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

TUPELO, Miss., July 21 /PRNewswire-FirstCall/ -- BancorpSouth, Inc. today announced financial results for the second quarter and six-months ended June 30, 2005.

Highlights of the second quarter of 2005 included: - A 9.7 percent expansion in loans and leases, net of unearned interest, at the end of the second quarter of 2005 compared with the end of the second quarter of 2004. - Growth of 9.0 percent in insurance commission revenue, supporting the recent ranking of BancorpSouth's insurance brokerage operations as the 18th largest in the country among bank holding companies. - Continuing improvement in key trends in BancorpSouth's traditional banking business on both a comparable-quarter and sequential quarter basis, including growth in net interest margin, interest revenue and net interest revenue. - Further strengthening in credit quality, with a 36.1 percent decline in nonperforming loans and leases at the end of the quarter from the end of the second quarter of 2004; a reduction in annualized net charge- offs to 0.26 percent of average loans and leases, net of unearned interest, from 0.36 percent; and an increase in reserve coverage of nonperforming loans and leases to 3.83 from 2.44.

Net income was $25.8 million, or $0.33 per diluted share, for the second quarter of 2005 compared with net income of $31.3 million, or $0.40 per diluted share, for the second quarter of 2004. As in previous quarters, BancorpSouth's second quarter 2005 financial results were significantly affected by impairment of the Company's mortgage servicing asset ("MSA"). For the quarter, a $3.9 million MSA impairment charge reduced earnings by $0.03 per diluted share after tax. For the second quarter of 2004, the reversal of previously recorded MSA impairment charges totaled $9.4 million, or $0.07 per diluted share after tax. Excluding the impact of MSA impairment, adjusted earnings for the second quarter of 2005 would have been $28.2 million, or $0.36 per diluted share, from adjusted earnings of $25.5 million, or $0.33 per diluted share, for the second quarter of 2004. Please see tables below for reconciliation of earnings and earnings per diluted share to adjusted earnings and adjusted earnings per diluted share.

"Despite the negative swing from a year ago in the impairment of our mortgage servicing asset, we are pleased by the direction of our fundamental results in the second quarter," commented Aubrey Patterson, Chairman and Chief Executive Officer of BancorpSouth. "The moderate and steady improvement in the national economic environment has been reflected in our markets through continued growth in loan demand. As interest rates have increased, and as we have funded loan growth primarily through the maturation of lower rate investments and the growth in our lower cost demand deposits, we have also benefited from an expansion in our net interest margin. This ongoing recovery in our traditional banking business continues to be complemented by growth from noninterest revenue products and services, such as the significant growth achieved in our insurance business. As a result, we believe BancorpSouth is well positioned to leverage continued improvement in the economic environment to achieve further growth in the second half of 2005."

Net Interest Revenue

Interest revenue for the second quarter of 2005 grew 10.0 percent, or $12.3 million, to $136.0 million from $123.7 million for the second quarter of 2004 and 3.0 percent from $132.1 million for the first quarter of 2005. Interest expense increased 20.8 percent, or $8.3 million, to $48.3 million for the second quarter of 2005 from $40.0 million for the second quarter last year and 7.4 percent from $45.0 million for the first quarter of 2005.

The average taxable equivalent yield on earning assets increased to 5.63 percent for the second quarter of 2005 from 5.15 percent for the second quarter of 2004 and 5.48 percent for the first quarter of 2005. The average rate paid on interest bearing liabilities was 2.34 percent for the second quarter of 2005, compared with 1.93 percent for the second quarter of 2004 and 2.17 percent for the first quarter of 2005.

Net interest revenue increased 4.8 percent to $87.7 million for the second quarter of 2005 from $83.7 million for the second quarter of 2004 and 0.7 percent from $87.1 million for the first quarter of 2005. Net interest margin expanded to 3.66 percent for the second quarter of 2005 from 3.52 percent for the second quarter of 2004 and 3.64 percent for the first quarter of 2005.

