BancorpSouth, Inc. Announces Financial Results for the Fourth Quarter of 2005

TUPELO, Miss., Jan. 23 /PRNewswire-FirstCall/ -- BancorpSouth, Inc. today announced financial results for the fourth quarter and twelve-months ended December 31, 2005.

Highlights of the fourth quarter of 2005 included: - An increase in net income and net income per diluted share of 41.5 percent and 37.5 percent, respectively, for the fourth quarter of 2005 as compared to the fourth quarter of 2004. - Growth in demand deposits of 13.5 percent at the end of 2005 from the end of 2004, the second consecutive quarter of double-digit percentage growth in comparable-period demand deposits. - The continued growth of net interest revenue, which, on a comparable-quarter basis, increased 10.3 percent for the fourth quarter of 2005, 6.6 percent for the third quarter, 4.8 percent for the second quarter and 4.4 percent for the first quarter. - The improvement in net interest margin in a challenging interest rate environment to 3.64 percent for the fourth quarter of 2005 from 3.51 percent for the fourth quarter of 2004 and 3.61 percent for the third quarter of 2005. - The opening of loan production offices in Fayetteville, Arkansas and Gulf Shores, Alabama, further building BancorpSouth's presence in dynamic markets in Northwest Arkansas and the Alabama Gulf Coast. - The completion of the acquisition of American State Bank Corporation, headquartered in Jonesboro, Arkansas, expanding the Company's presence in growing markets in Northeast Arkansas. Fourth-Quarter 2005 Summary Results

For the fourth quarter of 2005, BancorpSouth's net income increased 41.5 percent to $34.8 million from $24.6 million for the fourth quarter of 2004. Net income per diluted share for the fourth quarter of 2005 was $0.44, up 37.5 percent from $0.32 for the fourth quarter of 2004.

The Company's results for the fourth quarter of 2005 included a net positive impact of $0.07 per diluted share, related to Hurricane Katrina. The net positive impact consisted of a $2.8 million reduction in the Company's previous provision for credit losses related to the hurricane and a $6.9 million gain from insurance proceeds relating to the hurricane, offset by lost non-interest revenue of approximately $415,000, primarily from the Company's waiver of certain fees and service charges for customers in the affected area. In addition, the fourth quarter of 2005 results included the positive impact of $0.01 per diluted share related to a $761,000 reversal of previous impairment of the Company's mortgage servicing asset ("MSA") and $10,000 of net securities gains. Results for the fourth quarter of 2004 included the net negative impact of $0.01 per diluted share related to a $305,000 reversal of a previously recorded charge for impairment of the Company's MSA and $1.5 million of net securities losses.

Excluding the impact of Hurricane Katrina, changes in the valuation of the MSA and net securities gains or losses, the Company's net income increased 13.1 percent to $28.6 million for the fourth quarter of 2005 from $25.3 million for the fourth quarter of 2004. Net income per diluted share rose 9.1 percent to $0.36 for the fourth quarter of 2005 from $0.33 for the fourth quarter of 2004. Please see page 15 of this press release for reconciliation of GAAP and non-GAAP results.

2005 Summary Results

BancorpSouth's net income for 2005 rose 4.1 percent to $115.2 million, or $1.47 per diluted share, from $110.6 million, or $1.43 per diluted share, for 2004. Excluding the impact of Hurricane Katrina, changes in the valuation of the MSA and net securities gains or losses, net income for 2005 increased 6.4 percent to $114.7 million, or $1.46 per diluted share, from $107.9 million, or $1.38 per diluted share, for 2004. Please see page 15 of this press release for reconciliation of GAAP and non-GAAP results.

Aubrey Patterson, Chairman and Chief Executive Officer of BancorpSouth, remarked, "Our financial and operating results for the fourth quarter of 2005 and throughout the year have demonstrated the results of steady improvement in our markets. Even with the impact of Hurricane Katrina on loan demand in the second half of 2005, growth in key measures of our traditional banking business, such as interest revenue and net interest revenue, continued in each quarter of the year, and we completed 2005 with stronger credit quality and an improved net interest margin than at the end of 2004. As a result, BancorpSouth is well positioned to benefit from significant organic and acquisition-related growth opportunities throughout its six-state franchise and in contiguous markets, as well as from the unprecedented rebuilding efforts along the Gulf Coast."

