TUPELO, Miss., July 21, 2014 /PRNewswire/ — BancorpSouth, Inc. (NYSE: BXS) today announced financial results for the quarter ended June 30, 2014, as well as the extension of the merger agreements with Ouachita Bancshares Corp. and Central Community Corporation.

Highlights for the second quarter of 2014 included:

• Net income of $30.9 million or $0.32 per diluted share.
• Net operating income of $31.5 million or $0.33 per diluted share.
• Acquired assets of Lafayette, Louisiana based Knox Insurance Group, LLC. Knox was formed in 1972 and currently produces annual revenues of approximately $3 million.
• Generated net loan growth of $243.3 million, or 10.8 percent annualized, which represents the fifth consecutive quarter of net loan growth.
• Mortgage loan production of $291.0 million, which contributed to mortgage lending revenue of $9.1 million for the quarter.
• Continued progress toward reducing core operating expenses.
• Net interest margin increased to 3.59 percent compared with 3.54 percent for the first quarter of 2014.
• Non-performing loans and leases (“NPLs”) declined $19.6 million, or 21.0 percent, compared to the first quarter of 2014, while non-performing assets (“NPAs”) decreased $27.9 million, or 17.8 percent, over the same period.

The Company reported net income of $30.9 million, or $0.32 per diluted share, for the second quarter of 2014 compared with net income of $20.8 million, or $0.22 per diluted share, for the second quarter of 2013 and net income of $28.4 million, or $0.30 per diluted share, for the first quarter of 2014. Additionally, the Company reported net income of $59.3 million, or $0.62 per diluted share, for the first six months of 2014 compared to $41.6 million, or $0.44 per diluted share, for the first six months of 2013.

The Company reported net operating income (excluding merger related and other non-operating expenses) of $31.5 million, or $0.33 per diluted share, for the second quarter of 2014 compared to $27.5 million, or $0.29 per diluted share, for the second quarter of 2013 and $28.8 million, or $0.30 per diluted share, for the first quarter of 2014.

The Company and each of Ouachita Bancshares Corp. and Central Community Corporation have determined additional time will be required to obtain regulatory approvals and to satisfy closing conditions necessary to complete their respective mergers. The Company and each of Ouachita Bancshares Corp. and Central Community Corporation have extended their respective merger agreements to June 30, 2015.

“We continue to believe our proposed mergers with Ouachita Bancshares Corp. and Central Community Corporation are in the best interest of our shareholders, customers and communities,” stated Dan Rollins, BancorpSouth Chairman and Chief Executive Officer.

As previously announced, the mergers have been unanimously approved by the boards of directors of all three companies, and by the shareholders of Ouachita Bancshares Corp. and Central Community Corporation. The transactions remain subject to required regulatory approvals and the satisfaction of other closing conditions.

The Company has learned that federal bank regulators have identified concerns during the course of routine supervisory activities regarding the Company’s procedures, systems and processes related to certain of its compliance programs, including its Bank Secrecy Act and anti-money-laundering programs. In addition, the Consumer Financial Protection Bureau currently is conducting a review of the Company’s fair lending practices.

Rollins continued, “While disappointed in the delay in being able to close these transactions, we are working diligently to resolve the compliance concerns that have been identified and to make the necessary improvements in our compliance programs. We are pleased with the confidence that our merger partners have demonstrated through the extension of the merger agreements.”

“Clearly, our financial performance continues to improve and reflect the internal progress that we have made both in shifting our focus towards growth and in continuing to challenge our cost structure. Our loan production efforts during the quarter resulted in net loan growth of over ten percent on an annualized basis. Our mortgage lending team produced over $290 million in mortgage loans and our insurance group continues to grow organically and benefit from the insurance transactions we recently closed. We also continue to challenge and reduce core operating costs, as evidenced by the decline seen in salaries and employee benefits. Total non-interest expense for the quarter was impacted by elevated other real estate costs and legal expense, as well as $1.0 million of merger-related expense. Otherwise, we continue to be pleased with the trends in our operating expenses,” Rollins added.

