.1%

5.4%

3.4%

- %

    Commercial acquisition and development

13.9%

6.0%

0.4%

2.5%

1.6%

    Residential acquisition and development

26.3%

18.1%

15.8%

11.4%

5.4%

        Total CAD NPL as a % of outstanding CAD balance

17.5%

11.9%

8.6%

6.7%

3.0%

BancorpSouth, Inc.

Selected Loan Data

(Dollars in thousands)

(Unaudited)

As of

Sep-10

Jun-10

Mar-10

Dec-09

Sep-09

Unpaid principal balance of impaired loans

$         311,941

$           243,221

$           209,288

$      161,631

$             57,670

Cumulative charge offs on impaired loans

69,783

54,930

37,989

33,094

12,976

Outstanding balance of impaired loans

242,158

188,291

171,299

128,537

44,694

Other non-accrual loans and leases not impaired

105,023

75,467

28,338

15,476

38,038

    Total non-accrual loans and leases

$         347,181

$           263,758

$           199,637

$      144,013

$             82,732

Allowance for impaired loans

43,584

40,721

30,855

22,747

5,876

    Nonaccrual loans and leases, net of specific reserves

$         303,597

$           223,037

$           168,782

$      121,266

$             76,856

Loans and leases 90+ past due, still accruing

9,910

17,696

20,452

36,301

20,699

Restructured loans and leases, still accruing

52,325

20,813

15,576

6,161

8,205

    Total non-performing loans and leases

$         409,416

$           302,267

$           235,665

$      186,475

$           111,636

Allowance for impaired loans

43,584

40,721

30,855

22,747

5,876

Allowance for all other loans and leases

161,497

160,053

158,029

153,296

138,915

    Total Allowance for Credit Losses

$         205,081

$           200,774

$           188,884

$      176,043

$           144,791

Outstanding balance of impaired loans

$         242,158

$           188,291

$           171,299

$      128,537

$             44,694

Allowance for impaired loans

43,584

40,721

30,855

22,747

5,876

    Net book value of impaired loans

$         198,574

$           147,570

$           140,444

$      105,790

$             38,818

Net book value of impaired loans as a %

    of unpaid principal balance

64%

61%

67%

65%

67%

Coverage of other non-accrual loans and leases not impaired by

    the allowance for all other loans and leases

154%

212%

558%

991%

365%

Coverage of non-performing loans and leases not impaired

    by the allowance for all other loans and leases

97%

140%

246%

265%

208%

BancorpSouth, Inc.

Noninterest Revenue and Expense

(Dollars in thousands)

(Unaudited)

Quarter Ended

Sep-10

Jun-10

Mar-10

Dec-09

Sep-09

NONINTEREST REVENUE:

Mortgage lending

$          8,898

$             (2,304)

$               5,025

$          8,602

$               2,012

Credit card, debit card and merchant fees

9,569

9,333

8,810

7,883

8,902

Service charges

18,621

18,953

16,262

18,689

19,049

Trust income

2,783

2,707

2,587

3,014

2,435

Securities gains (losses), net

2,327

(585)

1,297

(102)

-

Insurance commissions

20,825

21,666

21,668

17,583

20,134

Annuity fees

537

698

781

1,060

572

Brokerage commissions and fees

1,340

1,419

1,317

1,390

1,349

Bank-owned life insurance

1,793

1,972

1,669

1,843

3,222

Other miscellaneous income

3,059

3,227

3,916

4,543

4,800

    Total noninterest revenue

$        69,752

$             57,086

$             63,332

$        64,505

$             62,475

NONINTEREST EXPENSE:

