BancorpSouth, Inc.
Aubrey Patterson, Chairman and Chief Executive Officer of BancorpSouth, commented, "The integration with First United Bancshares, Inc. is proceeding as planned. Longer term, we expect BancorpSouth to benefit from the opportunity to leverage our technology and strong product line into those markets. We will continue to look for opportunities to expand the number of products we offer to all our customers, such as insurance, and look to expand our relationships with small businesses."
"The rapid decline in interest rates in the first quarter created a challenging environment for banks. BancorpSouth does have some variable-rate loans and other loans with repricing options over a reasonably short time horizon and thus is subject to margin pressure as interest rates fall. However, we have been able to reduce the interest rates on our deposits in order to offset some of the impact of the interest rate decline."
Net Interest Income
Total interest revenue was $174.1 million in the first quarter of 2001, up 9.7 percent from the corresponding period in 2000 but down 2.4 percent from $178.3 million reported in the fourth quarter of 2000. Total interest expense for the 2001 first quarter was $92.5 million, a 19.6 percent increase from total interest expense of $77.4 million in the same period of the prior year but a decline of 3.2% from total interest expense of $95.6 million reported in the fourth quarter of 2000. In the first quarter of 2001, net interest margin was 4.01 percent, compared to 4.28 percent for the first quarter of 2000 and 4.03 percent in the fourth quarter of 2000. The cost of interest-bearing liabilities was 5.15 percent in the first quarter of 2001, compared to 4.66 percent in the first quarter of 2000 and 5.30 percent in the fourth quarter of 2000, while the taxable equivalent yield on earning assets was 8.41 percent in the first quarter of 2001 versus 8.21 percent in the same period a year earlier and 8.52 percent in the immediately preceding quarter.
"The drop in interest rates during the quarter caused the reduction in interest income," commented Patterson, "although it also led to a significant rate reduction for new deposits. When the Federal Reserve cuts short-term rates, the rates on some of our loans usually drop immediately or within a short time. Because we are not able to adjust the rate we pay on deposits as rapidly, net interest margins are compressed in a period of rapidly falling interest rates."
Deposit and Loan Activity
BancorpSouth continued to experience growth in total assets and total deposits compared to both the first quarter of 2000 and the fourth quarter of 2000. As of March 31, 2001, total assets were $9.4 billion, up 9.6 percent since March 31, 2000, and up 3.8 percent since the end of 2000; while total deposits were $7.8 billion, up 7.5 percent from March 31, 2000, and up 4.1 percent since year end 2000. Total loans as of March 31, 2001 were $6.0 billion, 5.7 percent higher than the level as of March 31, 2000, but down 2.3 percent from December 31, 2000.
Continuing a practice begun in the first quarter of 2000, the company sold its accumulated inventory of insured student loans in the first quarter of 2001. The sale of the $61.1 million loan portfolio created a pretax gain of $1.7 million. In addition, management decided to reduce the company's exposure to indirect automobile sales financing and is allowing BancorpSouth's portfolio of such loans to decline. The portfolio has decreased $123.0 million since the first quarter of 2000 and $30.5 million in the first quarter of 2001, reaching $234.4 million. Excluding the impact of these two items, total loan volume would have declined only 0.8 percent from the fourth quarter of 2000 to the first quarter of 2001.
"The economy in our markets generally is holding up, with unemployment at historically low rates," said Patterson, "but we are seeing some slowness in home construction in the Memphis area. Our liquidity position is strong because of good deposit growth coupled with slowing loan demand. Given the opportunities presented by the merger with First United, we anticipate a modest increase in loan volume for the year, and we expect to be able to continue to expand our loan portfolio without the need for outside funding because of our solid deposit base."
Loan Losses
The provision for loan losses in the first quarter of 2001 was $4.1 million, versus $4.6 million in the same quarter of the previous year and $5.5 million in the fourth quarter of 2000. Annualized net charge-offs for the first quarter of 2001 were .36 percent of average loans, while they were .18 percent of average loans in the year-ago quarter and .19 percent of average loans in the fourth quarter of 2000.
Non-performing assets totaled $43.6 million (.73 percent of loans) as of March 31, 2001, compared to $48.4 million (.86 percent of loans) as of March 31, 2000, and $50.1 million (.82 percent of net loans) at December 31, 2000. The allowance for credit losses amounted to 1.35 percent of total net loans at March 31, 2001.
"Loan quality has always been a hallmark of BancorpSouth," continued Patterson. "We maintain our high standards by applying conservative criteria at the time of origination and closely monitoring our credits throughout the life of the loan. While net charge-offs as a percent of loans was higher than usual in the first quarter of 2001, we anticipate that loans losses will be closer to historical levels for the remainder of the year."