Earnings for the quarter reflect no recorded provision for credit losses, which is consistent with no recorded provision for the first quarter of 2014 and a decline from $3.0 million for the second quarter of 2013. NPLs declined $19.6 million, or 21.0 percent, during the second quarter of 2014 to $73.7 million at June 30, 2014 compared with $93.3 million at March 31, 2014 and declined $94.3 million, or 56.1 percent, from $167.9 million at June 30, 2013. In addition, total NPAs declined $27.9 million, or 17.8 percent, to $128.9 million at June 30, 2014 compared with $156.9 million at March 31, 2014 and declined $127.5 million, or 49.7 percent, from $256.4 million at June 30, 2013. Net charge-offs were $2.6 million for the second quarter of 2014 compared with $3.5 million for the first quarter of 2014 and $4.6 million for the second quarter of 2013.

Net Interest Revenue

Net interest revenue was $103.1 million for the second quarter of 2014, an increase of 5.0 percent from $98.2 million for the second quarter of 2013 and an increase of 1.5 percent from $101.5 million for the first quarter of 2014. The fully taxable equivalent net interest margin was 3.59 percent for the second quarter of 2014 compared to 3.36 percent for the second quarter of 2013 and 3.54 percent for the first quarter of 2014. Yields on loans and leases declined to 4.38 percent for the second quarter of 2014 compared with 4.62 percent for the second quarter of 2013 and 4.48 percent for the first quarter of 2014, while yields on total interest earning assets were relatively flat at 3.88 percent for the second quarter of 2014 compared with 3.82 percent for the second quarter of 2013 and 3.85 percent for the first quarter of 2014. The average cost of deposits declined to 0.28 percent for the second quarter of 2014 from 0.39 percent for the second quarter of 2013 and 0.31 percent for the first quarter of 2014.

Asset, Deposit and Loan Activity

Total assets were $13.0 billion at June 30, 2014 compared with $13.2 billion at June 30, 2013. Total deposits were $10.7 billion at June 30, 2014 compared with $11.0 billion at June 30, 2013. Loans and leases, net of unearned income, were $9.3 billion at June 30, 2014 compared with $8.7 billion at June 30, 2013.

The decrease in time deposits of $332.1 million, or 13.4 percent, at June 30, 2014 compared to June 30, 2013 was partially offset by growth in noninterest bearing demand deposits, which increased $107.5 million, or 4.1 percent, over the same period. Additionally, savings deposits increased $88.7 million, or 7.3 percent, while interest bearing demand deposits declined $155.3 million, or 3.3 percent, over the same period. As of June 30, 2014, $834.1 million of time deposits were scheduled to mature during the following two quarters at a weighted average rate of 0.77 percent.

Provision for Credit Losses and Allowance for Credit Losses

For the second quarter of 2014, no provision for credit losses was recorded, compared with $3.0 million for the second quarter of 2013 and no provision for the first quarter of 2014. Net charge-offs for the second quarter of 2014 were $2.6 million, compared with $4.6 million for the second quarter of 2013 and $3.5 million for the first quarter of 2014. Recoveries of previously charged-off loans were $3.0 million for the second quarter of 2014, compared with $7.7 million for the second quarter of 2013 and $4.5 million for the first quarter of 2014. Annualized net charge-offs were 0.11 percent of average loans and leases for the second quarter of 2014, compared with 0.21 percent for the second quarter of 2013 and 0.16 percent for the first quarter of 2014.

NPLs were $73.7 million, or 0.79 percent of net loans and leases, at June 30, 2014, compared with $167.9 million, or 1.94 percent of net loans and leases, at June 30, 2013, and $93.3 million, or 1.03 percent of net loans and leases, at March 31, 2014. The allowance for credit losses was $147.1 million, or 1.58 percent of net loans and leases, at June 30, 2014 compared with $161.0 million, or 1.86 percent of net loans and leases, at June 30, 2013 and $149.7 million, or 1.65 percent of net loans and leases, at March 31, 2014.

NPLs at June 30, 2014 consisted primarily of $64.5 million of nonaccrual loans, compared with $77.5 million of nonaccrual loans at March 31, 2014. Payments received on nonaccrual loans during the second quarter of 2014 totaled $12.9 million, compared with payments received on such loans of $23.2 million during the first quarter of 2014. NPLs at June 30, 2014 also included $2.4 million of loans 90 days or more past due and still accruing, compared with $1.9 million of such loans at March 31, 2014, and included restructured loans still accruing of $6.7 million at June 30, 2014, compared with $13.8 million of such loans at March 31, 2014. Early stage past due loans, representing loans 30-89 days past due, totaled $28.8 million at June 30, 2014 compared to $28.3 million at March 31, 2014.

