BancorpSouth : Announces First Quarter 2017 Financial Results

Contact:

Chris Bagley Will Fisackerly

President and Chief Operating Officer; Senior Vice President and

Interim Chief Financial Officer Director of Corporate Finance

662/680-2009 662/680-2475

TUPELO, MS, April 19, 2017/PRNewswire -- BancorpSouth, Inc. (NYSE: BXS) today announced financial results for the quarter ended March 31, 2017.

• Net income of $38.1 million, or $0.41 per diluted share.

• Generated total deposit growth of $354.7 million, or 12.3 percent on an annualized basis.

• Net interest margin remained stable at 3.46 percent.

• Earnings benefitted from a positive pre-tax mortgage servicing rights ("MSR") valuation adjustment of $0.9 million.

• Net operating income - excluding MSR - of $36.9 million, or $0.39 per diluted share.

• Credit quality remained stable; recorded provision for credit losses of $1.0 million for the quarter.

• Total operating expense declined compared to both the first and fourth quarters of 2016 and operating efficiency ratio - excluding MSR - declined to 68.4 percent.

• Repurchased 1,613,691 shares of outstanding common stock at a weighted average price of $30.62 per share.

The Company reported net income of $38.1 million, or $0.41 per diluted share, for the first quarter of 2017 compared with net income of $22.5 million, or $0.24 per diluted share, for the first quarter of 2016 and net income of $37.7 million, or $0.40 per diluted share, for the fourth quarter of 2016.

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Box 789 • Tupelo, MS 38802-0789 • (662) 680-2000

The Company reported net operating income - excluding MSR - of $36.9 million, or $0.39 per diluted share, for the first quarter of 2017 compared to $36.9 million, or $0.39 per diluted share, for the first quarter of 2016 and $30.7 million, or $0.33 per diluted share, for the fourth quarter of 2016. Net operating income - excluding MSR - is a non-GAAP financial measure used by management to assess the core operating performance of the Company. This measure excludes items such as securities gains and losses, MSR valuation adjustments, restructuring charges, merger-related expenses, industry-related legal settlements, and other one-time charges. A full reconciliation of this measure is provided in the supplemental schedules of this news release.

"Our first quarter results reflect consistent improvement in our financial results, highlighted by continued balance sheet growth, disciplined expense control, and continued share repurchase activity," remarked Dan Rollins, Chairman and Chief Executive Officer. "We reported deposit growth for the quarter of $354.7 million, or 12.3 percent on an annualized basis. While first quarter is typically seasonally high for deposit growth, this growth is reflective of our teammates' continued commitment to broadening customer relationships and growing core deposits. Total operating expenses declined compared to both the first and fourth quarters of 2016, resulting in a decline in the operating efficiency ratio - excluding MSR - to 68.4 percent. Finally, we continue to be active in our share repurchase program, as we repurchased just over 1.6 million shares during the quarter at a weighted average price of $30.62 per share."

"Additionally, our net interest margin remained stable at 3.46 percent compared to the fourth quarter of last year. Yields on both our loan portfolio and securities portfolio increased during the quarter while our average cost of deposits remained flat. This benefit to our margin was offset by a shift in our asset mix, which resulted from increases in lower yielding assets, including overnight investments and securities."

Net interest revenue was $114.6 million for the first quarter of 2017, an increase of 3.1 percent from $111.2 million for the first quarter of 2016 and a decrease of 0.7 percent from $115.4 million for the fourth quarter of 2016. The fully taxable equivalent net interest margin was 3.46 percent for the first quarter of 2017 compared to 3.56 percent for the first quarter of 2016 and

3.46 percent for the fourth quarter of 2016. Yields on loans and leases were 4.20 percent for the first quarter of 2017 compared with 4.21 percent for the first quarter of 2016 and 4.18 percent for the fourth quarter of 2016, while yields on total interest earning assets were 3.70 percent for the first quarter of 2017 compared with 3.78 percent for the first quarter of 2016 and 3.70 percent for the fourth quarter of 2016. The average cost of deposits was 0.23 percent for the first quarter of 2017 compared to 0.21 percent for the first quarter of 2016 and 0.23 percent for the fourth quarter of 2016.

Total assets were $14.9 billion at March 31, 2017 compared with $13.9 billion at March 31, 2016. Loans and leases, net of unearned income, were $10.8 billion at March 31, 2017 compared with $10.4 billion at March 31, 2016.

Total deposits were $12.0 billion at March 31, 2017 compared with $11.5 billion at March 31, 2016. Time deposits decreased $11.0 million, or 0.6 percent, at March 31, 2017 compared to March 31, 2016. Over the same time period, interest bearing demand deposits increased $148.4 million, or 2.9 percent, while noninterest bearing demand deposits increased $298.0 million, or

9.6 percent, and savings deposits increased $120.7 million, or 8.0 percent.

