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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended March 31, 2003

OR

For the transition period from                                            to                                           

Commission file number 1-12991

BancorpSouth, Inc.
(Exact name of registrant as specified in its charter)

(662) 680-2000
(Registrant's telephone number, including area code)

NOT APPLICABLE
(Former name, former address, and former fiscal year, if changed since last year)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  X  No      

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes  X  No      

As of May 9, 2003, the Registrant had outstanding 77,432,382 shares of common stock, par value $2.50 per share.

BANCORPSOUTH, INC.
CONTENTS

FORWARD-LOOKING STATEMENTS

Certain statements contained in this Report may not be based on historical facts and are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1993, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements may be identified by reference to a future period(s) or by the use of forward-looking terminology, such as “anticipate,” “believe,” “estimate,” “expect,” “may,” “might,” “will,” “intend,” “could,” “would,” “plan” or similar expressions. These forward-looking statements include, without limitation, those relating to BancorpSouth’s liquidity, earnings per share, allowance for credit losses, net interest revenue, mortgage servicing asset, life insurance premium revenue, loan volume, deposits, net interest margin, potential acquisitions, litigation contingencies, student loans, goodwill, stock repurchase programs, capital resources, off-balance sheet entities or arrangements and BancorpSouth’s future growth and profitability. We caution you not to place undue reliance on the forward-looking statements contained in this Report, in that actual results could differ materially from those indicated in such forward-looking statements due to a variety of factors. These factors include, but are not limited to, changes in BancorpSouth’s operating or expansion strategy, changes in economic conditions, the ability to maintain credit quality, prevailing interest rates and government fiscal and monetary policies, effectiveness of BancorpSouth’s interest rate hedging strategies, changes in laws and regulations affecting financial institutions, ability of BancorpSouth to effectively service loans, ability of BancorpSouth to identify and integrate acquisitions and investment opportunities, manage its growth and effectively serve an expanding customer and market base, geographic concentrations of assets, availability of and costs associated with obtaining adequate and timely sources of liquidity, dependence on existing sources of funding, competition from other financial services companies, market conditions as they affect the ability of BancorpSouth to repurchase shares of its common stock, the effect of pending or future legislation, possible adverse rulings, judgments, settlements and other outcomes of pending litigation, other factors generally understood to affect the financial results of financial services companies and other factors detailed from time to time in BancorpSouth’s press releases and 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 of this Report.

BANCORPSOUTH, INC.
Notes to Consolidated Condensed Financial Statements
(Unaudited)

NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION AND
PRINCIPALS OF CONSOLIDATION

The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with the accounting policies in effect as of December 31, 2002, as set forth in the annual consolidated financial statements of BancorpSouth, Inc. (the “Company”) as of such date. In the opinion of management, all adjustments necessary for a fair presentation of the consolidated condensed financial statements have been included and all such adjustments were of a normal recurring nature. The results of operations for the three-month period ended March 31, 2003 are not necessarily indicative of the results to be expected for the full year. Certain 2002 amounts have been reclassified to conform with the 2003 presentation.

The consolidated condensed financial statements include the accounts of the Company and its wholly-owned subsidiary, BancorpSouth Bank (the “Bank”), and the Bank’s wholly-owned subsidiaries, Century Credit Life Insurance Company, Personal Finance Corporation, BancorpSouth Mortgage Company, BancorpSouth Insurance Services, Inc., BancorpSouth Investment Services, Inc. and BancorpSouth Municipal Development Corporation. BancorpSouth Capital Trust I (“the Trust”), a business trust, is treated as a subsidiary of the Company for financial reporting purposes (See “Note 6 – Trust Preferred Securities” to Consolidated Condensed Financial Statements).

NOTE 2 - LOANS

The composition of the loan portfolio by collateral type as of the date indicated is detailed below:

The following table presents information concerning non-performing loans as of the date indicated:

NOTE 3 - ALLOWANCE FOR CREDIT LOSSES

The following schedule summarizes the changes in the allowance for credit losses for the periods indicated:

NOTE 4 - PER SHARE DATA

The computation of basic earnings per share is based on the weighted average number of common shares outstanding. The computation of diluted earnings per share is based on the weighted average number of common shares outstanding plus the shares resulting from the assumed exercise of all outstanding stock options using the treasury stock method.