Non-interest Income
Non-interest income totaled $27.9 million in the first quarter of 2001, up 4.8 percent from the $26.7 million reported in the first quarter of 2000 and up 9.0 percent from $25.6 million reported in the fourth quarter of 2000.
"Non-traditional businesses such as insurance and investment services are providing a growing revenue stream," Patterson stated. "In the recent quarter, insurance-related revenue was $5.7 million, compared to $4.5 million a year earlier. We anticipate that these services will continue to show strong growth as we implement improved cross-selling techniques and as we introduce BancorpSouth's products into former First United markets."
Two unusual items impacted non-interest income in the first quarter of 2001. Revenue from mortgage lending swung from a $3.4 million positive in the first quarter of 2000 to a $1.3 million negative in the first quarter of 2001 as a result of a $4.3 million impairment in the value of BancorpSouth's mortgage servicing asset, which represents the present value of the future stream of servicing revenue. As interest rates decline, refinancing of home mortgages accelerates and the present value of the future stream of servicing fees declines as the expected life of those mortgages shortens. The company must recognize the decline in future revenue with a non-cash charge against income. To some extent, this charge is offset by higher loan origination fees as lower interest rates stimulate loan growth. As the company expects to retain the mortgage servicing rights, the charge should reverse itself as interest rates rise, refinancing slows and the expected life of the mortgages lengthens.
In the first quarter of 2001, the impact of the write-down in the servicing asset was partially offset by a pre-tax gain of $2.2 million resulting from the sale of certain investment securities out of the available- for-sale portfolio.
Non-interest Expense
Non-interest expenses for the first quarter of 2001 were $72.9 million, compared to $64.1 million for the first quarter of 2000 and $68.7 million in the fourth quarter of 2000 (before non-recurring charges).
"We continue to see the impact of the First United merger on non-interest expense," explained Jim Kelley, President and Chief Operating Officer of BancorpSouth. "At the time of the merger, we made customer retention our first priority in the transition process, even though that means higher non- interest expenses over the first year of the combined company as we gradually transition former First United offices to BancorpSouth systems. We achieved product standardization among all the offices in December without a detrimental effect on our customer base. In the first quarter, we transitioned the first two former First United banks to BancorpSouth systems with equal success. We anticipate completing the conversion by the end of the third quarter and expect to see the resulting cost savings begin to have a positive impact on our results in the fourth quarter."
Capital Management
During the first quarter of 2001, the company repurchased a total of 276,550 shares of its outstanding common stock, 21,850 shares under a repurchase program which terminated in January and 254,700 shares under a repurchase program announced on March 5, 2001, which will allow the company to acquire up to 4.2 million shares or approximately 5% of the shares outstanding at the time of the announcement.
BancorpSouth, Inc. is a financial services company with $9.4 billion in assets, headquartered in Tupelo, Mississippi. The company operates approximately 250 commercial banking, insurance, trust, broker/dealer and consumer finance locations in Alabama, Arkansas, Louisiana, Mississippi, Tennessee and Texas.
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," or "intend." These forward-looking statements include, without limitation, those relating to interest rates on deposits, expansion and prospects of products and services, integration and impact of recent acquisitions, effects of technology, interest rate sensitivity, expansion of loan portfolio, loan losses, prospects for 2001, mortgage servicing, the Company's future growth, and profitability.
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, due to a variety of factors. Those factors include, but are not limited to, changes in economic conditions and government fiscal and monetary policies, fluctuations in prevailing interest rates, ability to reduce interest on deposits as interest rates decline, laws and regulations affecting financial institutions, the ability of BancorpSouth to compete with other financial services companies, the ability of BancorpSouth to integrate acquisitions, the ability of BancorpSouth to operate and integrate new technology, the ability of BancorpSouth to manage its growth and effectively serve an expanding customer and market base, the ability of BancorpSouth to provide competitive services and products, changes in BancorpSouth's operating or expansion strategy, geographic concentration of BancorpSouth's assets, availability of and costs associated with obtaining adequate and timely sources of liquidity, the ability of BancorpSouth to attract, train and retain qualified personnel, the ability of BancorpSouth to effectively market its services and products, changes in consumer preferences, 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.