Patterson remarked, "The stronger loan growth is primarily accountable for our second consecutive comparable-quarter increase in net interest revenue. The increase in our net interest margin again demonstrated our ongoing efforts to optimize our asset/liability mix to maximize net interest revenue while reducing our exposure to interest rate volatility. The growth in loans enhanced our ability to achieve this goal for the second quarter, especially in a rising interest rate environment, as did our conservative investment discipline and our continued focus on growth in low cost liabilities."

Deposit and Loan Activity

Total assets at June 30, 2005, increased 1.5 percent to $10.8 billion from $10.7 billion at June 30, 2004. Total deposits grew 2.1 percent to $9.0 billion at June 30, 2005, from $8.8 billion at June 30, 2004. Loans and leases, net of unearned interest, increased 9.7 percent to $7.0 billion at June 30, 2005, from $6.4 billion at June 30, 2004.

Patterson said, "We attribute our loan growth for the second quarter to both continued internal growth, which has now increased for four consecutive quarters, and to our December 2004 acquisitions of banks in Brentwood, TN, and Baton Rouge, LA. As in recent quarters, a number of our markets produced double-digit loan growth for the second quarter, driven by the stronger economic activity throughout our markets. In addition, the 7.5 percent increase in our demand deposits for the second quarter of 2005 compared with the second quarter last year also reflects strong internal growth and the December acquisitions. Savings and other time deposits fell 2.2 percent on a comparable-quarter basis, consistent with our success in funding our loan growth through lower cost demand deposits and maturing investment securities, while restricting growth in higher priced liabilities."

Provision for Credit Losses and Allowance for Credit Losses

The provision for credit losses for the second quarter of 2005 decreased 38.4 percent to $3.0 million from $4.8 million for both the second quarter of 2004 and the first quarter of 2005. Annualized net charge-offs were 0.26 percent of average loans and leases for the second quarter of 2005 compared with 0.36 percent for the second quarter of 2004 and 0.22 percent for the first quarter of 2005.

Non-performing loans and leases fell 36.1 percent to $23.7 million, or 0.34 percent of loans and leases, at June 30, 2005, from $37.1 million, or 0.58 percent of loans and leases, at June 30, 2004, while decreasing 25.8 percent from $32.0 million, or 0.46 percent of loans and leases, at March 31, 2005. The allowance for credit losses was 1.29 percent of loans and leases at June 30, 2005, 1.41 percent of loans and leases at June 30, 2004 and 1.34 percent of loans and leases at March 31, 2005.

"Our ability to reduce our provision for credit losses for the quarter, in spite of solid loan growth, was entirely attributable to the continued improvement in our loan quality," said Patterson. "After six consecutive quarterly declines in total nonperforming loans, our reserve coverage, or allowance for credit losses to nonperforming loans, has improved to 3.8 at the end of the second quarter of 2005 from 2.4 at the same time in 2004 and 2.9 at the end of the first quarter of 2005. In addition, our allowance for credit losses to annualized charge-offs remained significantly stronger than industry averages at 4.9 for the second quarter of 2005 compared with 4.0 for the second quarter last year and 6.1 for the first quarter of 2005. Although we believe a stronger economic environment has contributed to stronger loan quality, we also credit the Company's disciplined lending and credit practices and our colleagues responsible for their ongoing implementation."

Noninterest Revenue

Noninterest revenue declined $8.4 million, or 16.3 percent, for the second quarter of 2005 compared with the second quarter of 2004, primarily due, as discussed above, to the negative $3.9 million impact from impairment of the MSA for the second quarter of 2005 compared with the positive $9.4 million impact from the recovery of a previously recorded impairment to the MSA for the second quarter of 2004. Excluding these items, noninterest revenue increased 11.5 percent for the second quarter of 2005 from the second quarter of 2004.