The following table provides a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations for the periods shown:

NOTE 5 - COMPREHENSIVE INCOME

The following table presents the components of other comprehensive income and the related tax effects allocated to each component for the periods indicated:

NOTE 6 - TRUST PREFERRED SECURITIES

On January 28, 2002, BancorpSouth Capital Trust I (the “Trust”), a business trust which is treated as a subsidiary of the Company for financial reporting purposes, issued 5,000,000 shares of 8.15% trust preferred securities, $25 face value per share, due January 28, 2032 and callable at the option of the Company after January 28, 2007. Payment of distributions on the trust preferred securities is guaranteed by the Company, but only to the extent the Trust has funds legally and immediately available to make such distributions. The Trust invested the net proceeds of $121,062,500 in the 8.15% Junior Subordinated Debt Securities issued by the Company, which will mature on January 28, 2032. The net proceeds to the Company from the issuance of its Junior Subordinated Debt Securities to the Trust were used for general corporate purposes, including repurchase of shares of its outstanding common stock.

NOTE 7 - GOODWILL AND OTHER INTANGIBLE ASSETS

The changes in the carrying amount of goodwill for the three months ended March 31, 2003 were as follows:

The following table presents information regarding the components of the Company’s identifiable intangible assets for the periods indicated:

At March 31, 2003 and December 31, 2002, aggregate impairment for MSRs was approximately $22,382,000 and approximately $23,197,000, respectively.

NOTE 8 - STOCK BASED COMPENSATION

At March 31, 2003, the Company had three stock-based employee compensation plans, which are the 1990 Stock Incentive Plan, the 1994 Stock Incentive Plan and the 1998 Stock Option Plan. The Company accounts for those plans under the recognition and measurement principles of Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. No stock-based employee compensation cost is reflected in net income, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” for the three months ended March 31, 2003 and 2002.

NOTE 9 - RECENT PRONOUNCEMENTS

In July 2002, SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” was issued. SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recorded when it is incurred and can be measured at fair value. The statement was adopted by the Company effective January 1, 2003 and has had no material impact on the financial position or results of operations of the Company.

In November 2002, FASB Interpretation (“FIN”) No. 45, “Guarantors Accounting and Disclosure Requirement for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” was issued. FIN No. 45 elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements regarding its obligations under certain guarantees that it has issued. FIN No. 45 also clarifies the requirement of the guarantor to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The initial recognition and initial measurement provisions of this interpretation were adopted by the Company effective January 1, 2003. The disclosure requirements of this interpretation were adopted by the Company effective December 16, 2002. The adoption of FIN No. 45 has had no material impact on the financial position or results of operations of the Company.

NOTE 10 - BUSINESS COMBINATIONS

On February 28, 2002, Pinnacle Bancshares, Inc., a bank holding company with $130 million in assets headquartered in Little Rock, Arkansas, merged with and into the Company. Pursuant to the merger, Pinnacle Bancshares’ subsidiary, Pinnacle Bank, merged into the Bank. Consideration given to complete this transaction consisted of 554,602 shares of the Company’s common stock in addition to cash paid to Pinnacle shareholders in the aggregate amount of $9,524,000. This transaction was accounted for as a purchase and, accordingly, the results of operations have been included since the date of acquisition. This acquisition was not material to the financial position or results of operations of the Company.

On May 3, 2002, certain assets of First Land and Investment Company were purchased by the Company. Consideration paid to complete this transaction consisted of 45,024 shares of the Company’s common stock. This transaction was accounted for as a purchase and, accordingly, the results of operations have been included since the date of acquisition. This acquisition was not material to the financial position or results of operations of the Company.

NOTE 11 - SEGMENT REPORTING

The Company’s principal activity is community banking, which includes providing a full range of deposit products, commercial loans and consumer loans. The general corporate and other operating segment includes leasing, mortgage lending, trust services, credit card activities, insurance services, investment services and other activities not allocated to community banking.