Selected Financial Data
Three Months Ended
March 31,
2001 2000
(Dollars in thousands, except per
share amounts)
Earnings Summary:
Net interest revenue $81,599 $81,328
Provision for credit losses 4,097 4,615
Noninterest revenue 27,949 26,674
Noninterest expense 72,832 64,120
Income before income taxes 32,619 39,267
Income tax provision 10,300 12,622
Net income 22,319 26,645
Earning per share: Basic $0.27 $0.31
Diluted: $0.27 $0.31
Balance sheet data at March 31:
Total assets $9,384,078 $8,560,573
Total earning assets 8,738,930 7,985,297
Loans and lease receivables, net of
unearned discount 5,960,862 5,620,581
Allowance for credit losses 80,461 76,362
Total deposits 7,785,627 7,245,458
Common shareholders' equity 804,085 758,183
Book value per share 9.59 8.92
Average balance sheet data:
Total assets $9,160,057 $8,479,566
Total earning assets 8,539,226 7,919,175
Loans and lease receivables, net of
unearned discount 6,025,742 5,559,943
Total deposits 7,612,436 7,125,843
Common shareholders' equity 789,892 755,015
Non-performing assets at March 31:
Non-accrual loans $12,116 $18,011
Loans 90+ days past due 22,338 18,120
Restructured loans 1,542 979
Other real estate owned 7,643 11,280
Net charge-offs as a percentage
of average loans (annualized) 0.36% 0.18%
Performance ratios (annualized)
Return on average assets 0.99% 1.26%
Return on common equity 11.46% 14.16%
Net interest margin 4.01% 4.28%
Average shares outstanding - diluted 84,200,255 85,704,216
BancorpSouth, Inc.
Consolidated Balance Sheets
(dollars in thousands)
(Unaudited)
March 31, 2001 March 31, 2000
Assets
Cash & due from banks $298,663 $273,427
Interest bearing deposits
with other banks 7,871 48,469
Held-to-maturity securities 1,224,997 1,077,997
Federal funds sold and securities
purchased under agreement to resell 520,399 129,219
Loans & leases 5,960,862 5,620,581
Allowance for credit losses (80,461) (76,362)
Net loans & leases 5,880,401 5,544,219
Available-for-sale securities 973,847 1,077,151
Mortgages held for sale 50,953 31,882
Bank premises & equipment 202,539 173,195
Accrued interest receivable 90,827 74,426
Other real estate owned 7,568 10,714
Other assets 126,013 119,874
Total assets $9,384,078 $8,560,573
Liabilities
Demand deposits:
Non-interest bearing $1,032,551 $1,002,662
Interest bearing 1,828,324 1,727,489
Total demand deposits 2,860,875 2,730,151
Savings & time deposits:
Savings 468,679 280,803
Premium access 427,092 579,860
Certificates of deposit 4,028,981 3,654,644
Total savings & time deposits 4,924,752 4,515,307
Total deposits 7,785,627 7,245,458
Federal funds purchased and
securities sold under
agreement to repurchase 502,749 277,088
Short-term borrowings 0 9,000
Accrued interest payable 52,466 39,563
Long-term debt 151,778 161,087
Other liabilities 87,373 70,194
Total liabilities 8,579,993 7,802,390
Shareholders' Equity
Common stock 214,484 214,410
Capital surplus 70,581 69,978
Unrealized gain(loss) on
securities 22,933 (16,904)
Retained earnings 525,383 502,587
Less: Cost of treasury stock (29,296) (11,888)
Total shareholders' equity 804,085 758,183
Total liabilities &
shareholders' equity $9,384,078 $8,560,573
BancorpSouth, Inc.