Patterson added, "We remain fully committed to expanding our noninterest revenues as an important long-term strategy for lowering the impact of interest rate volatility on the Company's financial results. The continuing potential of this strategy is demonstrated by the ongoing growth in our insurance commission revenue, which rose 9.0 percent for the second quarter of 2005 from the comparable prior-year quarter. We are pleased with the growth produced in our insurance operations as we have increased the integration of our regional insurance agencies. We are focused on expanding this business through further growth within existing markets and additional potential acquisitions within our current six-state franchise or contiguous states."

Noninterest Expense

Noninterest expense increased 7.8 percent to $90.6 million for the second quarter of 2005 from $84.0 million for the same quarter in 2004 and increased 1.0 percent from $89.7 million for the first quarter of 2005. The comparable- quarter growth in noninterest expense for the second quarter primarily reflected the additional salaries and employee benefits expense from operating the Brentwood, TN and Baton Rouge, LA banks that were acquired in December 2004, as well as increased occupancy costs related to the opening of new offices.

Capital Management

BancorpSouth repurchased 24,000 shares of its common stock during the second quarter of 2005 under a new stock repurchase plan authorized in April 2005 for the repurchase of up to 3 million shares. Combined with the shares repurchased under earlier plans, BancorpSouth had repurchased approximately 10.6 million shares of its common stock as of June 30, 2005, or approximately 13 percent of the shares outstanding when the 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 concluded, "As we enter the second half of 2005, we are confident of BancorpSouth's strong competitive position within its mid-South market and of the Company's ability to leverage the opportunities presented by sustained economic expansion. Because of the long-term focus of our business model and operating strategies, we are prepared for the expansionary phase of the economic cycle with proven people, clear business objectives, a strong capital base, high credit quality and a centralized technology infrastructure with inherent potential for significant operating leverage. We expect to produce growth in both our traditional banking business and in our noninterest revenue products and services through increased penetration of existing markets and expansion into new markets. We also continue to evaluate potential acquisitions appropriate to achieving our goals."

Conference Call

BancorpSouth will conduct a conference call to discuss its second quarter results tomorrow, July 22, 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 interest rates, noninterest revenue products and services, lending and credit practices, business objectives, asset/liability mix, low cost liabilities, loan demand, loan quality, loan and deposit growth, long-term strategy, insurance operations, operating leverage, centralized technology infrastructure, allowance for credit losses, net interest revenue, customer relationships, credit quality, business model and operating strategies, expansion of products and services, penetration of existing markets and expansion into new markets, potential acquisitions, the economic and operating environment, common stock repurchase plan, capitalization, competitive position, long-term growth prospects and 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 may include, but are not limited to, 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 fund growth with lower cost liabilities, the ability of BancorpSouth to maintain credit quality, the ability of BancorpSouth to effectively integrate acquisitions, 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 and close 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 $10.8 billion in assets. BancorpSouth Bank, a wholly-owned subsidiary of BancorpSouth, Inc., operates approximately 250 commercial banking, insurance, trust and broker/dealer locations in Alabama, Arkansas, Louisiana, Mississippi, Tennessee and Texas.