Results of operations and selected financial information by operating segment for the three-month periods ended March 31, 2003 and 2002 are presented below:

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                CONDITION AND RESULTS OF OPERATIONS

BancorpSouth, Inc. (the “Company”) is a bank holding company headquartered in Tupelo, Mississippi. BancorpSouth Bank (the “Bank”), the Company’s banking subsidiary, has commercial banking operations in Mississippi, Tennessee, Alabama, Arkansas, Texas and Louisiana. The Bank and its consumer finance, credit life insurance, mortgage loan, insurance agency and brokerage subsidiaries provide commercial banking, leasing, mortgage origination and servicing, life insurance, brokerage and trust services to corporate customers, local governments, individuals and other financial institutions through an extensive network of branches and offices. BancorpSouth Capital Trust I, a business trust organized for the purpose of issuing preferred securities to the public, is treated as a subsidiary of the Company for financial reporting purposes (See “Note 6 – Trust Preferred Securities” to Consolidated Condensed Financial Statements).

The following discussion provides certain information concerning the consolidated financial condition and results of operations of the Company. This discussion should be read in conjunction with the unaudited consolidated condensed financial statements for the periods ended March 31, 2003 and 2002, found in “Item 1. Financial Statements” of this Report.

RESULTS OF OPERATIONS

Summary

The Company’s net income for the first quarter of 2003 was $39.15 million, an increase of 33.17% from $29.40 million in the first quarter of 2002. Basic and diluted earnings per share for the first quarter of 2003 were $0.51 and $0.50, respectively, compared to basic and diluted earnings per share of $0.36 for the same period of 2002. During the first quarter of 2003, the Company recognized net gains from the sale of securities of $13.6 million, $8.4 million after tax, or $0.11 per diluted share. The annualized returns on average assets for the first quarter of 2003 and 2002 were 1.56% and 1.24%, respectively.

Critical Accounting Policies

During the three months ended March 31, 2003, there was no material change in the Company’s critical accounting policies and no material change in the application of critical accounting policies as presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002.

Net Interest Revenue

Net interest revenue is the difference between interest revenue earned on assets, such as loans, leases and securities, and interest expense incurred on liabilities, such as deposits and borrowings, and continues to provide the Company with its principal source of revenue. Net interest revenue is affected by the general level of interest rates, changes in interest rates and by changes in the amount and composition of interest earning assets and interest bearing liabilities. The Company’s long-term objective is to manage those assets and liabilities to maximize net interest revenue, while balancing interest rate, credit, liquidity and capital risks. For purposes of this discussion, interest revenue from tax-exempt loans and investment securities has been adjusted to a fully taxable equivalent basis, using an effective tax rate of 35%.

Net interest revenue was $92.87 million for the three months ended March 31, 2003, compared to $95.41 million for the same period in 2002, representing a decrease of $2.53 million, or 2.66%.

Interest revenue decreased $12.12 million, or 7.94%, to $140.41 million for the three months ended March 31, 2003 from $152.53 million for the three months ended March 31, 2002. While average interest earning assets increased by $527.10 million, or 5.88%, to $9.50 billion for the first quarter of 2003 from $8.97 billion for the first quarter of 2002, the average yield of those assets declined by 90 basis points to 6.00% for the first quarter of 2003 from 6.90% for the first quarter of 2002.

Interest expense decreased $9.58 million, or 16.77%, to $47.54 million for the three months ended March 31, 2003 from $57.12 million for the three months ended March 31, 2002. Average interest bearing liabilities increased $526.50 million, or 6.89%, to $8.16 billion for the first quarter of 2003 from $7.64 billion for the first quarter of 2002, while the average rate paid on those liabilities decreased 67 basis points to 2.36% for the first quarter of 2003 from 3.03% for the first quarter of 2002.

The relative performance of the asset deployment and funding functions are frequently measured by two calculations – net interest margin and net interest rate spread. Net interest margin is determined by dividing fully taxable equivalent net interest revenue by average earning assets. Net interest rate spread is the difference between the average fully taxable equivalent yield earned on interest earning assets and the average rate paid on interest bearing liabilities.