Net Interest Revenue

Interest revenue for the fourth quarter of 2005 increased 18.8 percent, or $23.7 million, to $150.0 million from $126.3 million for the fourth quarter of 2004 and 5.8 percent from $141.8 million for the third quarter of 2005. Interest expense increased 35.6 percent, or $15.1 million, to $57.7 million for the fourth quarter of 2005 from $42.6 million for the fourth quarter of 2004 and 8.2 percent from $53.3 million for the third quarter of 2005.

The average taxable equivalent yield on earning assets increased to 5.86 percent for the fourth quarter of 2005 from 5.25 percent for the fourth quarter of 2004 and 5.74 percent for the third quarter of 2005. The average rate paid on interest bearing liabilities was 2.69 percent for the fourth quarter of 2005, compared with 2.07 percent for the fourth quarter of 2004 and 2.54 percent for the third quarter of 2005.

Net interest revenue increased 10.3 percent to $92.3 million for the fourth quarter of 2005 from $83.7 million for the fourth quarter of 2004 and 4.3 percent from $88.4 million for the third quarter of 2005. Net interest margin was 3.64 percent for the fourth quarter of 2005 compared with 3.51 percent for the fourth quarter of 2004 and 3.61 percent for the third quarter of 2005.

Patterson continued, "The double-digit increase in net interest revenue for the fourth quarter of 2005 compared to the fourth quarter of 2004 reflected our continuing trend of accelerating growth. In addition to reflecting the expansion of our loan portfolio, this growth was driven by our continuous efforts to optimize our asset/liability mix during a challenging interest rate environment. As throughout 2005, asset yields improved for the quarter as we priced new loans in a rising rate environment and invested maturing securities in either higher-rate loans or short-term investments. Although the average rate paid on interest bearing liabilities also rose for the quarter, the increase was mitigated by our continuing strategy of funding loan growth partially through lower cost demand deposits rather than higher cost liabilities."

Deposit and Loan Activity

Total assets at December 31, 2005, increased 8.5 percent to $11.8 billion from $10.8 billion at December 31, 2004. Total deposits grew 6.1 percent to $9.6 billion at December 31, 2005, from $9.1 billion at December 31, 2004. Loans and leases, net of unearned interest, increased 7.8 percent to $7.4 billion at December 31, 2005, from $6.8 billion at December 31, 2004.

"Our loan growth on both a comparable- and sequential-quarter basis for the fourth quarter of 2005, even with the disruption to the Mississippi Gulf Coast market, reflected continued economic expansion, as well as the strategic benefits of our geographically diverse markets," added Patterson. "Our fourth-quarter results also benefited from the strengthening of this geographic diversity through our acquisitions over the last 12 months in Brentwood, Tennessee, Baton Rouge, Louisiana, and Jonesboro, Arkansas. We expect our new loan production offices opened in Fayetteville, Arkansas and Gulf Shores, Alabama will further contribute to expanding our markets for loans. Continuing trends that were evident throughout 2005, our deposit growth for the fourth quarter of 2005 compared with the fourth quarter of 2004 was driven by a 24.7 percent increase in noninterest bearing demand deposits and a 7.6 percent increase in interest bearing demand deposits. Time deposits at the end of 2005 remained stable compared to the end of 2004, as we continued to balance the needs of our core deposit relationships and our asset/liability management strategy."

Provision for Credit Losses and Allowance for Credit Losses

The provision for credit losses for the fourth quarter of 2005 declined 61.3 percent to $2.0 million from $5.1 million for the fourth quarter of 2004 and 86.6 percent from $14.7 million for the third quarter of 2005. As previously noted, the $10.4 million provision for credit losses in the third quarter of 2005 relating to the impact of Hurricane Katrina was reduced by $2.8 million in the fourth quarter of 2005 as contacts with many customers have been re-established and losses related to loans in the impacted area are not expected to be as great as originally anticipated in September immediately following the hurricane. Excluding this reduction, the provision for credit losses declined 6.2 percent for the fourth quarter of 2005 from the fourth quarter of 2004. Annualized net charge-offs were 0.16 percent of average loans and leases for the fourth quarter of 2005 compared with 0.32 percent for the fourth quarter of 2004 and 0.27 percent for the third quarter of 2005.