BancorpSouth, Inc. Selected Financial Data Three Months Ended Six Months Ended June 30, June 30, 2005 2004 2005 2004 (Dollars in thousands, except per share amounts) Earnings Summary: Net interest revenue $87,717 $83,684 $174,846 $167,166 Provision for credit losses 2,980 4,835 7,767 8,851 Noninterest revenue 43,022 51,416 96,941 97,456 Noninterest expense 90,575 84,031 180,263 170,036 Income before income taxes 37,184 46,234 83,757 85,735 Income tax provision 11,394 14,961 26,223 27,297 Net income $25,790 $31,273 $57,534 $58,438 Earning per share: Basic $0.33 $0.41 $0.74 $0.76 Diluted $0.33 $0.40 $0.73 $0.75 Balance sheet data at June 30: Total assets $10,831,291 $10,670,323 Total earning assets 9,876,000 9,797,631 Loans and leases, net of unearned interest 7,046,942 6,422,864 Allowance for credit losses 91,076 90,537 Total deposits 8,974,580 8,789,246 Common shareholders' equity 936,167 852,910 Book value per share 11.96 11.10 Average balance sheet data: Total assets $10,788,265 $10,614,248 $10,833,282 $10,533,989 Total earning assets 9,858,677 9,831,843 9,906,348 9,753,243 Loans and leases, net of unearned interest 6,989,792 6,333,868 6,932,500 6,280,566 Total deposits 8,963,216 8,801,737 9,028,500 8,794,229 Common shareholders' equity 924,661 886,197 921,617 876,096 Non-performing assets at June 30: Non-accrual loans and leases $10,619 $13,611 Loans and leases 90+ days past due 11,010 19,462 Restructured loans and leases 2,120 4,072 Other real estate owned 16,072 20,440 Net charge-offs as a percentage of average loans (annualized) 0.26% 0.36% 0.24% 0.33% Performance ratios (annualized) Return on average assets 0.96% 1.18% 1.07% 1.12% Return on common equity 11.19% 14.19% 12.59% 13.40% Net interest margin 3.66% 3.52% 3.65% 3.54% Average shares outstanding - basic 78,220,515 77,063,891 78,212,363 77,365,432 Average shares outstanding - diluted 78,536,657 77,444,302 78,554,782 77,783,687 BancorpSouth, Inc. Consolidated Balance Sheet (Unaudited) June 30, % 2005 2004 Change (In thousands) Assets Cash and due from banks $354,694 $333,697 6.29% Interest bearing deposits with other banks 6,746 18,024 (62.57%) Held-to-maturity securities, at amortized cost 1,208,680 1,510,209 (19.97%) Available-for-sale securities, at fair value 1,531,165 1,793,134 (14.61%) Trading securities, at fair value 114 - N/A Federal funds sold and securities purchased under agreement to resell 24,569 10,488 134.26% Loans and leases 7,077,568 6,452,602 9.69% Less: Unearned interest (30,626) (29,738) 2.99% Allowance for credit losses (91,076) (90,537) 0.60% Net loans and leases 6,955,866 6,332,327 9.85% Loans held for sale 57,785 42,913 34.66% Premises and equipment, net 239,306 218,456 9.54% Accrued interest receivable 65,428 68,690 (4.75%) Goodwill 107,780 61,445 75.41% Other assets 279,158 280,940 (0.63%) Total Assets $10,831,291 $10,670,323 1.51% Liabilities Deposits: Demand: Noninterest bearing $1,489,190 $1,311,477 13.55% Interest bearing 2,723,172 2,607,141 4.45% Savings 732,298 786,235 (6.86%) Other time 4,029,920 4,084,393 (1.33%) Total deposits 8,974,580 8,789,246 2.11% Federal funds purchased and securities sold under agreement to repurchase 484,400 458,116 5.74% Other short-term borrowings 62,000 185,000 (66.49%) Accrued interest payable 19,628 17,590 11.59% Junior subordinated debt securities 138,145 128,866 7.20% Long-term debt 137,954 137,838 0.08% Other liabilities 78,417 100,757 (22.17%) Total Liabilities 9,895,124 9,817,413 0.79% Shareholders' Equity Common stock 195,723 192,086 1.89% Capital surplus 83,359 44,445 87.56% Accumulated other comprehensive income (loss) (7,607) (8,276) (8.08%) Retained earnings 664,692 624,655 6.41% Total Shareholders' Equity 936,167 852,910 