Net interest margin for the first quarter of 2003 and 2002 was 3.97% and 4.31%, respectively. Net interest rate spread for the first quarter of 2003 was 3.64%, a decrease of 22 basis points from 3.86% for the same period of 2002. The decline in net interest margin and net interest rate spread was due to a larger decrease in the average rate earned on interest earning assets, from 6.90% for the first quarter of 2002 to 6.00% for the first quarter of 2003, than the decrease in the average rate paid on interest bearing liabilities from 3.03% for the first quarter of 2002 to 2.36% for the first quarter of 2003.

Provision for Credit Losses

The provision for credit losses is the cost of providing an allowance or reserve for estimated probable losses on loans. The amount for each accounting period is dependent upon many factors, including loan growth, net charge-offs, changes in the composition of the loan portfolio, delinquencies, management’s assessment of loan portfolio quality, the value of collateral and general economic factors. The process of determining the adequacy of the provision requires that management make material estimates and assumptions that are particularly susceptible to significant change. Future additions to the allowance for credit losses may be necessary based upon changes in economic conditions. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for credit losses. These agencies may require the Company to recognize changes to the allowance based on their judgments about information available to them at the time of their examination.

The provision for credit losses totaled $6.52 million for the first quarter of 2003, compared to $6.76 million for the same period of 2002, representing a decrease of 3.52%. The decrease in the provision for credit losses for the first quarter of 2003 when compared to the first quarter of 2002 reflects the fact that loans charged off, net of recoveries, decreased 20.04% in the first quarter of 2003 when compared to the same period of 2002. The decrease in the provision for credit losses for the first quarter of 2003 of approximately $238,000 from the provision for credit losses for the first quarter of 2002 is also reflective of the fact that the Company has experienced only moderate loan growth since the first quarter of 2002 and that the Company’s volume of non-performing loans has remained at about the same level, which was $40.22 million at March 31, 2003 and $38.25 million at March 31, 2002. The Company’s exposure to losses from indirect automobile sales financing also continues to diminish as that portfolio of loans totaled $51.37 million at March 31, 2003, $65.53 million at December 31, 2002 and $122.96 million at March 31, 2002. The Company’s allowance for credit losses as a percentage of loans outstanding at March 31, 2003 was 1.43%, at December 31, 2002 was 1.38% and at March 31, 2002 was 1.37%.

Other Revenue

Other revenue for the quarter ended March 31, 2003 totaled $55.02 million, compared to $34.93 million for the same period of 2002, an increase of 57.50%. Revenue of $7.56 million from mortgage lending activities was recorded for the three months ended March 31, 2003, an increase of $2.01 million from $5.55 million for the first quarter of 2002. The Company’s revenue from mortgage lending is primarily attributable to two activities, origination of new mortgage loans and servicing mortgage loans, and typically fluctuates as interest rates change. The Company’s normal practice is to generate mortgage loans, sell the loans in the secondary market and retain the servicing rights to the sold loans. The origination process generates loan origination fees and net gains or losses from the sale of the mortgage loans originated. The mortgage servicing rights are capitalized and carried as an asset by the Company at the lower of cost or fair value and represent the present value of the future stream of servicing fees expected to be earned over the estimated lives of the loans being serviced. The Company does not routinely hedge the value of its mortgage servicing asset and is susceptible to significant fluctuations in value in changing interest rate environments. When interest rates decline, refinancing of home mortgages typically accelerates and the value of the Company’s mortgage servicing asset typically declines as the expected lives of the underlying mortgages shorten. When interest rates rise, refinancing of home mortgages typically declines and the value of the Company’s mortgage servicing asset typically increases as the expected lives of the underlying mortgages lengthen. The relatively stable mortgage interest rates during the first quarters of 2003 and 2002 resulted in small changes in the value of the Company’s mortgage servicing asset. During the first quarter of 2003, approximately $815,000 of previously recorded impairment was recovered compared to the recovery of approximately $531,000 of previously recorded impairment in the first quarter of 2002. Revenue from mortgage loan origination activities was $6.62 million in the first quarter of 2003 compared to $4.21 million in the first quarter of 2002. Mortgage loans originated during the first quarter of 2003 totaled $302.38 million compared to originations of $192.19 million during the first quarter of 2002, an increase of 57.34%.