Included in nonaccrual loans at June 30, 2014 were $36.6 million of loans, or 56.7 percent of total nonaccrual loans, that were paying as agreed, compared with $44.2 million, or 57.0 percent of total nonaccrual loans, at March 31, 2014. These loans were generally placed on nonaccrual status because the collateral values were less than the outstanding balances, and because of uncertainty as to whether the borrowers possessed adequate liquidity or would be able to generate sufficient cash flow to satisfy the debt given the short-fall in collateral values. Such loans are generally deemed to be impaired, with a specific reserve established for the difference in the balance owed and the disposition value of the collateral.

Other real estate owned (“OREO”) decreased $8.3 million to $55.3 million during the second quarter of 2014 from $63.6 million at March 31, 2014. This net decrease reflected $4.1 million of OREO added through foreclosure, offset by sales of OREO of $10.3 million. Write-downs in the value of existing properties were $2.2 million for the second quarter of 2014 compared to $1.8 million for the first quarter of 2014. Sales of OREO during the second quarter of 2014 resulted in a net loss of $1.1 million compared to a net loss of $0.5 million for the first quarter of 2014. At June 30, 2014, OREO was carried at 44.2 percent of the aggregate loan balances at the time of foreclosure, compared with 44.5 percent at March 31, 2014.

Noninterest Revenue

Noninterest revenue was $69.8 million for the second quarter of 2014, compared with $76.1 million for the second quarter of 2013 and $66.5 million for the first quarter of 2014. These results included a negative mortgage servicing rights (“MSR”) valuation adjustment of $2.1 million for the second quarter of 2014 compared with a positive MSR valuation adjustment of $5.3 million for the second quarter of 2013 and a negative MSR valuation adjustment of $1.5 million for the first quarter of 2014.

Excluding the MSR valuation adjustments, net mortgage lending revenue was $11.2 million for the second quarter of 2014, compared with $12.6 million for the second quarter of 2013 and $4.9 million for the first quarter of 2014. Mortgage origination volume for the second quarter of 2014 was $291.0 million, compared with $435.0 million for the second quarter of 2013 and $197.1 million for the first quarter of 2014.

Credit and debit card fee revenue was $8.6 million for the second quarter of 2014, compared with $8.3 million for the second quarter of 2013 and $7.8 million for the first quarter of 2014. Deposit service charge revenue was $12.4 million for the second quarter of 2014, compared with $12.8 million for the second quarter of 2013 and $12.5 million for the first quarter of 2014. Insurance commission revenue was $28.6 million for the second quarter of 2014, compared with $25.9 million for the second quarter of 2013 and $31.6 million for the first quarter of 2014.

Noninterest Expense

Noninterest expense for the second quarter of 2014 was $128.0 million, compared with $142.3 million for the second quarter of 2013 and $126.7 million for the first quarter of 2014. Salaries and employee benefits expense declined to $74.7 million for the second quarter of 2014 compared to $78.3 million for the second quarter of 2013 and $78.9 million for the first quarter of 2014. Foreclosed property expense was $4.2 million for the second quarter of 2014 compared with $3.2 million for the second quarter of 2013 and $2.6 million for the first quarter of 2014. Deposit insurance assessments were $2.0 million for the second quarter of 2014 compared to $2.9 million for the second quarter of 2013 and $1.6 million for the first quarter of 2014. Noninterest expense for the second quarter of 2013 included a pre-tax charge of $10.9 million related to the Voluntary Early Retirement Program (“VERO”).

Capital Management

BancorpSouth is a “well capitalized” financial holding company, as defined by federal regulations, with Tier 1 risk-based capital of 13.09 percent at June 30, 2014 and total risk based capital of 14.35 percent, compared with required minimum levels of 6 percent and 10 percent, respectively, for “well capitalized” classification. The Company’s equity capitalization consists of 100 percent common stock. BancorpSouth’s ratio of shareholders’ equity to assets was 12.24 percent at June 30, 2014, compared with 11.04 percent at June 30, 2013 and 11.83 percent at March 31, 2014. The ratio of tangible shareholders’ equity to tangible assets was 10.03 percent at June 30, 2014, compared with 9.04 percent at June 30, 2013 and 9.69 percent at March 31, 2014.

