BXS BancorpSouth Bank

BancorpSouth, Inc. Announces Financial Results for the First Quarter of 2004 TUPELO, Miss., April 16 /PRNewswire-FirstCall/ -- BancorpSouth, Inc. today announced that net income for the first quarter of 2004 was $27.2 million, or $0.35 per basic and diluted share, compared with net income of $39.1 million, or $0.51 per basic share and $0.50 per diluted share, for the first quarter of 2003. Results for the first quarter of 2003 include the impact of net gains from securities sales of $13.6 million ($8.4 million after tax or $0.11 per diluted share). "While our financial results for the first quarter of 2004 reflected the impact of low interest rates on our investment and loan yields, they also continued to demonstrate the strategic benefits of our ongoing initiatives to diversify through the growth of noninterest revenues," said Aubrey Patterson, Chairman and Chief Executive Officer of BancorpSouth. "During the first quarter, these benefits were particularly evident in the more-than doubling of our insurance commissions, to $14.5 million from $6.4 million for the first quarter of last year. This increase was nearly double the $4.2 million decline in net interest revenue after loan loss provision between the comparable quarters. We remain confident that our conservative lending and investment policies will serve us well as the economy continues to recover. We expect the dual effect of increased loan demand and rising asset yields will enhance revenue in a recovering economic environment. We will continue to pursue our strategies for expanding market share in our core six-state market through both our traditional community banking business and our increasing array of noninterest revenue products and services." Net Interest Revenue Interest revenue for the first quarter of 2004 was $123.2 million, a 10.5 percent decrease from $137.7 million for the first quarter of 2003 and a 2.4 percent decline from $126.2 million for the fourth quarter of 2003. Interest expense declined 16.5 percent for the first quarter of 2004 to $39.7 million from $47.5 million for the first quarter of 2003 and declined 1.1 percent from $40.1 million for the fourth quarter of 2003. The average taxable equivalent yield on earning assets fell to 5.22 percent for the first quarter of 2004 from 6.00 percent for the first quarter of 2003 and 5.39 percent for the fourth quarter of 2003. The average rate paid on interest bearing liabilities decreased to 1.94 percent for the first quarter of 2004 from 2.36 percent for the first quarter of 2003 and 1.99 percent for the fourth quarter of 2003. Net interest revenue for the first quarter of 2004 was $83.5 million, down 7.4 percent from $90.1 million for the first quarter of 2003 and down 3.0 percent from $86.1 million for the fourth quarter of 2003. Net interest margin declined to 3.57 percent for the first quarter of 2004 from 3.97 percent for the first quarter of 2003 and 3.70 percent for the fourth quarter of 2003. "The decline in net interest revenue for the first quarter primarily reflects the difficulty in a low interest rate environment of reducing funding costs enough to offset falling asset yields," Patterson added. "Despite this challenge, we have continued a conservative stance in the average maturity of our investment assets, which, despite incremental short-term costs, better prepares us for a rising rate environment. In addition, because rates paid on interest bearing liabilities have fallen to such low levels, we are constrained in our ability to further lower them because of the value we place on long-term customer relationships. The impact of these decisions, which are consistent with the conservative operating philosophies of our organization, is reflected in the compression of our net interest margin for the quarter." Deposit and Loan Activity Total assets increased 2.4 percent to $10.6 billion at the end of the first quarter of 2004 from $10.3 billion at March 31, 2003. Total deposits rose 2.2 percent to $8.9 billion at the end of the first quarter of 2004 from $8.7 billion at the end of the first quarter of 2003. Total loans were $6.28 billion at March 31, 2004, down 0.3 percent from $6.31 billion at March 31, 2003. Loan growth has continued to be impacted by the Company's decision to reduce its exposure to indirect automobile sales financing and certain higher risk consumer loans by allowing its portfolio of such loans to decline. The Company's portfolio of such loans