Non-performing loans and leases fell 15.3 percent to $28.8 million, or 0.39 percent of loans and leases, at December 31, 2005, from $34.0 million, or 0.50 percent of loans and leases, at December 31, 2004, while increasing 20.6 percent from $23.9 million, or 0.34 percent of loans and leases, at September 30, 2005. The allowance for credit losses increased to 1.38 percent of loans and leases at December 31, 2005, from 1.34 percent of loans and leases at December 31, 2004 and declined from 1.43 percent of loans and leases at September 30, 2005.

Patterson said, "During the fourth quarter of 2005, we were pleased to reduce a portion of our third-quarter provision for credit losses related to Hurricane Katrina after a careful review of our exposure in the affected area. Although the aggregate impact of the storm on our financial condition and results of operation may not be known for some time, we are encouraged that our loss exposure appears less than originally estimated. Because of payment date extensions to customers as part of our hurricane-relief efforts, none of the loans associated with our hurricane-related provision for credit losses are included in non-performing loans and leases at year end or annualized charge-offs for the quarter. Nonetheless, we remain confident of our high credit quality, as nonperforming loans and leases declined on a comparable-quarter basis for the eighth consecutive quarter and reserve coverage, or allowance for credit losses to nonperforming loans and leases, was 350 percent at the end of 2005."

Noninterest Revenue

Noninterest revenue increased 22.8 percent to $53.7 million for the fourth quarter of 2005 compared with $43.7 million for the fourth quarter of 2004. As discussed above, noninterest revenue for the fourth quarter of 2005 included a net positive impact of $7.2 million, consisting of hurricane-related insurance proceeds, the recovery of a previously recorded impairment of the MSA and net securities gains, offset by lost noninterest revenue related to hurricane relief. Noninterest revenue for the fourth quarter of 2004 included a net negative impact of $1.2 million, consisting of a reversal of a previously recorded charge for impairment of the Company's MSA and net securities losses. Excluding these items, noninterest revenue increased 3.5 percent for the fourth quarter of 2005 from the fourth quarter of 2004.

"Our noninterest revenue for the fourth quarter reflected the continuing and anticipated impact of a rising interest rate environment on our mortgage business, as well as reduced insurance commission revenues resulting from Hurricane Katrina," Patterson stated. "The hurricane primarily affected one of our three insurance agencies, which operates in the Mississippi Gulf Coast region, and was the major contributor to a reduction in insurance commission growth for the second half of 2005 to 2.1 percent over the second half of 2004, compared with 9.6 percent growth for the first half of 2005 over the same period in 2004. We are confident of the long-term growth potential our insurance business represents, and we remain fully committed to our strategy of building noninterest revenues both to provide more comprehensive services to our customers and to reduce the Company's exposure to interest rate risk."

Noninterest Expense

Noninterest expense increased 5.0 percent to $92.3 million for the fourth quarter of 2005 from $87.9 million for the fourth quarter of 2004 and increased 3.1 percent from $89.5 million for the third quarter of 2005. The growth in noninterest expense primarily resulted from additional salaries and employee benefits associated with the acquisitions of three banks since late December 2004 and increased occupancy costs from opening new offices during 2005.

Capital Management

BancorpSouth repurchased 219,100 shares of its common stock during the fourth quarter of 2005 under the stock repurchase plan authorized in April 2005 for the repurchase of up to 3 million shares. With 340,500 shares repurchased under this plan through the end of 2005 combined with the shares repurchased under earlier plans, BancorpSouth had repurchased approximately 10.9 million shares of its common stock as of December 31, 2005, or approximately 13 percent of the shares outstanding when the original share repurchase program was initiated in 2001. BancorpSouth will continue to evaluate additional share repurchases under the April 2005 plan, which authorizes these repurchases during a two-year period expiring April 30, 2007.

Summary

Patterson said, "We are encouraged by the improving environment for our traditional banking business during 2005, which we have further supported through our strategies for organic growth and acquisition. In addition, we remain confident that BancorpSouth is uniquely positioned in its markets because of its focus on providing high quality, community bank-style service to its consumer and small to mid-sized business customers, backed by the sophisticated and comprehensive product lines and infrastructure of a large regional bank.

"The strength of the Company's people and the depth of their involvement in their communities have been especially evident since the disaster created by Hurricane Katrina. We expect BancorpSouth to be deeply involved in helping to rebuild and renew the Gulf Coast. Both our new loan production office in Gulf Shores, Alabama and our recent approval for a new full-service branch office in Bay St. Louis, Mississippi are tangible evidence of this commitment. Because of the combination of our outstanding team, the growth opportunities within and contiguous to our six-state franchise, our high credit quality and our financial strength, BancorpSouth enters 2006 with undiminished prospects for long-term growth."