Transaction Closings and Announcements

On December 18, 2013, BancorpSouth Insurance Services, Inc. acquired the assets of Houston, Texas based GEM Insurance Agencies, LP (“GEM”). GEM was formed in 1954 and produces annual commission revenues of approximately $9 million. As a part of the transaction, the Company’s existing Houston office re-located into GEM’s current office located at 3355 West Alabama Street in Houston. The combined operations are expected to produce annual revenues of approximately $11 million.

On January 8, 2014, the Company announced the signing of a definitive merger agreement with Ouachita Bancshares Corp., parent company of Ouachita Independent Bank (collectively referred to as “OIB”), headquartered in Monroe, Louisiana, pursuant to which Ouachita Bancshares Corp. will be merged with and into the Company. OIB operates 12 full-service banking offices along the I-20 corridor and has loan production offices in Madison, Mississippi and Natchitoches, Louisiana. As of June 30, 2014, OIB, on a consolidated basis, reported total assets of $645.2 million, total loans of $484.6 million and total deposits of $538.3 million. Under the terms of the definitive agreement, the Company will issue approximately 3,675,000 shares of the Company’s common stock plus $22.875 million in cash for all outstanding shares of Ouachita Bancshares Corp.’s capital stock, subject to certain conditions and potential adjustments. The terms of the amended agreement provide for a minimum total deal value of $107.5 million but also allow Ouachita Bancshares Corp. to terminate the agreement if the average closing price of the Company’s common stock declines below a certain threshold prior to closing. The merger has been unanimously approved by the Board of Directors of each company and was approved by OIB shareholders on April 8, 2014. As previously discussed, the merger agreement has been extended to allow for additional time to obtain the necessary regulatory approvals and to satisfy all closing conditions. The transaction is expected to close shortly after receiving all required regulatory approvals, though the Company can provide no assurance that the merger will close timely or at all.

On January 21, 2014, the Company announced the signing of a definitive merger agreement with Central Community Corporation, headquartered in Temple, Texas, pursuant to which Central Community Corporation will be merged with and into the Company. Central Community Corporation is the parent company of First State Bank Central Texas (“First State Bank”), which is headquartered in Austin, Texas. First State Bank operates 31 full-service banking offices in central Texas. As of June 30, 2014, Central Community Corporation, on a consolidated basis, reported total assets of $1.4 billion, total loans of $562.0 million and total deposits of $1.1 billion. Under the terms of the definitive agreement, the Company will issue approximately 7,250,000 shares of the Company’s common stock plus $28.5 million in cash for all outstanding shares of Central Community Corporation’s capital stock, subject to certain conditions and potential adjustments. The terms of the amended agreement provide for a minimum total deal value of $191.0 million but also allow Central Community Corporation to terminate the agreement if the average closing price of the Company’s common stock declines below a certain threshold prior to closing. The merger has been unanimously approved by the Board of Directors of each company and was approved by Central Community Corporation shareholders on April 24, 2014. As previously discussed, the merger agreement has been extended to allow for additional time to obtain the necessary regulatory approvals and to satisfy all closing conditions. The transaction is expected to close shortly after receiving all required regulatory approvals, though the Company can provide no assurance that the merger will close timely or at all.

On April 9, 2014, BancorpSouth Insurance Services, Inc. acquired assets of Lafayette, Louisiana based Knox Insurance Group, LLC. Knox was formed in 1972 and currently produces annual revenues of approximately $3 million. Knox will continue to operate under current leadership in Lafayette.

Summary

Rollins concluded, “While the delay in being able to close the two pending bank transactions is unfortunate, it does not impact our ability to continue to do the things internally that improve performance. Our lending team continues to feed off the momentum they have built and our lines of business, including insurance, mortgage, and wealth management, continue to win new customers and grow revenue. We have plenty of work to do internally and a lot of runway left to continue to improve performance while we await the required regulatory approvals to close the transactions.”

Conference Call

BancorpSouth will conduct a conference call to discuss its second quarter 2014 results on July 22, 2014, 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.

About BancorpSouth, Inc.

BancorpSouth, Inc. is a financial holding company headquartered in Tupelo, Mississippi, with $13.0 billion in assets. BancorpSouth Bank, a wholly-owned subsidiary of BancorpSouth, Inc., operates 295 commercial banking, mortgage, and insurance locations in Alabama, Arkansas, Florida, Louisiana, Mississippi, Missouri, Tennessee and Texas, including an insurance location in Illinois.