totaled $48.4 million at March 31, 2004, down from $59.2 million at December 31, 2003 and $95.7 million at March 31, 2003. Patterson said, "Although loan activity in our markets for the first quarter of 2004 was less than early indications suggested, we are pleased that total loans essentially stabilized compared to the end of the first quarter of 2003 and December 31, 2003. As a result of our ongoing efforts to manage interest rate exposure, our total savings and other time deposits declined by 2.6% for the first quarter of 2004 when compared to the same period of 2003. Total deposits increased as a result of an 8.7% growth in our demand deposits, a low-cost source of funds that we believe reflects our expanding share of our six-state market." Provision for Credit Losses and Allowance for Credit Losses The provision for credit losses was $4.0 million for the first quarter of 2004, down 38.4 percent from $6.5 million for the first quarter of 2003 and 46.3 percent from $7.5 million for the fourth quarter of 2003. Annualized net charge-offs were 0.31 percent of average loans for the first quarter of 2004 compared with 0.30 percent for the first quarter of 2003 and 0.38 percent for the fourth quarter of 2003. Non-performing loans at March 31, 2004 were $39.8 million, or 0.64 percent of loans, compared with $40.2 million, or 0.64 percent of loans, at March 31, 2003, and $51.4 million, or 0.83 percent of loans, at December 31, 2003. The allowance for credit losses was 1.46 percent of loans at March 31, 2004, 1.43 percent of loans at March 31, 2003 and 1.48 percent of loans at December 31, 2003. Patterson continued, "Our first quarter results demonstrate that strong credit quality remains a hallmark of BancorpSouth. We were particularly pleased with the drop in annualized charge-offs and the 22.7 percent reduction in non-performing loans compared to the fourth quarter of 2003. As a result of these improvements, we reduced our provision for credit losses substantially for the first quarter of 2004 on both a comparable and sequential quarter basis, while maintaining an allowance for credit losses as a percentage of loans consistent with that of prior periods." Noninterest Revenue Noninterest revenue for the first quarter of 2004 was $46.0 million, a decrease of 12.0 percent from $52.3 million for the first quarter of 2003 and a decrease of 4.2 percent from $48.1 million for the fourth quarter of 2003. During the first quarter of 2004, mortgage lending reflected a loss of $1.1 million primarily as a result of a $2.3 million non-cash charge for impairment of the Company's mortgage servicing asset. For the first quarter of 2003, mortgage lending produced revenue of $4.9 million that included an $815,000 reversal of previously recorded impairment charges. The Company originated $149.8 million in mortgage loans during the first quarter of 2004, down from $302.4 million for the first quarter of 2003. For the fourth consecutive year, the Company sold its accumulated inventory of government guaranteed student loans during the first quarter, generating a $2.4 million gain which equaled the $2.4 million gain for such sales in the first quarter of 2003. Net gains of $618,000 on the sale of securities were recorded in the first quarter of 2004. This compares to net gains of $13.6 million in the first quarter of 2003 as the Company sold intermediate term bonds pursuant to its efforts to manage its interest rate risk. BancorpSouth's insurance commissions grew 126.4 percent to $14.5 million for the first quarter of 2004 from $6.4 million for the first quarter of 2003 and 10.4 percent from $13.1 million for the fourth quarter of 2003. The growth compared to the first quarter of 2003 is primarily a result of the acquisition of Wright & Percy Insurance, Baton Rouge, Louisiana, in the second quarter of 2003 and the acquisition of Ramsey, Krug, Farrell & Lensing Insurance, Little Rock, Arkansas, in the third quarter of 2003. "One of the primary goals of our initiatives to increase noninterest revenue is to lessen the Company's exposure to interest rate risk, and we believe that significant progress has been made toward achieving that goal," remarked Patterson. "Although we continue to expect mortgage originations to slow compared with 2003, we believe we have additional significant opportunities to expand noninterest revenue through growth of our existing products and services within existing markets, through acquisitions and through geographic