Consolidated Statements of Income
(amounts in thousands, except per share data)
(Unaudited)
Quarter Ended
Mar-01 Dec-00 Sep-00 Jun-00 Mar-00
Interest Revenue:
Loans, including fees $136,737 $140,892 $134,910 $129,030 $124,360
Held-to-maturity
securities: 16,051 18,141 15,899 15,307 15,408
Available-for-sale
securities 15,586 16,177 21,554 17,696 17,155
Short term investments 5,766 3,185 962 1,553 1,806
Total interest revenue 174,140 178,395 173,325 163,586 158,729
Interest Expense:
Deposits 83,944 84,709 81,031 74,088 70,536
Short term borrowings 3,557 7,007 9,058 4,416 4,274
Long term borrowings 2,265 2,378 2,559 2,442 2,397
Other interest expense 2,775 1,503 110 182 194
Total interest expense 92,541 95,597 92,758 81,128 77,401
Net interest revenue 81,599 82,798 80,567 82,458 81,328
Provision for credit
losses 4,097 5,497 10,656 5,398 4,615
Net interest revenue,
after credit loss
provision 77,502 77,301 69,911 77,060 76,713
Other Revenue:
Mortgage lending (1,333) 1,900 2,493 3,059 3,422
Service charges 10,342 10,927 10,213 10,234 9,098
Life insurance premiums 1,094 1,116 1,107 1,058 1,020
Trust income 1,684 1,625 1,794 1,637 1,644
Securities gains, net 2,884 (15,549) (254) (7) 177
Insurance commissions 4,608 4,845 3,717 3,972 3,499
Other 8,670 5,188 4,496 5,333 7,814
Total other revenue 27,949 10,052 23,566 25,286 26,674
Other Expense:
Salaries and employee
benefits 38,721 33,845 34,070 32,008 33,933
Occupancy 5,129 4,838 4,647 4,409 4,449
Equipment 7,032 6,960 6,124 5,506 5,544
Telecommunications 2,182 2,041 1,868 1,751 1,574
Other 19,768 21,981 29,898 20,161 18,620
Total other expense 72,832 69,665 76,607 63,835 64,120
Income before
income taxes 32,619 17,688 16,870 38,511 39,267
Income tax expense 10,300 5,413 7,379 12,527 12,622
Net Income $22,319 $12,275 $9,491 $25,984 $26,645
Net Income Per Share:
Basic $0.27 $0.15 $0.11 $0.31 $0.31
Diluted $0.27 $0.15 $0.11 $0.31 $0.31
BancorpSouth, Inc.
Average Balances, Interest Income and Expense,
and Average Yields and Rates
(dollars in thousands) Quarter Ended
Unaudited March 31, 2001
Average Yield/
(Taxable equivalent basis) Balance Interest Rate
ASSETS
Loans net of Unearned Income $6,063,946 $137,055 9.17%
Held-to-maturity securities:
Taxable 842,693 13,212 6.36%
Non Taxable 232,636 4,366 7.61%
Available-for-sale securities
Taxable 838,410 13,616 6.59%
Non Taxable 155,988 3,031 7.88%
Short term investments 405,553 5,767 5.77%
Total interest earning
assets and revenue 8,539,226 177,047 8.41%
Other assets 701,784
Less: allowance for credit
losses (80,953)
Total $9,160,057
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits:
Demand - interest bearing $1,770,537 $14,340 3.28%
Savings 896,888 10,685 4.83%
Time 3,975,219 58,918 6.01%
Short-term borrowings 490,736 6,333 5.23%
Long-term debt 151,870 2,265 6.05%
Total interest bearing
liabilities and expense 7,285,250 92,541 5.15%
Demand deposits -
non-interest bearing 969,793
Other liabilities 115,122
Total liabilities 8,370,165
Shareholders' equity 789,892
Total $9,160,057
Net interest revenue $84,506
Net interest margin 4.01%
Net interest rate spread 3.26%
Interest bearing liabilities to
interest earning assets 85.32%
Net interest tax equivalent
adjustment $2,907
BancorpSouth, Inc.
Average Balances, Interest Income and Expense,
and Average Yields and Rates
(dollars in thousands) Quarter Ended
Unaudited December 31, 2000
Average Yield/
(Taxable equivalent basis) Balance Interest Rate
ASSETS
Loans net of Unearned Income $6,073,609 $141,295 9.25%
Held-to-maturity securities:
Taxable 889,349 14,114 6.31%
Non Taxable 327,673 6,195 7.52%
Available-for-sale securities
Taxable 913,866 15,271 6.65%
Non Taxable 69,280 1,394 8.00%
Short term investments 198,310 3,185 6.39%
Total interest earning
assets and revenue 8,472,087 181,454 8.52%
Other assets 670,163
Less: allowance for credit
losses (79,633)
Total $9,062,617
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits:
Demand - interest bearing $1,668,090 $13,960 3.33%
Savings 904,717 11,888 5.23%
Time 3,883,979 58,861 6.03%
Short-term borrowings 567,066 8,509 5.97%
Long-term debt 157,786 2,378 6.00%
Total interest bearing
liabilities and expense 7,181,638 95,596 5.30%
Demand deposits -
non-interest bearing 987,644
Other liabilities 120,012
Total liabilities 8,289,294
Shareholders' equity 773,323
Total $9,062,617
Net interest revenue $85,858
Net interest margin 4.03%
Net interest rate spread 3.23%
Interest bearing liabilities to
interest earning assets 84.77%
Net interest tax equivalent
adjustment $3,060
BancorpSouth, Inc.