Service charge revenue increased 33.73%, from $10.21 million for the first quarter of 2002 to $13.65 million for the first quarter of 2003. The increase in service charges on deposit accounts is attributable to higher volumes of items processed, growth in the number of deposit accounts, rate increases and expansion of overdraft privileges to depositors. Life insurance premium revenue decreased by 14.73% for the first quarter of 2003 when compared to the first quarter of 2002 as the Company reduced its emphasis toward selling credit life insurance products. We expect this trend of declining life insurance premium revenue to continue. Insurance commissions increased 12.69%, from $5.67 million for the first quarter of 2002 to $6.39 million for the first quarter of 2003. The increase in insurance commissions for the first quarter of 2003 compared to the respective period in 2002 is attributable to increased property and casualty commissions and increased annuity sales. Trust income from fiduciary activities was $1.49 million for the first quarter of 2003, a decrease of 22.48% from $1.92 million reported in the first quarter of 2002.

Net security gains of $13.56 million were reported in the first quarter of 2003 compared to net security losses of approximately $25,000 for the first quarter of 2002. The net security gains in the first quarter of 2003 were from the sale of approximately $720 million in intermediate term securities pursuant to our efforts to manage the interest rate sensitivity of the Company’s assets and liabilities. Other revenue for the first quarter of 2003 included a gain of $2.41 million from the sale of $87.49 million in student loans compared to a gain of $2.16 million on sales of $80.19 million in student loans in the first quarter of 2002. The Bank continues to originate student loans, which may result in subsequent periodic sales.

Other Expense

Other expense totaled $79.62 million for the first quarter of 2003, a 3.18% increase from $77.17 million for the same period of 2002. Salaries and employee benefits expense for the first quarter of 2003 was $45.46 million, a 6.74% increase from $42.59 million for the first quarter of 2002. This increase is attributable to increases in employee salaries and the cost of employee health care and other benefits, the addition of employees for locations added since the first quarter of 2002 and employees added through acquisitions in the first quarter of 2002. Occupancy expense increased 6.20% to $5.58 million for the first quarter of 2003 from $5.25 million for the first quarter of 2002. This increase was primarily due to additional locations and facilities opened since March 31, 2002. Equipment expense of $6.00 million for the first quarter of 2003 represented a decrease of 8.14% when compared to equipment expense of $6.54 million for the first quarter of 2002. The decrease is primarily attributable to decreases in equipment rental and maintenance expense. Telecommunications expense of $1.86 million for the first quarter of 2003 represented a decrease of 3.38% when compared to telecommunications expense of $1.93 million for the first quarter of 2002. This decrease is primarily attributable to decreased voice and data transmission expenses. The other components of other expense for the first quarter of 2003 totaled $20.72 million, a 0.71% decrease from $20.87 million for the first quarter of 2002. While some categories of other expense did increase due to normal increases in the cost of services and supplies, other categories of other expense decreased due to expense control efforts and resulted in an overall decrease in the other components of other expense.

Income Tax

Income tax expense was $19.87 million and $14.03 million for the first quarter of 2003 and 2002, respectively, representing an increase of 41.61%. The increase for the first quarter of 2003 compared to the first quarter of 2002 is a function of increased income in 2003. The effective tax rates for the first quarters of 2003 and 2002 were 33.66% and 32.30%, respectively.

FINANCIAL CONDITION

Earning Assets

The percentage of earning assets to total assets measures the effectiveness of management’s efforts to invest available funds into the most efficient and profitable uses. Earning assets at March 31, 2003 were $9.59 billion, or 92.77% of total assets, compared with $9.43 billion, or 92.52% of total assets, at December 31, 2002.

The securities portfolio is used to make various term investments, to provide a source of liquidity and to serve as collateral to secure certain types of deposits. Held-to-maturity securities at March 31, 2003 were $1.86 billion, compared with $1.19 billion at the end of 2002, a 56.24% increase. Available-for-sale securities were $1.07 billion at March 31, 2003, compared to $1.64 billion at December 31, 2002, a 34.88% decrease.