expansion." Noninterest Expense For the first quarter of 2004, noninterest expense increased 11.8 percent to $86.0 million from $76.9 million for the first quarter of 2003 and 1.4 percent from $84.8 million for the fourth quarter of 2003. Consistent with the growth in noninterest expense for the fourth quarter of 2003, this increase primarily reflects a 17.0 percent increase in salaries and employee benefits principally as a result of the acquisitions of two insurance agencies in the second and third quarters of 2003. Capital Management BancorpSouth repurchased 588,900 shares of its common stock during the first quarter of 2004 under a stock repurchase plan authorized in April 2003 for the repurchase of up to 3.9 million shares. A total of 1,032,408 shares had been purchased under this plan at the end of the first quarter of 2004. Combined with the shares repurchased earlier under separate plans for the repurchase of 4.2 million shares and 4.1 million shares, respectively, BancorpSouth had repurchased approximately 9.3 million shares of its common stock as of March 31, 2004, or 11.1 percent of its outstanding shares at March 5, 2001, when the first of these plans was authorized. BancorpSouth will continue to evaluate additional share repurchases under the April 2003 plan, which authorizes these repurchases during a two-year period. Summary Patterson concluded, "In many respects, BancorpSouth's first-quarter results are attributable to disciplined decisions we made to adhere to our conservative lending and investment philosophies. We believe these philosophies underlie our long-term record of enhanced shareholder value, despite the short-term costs they entail. We will continue to proactively manage our assets and liabilities to decrease our exposure to changing interest rates, even as we diversify our revenue streams through the growth of noninterest revenues. As a result of conservative operating philosophies that have built a strong, liquid and well capitalized Company, we believe we have well positioned BancorpSouth for success in an improving economic environment." Conference Call BancorpSouth will conduct a conference call with analysts at 1:30 p.m. (Central Time) on April 19, 2004. 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, those relating to interest rates, lending and investment policies, market share, credit quality, mortgage originations, noninterest revenue, expansion of products and services, geographic expansion and acquisitions, common stock repurchase plan, shareholder value, strategies to achieve consistent long-term growth and BancorpSouth'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. These factors include, but are not limited to, changes in economic conditions and government fiscal and monetary policies, fluctuations in prevailing interest rates, the ability of BancorpSouth to maintain credit quality, the ability of BancorpSouth to effectively integrate acquisitions, changes in laws and regulations affecting financial institutions in general, possible adverse rulings, judgments, settlements and other outcomes of pending litigation, the ability of BancorpSouth to compete with other financial services companies, the ability of BancorpSouth to provide and market 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 manage its growth and effectively serve an expanding customer and market base, the ability of BancorpSouth to attract, train and retain qualified personnel, the ability of BancorpSouth to effectively market its services and products, the ability of BancorpSouth to repurchase its common stock on favorable terms, the ability of BancorpSouth to identify potential acquisitions, 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. is a bank holding company headquartered in Tupelo, Mississippi with approximately $10.6 billion in assets. BancorpSouth operates approximately 250 commercial banking, insurance, trust and broker/dealer locations in Alabama, Arkansas, Louisiana, Mississippi, Tennessee and Texas. Selected Financial Data Three Months Ended March 31, 2004 2003 (Dollars in thousands, except per share amounts) Earnings Summary: Net interest revenue $83,482 $90,144 Provision for credit losses (4,015) (6,522) Noninterest revenue 46,040 52,309 Noninterest expense 86,006 76,916 Income before income taxes 39,501 59,015 Income tax provision 12,336 19,867 Net income $27,165 $39,148 Earning per share: Basic $0.35 $0.51 Diluted $0.35 $0.50 Balance sheet data at March 31: Total