BANCORPSOUTH BANK

Financial Information

As of and for the Three Months

Ended March 31, 2020

Forward Looking Statements

Certain statements made in this presentation are not statements of historical fact and constitute "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created under the Private Securities Litigation Reform Act of 1995. These statements are often, but not always, made through the use of words or phrases such as "may," "should," "could," "predict," "potential," "believe," "will likely result," "expect," "continue," "will," "anticipate," "seek," "aspire," "roadmap," "achieve," "estimate," "intend," "plan," "project," "projection," "forecast," "goal," "target," "would," and "outlook," or the negative version of those words or other comparable words of a future or forward-looking nature. These forward-looking statements include, without limitation, those relating to the impact of the COVID-19 pandemic on BancorpSouth Bank's (the "Company") assets, business, cash flows, financial condition, liquidity, prospects and results of operations, the benefits, costs, synergies and financial and operational impact of the Texas First merger on the Company, the acceptance by customers of Texas First of the Company's products and services after the closing of the merger, the opportunities to enhance market share in certain markets and market acceptance of the Company generally in new markets, the Company's ability to operate its regulatory compliance programs consistent with federal, state and local laws, including its Bank Secrecy Act ("BSA") and anti-money laundering ("AML") compliance program and its fair lending compliance program, the Company's ability to pay dividends or coupons on 5.5% Series A Non-Cumulative Perpetual Preferred Stock, par value $0.01 per share, or the 4.125% Fixed-to-Floating Rate Subordinated Notes due November 20, 2029 (the "Notes") or its ability to ultimately repay the Notes or otherwise comply with the terms of such instruments, amortization expense for intangible assets, goodwill impairments, loan impairments, utilization of appraisals and inspections for real estate loans, maturity, renewal or extension of construction, acquisition and development loans, net interest revenue and net interest margin, fair value determinations, the amount of the Company's non-performing loans and leases, credit quality, credit losses, liquidity, off-balance sheet commitments and arrangements, valuation of mortgage servicing rights, allowance and provision for credit losses, early identification and resolution of credit issues, utilization of non-GAAP financial measures, the ability of the Company to collect all amounts due according to the contractual terms of loan agreements, the Company's reserve for losses from representation and warranty obligations, the Company's foreclosure process related to mortgage loans, the resolution of non-performing loans that are collaterally dependent, real estate values, fully-indexed interest rates, interest rate risk, interest rate sensitivity, the impact of interest rates on loan yields, calculation of economic value of equity, impaired loan charge-offs, diversification of the Company's revenue stream, the growth of the Company's insurance business and commission revenue, the growth of the Company's customer base and loan, deposit and fee revenue sources, liquidity needs and strategies, the ability of the Company to access successfully the capital and credit markets when needed or as desired, sources of funding, declaration and payment of dividends, the utilization of the Company's share repurchase program, the implementation and execution of cost saving initiatives, improvement in the Company's efficiencies, operating expense trends, and the impact of certain claims and ongoing, pending or threatened litigation, administrative and investigatory matters.

These forward-looking statements are not historical facts, and are based upon current expectations, estimates and projections about the Company's industry, management's beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain, involve risk and are beyond the Company's control. The inclusion of these forward-looking statements should not be regarded as a representation by the Company or any other person that such expectations, estimates and projections will be achieved. Accordingly, the Company cautions that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict and that are beyond the Company's control. These risks, assumptions and uncertainties may include, but are not limited to, the impact of the COVID-19 pandemic on the Company's assets, business, cash flows, financial condition, liquidity, prospects and results of operations, increases in the provision and allowance for credit losses and interest rate pressure on net interest revenue and net interest margin, the Company's ability to operate its regulatory compliance programs consistent with federal, state and local laws, including its BSA/AML compliance program and its fair lending compliance program, the ability of the Company to meet expectations regarding the benefits, costs, synergies, and financial and operational impact of the Texas First merger, the possibility that any of the anticipated benefits, costs, synergies and financial and operational improvements of the Texas First merger will not be realized or will not be realized as expected, the ability of the Company and Texas First to meet expectations regarding the accounting and tax treatments of the Texas First merger, the possibility that any of the anticipated benefits of the Texas First merger will not be realized or will not be realized as expected, the lack of availability of the Company's filings mandated by the Exchange Act from the Securities and Exchange Commission's publicly available website after November 1, 2017, the impact of any ongoing pending or threatened litigation, administrative and investigatory matters involving the Company, 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, limitations on the Company's ability to declare and pay dividends, the availability of capital on favorable terms if and when needed, liquidity risk, governmental regulation, including the Dodd-Frank Wall Street Reform and Consumer Protection 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 and 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 the loss of any key Company personnel, 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 growth of the Company's insurance business and commission revenue, the growth of the Company's loan, deposit and fee revenue sources, 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, dispositions and other strategic growth opportunities and initiatives, 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 capital stock to raise capital or acquire other banks, bank holding companies, financial holding companies and insurance agencies, the utilization of the Company's share repurchase program, the implementation and execution of cost saving initiatives, 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 and news releases, reports and other filings with the Federal Deposit Insurance Corporation (the "FDIC").