Salaries and employee benefits

$        68,232

$             68,189

$             69,287

$        66,926

$             70,353

Occupancy, net

11,038

10,527

10,775

10,897

10,720

Equipment

5,523

5,877

5,739

5,578

5,853

Deposit insurance assessments

4,752

4,362

4,250

3,786

3,402

Advertising

1,742

1,196

656

1,120

3,197

Foreclosed property expense

4,912

3,813

3,538

6,292

3,692

Telecommunications

2,624

2,494

2,200

2,203

2,219

Public relations

1,423

1,656

1,648

1,304

1,467

Data processing

1,576

1,594

1,470

1,360

1,542

Computer software

1,793

1,900

1,704

1,759

1,782

Amortization of intangibles

961

984

1,015

1,139

1,195

Legal fees

1,727

1,313

1,328

1,885

1,570

Postage and shipping

1,237

1,178

1,360

1,254

1,216

Other miscellaneous expense

15,547

14,933

15,513

17,858

14,464

Total noninterest expense

$      123,087

$           120,016

$           120,483

$      123,361

$           122,672

BancorpSouth, Inc.

Average Balances, Interest Income and Expense,

and Average Yields and Rates

(Dollars in thousands)

(Unaudited)

Quarter Ended

September 30, 2010

Average

Yield/

(Taxable equivalent basis)

Balance

Interest

Rate

ASSETS

Loans, loans held for sale,

 and leases net of unearned income

$ 9,682,146

$ 125,211

5.13%

Held-to-maturity securities:

 Taxable

993,494

9,119

3.64%

 Tax-exempt

230,182

3,975

6.85%

Available-for-sale securities:

 Taxable

847,942

7,782

3.64%

 Tax-exempt

69,735

1,225

6.97%

Short-term investments

442,927

292

0.26%

 Total interest earning

   assets and revenue

12,266,426

147,604

4.77%

Other assets

1,265,657

Less:  allowance for credit losses

(227,201)

   Total

$ 13,304,882

LIABILITIES AND

SHAREHOLDERS' EQUITY

Deposits:

 Demand - interest bearing

$ 4,651,166

$ 8,582

0.73%

 Savings

786,267

881

0.44%

 Other time

3,829,068

21,108

2.19%

Short-term borrowings

483,651

257

0.21%

Junior subordinated debt

160,312

2,880

7.13%

Long-term debt

110,734

1,499

5.37%

 Total interest bearing

   liabilities and expense

10,021,198

35,207

1.39%

Demand deposits -

 noninterest bearing

1,911,125

Other liabilities

143,413

 Total liabilities

12,075,736

Shareholders' equity

1,229,146

 Total

$ 13,304,882

Net interest revenue

$ 112,397

Net interest margin

3.64%

Net interest rate spread

3.38%

Interest bearing liabilities to

  interest earning assets

81.70%

Net interest tax equivalent adjustment

$ 2,719

BancorpSouth, Inc.

Average Balances, Interest Income and Expense,

and Average Yields and Rates

(Dollars in thousands)

(Unaudited)

Quarter Ended

June 30, 2010

Average

Yield/

(Taxable equivalent basis)

Balance

Interest

Rate

ASSETS

Loans, loans held for sale,

 and leases net of unearned income

$ 9,763,448

$ 126,131

5.18%

Held-to-maturity securities:

 Taxable

939,046

9,474

4.05%

 Tax-exempt

218,747

3,711

6.80%

Available-for-sale securities:

 Taxable

821,050

8,029

3.92%

 Tax-exempt

72,440

1,281

7.09%

Short-term investments

295,618

176

0.24%

 Total interest earning

   assets and revenue

12,110,349

148,802

4.93%

Other assets

1,329,535

Less:  allowance for credit losses

(216,378)

   Total

$ 13,223,506

LIABILITIES AND

SHAREHOLDERS' EQUITY

Deposits:

 Demand - interest bearing

$ 4,635,078

$ 9,750

0.84%

 Savings

770,665

915

0.48%

 Other time

3,814,314

21,536

2.26%

Short-term borrowings

486,350

264

0.22%

Junior subordinated debt

160,312

2,861

7.16%

Long-term debt

112,731

1,506

5.36%

 Total interest bearing

   liabilities and expense

9,979,450

36,832

1.48%

Demand deposits -

 noninterest bearing

1,855,598

Other liabilities

142,672

 Total liabilities

11,977,720

Shareholders' equity

1,245,786

 Total

$ 13,223,506

Net interest revenue

$ 111,970

Net interest margin

3.71%

Net interest rate spread

3.45%

Interest bearing liabilities to

  interest earning assets

82.40%

Net interest tax equivalent adjustment

$ 2,640

BancorpSouth, Inc.