assets $10,582,429 $10,335,009 Total earning assets 9,792,926 9,587,753 Loans and lease receivables, net of unearned discount 6,252,956 6,263,585 Allowance for credit losses (91,327) (89,600) Total deposits 8,881,115 8,689,351 Common shareholders' equity 882,988 820,610 Book value per share 11.41 10.61 Average balance sheet data: Total assets $10,453,731 $10,191,544 Total earning assets 9,674,642 9,494,684 Loans and lease receivables, net of unearned discount 6,227,264 6,347,818 Total deposits 8,786,720 8,560,002 Common shareholders' equity 867,994 815,907 Non-performing assets at March 31: Non-accrual loans $16,410 $13,764 Loans 90+ days past due 19,392 26,458 Restructured loans 3,954 17 Other real estate owned 18,176 16,641 Net charge-offs as a percentage of average loans (annualized) 0.31% 0.30% Performance ratios (annualized) Return on average assets 1.05% 1.56% Return on common equity 12.59% 19.46% Net interest margin 3.57% 3.97% Average shares outstanding - diluted 78,123,071 77,857,362 BancorpSouth, Inc. Consolidated Balance Sheets March 31, % 2004 2003 Change (In thousands) Assets Cash and due from banks $329,876 $351,278 (6.09%) Interest bearing deposits with other banks 199,820 26,305 659.63% Held-to-maturity securities, at amortized cost 1,320,134 1,864,519 (29.20%) Available-for-sale securities, at fair market value 1,906,746 1,069,325 78.31% Federal funds sold and securities purchased under agreement to resell 72,511 303,735 Loans 6,284,805 6,305,533 (0.33%) Less: Unearned discount (31,849) (41,948) (24.08%) Allowance for credit losses (91,327) (89,600) 1.93% Net loans 6,161,629 6,173,985 (0.20%) Loans held for sale 40,759 60,283 (32.39%) Premises and equipment, net 212,797 210,789 0.95% Accrued interest receivable 66,682 70,919 (5.97%) Goodwill 59,671 32,462 83.82% Other assets 211,804 171,409 23.57% Total Assets $10,582,429 $10,335,009 2.39% Liabilities Deposits: Demand: Noninterest bearing $1,320,812 $1,214,216 8.78% Interest bearing 2,704,473 2,489,120 8.65% Savings 788,679 819,430 (3.75%) Other time 4,067,151 4,166,585 (2.39%) Total deposits 8,881,115 8,689,351 2.21% Federal funds purchased and securities sold under agreement to repurchase 416,222 446,932 (6.87%) Accrued interest payable 18,816 25,036 (24.84%) Junior subordinated debt securities 128,866 125,000 3.09% Long-term debt 138,170 139,450 (0.92%) Other liabilities 116,252 88,630 31.16% Total Liabilities 9,699,441 9,514,399 1.94% Shareholders' Equity Common stock 193,456 193,319 0.07% Capital surplus 43,833 21,115 107.59% Accumulated other comprehensive income 27,598 30,677 (10.04%) Retained earnings 618,101 575,499 7.40% Total Shareholders' Equity 882,988 820,610 7.60% Total Liabilities & Shareholders' Equity $10,582,429 $10,335,009 2.39% BancorpSouth, Inc. Consolidated Statements of Income (Dollars in thousands, except per share data) (Unaudited) Quarter Ended Mar 2004 Dec 2003 Sept 2003 INTEREST REVENUE: Loans $92,250 $94,822 $98,292 Deposits with other banks 128 96 67 Federal funds sold and securities purchased under agreement to resell 697 772 1,295 Held-to-maturity securities: Taxable 10,112 9,831 10,258 Tax-exempt 1,796 1,860 1,941 Available-for-sale securities: Taxable 15,688 16,108 15,160 Tax-exempt 1,759 1,878 1,903 Loans held for sale 756 856 896 Total interest revenue 123,186 126,223 129,812 INTEREST EXPENSE: Deposits 33,918 33,929 35,260 Federal funds purchased and securities sold under agreement to repurchase 1,063 1,551 2,018 Other 4,723 4,658 4,726 Total interest expense 39,704 40,138 42,004 Net interest revenue 83,482 86,085 87,808 Provision for credit losses 4,015 7,472 4,664 Net interest revenue, after provision for credit losses 79,467 78,613 83,144 NONINTEREST REVENUE: Mortgage lending (1,141) 6,441 10,323 Service charges 14,318 15,882 16,131 Life insurance premiums 562 657 760 Trust income 1,686 2,138 1,905 Security gains, net 618 40 60 Insurance commissions 14,458 13,101 11,946 Other 15,539 9,815 8,695 Total noninterest revenue 46,040 48,074 49,820 NONINTEREST EXPENSE: Salaries and employee benefits 50,036 47,633 46,449 Occupancy, net of rental income 5,956 5,853 5,932 Equipment 5,460 5,569 6,063 Telecommunications 1,838 1,874 1,915 Other 22,716 23,898 22,192 Total noninterest expenses 86,006 84,827 82,551 Income before income taxes 39,501 41,860 50,413 Income tax expense 12,336 12,990 16,539 Net income $27,165 $28,870 $33,874 Net income per share: Basic $0.35 $0.37 $0.43 Diluted $0.35 $0.37 $0.43 BancorpSouth, Inc. Consolidated