The foregoing factors should not be construed as exhaustive and should be read in conjunction with those factors that are set forth from time to time in our periodic and current reports filed with the FDIC, including those factors included in our Annual Report on Form 10-K for the year ended December 31, 2019 under the heading "Item 1A. Risk Factors," in our Quarterly Reports on Form 10-Q and in our Current Reports on Form 8-K.

Although the Company believes that the expectations reflected in these forward-looking statements are reasonable as of the date of this presentation, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. If one or more events related to these or other risks or uncertainties materialize, or if the Company's underlying assumptions prove to be incorrect, actual results may differ materially from the Company's forward-looking statements. Accordingly, undue reliance should not be placed on any such forward-looking statements. Any forward-looking statement speaks only as of the date of this presentation, and the Company does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law. New risks and uncertainties may emerge from time to time, and it is not possible for the Company to predict their occurrence or how they will affect the Company.

2

COVID-19 Pandemic Response

•

•

Customers & •

Communities

•

•

SBA Preferred Lender actively engaged in assisting customers with loan programs - currently in the process of funding over $1.0 billion in approved PPP loans

Granting loan extensions and deferrals to qualifying customers

Actively working with mortgage customers on CARES Act forbearance opportunity - approximately 5% of mortgage servicing portfolio currently in forbearance

Provided waivers on certain fees and charges including penalties on early CD withdrawals Suspended all foreclosures and repossessions

•

Operational

•

•

•

Converted branch lobby hours to appointment only in an effort to promote drive-thru teller traffic and mobile banking

Temporarily closed a limited number of branches on a case by case basis Implemented additional cleaning and sanitary measures

Established multiple facility initiatives to promote social distancing

•

•

•

Teammates

•

•

Focused on the health and protection of all teammates Implemented travel restrictions early in the pandemic

Employees deemed "high-risk" according to the CDC guidelines encouraged to work remotely or to quarantine

Significant portion of workforce working remotely and other departments working on rotating schedules; teammates in critical functions have been further separated in our facilities

Provided additional three weeks of paid time off specific to COVID-19 family and dependent support

3

Q1 Financial Highlights

•

Earnings •

Highlights •

Pre-taxpre-provision net revenue of $91.7 million - 1.74% of average assets annualized

Net income available to common shareholders of $21.9 million, or $0.21 per diluted common share

Net operating income available to common shareholders - excluding MSR - of $34.4 million, or $0.33 per diluted common share

•

M&A Activity •

•

Completed acquisition of Texas First Bancshares, Inc.

Added $185 million in loans and $370 million in deposits to Central Texas presence Merger-related expenses of $4.5 million

•

Credit •

Adopted CECL effective January 1, 2020

Provision for credit losses of $46.0 million for the quarter

•

Mortgage •

•

Production volume of $477.1 million

Production and servicing revenue of $20.6 million

Negative pre-tax mortgage servicing rights ("MSR") valuation adjustment of $11.1 million

•

Capital •

Repurchased 3.3 million shares at weighted average price of $26.42 per share Maintained strong regulatory capital metrics - total risk-based capital of 13.73%

As of and for the three months ended March 31, 2020.

  • All non-GAAP measures are defined and/or reconciled in the quarterly news release which accompanies this presentation.