Average Balances, Interest Income and Expense,
and Average Yields and Rates
(dollars in thousands) Quarter Ended
September 30, 2000
Unaudited Average Yield/
Balance Interest Rate
(Taxable equivalent basis)
ASSETS
Loans net of Unearned Income $5,888,736 $135,311 9.14%
Held-to-maturity securities:
Taxable 760,409 11,951 6.25%
Non Taxable 325,687 6,074 7.42%
Available-for-sale securities
Taxable 1,242,043 20,519 6.57%
Non Taxable 75,530 1,591 8.38%
Short term investments 58,408 962 6.55%
Total interest earning
assets and revenue 8,350,813 176,408 8.40%
Other assets 645,252
Less: allowance for credit
losses (76,879)
Total $8,919,186
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits:
Demand - interest bearing $1,659,533 $13,842 3.32%
Savings 877,041 9,956 4.52%
Time 3,801,938 57,233 5.99%
Short-term borrowings 579,725 9,168 6.29%
Long-term debt 169,573 2,559 6.00%
Total interest bearing
liabilities and expense 7,087,810 92,758 5.21%
Demand deposits -
non-interest bearing 972,647
Other liabilities 96,615
Total liabilities 8,157,072
Shareholders' equity 762,114
Total $8,919,186
Net interest revenue $83,650
Net interest margin 3.99%
Net interest rate spread 3.20%
Interest bearing liabilities to
interest earning assets 84.88%
Net interest tax equivalent
adjustment $3,083
BancorpSouth, Inc.
Average Balances, Interest Income and Expense,
and Average Yields and Rates
(dollars in thousands) Quarter Ended
Unaudited June 30, 2000
Average Yield/
Balance Interest Rate
(Taxable equivalent basis)
ASSETS
Loans net of Unearned Income $5,750,197 $129,411 9.05%
Held-to-maturity securities:
Taxable 753,072 11,446 6.11%
Non Taxable 324,755 5,941 7.36%
Available-for-sale securities
Taxable 996,124 16,685 6.74%
Non Taxable 76,029 1,555 8.23%
Short term investments 99,355 1,553 6.29%
Total interest earning
assets and revenue 7,999,532 166,591 8.38%
Other assets 636,386
Less: allowance for credit
losses (76,545)
Total $8,559,373
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits:
Demand - interest bearing $1,707,641 $13,758 3.24%
Savings 826,070 8,206 4.00%
Time 3,708,808 52,124 5.65%
Short-term borrowings 328,870 4,598 5.62%
Long-term debt 165,584 2,442 5.93%
Total interest bearing
liabilities and expense 6,736,973 81,128 4.84%
Demand deposits -
non-interest bearing 965,742
Other liabilities 99,701
Total liabilities 7,802,416
Shareholders' equity 756,957
Total $8,559,373
Net interest revenue $85,463
Net interest margin 4.30%
Net interest rate spread 3.53%
Interest bearing liabilities to
interest earning assets 84.22%
Net interest tax equivalent
adjustment $3,005
BancorpSouth, Inc.
Average Balances, Interest Income and Expense,
and Average Yields and Rates
(dollars in thousands) Quarter Ended
Unaudited March 31, 2000
Average Yield/
Balance Interest Rate
(Taxable equivalent basis)
ASSETS
Loans net of Unearned Income $5,608,277 $124,713 8.94%
Held-to-maturity securities:
Taxable 781,038 11,575 5.96%
Non Taxable 321,956 5,898 7.37%
Available-for-sale securities
Taxable 1,007,238 16,106 6.43%
Non Taxable 74,507 1,614 8.71%
Short term investments 126,159 1,805 5.75%
Total interest earning
assets and revenue 7,919,175 161,711 8.21%
Other assets 635,476
Less: allowance for credit
losses (75,085)
Total $8,479,566
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits:
Demand - interest bearing $1,654,789 $12,666 3.08%
Savings 890,646 8,897 4.02%
Time 3,635,417 48,973 5.42%
Short-term borrowings 338,072 4,467 5.31%
Long-term debt 165,802 2,397 5.81%
Total interest bearing
liabilities and expense 6,684,726 77,400 4.66%
Demand deposits -
non-interest bearing 944,990
Other liabilities 94,835
Total liabilities 7,724,551
Shareholders' equity 755,015
Total $8,479,566
Net interest revenue $84,311
Net interest margin 4.28%
Net interest rate spread 3.56%
Interest bearing liabilities to
interest earning assets 84.41%
Net interest tax equivalent
adjustment $2,983
SOURCE: BancorpSouth, Inc.
Contact: L. Nash Allen, Jr., 662-680-2330, or Gary C. Bonds,
662-680-2332, both of BancorpSouth, Inc.
Website: http://www.bancorpsouth.com/