Forward-Looking Statements

Certain statements contained in this news release may not be based upon 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,” “could,” “estimate,” “expect,” “foresee,” “intend,” “may,” “might,” “plan,” “will,” or “would” or future or conditional verb tenses and variations or negatives of such terms. These forward-looking statements include, without limitation, statements relating to the terms, timing and closings of the proposed mergers with Ouachita Bancshares Corp. and Central Community Corporation, the Company’s undertaking and performance of the necessary actions to remediate and fully resolve those concerns regarding the Company’s procedures, systems and processes related to certain of its compliance programs, including its Bank Secrecy Act and anti-money-laundering programs, that have been identified by its federal bank regulators, the acceptance by customers of Ouachita Bancshares Corp. and Central Community Corporation of the Company’s products and services if the proposed mergers close, non-accrual loans and any uncertainty regarding repayment, or determinations of impairment, of such non-accrual loans, revenue estimates for the Company’s operations in Houston, Texas following the closing of the transaction with GEM, the retention of key personnel, Knox’s continued operations and generation of revenues, the Company’s opportunities to grow organically and through acquisitions, the Company’s ability to enhance market share in existing markets and to gain acceptance of the Company generally in new markets, the Company’s focus on and impact of cost-saving initiatives, the Company’s ability to improve efficiency, trends in the Company’s operating expenses, and the Company’s use of non-GAAP financial measures.

The Company cautions you not to place undue reliance on the forward-looking statements contained in this news release in that actual results could differ materially from those indicated in such forward-looking statements because of a variety of factors. These factors may include, but are not limited to, the ability of the Company to resolve to the satisfaction of its federal bank regulators those identified concerns regarding the Company’s procedures, systems and processes related to certain of its compliance programs, including its Bank Secrecy Act and anti-money-laundering programs, the findings and results of the Consumer Financial Protection Bureau in its review of the Company’s fair lending practices, the ability of the Company, Ouachita Bancshares Corp. and Central Community Corporation to obtain regulatory approval of and close the proposed mergers, the potential impact upon the Company of the delay in the closings, if any, of these proposed mergers, the ability of the Company to retain key personnel after the closings, if any, of these proposed mergers and the Knox acquisition, conditions in the financial markets and economic conditions generally, the adequacy of the Company’s provision and allowance for credit losses to cover actual credit losses, the credit risk associated with real estate construction, acquisition and development loans, losses resulting from the significant amount of the Company’s other real estate owned, limitations on the Company’s ability to declare and pay dividends, the impact of legal or administrative proceedings, the availability of capital on favorable terms if and when needed, liquidity risk, governmental regulation, including the Dodd Frank Act, and supervision of the Company’s operations, the short-term and long-term impact of changes to banking capital standards on the Company’s regulatory capital and liquidity, the impact of regulations on service charges on the Company’s core deposit accounts, the susceptibility of the Company’s business to local economic or environmental conditions, the soundness of other financial institutions, changes in interest rates, the impact of monetary policies and economic factors on the Company’s ability to attract deposits or make loans, volatility in capital and credit markets, reputational risk, the impact of hurricanes or other adverse weather events, any requirement that the Company write down goodwill or other intangible assets, diversification in the types of financial services the Company offers, the Company’s ability to adapt its products and services to evolving industry standards and consumer preferences, competition with other financial services companies, risks in connection with completed or potential acquisitions, the Company’s growth strategy, interruptions or breaches in the Company’s information system security, the failure of certain third party vendors to perform, unfavorable ratings by rating agencies, dilution caused by the Company’s issuance of any additional shares of its common stock to raise capital or acquire other banks, bank holding companies, financial holding companies and insurance agencies, other factors generally understood to affect the assets, business, cash flows, financial condition, liquidity, prospects and/or results of operations of financial services companies and other factors detailed from time to time in the Company’s press releases and filings with the Securities and Exchange Commission. Forward-looking statements speak only as of the date that they were made, and, except as required by law, the Company does not undertake any obligation to update or revise forward-looking statements to reflect events or circumstances after the date of this news release. Unless otherwise noted, any quotes in this news release can be attributed to company management.

SOURCE BancorpSouth, Inc.