Recent Quarterly Results

Three Months Ended

% Change

3/31/20

12/31/19

3/31/19

vs 12/31/19

vs 3/31/19

Net interest revenue

$

167.5

$

170.8

$

152.6

(1.9)

%

9.8

%

Provision for credit losses

46.0

0.0

0.5

NM

NM

Noninterest revenue

76.5

74.7

64.2

2.4

19.1

Noninterest expense

168.0

162.4

150.0

3.5

12.0

Income before income taxes

30.0

83.1

66.3

(63.9)

(54.7)

Income tax expense

5.8

17.3

14.7

(66.7)

(60.8)

Net income

$

24.3

$

65.8

$

51.6

(63.2) %

(53.0) %

Less: Preferred dividends

2.4

-

-

-

-

Net income available to common shareholders

$

21.9

$

65.8

$

51.6

(66.8) %

(57.6) %

Plus: Non-operating items, net of tax

4.2

4.3

0.6

NM

NM

Less: MSR market value adjustment, net of tax

(8.3)

2.4

(3.7)

NM

NM

Net operating income available to common

shareholders - excluding MSR

$

34.4

$

67.8

$

55.9

(49.3) %

(38.5) %

Net income per common share: diluted

$

0.21

$

0.63

$

0.52

(66.7) %

(59.6) %

Operating earnings per common share -

excluding MSR

$

0.33

$

0.65

$

0.56

(49.2) %

(41.1) %

Pre-taxpre-provision net revenue

$

91.7

$

85.8

$

72.5

6.9

%

26.4

%

Pre-taxpre-provision net revenue to total

average assets

1.74%

1.68%

1.63%

3.6

%

6.7

%

Dollars in millions, except per share data.

All non-GAAP measures are defined and/or reconciled in the quarterly news release which

5

accompanies this presentation.

NM - Not Meaningful

Figures may not foot due to rounding.

Noninterest Revenue

Three Months Ended

% Change

3/31/20

12/31/19

3/31/19

vs 12/31/19

vs 3/31/19

Mortgage production and servicing revenue

$

20,553

$

6,938

$

6,909

196.2

%

197.5

%

Credit card, debit card and merchant fees

9,176

9,836

8,874

(6.7)

3.4

Deposit service charges

11,682

12,193

10,766

(4.2)

8.5

Insurance commissions

29,603

27,648

30,180

7.1

(1.9)

Wealth management

6,570

6,617

5,635

(0.7)

16.6

Other

9,995

8,301

6,725

20.4

48.6

Total noninterest revenue-excluding MSR

87,579

71,533

69,089

22.4

%

26.8

%

MSR valuation adjustment

(11,083)

3,164

(4,869)

NM

NM

Total noninterest revenue

$

76,496

$

74,697

$

64,220

2.4

%

19.1

%

% of total revenue

31.3%

30.4%

29.6%

6

Dollars in thousands

NM - Not Meaningful

Noninterest Expense

Three Months Ended

% Change

3/31/20

12/31/19

3/31/19

vs 12/31/19

vs 3/31/19

Salaries and employee benefits

$

108,272

$

97,137

$

97,228

11.5

%

11.4

%

Occupancy, net of rental income

12,708

12,267

11,551

3.6

10.0

Equipment

4,649

4,725

3,888

(1.6)

19.6

Deposit insurance assessments

1,546

2,200

2,740

(29.7)

(43.6)

Advertising and public relations

1,779

2,033

1,712

(12.5)

3.9

Foreclosed property expense

924

855

624

8.1

48.1

Data processing, telecom and computer software

15,422

16,023

13,481

(3.8)

14.4

Amortization of intangibles

2,394

2,508

1,985

(4.5)

20.6

Legal

898

854

605

5.2

48.4

Merger expense

4,494

5,782

891

NM

NM

Postage and shipping

1,441

1,353

1,412

6.5

2.1

Other miscellaneous expense

13,479

16,614

13,851

(18.9)

(2.7)

Total noninterest expense

168,006

162,351

149,968

3.5

%

12.0

%

Non-operating items:

Merger expense

4,494

5,782

891

NM

NM

Total noninterest expense - operating

$

163,512

$

156,569

$

149,077

4.4

%

9.7

%

7

Dollars in thousands

NM - Not Meaningful

Capital

*

  • *Pro forma representing fully-phased in CECL impact

Deposits and Customer Repos

  • Total deposits and customer repos have increased $503 million, or 11.9 percent annualized compared to December 31, 2019. Acquired deposits and customer repos totaled approximately $370 million during the quarter, while deposits and customer repos increased approximately $130 million on an organic basis.
  • Total deposits and customer repos have increased $2.3 billion, or 14.8 percent, since March 31, 2019. Of this increase, approximately $1.7 billion represents acquired balances while organic funding growth totaled approximately $560 million, or 3.7 percent.