Average Balances, Interest Income and Expense,

and Average Yields and Rates

(Dollars in thousands)

(Unaudited)

Quarter Ended

March 31, 2010

Average

Yield/

(Taxable equivalent basis)

Balance

Interest

Rate

ASSETS

Loans, loans held for sale,

 and leases net of unearned income

$ 9,809,884

$ 128,299

5.30%

Held-to-maturity securities:

 Taxable

851,525

9,525

4.54%

 Tax-exempt

215,250

3,786

7.13%

Available-for-sale securities:

 Taxable

859,757

8,386

3.96%

 Tax-exempt

72,396

1,279

7.16%

Short-term investments

170,734

103

0.24%

 Total interest earning

   assets and revenue

11,979,546

151,378

5.12%

Other assets

1,340,608

Less:  allowance for credit losses

(192,983)

   Total

$ 13,127,171

LIABILITIES AND

SHAREHOLDERS' EQUITY

Deposits:

 Demand - interest bearing

$ 4,568,045

$ 9,392

0.83%

 Savings

748,342

889

0.48%

 Other time

3,741,938

21,529

2.33%

Short-term borrowings

564,191

587

0.42%

Junior subordinated debt

160,312

2,855

7.22%

Long-term debt

112,764

1,524

5.48%

 Total interest bearing

   liabilities and expense

9,895,592

36,776

1.51%

Demand deposits -

 noninterest bearing

1,819,945

Other liabilities

146,225

 Total liabilities

11,861,762

Shareholders' equity

1,265,409

 Total

$ 13,127,171

Net interest revenue

$ 114,602

Net interest margin

3.88%

Net interest rate spread

3.62%

Interest bearing liabilities to

  interest earning assets

82.60%

Net interest tax equivalent adjustment

$ 2,720

BancorpSouth, Inc.

Average Balances, Interest Income and Expense,

and Average Yields and Rates

(Dollars in thousands)

(Unaudited)

Quarter Ended

December 31, 2009

Average

Yield/

(Taxable equivalent basis)

Balance

Interest

Rate

ASSETS

Loans, loans held for sale,

 and leases net of unearned income

$ 9,821,066

$ 130,671

5.28%

Held-to-maturity securities:

 Taxable

878,452

10,239

4.62%

 Tax-exempt

209,242

3,682

6.98%

Available-for-sale securities:

 Taxable

892,191

8,676

3.86%

 Tax-exempt

72,902

1,344

7.31%

Short-term investments

92,651

61

0.26%

 Total interest earning

   assets and revenue

11,966,504

154,673

5.13%

Other assets

1,267,510

Less:  allowance for credit losses

(168,842)

   Total

$ 13,065,172

LIABILITIES AND

SHAREHOLDERS' EQUITY

Deposits:

 Demand - interest bearing

$ 4,155,330

$ 9,023

0.86%

 Savings

717,630

900

0.50%

 Other time

3,748,894

23,445

2.48%

Short-term borrowings

713,972

405

0.23%

Junior subordinated debt

160,312

2,865

7.09%

Long-term debt

303,301

3,011

3.94%

 Total interest bearing

   liabilities and expense

9,799,439

39,649

1.61%

Demand deposits -

 noninterest bearing

1,826,763

Other liabilities

171,981

 Total liabilities

11,798,183

Shareholders' equity

1,266,989

 Total

$ 13,065,172

Net interest revenue

$ 115,024

Net interest margin

3.81%

Net interest rate spread

3.52%

Interest bearing liabilities to

  interest earning assets

81.89%

Net interest tax equivalent adjustment

$ 2,677

BancorpSouth, Inc.