Conference Call

BancorpSouth will conduct a conference call to discuss its fourth quarter results today, January 23, 2005, 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 may include, without limitation, statements relating to the contribution of our new loan production offices to expanding our loan markets, the magnitude of loan-related losses in the area impacted by Hurricane Katrina, the aggregate impact of Hurricane Katrina on our financial condition and results of operation, the impact of a rising interest rate environment on our mortgage business, purchases under our common stock repurchase plan, our involvement in rebuilding and renewing the Gulf Coast and the reconciliation of GAAP and non-GAAP results. 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 may include, but are not limited to, the rate of economic recovery in the region affected by Hurricane Katrina, changes in economic conditions and government fiscal and monetary policies, fluctuations in prevailing interest rates and the ability of BancorpSouth to manage its assets and liabilities to limit exposure to changing interest rates, the ability of BancorpSouth to increase noninterest revenue and expand noninterest revenue business, the ability of BancorpSouth to continue to fund growth with lower cost demand deposits rather than higher cost liabilities, the ability of BancorpSouth to maintain credit quality, changes in laws and regulations affecting financial service companies 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, the ability of BancorpSouth to diversify revenue, 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 achieve profitable growth and increase shareholder value, the ability of BancorpSouth to attract, train and retain qualified personnel, the ability of BancorpSouth to repurchase its common stock on favorable terms, the ability of BancorpSouth to leverage opportunities, the ability of BancorpSouth to identify, close and effectively integrate potential acquisitions, the ability of BancorpSouth to expand geographically and enter fast-growing markets, 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 financial holding company headquartered in Tupelo, Mississippi with approximately $11.8 billion in assets. BancorpSouth Bank, a wholly-owned subsidiary of BancorpSouth, Inc., operates approximately 270 commercial banking, insurance, trust and broker/dealer locations in Alabama, Arkansas, Louisiana, Mississippi, Tennessee and Texas.

BancorpSouth, Inc. Selected Financial Data Three Months Ended Twelve Months Ended December 31, December 31, 2005 2004 2005 2004 (Dollars in thousands, except per share amounts) Earnings Summary: Net interest revenue $92,270 $83,668 $355,557 $333,792 Provision for credit losses 1,975 5,104 24,467 17,485 Noninterest revenue 53,708 43,736 198,812 183,519 Noninterest expense 92,326 87,928 362,102 342,945 Income before income taxes 51,677 34,372 167,800 156,881 Income tax provision 16,871 9,778 52,601 46,261 Net income $34,806 $24,594 $115,199 $110,620 Earning per share: Basic $0.44 $0.32 $1.47 $1.44 Diluted $0.44 $0.32 $1.47 $1.43 Balance sheet data at December 31: Total assets $11,769,164 $10,848,193 Total earning assets 10,622,578 9,944,432 Loans and leases, net of unearned interest 7,365,555 6,836,698 Allowance for credit losses 101,500 91,673 Total deposits 9,607,258 9,059,091 Common shareholders' equity 978,143 916,428 Book value per share 12.34 11.74 Average balance sheet data: Total assets $11,312,267 $10,569,902 $10,968,916 $10,555,133 Total earning assets 10,314,889 9,744,155 10,023,974 9,750,548 Loans and leases, net of unearned interest 7,165,025 6,527,002 7,026,009 6,387,656 Total deposits 9,336,366 8,851,405 9,110,411 8,816,520 Common shareholders' equity 960,009 879,434 934,646 873,264 Non-performing assets at December 31: Non-accrual loans and leases $8,816 $12,335 Loans and leases 90+ days past due 17,744 19,554 Restructured loans and leases 2,239 2,122 Other real estate owned 15,947 14,741 Net charge-offs as a percentage of average loans (annualized) 0.16% 0.32% 0.23% 0.31% Performance ratios (annualized): Return on average assets 1.22% 0.93% 1.05% 1.05% Return on common equity 14.38% 11.13% 12.33% 12.67% Net interest margin 3.64% 3.51% 3.64% 3.52% Average shares outstanding - basic 78,415,796 76,518,126 78,266,018 76,957,920 Average shares outstanding - diluted 78,707,893 76,966,334 78,596,899 77,378,136 BancorpSouth, Inc. Consolidated Balance Sheet (Unaudited) December 31, % 2005 2004 Change (Dollars in thousands) Assets Cash and due from banks $461,659 $315,849 46.16% Interest bearing deposits with other banks 6,809 6,687 1.82% Held-to-maturity securities, at amortized cost 1,412,529 1,274,920 10.79% Available-for-sale securities, at fair value 1,353,882 1,681,729 (19.49%) Trading securities, at fair value - 31,758 (100.00%) Federal funds sold and securities purchased under agreement to resell 409,531 27,414 N/A Loans and leases 7,401,212 6,865,044 7.81% Less: Unearned interest (35,657) (28,346) 25.79% Allowance for credit losses (101,500) (91,673) 10.72% Net loans and leases 7,264,055 6,745,025 7.70% Loans held for sale 74,271 85,225 (12.85%) Premises and equipment, net 261,172 228,524 14.29% Accrued interest receivable 78,730 66,471 18.44% Goodwill 138,754 109,719 26.46% Other assets 307,772 274,872 11.97% Total Assets $11,769,164 $10,848,193 8.49% Liabilities Deposits: Demand: Noninterest bearing $1,798,892 $1,442,067 24.74% Interest bearing 2,965,057 2,754,535 7.64% Savings 729,279 762,989 (4.42%) Other time 4,114,030 4,099,500 0.35% Total deposits 9,607,258 9,059,091 6.05% Federal funds purchased and securities sold under agreement to repurchase 748,139 455,908 64.10% Other short-term borrowings 2,000 12,500 (84.00%) Accrued interest payable 24,435 17,939 36.21% Junior subordinated debt securities 144,847 138,145 4.85% Long-term debt 137,228 141,094 (2.74%) Other liabilities 127,114 107,088 18.70% Total Liabilities 10,791,021 9,931,765 8.65% Shareholders' Equity Common stock 198,093 195,095 1.54% Capital surplus 108,961 81,122 34.32% Accumulated other comprehensive income (loss) (15,256) (802) N/A Retained earnings 686,345 641,013 7.07% Total Shareholders' Equity 978,143 916,428 6.73% Total Liabilities & Shareholders' Equity $11,769,164 $10,848,193 8.49% BancorpSouth, Inc. Consolidated Condensed Statements of Income (Dollars in thousands, except per share data) (Unaudited) Quarter Ended Year To Date Dec Sept Jun Mar Dec Dec Dec 2005 2005 2005 2005 2004 2005 2004 INTEREST REVENUE: Loans and leases $121,243 $115,800 $109,874 $103,805 $96,666 $450,722 $374,033 Deposits with other banks 177 166 139 111 135 593 653 Federal funds sold and securities purchased under agreement to resell 3,052 1,061 197 391 272 4,701 1,195 Held-to-maturity securities: Taxable 10,461 9,160 9,452 9,766 10,812 38,839 45,734 Tax-exempt 1,696 1,667 1,557 1,598 1,621 6,518 6,804 Available-for-sale securities: Taxable 11,048 11,761 12,765 13,745 14,516 