As of 3/31/20

As of 12/31/19

As of 3/31/19

Balance

% of Total

Balance

% of Total

Balance

% of Total

Noninterest bearing demand

$

4,861

27.9%

$

4,662

27.5%

$

4,202

27.7%

Interest bearing demand

7,268

41.7%

7,177

42.4%

6,354

41.9%

Savings

2,013

11.6%

1,938

11.5%

1,855

12.2%

Other time

2,745

15.8%

2,634

15.6%

2,282

15.0%

Customer Repos

539

3.1%

513

3.0%

482

3.2%

Total Deposits and Customer Repos

$

17,427

100.0%

$

16,924

100.0%

$

15,174

100.0%

Total Cost of Deposits

0.67%

0.68%

0.63%

  • Dollars in millions

Loan Portfolio

  • Total loans have increased $135 million, or 3.9 percent annualized compared to December 31, 2019. Acquired loans totaled approximately $185 million during the quarter, while loans decreased approximately $50 million organically during the quarter.
  • Total loans have increased $1.2 billion, or 8.8 percent, since March 31, 2019, primarily as a result of acquired loans. Organic loan growth has been essentially flat over this period.

As of 3/31/20

As of 12/31/19

As of 3/31/19

Balance

% of Total

Balance % of Total

Balance % of Total

Commercial and industrial

Commercial and industrial-non real estate

$

2,008

14.1%

$

1,980

14.0%

$

1,729

13.2%

Commercial and industrial-owner occupied

2,291

16.1%

2,269

16.1%

2,129

16.3%

Total commercial and industrial

4,299

30.2%

4,248

30.2%

3,858

29.5%

Commercial real estate

Agricultural

340

2.4%

337

2.4%

310

2.4%

Construction, acquisition and development

1,582

11.1%

1,577

11.2%

1,323

10.1%

Commercial real estate

3,304

23.2%

3,221

22.9%

3,169

24.2%

Total commercial real estate

5,225

36.7%

5,136

36.4%

4,802

36.7%

Consumer

Consumer mortgages

3,572

25.1%

3,543

25.1%

3,243

24.8%

Home equity

686

4.8%

684

4.9%

663

5.1%

Credit cards

94

0.7%

103

0.7%

99

0.8%

Total consumer

4,352

30.6%

4,329

30.7%

4,005

30.6%

All other

349

2.5%

377

2.7%

407

3.1%

Total

$

14,225

100.0%

$

14,090

100.0%

$

13,071

100.0%

10

Dollars in millions

Net loans and leases

COVID-19 High Risk Portfolios

As of 3/31/20

Total

% of BancorpSouth

Outstanding

Portfolio

Committed

(based on committed

Medical

Balance

Balance

balance)

$

762

$

872

4.88%

Hotels & Accommodation

620

715

4.01%

Retail CRE

654

714

4.00%

Food Services

264

288

1.62%

Oil & Gas

76

188

1.06%

Total

$

2,376

$

2,777

15.57%

11

Dollars in millions

Medical Portfolio

As of 3/31/20

% of BancorpSouth

Total

Portfolio

Outstanding

Committed

(based on committed

Medical clinics

Balance

Balance

balance)

$

490

$

565

3.17%

Nursing homes

178

206

1.15%

Dental

59

63

0.35%

All other medical

35

38

0.21%

Total

$

762

$

872

4.88%

Medical Loan-to-Value

85% + LTV

25 - 50% LTV

14%

41%

75 - 85% LTV

7%

65 - 75% LTV

14%

50 - 65% LTV

24%

12

Dollars in millions

Hotels & Accommodation Portfolio

Hotels and Accommodation Loan-to-Value

85% + LTV

4%

25 - 50% LTV

75 - 85% LTV

35%

5%

65 - 75% LTV

23%

50 - 65% LTV

33%

13

Retail CRE Portfolio

As of 3/31/20

% of BancorpSouth

Total

Portfolio

Outstanding

Committed

(based on committed

Commercial real estate

Balance

Balance

balance)