Average Balances, Interest Income and Expense,

and Average Yields and Rates

(Dollars in thousands)

(Unaudited)

Quarter Ended

September 30, 2009

Average

Yield/

(Taxable equivalent basis)

Balance

Interest

Rate

ASSETS

Loans, loans held for sale,

 and leases net of unearned income

$ 9,808,427

$ 130,957

5.30%

Held-to-maturity securities:

 Taxable

998,773

11,799

4.69%

 Tax-exempt

199,360

3,373

6.71%

Available-for-sale securities:

 Taxable

889,278

8,591

3.83%

 Tax-exempt

69,737

1,251

7.12%

Short-term investments

62,334

47

0.30%

 Total interest earning

   assets and revenue

12,027,909

156,020

5.15%

Other assets

1,285,360

Less:  allowance for credit losses

(146,212)

   Total

$ 13,167,057

LIABILITIES AND

SHAREHOLDERS' EQUITY

Deposits:

 Demand - interest bearing

$ 4,010,281

$ 9,038

0.89%

 Savings

716,155

936

0.52%

 Other time

3,726,754

25,535

2.72%

Short-term borrowings

1,071,144

544

0.20%

Junior subordinated debt

160,312

2,884

7.14%

Long-term debt

286,285

2,814

3.90%

 Total interest bearing

   liabilities and expense

9,970,931

41,751

1.66%

Demand deposits -

 noninterest bearing

1,747,021

Other liabilities

184,006

 Total liabilities

11,901,958

Shareholders' equity

1,265,099

 Total

$ 13,167,057

Net interest revenue

$ 114,269

Net interest margin

3.77%

Net interest rate spread

3.49%

Interest bearing liabilities to

  interest earning assets

82.90%

Net interest tax equivalent adjustment

$ 2,533

BancorpSouth, Inc.

Reconciliation of Non-GAAP Measures

(Dollars in thousands)

(Unaudited)

Reconciliation of Pre-tax Pre-Provision Earnings (a):

Quarter Ended

September 30,

June 30,

September 30,

2010

2010

2009

Net income

$                11,260

$        (12,560)

$          21,531

Plus:

Provision for credit losses

54,850

62,354

22,514

Income tax expense (benefit)

(9,767)

(3,395)

7,494

Pre-tax Pre-Provision Earnings

$                56,343

$          46,399

$          51,539

Reconciliation of Tangible assets and Tangible Shareholders' Equity to

Total Assets and Total Shareholders' Equity (b):

September 30,

2010

2009

Tangible assets

Total assets

$         13,583,016

$   13,271,873

Less:  

Goodwill

270,097

270,097

Other identifiable intangible assets

20,573

24,347

Total tangible assets

$         13,292,346

$   12,977,429

Tangible shareholders' equity

Total shareholders' equity

$           1,235,705

$     1,286,218

Less:

Goodwill

270,097

270,097

Other identifiable intangible assets

20,573

24,347

Total tangible shareholders' equity

$              945,035

$        991,774

Tangible shareholders' equity to tangible assets

7.11%

7.64%

(a)

BancorpSouth, Inc. utilizes pre-tax pre-provision earnings as an additional measure when evaluating

the performance of the Company.  Pre-tax pre-provision earnings are defined as net income plus

provision for credit losses and income tax expense.  Management believes pre-tax pre-provision

earnings is important to investors as it shows earnings trends without giving effect to provision for

credit losses and taxes.

(b)

BancorpSouth, Inc. utilizes tangible assets and tangible shareholders' equity measures when

evaluating the performance of the Company.  Tangible shareholders' equity is defined by the

Company as total shareholders' equity less goodwill and other identifiable intangible assets.

Tangible assets are defined by the Company as total assets less goodwill and other identifiable

intangible assets.  Management believes the ratio of tangible equity to tangible assets is important

to investors who are interested in evaluating the adequacy of our capital levels.

SOURCE BancorpSouth, Inc.



RELATED LINKS

http://www.bancorpsouth.com