Statements of Income (Dollars in thousands, except per share data) (Unaudited) Quarter Ended Jun 2003 Mar 2003 INTEREST REVENUE: Loans $102,369 $104,546 Deposits with other banks 100 84 Federal funds sold and securities purchased under agreement to resell 2,215 2,307 Held-to-maturity securities: Taxable 12,628 13,602 Tax-exempt 2,079 2,216 Available-for-sale securities: Taxable 11,031 12,127 Tax-exempt 1,995 2,094 Loans held for sale 777 706 Total interest revenue 133,194 137,682 INTEREST EXPENSE: Deposits 39,289 40,544 Federal funds purchased and securities sold under agreement to repurchase 2,191 2,355 Other 4,645 4,639 Total interest expense 46,125 47,538 Net interest revenue 87,069 90,144 Provision for credit losses 6,472 6,522 Net interest revenue, after provision for credit losses 80,597 83,622 NONINTEREST REVENUE: Mortgage lending 1,634 4,854 Service charges 16,232 13,654 Life insurance premiums 876 961 Trust income 1,684 1,486 Security gains, net 180 13,556 Insurance commissions 8,314 6,387 Other 10,962 11,411 Total noninterest revenue 39,882 52,309 NONINTEREST EXPENSE: Salaries and employee benefits 44,974 42,754 Occupancy, net of rental income 5,609 5,580 Equipment 5,776 6,003 Telecommunications 1,828 1,860 Other 20,113 20,719 Total noninterest expenses 78,300 76,916 Income before income taxes 42,179 59,015 Income tax expense 12,938 19,867 Net income $29,241 $39,148 Net income per share: Basic $0.38 $0.51 Diluted $0.37 $0.50 BancorpSouth, Inc. Average Balances, Interest Income and Expense, and Average Yields and Rates (Dollars in thousands) (Unaudited) Quarter Ended March 31, 2004 Average Yield/ (Taxable equivalent basis) Balance Interest Rate ASSETS Loans net of unearned income $6,314,778 $93,522 5.96% Held-to-maturity securities: Taxable 998,854 10,113 4.07% Tax-exempt 149,264 2,762 7.44% Available-for-sale securities: Taxable 1,742,486 15,686 3.62% Tax-exempt 165,208 2,706 6.59% Short-term investments 304,052 825 1.09% Total interest earning assets and revenue 9,674,642 125,614 5.22% Other assets 871,419 Less: allowance for credit losses (92,330) Total $10,453,731 LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Demand - interest bearing $2,701,052 $5,694 0.85% Savings 784,161 1,362 0.70% Other time 4,064,639 26,861 2.66% Short-term borrowings 411,693 1,097 1.07% Junior subordinated debt 128,866 2,626 8.19% Long-term debt 138,282 2,063 6.00% Total interest bearing liabilities and expense 8,228,693 39,703 1.94% Demand deposits - noninterest bearing 1,236,868 Other liabilities 120,176 Total liabilities 9,585,737 Shareholders' equity 867,994 Total $10,453,731 Net interest revenue $85,911 Net interest margin 3.57% Net interest rate spread 3.28% Interest bearing liabilities to interest earning assets 85.05% Net interest tax equivalent adjustment $2,428 BancorpSouth, Inc. Average Balances, Interest Income and Expense, and Average Yields and Rates (Dollars in thousands) (Unaudited) Quarter Ended March 31, 2003 Average Yield/ (Taxable equivalent basis) Balance Interest Rate ASSETS Loans net of unearned income $6,398,632 $105,660 6.70% Held-to-maturity securities: Taxable 1,274,105 13,602 4.33% Tax-exempt 178,998 3,409 7.72% Available-for-sale securities: Taxable 1,056,317 12,127 4.66% Tax-exempt 201,746 3,222 6.48% Short-term investments 384,886 2,390 2.52% Total interest earning assets and revenue 9,494,684 140,410 6.00% Other assets 785,579 Less: allowance for credit losses (88,719) Total $10,191,544 LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Demand - interest bearing $2,500,301 $7,134 1.16% Savings 820,832 2,159 1.07% Other time 4,132,837 31,252 3.07% Short-term borrowings 445,811 2,364 2.15% Junior subordinated debt 125,000 2,547 8.15% Long-term debt 139,559 2,082 6.05% Total interest bearing liabilities and expense 8,164,340 47,538 2.36% Demand deposits - noninterest bearing 1,106,032 Other liabilities 105,265 Total liabilities 9,375,637 Shareholders' equity 815,907 Total $10,191,544 Net interest revenue $92,872 Net interest margin 3.97% Net interest rate spread 3.64% Interest bearing liabilities to interest earning assets 85.99% Net interest tax equivalent adjustment $2,728 DATASOURCE: BancorpSouth, Inc. CONTACT: L. Nash Allen, Jr., Treasurer and Chief Financial Officer, +1-662-680-2330, or Gary C. Bonds, Senior Vice President and Controller, +1-662-680-2332, both of BancorpSouth, Inc. Web site: http://www.bancorpsouth.com/

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