9.76% Total Liabilities & Shareholders' Equity $10,831,291 $10,670,323 1.51% BANCORPSOUTH, INC. Consolidated Condensed Statements of Income (dollars in thousands, except per share data) (Unaudited) Quarter Ended Jun 2005 Mar 2005 Dec 2004 INTEREST REVENUE: Loans and leases $109,874 $103,805 $96,666 Deposits with other banks 139 111 135 Federal funds sold and securities purchased under agreement to resell 197 391 272 Held-to-maturity securities: Taxable 9,452 9,766 10,812 Tax-exempt 1,557 1,598 1,621 Available-for-sale securities: Taxable 12,765 13,745 14,516 Tax-exempt 1,491 1,677 1,584 Loans held for sale 571 1,018 649 Total interest revenue 136,046 132,111 126,255 INTEREST EXPENSE: Deposits 40,432 37,905 36,103 Fed funds purchased and securities sold under agreement to repurchase 2,590 2,161 1,726 Other 5,307 4,916 4,758 Total interest expense 48,329 44,982 42,587 Net interest revenue 87,717 87,129 83,668 Provision for credit losses 2,980 4,787 5,104 Net interest revenue, after provision for credit losses 84,737 82,342 78,564 NONINTEREST REVENUE: Mortgage lending (2,453) 5,628 2,041 Service charges 16,411 14,726 15,533 Trust income 2,004 1,889 2,111 Security gains, net 371 70 (1,484) Insurance commissions 14,425 15,932 14,282 Other 12,264 15,674 11,253 Total noninterest revenue 43,022 53,919 43,736 NONINTEREST EXPENSES: Salaries and employee benefits 52,578 53,240 50,852 Occupancy, net of rental income 6,841 6,412 6,649 Equipment 5,637 5,449 5,329 Other 25,519 24,587 25,098 Total noninterest expenses 90,575 89,688 87,928 Income before income taxes 37,184 46,573 34,372 Income tax expense 11,394 14,829 9,778 Net income $25,790 $31,744 $24,594 Net income per share: Basic $0.33 $0.41 $0.32 Diluted $0.33 $0.40 $0.32 BANCORPSOUTH, INC. Consolidated Condensed Statements of Income (dollars in thousands, except per share data) (Unaudited) Quarter Ended Sep 2004 Jun 2004 INTEREST REVENUE: Loans and leases $93,759 $91,358 Deposits with other banks 102 288 Federal funds sold and securities purchased under agreement to resell 111 115 Held-to-maturity securities: Taxable 12,020 12,791 Tax-exempt 1,693 1,694 Available-for-sale securities: Taxable 14,691 15,309 Tax-exempt 1,613 1,650 Loans held for sale 517 478 Total interest revenue 124,506 123,683 INTEREST EXPENSE: Deposits 35,198 33,915 Fed funds purchased and securities sold under agreement to repurchase 1,336 1,101 Other 5,014 4,983 Total interest expense 41,548 39,999 Net interest revenue 82,958 83,684 Provision for credit losses 3,530 4,835 Net interest revenue, after provision for credit losses 79,428 78,849 NONINTEREST REVENUE: Mortgage lending (672) 11,365 Service charges 15,965 16,057 Trust income 2,059 1,842 Security gains, net 146 59 Insurance commissions 14,366 13,232 Other 10,463 8,861 Total noninterest revenue 42,327 51,416 NONINTEREST EXPENSES: Salaries and employee benefits 49,176 48,628 Occupancy, net of rental income 6,264 6,084 Equipment 5,390 5,636 Other 24,150 23,683 Total noninterest expenses 84,980 84,031 Income before income taxes 36,775 46,234 Income tax expense 9,187 14,961 Net income $27,588 $31,273 Net income per share: Basic $0.36 $0.41 Diluted $0.36 $0.40 BANCORPSOUTH, INC. Consolidated Condensed Statements of Income (dollars in thousands, except per share data) (Unaudited) Year To Date Jun 2005 Jun 2004 INTEREST REVENUE: Loans and leases $213,678 $183,608 Deposits with other banks 251 416 Federal funds sold and securities purchased under agreement to resell 589 811 Held-to-maturity securities: Taxable 19,218 22,903 Tax-exempt 3,154 3,490 Available-for-sale securities: Taxable 26,510 30,997 Tax-exempt 3,168 3,409 Loans held for sale 1,589 1,234 Total interest revenue 268,157 246,868 INTEREST