The Bank’s loan portfolio makes up the single largest component of the Company’s earning assets. The Bank’s lending activities include both commercial and consumer loans. Loan originations are derived from a number of sources, including direct solicitation by the Bank’s loan officers, real estate broker referrals, mortgage loan companies, current savers and borrowers, builders, attorneys, walk-in customers and, in some instances, other lenders. The Bank has established disciplined and systematic procedures for approving and monitoring loans that vary depending on the size and nature of the loan. Loans, net of unearned discount, totaled $6.26 billion at March 31, 2003, which represents a 1.97% decrease from the December 31, 2002 total of $6.39 billion. We believe that the limited growth in loans is primarily attributable to the weak economic climate in both our regional and national economy. Management also continued its strategy to reduce the Company’s exposure to indirect automobile sales financing by allowing its portfolio of such loans to decline. Indirect automobile loans were $51.37 million at March 31, 2003, representing a decrease of $14.15 million from $65.53 million at December 31, 2002.

At March 31, 2003, the Company did not have any concentrations of loans in excess of 10% of total loans outstanding. Loan concentrations are considered to exist when there are amounts loaned to a multiple number of borrowers engaged in similar activities that would cause them to be similarly impacted by economic or other conditions. However, the Company does conduct business in a geographically concentrated area. Therefore, the ability of the Company’s borrowers to repay loans is to some extent dependent upon the economic conditions prevailing in the Company’s market area.

In the normal course of business, management becomes aware of possible credit problems in which borrowers exhibit potential for the inability to comply with the contractual terms of their loans, but which do not meet the criteria for disclosure as potential problem loans because, at this time, management does not have serious doubt as to the borrowers’ ability to comply with the loan terms. Historically, some of these loans are ultimately restructured or placed in non-accrual status.

The Company’s policy provides that loans, other than installment loans, are generally placed on non-accrual status if, in management’s opinion, payment in full of principal or interest is not expected, or when payment of principal or interest is more than 90 days past due, unless the loan is both well secured and in the process of collection. Non-performing loans were 0.64% of all loans outstanding at March 31, 2003 and 0.58% of all loans outstanding at December 31, 2002.

Allowance for Credit Losses

The Company maintains the allowance for credit losses at a level that, in the opinion of management, is adequate to meet the estimated probable losses on its current portfolio of loans. The process of determining the adequacy of the allowance for credit losses requires that management make material estimates and assumptions that are particularly susceptible to significant change. In employing its systematic methodology, the Company follows several processes to determine the allowance for credit losses.

The allowance for credit losses is based principally upon the Company’s loan classification system. The Company has a disciplined approach for assigning credit ratings and classifications to individual credits. Each credit is assigned a grade by the relevant loan officer, which serves as a basis for the credit analysis of the entire portfolio. The grade considers the borrower’s creditworthiness, collateral values, cash flows and other factors. An independent loan review department is responsible for reviewing the credit rating and classification of individual credits and assessing trends in the portfolio, adherence to internal credit policies and procedures and other factors that may affect the overall adequacy of the allowance. The loss factors assigned to each classification are based upon the attributes (loan to collateral values, borrower creditworthiness, etc.) of the loans typically assigned to each grade. Management periodically reviews the loss factors assigned in light of the general economic environment and overall condition of the loan portfolio and modifies the loss factors assigned to each classification as deemed appropriate. The overall allowance includes a component representing the results of other analyses intended to ensure that the allowance is adequate to cover other probable losses inherent in the portfolio. This component considers analyses of changes in credit risk resulting from different underwriting criteria in acquired loan portfolios, industry concentrations, changes in the mix of loans originated, overall credit criteria and other economic indicators. Future additions to the allowance may be necessary based on changes in economic conditions. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for credit losses. These agencies may require the Company to record changes to the allowance based on their judgments about information available to them at the time of their examination.

The allocation of allowance by loan category is based, in part, on evaluations of specific loans’ past history and on economic conditions within specific industries or geographical areas. Accordingly, because all of these conditions are subject to change, the allocation is not necessarily indicative of the breakdown of any future allowance or losses. The following table presents the allocation of the allowance for credit losses by loan category and the percentage of total loans for each category in the loan portfolio for the dates indicated: