TUPELO — BancorpSouth Inc. has filed its Annual Report on Form 10-K for the year ended Dec. 31, 2009, with the Securities and Exchange Commission. As previously announced, the delay in filing the annual report resulted from management’s determination, in consultation with BancorpSouth’s independent registered public accounting firm and with the concurrence of the Audit Committee of the board of directors, that certain asset quality indicators, including the allowance for credit losses, and their impact on BancorpSouth’s financial statements for the fourth quarter and year ended Dec. 31, 2009, should be further reviewed.
As a result of this review, the company’s previously announced results for the fourth quarter and year have been revised to reflect, among other things:
• A $27.6 million increase in the provision for credit losses; a $4.5 million increase in foreclosed property expense, which included $3.8 million for a valuation allowance; a $2.3 million expense related to a specific litigation matter; and, a reversal of interest income totaling $606,000 related to loans placed on non-accrual.
• A $21.6 million, or $0.26 per diluted share, reduction in net income, producing a net loss of $2.1 million, or $0.03 per diluted share, for the fourth quarter of 2009 and net income of $82.7 million, or $0.99 per diluted share, for the full-year 2009.
• Nonperforming loans and leases of $186.5 million, or 1.91 percent of net loans and leases at year-end.
• Annualized net charge-offs of 1.27 percent of average loans and leases for the fourth quarter of 2009 and 0.76 percent for full-year 2009.
• An allowance for credit losses at year-end that was equal to 2.4 times net charge-offs for 2009 and 94 percent of non-performing loans and leases. The allowance for credit losses at year-end was 1.80 percent of net loans and leases.
• A ratio of shareholders’ equity to assets of 9.69 percent at the end of 2009 and tangible equity to assets of 7.63 percent. Year-end Tier 1 risk-based capital of 11.17 percent and total risk-based capital of 12.42 percent compared favorably with required minimum levels of 6 percent and 10 percent, respectively, to meet the definition of “well capitalized” under federal regulations.
Aubrey Patterson, chairman and CEO of BancorpSouth, said, “In February, it became necessary to determine whether certain additional provisions should be made in the fourth quarter of 2009. Working in conjunction with our independent auditors, we concluded that these matters should be included in the results of operations for the fourth quarter of 2009.
“The company undertook a very thorough review of credit quality and adequacy of the allowance for credit losses, focusing especially on the real estate acquisition and development portfolio. As a result of this review, we determined that $27.6 million should be added to the provision as a result of rating downgrades and impairments.
“Given the deterioration in real estate values generally, we also determined that the company should write down the net carrying value of other real estate owned by $4.5 million. This write-down included the establishment of a valuation reserve of $3.8 million for losses in other real estate owned. Another factor was the conclusion of a pending litigation matter in March 2010, which resulted in an additional litigation reserve of $2.3 million. The net effect of these and less significant individual adjustments resulted in essentially a break-even fourth quarter and annual earnings for 2009 of $82.7 million.
“To ensure an even stronger focus on credit quality in this difficult economic environment, the company is currently taking steps to establish a centralized real estate risk management group which will add strength and direction to improved procedures for real estate appraisal processes, early identification and impairment of troubled credits and generally tightened controls on all aspects of administration of this portfolio.
“As a result of our review, the allowance for credit losses was a 2.4 multiple of 2009 net charge-offs and 94 percent of non-performing loans at year end. I am confident that these enhanced reserves place the company’s balance sheet in an extremely strong position.”
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