EXPENSE: Deposits 78,337 67,832 Fed funds purchased and securities sold under agreement to repurchase 4,751 2,163 Other 10,223 9,707 Total interest expense 93,311 79,702 Net interest revenue 174,846 167,166 Provision for credit losses 7,767 8,851 Net interest revenue, after provision for credit losses 167,079 158,315 NONINTEREST REVENUE: Mortgage lending 3,175 10,224 Service charges 31,137 30,375 Trust income 3,893 3,528 Security gains, net 441 677 Insurance commissions 30,357 27,690 Other 27,938 24,962 Total noninterest revenue 96,941 97,456 NONINTEREST EXPENSES: Salaries and employee benefits 105,818 98,663 Occupancy, net of rental income 13,252 12,040 Equipment 11,087 11,096 Other 50,106 48,237 Total noninterest expenses 180,263 170,036 Income before income taxes 83,757 85,735 Income tax expense 26,223 27,297 Net income $57,534 $58,438 Net income per share: Basic $0.74 $0.76 Diluted $0.73 $0.75 BancorpSouth, Inc. Average Balances, Interest Income and Expense, and Average Yields and Rates (Dollars in thousands) (Unaudited) Quarter Ended June 30, 2005 Average Yield/ (Taxable equivalent basis) Balance Interest Rate ASSETS Loans, loans held for sale, and leases net of unearned interest $7,034,782 $111,017 6.33% Held-to-maturity securities: Taxable 1,072,562 9,452 3.53% Tax-exempt 137,503 2,395 6.99% Available-for-sale securities: Taxable 1,444,327 12,765 3.54% Tax-exempt 131,287 2,294 7.01% Short-term investments 38,216 336 3.54% Total interest earning assets and revenue 9,858,677 138,259 5.63% Other assets 1,022,044 Less: allowance for credit losses (92,456) Total $10,788,265 LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Demand - interest bearing $2,795,706 $8,762 1.26% Savings 747,451 1,503 0.81% Other time 3,954,223 30,166 3.06% Short-term borrowings 517,846 3,109 2.41% Junior subordinated debt 138,145 2,771 8.04% Long-term debt 138,074 2,018 5.86% Total interest bearing liabilities and expense 8,291,445 48,329 2.34% Demand deposits - noninterest bearing 1,465,836 Other liabilities 106,323 Total liabilities 9,863,604 Shareholders' equity 924,661 Total $10,788,265 Net interest revenue $89,930 Net interest margin 3.66% Net interest rate spread 3.29% Interest bearing liabilities to interest earning assets 84.10% Net interest tax equivalent adjustment $2,213 BancorpSouth, Inc. Average Balances, Interest Income and Expense, and Average Yields and Rates (Dollars in thousands) (Unaudited) Quarter Ended June 30, 2004 Average Yield/ (Taxable equivalent basis) Balance Interest Rate ASSETS Loans, loans held for sale, and leases net of unearned interest $6,374,578 $92,361 5.83% Held-to-maturity securities: Taxable 1,343,048 12,791 3.83% Tax-exempt 148,345 2,606 7.06% Available-for-sale securities: Taxable 1,718,434 15,307 3.58% Tax-exempt 152,756 2,538 6.68% Short-term investments 94,682 402 1.71% Total interest earning assets and revenue 9,831,843 126,005 5.15% Other assets 874,186 Less: allowance for credit losses (91,781) Total $10,614,248 LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Demand - interest bearing $2,669,270 $5,765 0.87% Savings 790,000 1,353 0.69% Other time 4,059,635 26,798 2.65% Short-term borrowings 531,398 1,400 1.06% Junior subordinated debt 128,866 2,625 8.19% Long-term debt 137,952 2,058 6.00% Total interest bearing liabilities and expense 8,317,122 39,999 1.93% Demand deposits - noninterest bearing 1,282,832 Other liabilities 128,097 Total liabilities 9,728,051 Shareholders' equity 886,197 Total $10,614,248 Net interest revenue $86,006 Net interest margin 3.52% Net interest rate spread 3.22% Interest bearing liabilities to interest earning assets 84.59% Net interest tax equivalent adjustment $2,322 BancorpSouth, Inc. Average