49,319 60,204 Tax-exempt 1,400 1,481 1,491 1,677 1,584 6,049 6,605 Loans held for sale 920 686 571 1,018 649 3,195 2,401 Total interest revenue 149,997 141,782 136,046 132,111 126,255 559,936 497,629 INTEREST EXPENSE: Deposits 47,970 44,790 40,432 37,905 36,103 171,097 139,133 Fed funds purchased and securities sold under agreement to repurchase 4,896 3,692 2,590 2,161 1,726 13,339 5,226 Other 4,861 4,859 5,307 4,916 4,758 19,943 19,478 Total interest expense 57,727 53,341 48,329 44,982 42,587 204,379 163,837 Net interest revenue 92,270 88,441 87,717 87,129 83,668 355,557 333,792 Provision for credit losses 1,975 14,725 2,980 4,787 5,104 24,467 17,485 Net interest revenue, after provision for credit losses 90,295 73,716 84,737 82,342 78,564 331,090 316,307 NONINTEREST EXPENSES: Salaries and employee benefits 53,959 52,173 52,578 53,240 50,852 211,950 198,692 Occupancy, net of rental income 7,133 6,751 6,841 6,412 6,649 27,137 24,953 Equipment 5,592 5,501 5,637 5,449 5,329 22,179 21,815 Other 25,642 25,088 25,519 24,587 25,098 100,836 97,485 Total noninterest expenses 92,326 89,513 90,575 89,688 87,928 362,102 342,945 Income before income taxes 51,677 32,366 37,184 46,573 34,372 167,800 156,881 Income tax expense 16,871 9,507 11,394 14,829 9,778 52,601 46,261 Net income $34,806 $22,859 $25,790 $31,744 $24,594 $115,199 $110,620 Net income per share: Basic $0.44 $0.29 $0.33 $0.41 $0.32 $1.47 $1.44 Diluted $0.44 $0.29 $0.33 $0.40 $0.32 $1.47 $1.43 BancorpSouth, Inc. Average Balances, Interest Income and Expense, and Average Yields and Rates (Dollars in thousands) (Unaudited) Quarter Ended December 31, 2005 Average Yield/ (Taxable equivalent basis) Balance Interest Rate ASSETS Loans, loans held for sale, and leases net of unearned interest $7,242,759 $122,802 6.73% Held-to-maturity securities: Taxable 1,180,429 10,462 3.52% Tax-exempt 154,869 2,609 6.68% Available-for-sale securities: Taxable 1,303,933 11,048 3.36% Tax-exempt 120,821 2,154 7.07% Short-term investments 312,078 3,227 4.10% Total interest earning assets and revenue 10,314,889 152,302 5.86% Other assets 1,099,786 Less: allowance for credit losses (102,408) Total $11,312,267 LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Demand - interest bearing $2,888,641 $11,697 1.61% Savings 722,108 1,451 0.80% Other time 4,029,764 34,822 3.43% Short-term borrowings 601,703 4,915 3.24% Junior subordinated debt 140,403 2,835 8.01% Long-term debt 137,353 2,008 5.80% Total interest bearing liabilities and expense 8,519,972 57,728 2.69% Demand deposits - noninterest bearing 1,695,853 Other liabilities 136,433 Total liabilities 10,352,258 Shareholders' equity 960,009 Total $11,312,267 Net interest revenue $94,574 Net interest margin 3.64% Net interest rate spread 3.17% Interest bearing liabilities to interest earning assets 82.60% Net interest tax equivalent adjustment $2,305 BancorpSouth, Inc. Average Balances, Interest Income and Expense, and Average Yields and Rates (Dollars in thousands) (Unaudited) Quarter Ended December 31, 2004 Average Yield/ (Taxable equivalent basis) Balance Interest Rate ASSETS Loans, loans held for sale, and leases net of unearned interest $6,602,776 $97,859 5.90% Held-to-maturity securities: Taxable 1,209,803 10,812 3.56% Tax-exempt 141,927 2,494 6.99% Available-for-sale securities: Taxable 1,585,934 14,508 3.64% Tax-exempt 144,340 2,436 6.71% Short-term investments 59,375 408 2.80% Total interest earning assets and revenue 9,744,155 128,517 5.25% Other assets 915,620 Less: allowance for credit losses (89,873) Total $10,569,902 LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Demand - interest bearing $2,660,417 $6,564 0.98% Savings 773,506 1,465 0.76% Other time 4,049,843 28,074 2.76% Short-term borrowings 448,600 1,836 1.63% Junior subordinated debt 128,866 2,626 8.11% Long-term debt 135,587 2,022 5.93% Total interest bearing liabilities and expense 8,196,819 42,587 2.07% Demand deposits - noninterest bearing 1,367,639 Other liabilities 126,010 Total liabilities 9,690,468 Shareholders' equity 879,434 Total $10,569,902 Net interest revenue $85,930 Net interest margin 3.51% Net interest rate spread 3.18% Interest bearing liabilities to interest earning assets 84.12% Net interest tax equivalent adjustment $2,261 BancorpSouth, Inc. Average Balances, Interest Income and Expense, and Average Yields and Rates (Dollars in thousands) (Unaudited) Year To Date December 31, 2005 Average Yield/ (Taxable equivalent basis) Balance Interest Rate ASSETS Loans, loans held