$

336

$

351

1.97%

Commercial and industrial-owner occupied

268

287

1.61%

Construction, acquisition and development

50

76

0.42%

Total

$

654

$

714

4.00%

Retail CRE Loan-to-Value

85% + LTV

25 - 50% LTV

3%

27%

75 - 85% LTV

10%

65 - 75% LTV

50 - 65% LTV

28%

32%

14

Dollars in millions

Credit Quality Highlights

●Adopted CECL effective January 1, 2020

Initial adoption resulted in $62.6 million increase to allowance ($40.0 million recorded to retained earnings and $22.6 million resulting from reduction in non-accretable difference on PCI loans)

Recorded a provision for credit losses of $46.0 million for the quarter Net charge-offs totaled $13.7 million for the quarter

Ending allowance for credit losses of $218.2 million, or 1.53% of net loans and leases, at March 31, 2020

●Reported net charge-offs of $14.1 million on acquired credits (discount "grossed up" under CECL) compared to net recoveries of $0.4 million on BXS originated loans

●Continued stability in other credit quality indicators including non- performing loans, non-performing assets, and near-term delinquencies.

15 As of March 31, 2020

Allowance for Credit Losses

ACL to Net

Loans & Leases

1.53%

ALLL to Net

Loans & Leases

0.85%

Dollars in millions

*Day one provision of $1 million associated with acquired loans is included in the $5 million allowance for credit losses increase resulting from the Texas First merger closing.

16 **Approximately $13 million of total is related to loans characterized as PCI prior to transition to CECL.

Mortgage and Insurance Revenue

Mortgage Lending Revenue

Three Months Ended

Origination revenue

3/31/20

12/31/19

9/30/19

6/30/19

3/31/19

$

17,906

$

4,326

$

8,922

$

7,016

$

4,068

Servicing revenue

5,153

4,935

4,903

4,890

4,893

MSR payoffs/paydowns

(2,506)

(2,323)

(2,542)

(2,739)

(2,052)

Mortgage production and servicing revenue

20,553

6,938

11,283

9,167

6,909

MSR valuation adjustment

(11,083)

3,164

(3,994)

(8,816)

(4,869)

Total mortgage banking revenue

$

9,470

$

10,102

$

7,289

$

351

$

2,040

Production volume

$

477,054

$

504,851

$

536,089

$

495,535

$

291,746

Purchase money production

$

285,300

$

321,700

$

353,900

$

397,900

$

227,500

Mortgage loans sold

$

409,436

$

419,142

$

374,156

$

304,352

$

239,239

Margin on loans sold

4.37%

1.03%

2.38%

2.31%

1.70%

Current pipeline

$

570,151

$

289,648

$

370,172

$

304,778

$

234,748

Mortgage originators

157

153

159

161

159

Insurance Commission Revenue

Property and casualty commissions

$

21,246

$

19,994

$

22,643

$

23,429

$

21,238

Life and health commissions

6,175

5,979

6,116

7,355

5,982

Risk management income

532

667

564

622

587

Other

1,650

1,008

2,189

2,545

2,373

Total insurance commissions

$

29,603

$

27,648

$

31,512

$

33,951

$

30,180

Dollars in thousands

17

Summary

Highlights

  • Maintained strong regulatory capital metrics
  • Repurchased 3.3 million shares during the first quarter
  • Robust mortgage production volume contributed to increased mortgage production and servicing revenue
  • Completed the acquisition of Texas First Bancshares, Inc., effective January 1, 2020 adding approximately $185 million in loans and $370 million in deposits

Current Focus

  • Support our teammates, customers, and communities while appropriately managing credit exposure
  • Continue to challenge expenses and improve efficiency
  • Enhance customer experience, including improved technology offerings

18

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BancorpSouth Bank published this content on 21 April 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 21 April 2020 16:07:01 UTC