Balances, Interest Income and Expense, and Average Yields and Rates (Dollars in thousands) (Unaudited) Year To Date June 30, 2005 Average Yield/ (Taxable equivalent basis) Balance Interest Rate ASSETS Loans, loans held for sale, and leases net of unearned interest $7,006,579 $216,388 6.23% Held-to-maturity securities: Taxable 1,082,715 19,218 3.58% Tax-exempt 137,915 4,853 7.10% Available-for-sale securities: Taxable 1,488,762 26,510 3.59% Tax-exempt 135,200 4,874 7.27% Short-term investments 55,177 839 3.07% Total interest earning assets and revenue 9,906,348 272,682 5.55% Other assets 1,019,268 Less: allowance for credit losses (92,334) Total $10,833,282 LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Demand - interest bearing $2,832,204 $16,577 1.18% Savings 756,919 3,058 0.81% Other time 3,993,458 58,702 2.96% Short-term borrowings 491,173 5,407 2.22% Junior subordinated debt 138,145 5,526 8.07% Long-term debt 138,276 4,041 5.89% Total interest bearing liabilities and expense 8,350,175 93,311 2.25% Demand deposits - noninterest bearing 1,445,919 Other liabilities 115,571 Total liabilities 9,911,665 Shareholders' equity 921,617 Total $10,833,282 Net interest revenue $179,371 Net interest margin 3.65% Net interest rate spread 3.30% Interest bearing liabilities to interest earning assets 84.29% Net interest tax equivalent adjustment $4,525 BancorpSouth, Inc. Average Balances, Interest Income and Expense, and Average Yields and Rates (Dollars in thousands) (Unaudited) Year To Date June 30, 2004 Average Yield/ (Taxable equivalent basis) Balance Interest Rate ASSETS Loans, loans held for sale, and leases net of unearned interest $6,344,678 $185,883 5.89% Held-to-maturity securities: Taxable 1,170,951 22,903 3.93% Tax-exempt 148,805 5,368 7.25% Available-for-sale securities: Taxable 1,730,460 30,994 3.60% Tax-exempt 158,982 5,244 6.63% Short-term investments 199,367 1,227 1.24% Total interest earning assets and revenue 9,753,243 251,619 5.19% Other assets 872,802 Less: allowance for credit losses (92,056) Total $10,533,989 LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Demand - interest bearing $2,685,161 $11,459 0.86% Savings 787,081 2,715 0.69% Other time 4,062,137 53,659 2.66% Short-term borrowings 471,545 2,497 1.06% Junior subordinated debt 128,866 5,251 8.19% Long-term debt 138,117 4,122 6.00% Total interest bearing liabilities and expense 8,272,907 79,702 1.94% Demand deposits - noninterest bearing 1,259,850 Other liabilities 124,136 Total liabilities 9,656,893 Shareholders' equity 876,096 Total $10,533,989 Net interest revenue $171,917 Net interest margin 3.54% Net interest rate spread 3.25% Interest bearing liabilities to interest earning assets 84.82% Net interest tax equivalent adjustment $4,751 BancorpSouth, Inc. Reconciliation of Adjusted Earnings and Adjusted Earnings Per Diluted Share to Earnings and Earnings Per Diluted Share (Unaudited) (In thousands, except per share amounts) Three-Months Ended June 30, 2005 2004 Earnings - GAAP basis (a) $25,790 $31,273 Mortgage servicing asset expense (recovery), net of tax 2,383 (5,782) Adjusted earnings (b) $28,173 $25,491 Earnings per diluted share - GAAP basis $0.33 $0.40 Adjusted earnings per diluted share (b) $0.36 $0.33 Diluted shares used in computing per share amounts: Earnings per share 78,536,657 77,444,302 Adjusted earnings per share 78,536,657 77,444,302 (a) GAAP is the acronym for generally accepted accounting principles. (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 a volatile non-cash item. 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 thus susceptible to varying calculations, it may not be comparable as presented to other similarly titled measures of other companies.