for sale, and leases net of unearned interest $7,098,300 $456,290 6.43% Held-to-maturity securities: Taxable 1,100,432 38,839 3.53% Tax-exempt 143,679 10,027 6.98% Available-for-sale securities: Taxable 1,412,600 49,319 3.49% Tax-exempt 129,519 9,307 7.19% Short-term investments 139,444 5,293 3.80% Total interest earning assets and revenue 10,023,974 569,075 5.68% Other assets 1,040,569 Less: allowance for credit losses (95,627) Total $10,968,916 LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Demand - interest bearing $2,849,199 $38,947 1.37% Savings 738,555 5,967 0.81% Other time 3,998,864 126,183 3.16% Short-term borrowings 526,274 14,080 2.68% Junior subordinated debt 138,714 11,142 8.03% Long-term debt 137,902 8,060 5.84% Total interest bearing liabilities and expense 8,389,508 204,379 2.44% Demand deposits - noninterest bearing 1,523,793 Other liabilities 120,969 Total liabilities 10,034,270 Shareholders' equity 934,646 Total $10,968,916 Net interest revenue $364,696 Net interest margin 3.64% Net interest rate spread 3.24% Interest bearing liabilities to interest earning assets 83.69% Net interest tax equivalent adjustment $9,139 BancorpSouth, Inc. Average Balances, Interest Income and Expense, and Average Yields and Rates (Dollars in thousands) (Unaudited) Year To Date December 31, 2004 Average Yield/ (Taxable equivalent basis) Balance Interest Rate ASSETS Loans, loans held for sale, and leases net of unearned interest $6,451,061 $378,546 5.87% Held-to-maturity securities: Taxable 1,213,525 45,735 3.77% Tax-exempt 146,103 10,466 7.16% Available-for-sale securities: Taxable 1,665,605 60,192 3.61% Tax-exempt 152,018 10,162 6.69% Short-term investments 122,236 1,849 1.51% Total interest earning assets and revenue 9,750,548 506,950 5.20% Other assets 895,873 Less: allowance for credit losses (91,288) Total $10,555,133 LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Demand - interest bearing $2,673,026 $24,193 0.91% Savings 782,031 5,659 0.72% Other time 4,063,173 109,282 2.69% Short-term borrowings 479,129 6,003 1.25% Junior subordinated debt 128,866 10,503 8.15% Long-term debt 137,354 8,197 5.97% Total interest bearing liabilities and expense 8,263,579 163,837 1.98% Demand deposits - noninterest bearing 1,298,290 Other liabilities 120,000 Total liabilities 9,681,869 Shareholders' equity 873,264 Total $10,555,133 Net interest revenue $343,113 Net interest margin 3.52% Net interest rate spread 3.22% Interest bearing liabilities to interest earning assets 84.75% Net interest tax equivalent adjustment $9,321 BancorpSouth, Inc. Reconciliation of Adjusted Earnings and Adjusted Earnings Per Diluted Share to Earnings and Earnings Per Diluted Share (Unaudited) (Dollars in thousands, except per share amounts) Three Months Ended Twelve Months Ended December 31, December 31, 2005 2004 2005 2004 Earnings - GAAP basis (a) $34,806 $24,594 $115,199 $110,620 Mortgage servicing asset expense (recovery), net of tax (470) (188) (2,354) (3,158) Impact on earnings related to Hurricane Katrina, net of tax (5,701) - 2,202 - Net securities (gains) losses, net of tax (6) 916 (291) 408 Adjusted earnings (b) $28,629 $25,322 $114,756 $107,870 Earnings per diluted share - GAAP basis $0.44 $0.32 $1.47 $1.43 Adjusted earnings per diluted share (b) $0.36 $0.33 $1.46 $1.39 Diluted shares used in computing per share amounts: Earnings per share 78,707,893 76,966,334 78,596,899 77,378,136 Adjusted earnings per share 78,707,893 76,966,334 78,596,899 77,378,136 (a)GAAP is the acronym for generally accepted accounting principles in the United States. (b)BancorpSouth, Inc. believes its calculation of adjusted earnings per diluted share provides a better measure of the Company's ongoing performance and provides better comparability to prior periods because it excludes volatile non-cash items, the impact on earnings related to Hurricane Katrina and the impact of securities gains or losses. Adjusted earnings per diluted share should not be considered as a measure of financial performance under accounting principles generally accepted in the United States, and the items excluded from it are significant components in understanding and assessing financial performance. Because adjusted earnings per diluted share is not a measurement determined in accordance with accounting principles generally accepted in the United States and is, therefore, susceptible to varying calculations, it may not be comparable as presented to other similarly titled measures of other companies.