Earnings for the first quarter reflect a provision for credit losses of $1.0 million, which was flat compared to both the first and fourth quarters of 2016. Net recoveries for the first quarter of 2017 were $0.5 million, compared with net charge-offs of $1.0 million for the first quarter of 2016 and net charge-offs of $3.2 million for the fourth quarter of 2016. The allowance for credit losses was $125.2 million, or 1.16 percent of net loans and leases, at March 31, 2017, compared with $126.5 million, or 1.21 percent of net loans and leases, at March 31, 2016 and $123.7 million, or 1.14 percent of net loans and leases, at December 31, 2016.

Total non-performing assets ("NPAs") were $90.0 million, or 0.83 percent of net loans and leases, at March 31, 2017 compared with $106.9 million, or 1.02 percent of net loans and leases, at March 31, 2016, and $109.7 million, or 1.01 percent of net loans and leases, at December 31, 2016. Other real estate owned was $8.5 million at March 31, 2017 compared with $12.7 million at March 31, 2016 and $7.8 million at December 31, 2016.

Noninterest revenue was $70.9 million for the first quarter of 2017, compared with $64.7 million for the first quarter of 2016 and $72.0 million for the fourth quarter of 2016. These results included a positive MSR valuation adjustment of $0.9 million for the first quarter of 2017 compared with a negative MSR valuation adjustment of $8.0 million for the first quarter of 2016 and a positive MSR valuation adjustment of $11.2 million for the fourth quarter of 2016. Valuation adjustments in the MSR asset are driven primarily by fluctuations in interest rates period over period.

Excluding the MSR valuation adjustments, mortgage banking revenue was $8.1 million for the first quarter of 2017, compared with $9.8 million for the first quarter of 2016 and $5.6 million for the fourth quarter of 2016. Mortgage origination volume for the first quarter of 2017 was

$287.8 million, compared with $315.4 million for the first quarter of 2016 and $395.9 million for the fourth quarter of 2016.

Credit and debit card fee revenue was $8.9 million for the first quarter of 2017, compared with

$9.0 million for the first quarter of 2016 and $9.3 million for the fourth quarter of 2016. Deposit service charge revenue was $9.7 million for the first quarter of 2017, compared with $11.0 million for the first quarter of 2016 and $10.0 million for the fourth quarter of 2016. Insurance commission revenue was $32.9 million for the first quarter of 2017, compared with $33.2 million for the first quarter of 2016 and $25.7 million for the fourth quarter of 2016. Wealth management revenue was $5.2 million for the first quarter of 2017, compared with $5.1 million for the first quarter of 2016 and $5.4 million for the fourth quarter of 2016.

Noninterest expense for the first quarter of 2017 was $127.1 million, compared with $141.5 million for the first quarter of 2016 and $130.5 million for the fourth quarter of 2016. Total noninterest expense for the first quarter of 2016 included a charge of $13.8 million to reflect a liability associated with the settlement of a previously announced joint investigation by the Consumer Financial Protection Bureau and the U.S. Department of Justice. Salaries and employee benefits expense was $81.4 million for the first quarter of 2017 compared to $81.7 million for the first quarter of 2016 and $80.9 million for the fourth quarter of 2016. Occupancy expense was $10.3 million for the first quarter of 2017, which was flat compared to both the first and fourth quarters of 2016. Other noninterest expense was $29.4 million for the first quarter of 2017, compared to $33.2 million for the first quarter of 2016 and $34.0 million for the fourth quarter of 2016.

The Company's equity capitalization is comprised entirely of common stock. BancorpSouth's ratio of shareholders' equity to assets was 11.45 percent at March 31, 2017, compared with 12.06 percent at March 31, 2016 and 11.71 percent at December 31, 2016. The ratio of tangible shareholders' equity to tangible assets was 9.49 percent at March 31, 2017, compared with 10.05 percent at March 31, 2016 and 9.73 percent at December 31, 2016.

During the first quarter of 2017, the Company repurchased 1,613,691 shares of its outstanding common stock at a weighted average price of $30.62 per share. During the fourth quarter of 2016, the Company repurchased 436,541 shares at a weighted average price of $22.91 per share. As of March 31, 2017, the Company had 4,398,249 remaining shares available for repurchase under its current share repurchase authorization, which expires on December 29, 2017. On January 9, 2017, the Company redeemed $6.7 million in junior subordinated debt securities issued to American State Capital Trust I and $6.2 million in junior subordinated debt securities issued to Business Holding Company Trust I. Each of these junior subordinated debt securities was assumed by the Company pursuant to prior acquisitions of banks by the Company.

Estimated regulatory capital ratios at March 31, 2017 were calculated in accordance with the Basel III capital framework. BancorpSouth is a "well capitalized" financial holding company, as defined by federal regulations, with Tier 1 risk-based capital of 12.16 percent at March 31, 2017 and total risk-based capital of 13.21 percent, compared with required minimum levels of 8 percent and 10 percent, respectively, in order to qualify for "well capitalized" classification.

On December 19, 2016, BancorpSouth Insurance Services, Inc. announced and closed the acquisition of certain assets of Gonzales, Louisiana based Waguespack & Associates Insurance, Inc. The agency was formed in 1986 and is expected to produce annual revenues of approximately $3 million. Waguespack will continue to operate under current leadership in its current location in Gonzales.