UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2006

OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number: 1-12991

BANCORPSOUTH, INC.

(Exact name of registrant as specified in its charter)

Mississippi		64-0659571
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
One Mississippi Plaza, 201 South Spring Street
Tupelo, Mississippi		38804
(Address of principal executive offices)		(Zip Code)

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

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

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 þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check One):

Large Accelerated Filer þ     Accelerated Filer o     Non-Accelerated Filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of November 1, 2006, the registrant had outstanding 79,121,573 shares of common stock, par value $2.50 per share.

 

 

BANCORPSOUTH, INC.
CONTENTS

				Page
PART I. Financial Information
ITEM 1.		Financial Statements
		Consolidated Balance Sheets (Unaudited) September 30, 2006 and December 31, 2005			3
		Consolidated Statements of Income (Unaudited) Three Months and Nine Months Ended September 30, 2006 and 2005			4
		Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended September 30, 2006 and 2005			5
		Notes to Consolidated Financial Statements (Unaudited)			6
ITEM 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			16
ITEM 3.		Quantitative and Qualitative Disclosures About Market Risk			30
ITEM 4.		Controls and Procedures			30
PART II. Other Information
ITEM 1A.		Risk Factors			30
ITEM 2.		Unregistered Sales of Equity Securities and Use of Proceeds			30
ITEM 6.		Exhibits			30
EX-31.1 SECTION 302 CERTIFICATION OF THE CEO
EX-31.2 SECTION 302 CERTIFICATION OF THE CFO
EX-32.1 SECTION 906 CERTIFICATION OF THE CEO
EX-32.2 SECTION 906 CERTIFICATION OF THE CFO

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 1933, 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,” “foresee,” “may,” “might,” “will,” “intend,” “could,” “would” or “plan,” or future or conditional verb tenses, and variations or negatives of such terms. These forward-looking statements include, without limitation, those relating to BancorpSouth’s net interest margin, net interest revenue, the impact of interest rate volatility on interest earning assets and interest bearing liabilities, the use of demand deposits and maturing investment securities to fund loan growth, payment of dividends, prepayment of Junior Subordinated Debt Securities, valuation of mortgage servicing rights, operating results, noninterest revenue, deposits, key indicators of BancorpSouth’s financial performance (such as return on average assets and return on average shareholders’ equity), capital resources, BancorpSouth’s products and services, liquidity needs and strategies, provision for credit losses, allowance for credit losses, future acquisitions to further BancorpSouth’s business strategies, the effect of certain legal claims, the impact of federal and state regulatory requirements for capital, assessment of credit losses for loans to customers in the region affected by Hurricane Katrina, additional share repurchases under BancorpSouth’s stock repurchase program, diversification of BancorpSouth’s revenue stream, the impact of recent accounting pronouncements 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 as a result of a variety of factors. These factors include, but are not limited to, the rate of economic recovery in the areas affected by Hurricane Katrina, the ability of BancorpSouth to increase noninterest revenue and expand noninterest revenue business, the ability of BancorpSouth to fund growth with lower cost liabilities, the ability of BancorpSouth to maintain credit quality, the ability of BancorpSouth to provide and market competitive services and products, the ability of BancorpSouth to diversify revenue, the ability of BancorpSouth to attract, train and retain qualified personnel, the ability of BancorpSouth to operate and integrate new technology, changes in consumer preferences, changes in BancorpSouth’s operating or expansion strategy, changes in economic conditions and government fiscal and monetary policies, legislation and court decisions related to the amount of damages recoverable in legal proceedings, fluctuations in prevailing interest rates and the effectiveness of BancorpSouth’s interest rate hedging strategies, the ability of BancorpSouth to balance interest rate, credit, liquidity and capital risks, the ability of BancorpSouth to collect amounts due under loan agreements and attract deposits, laws and regulations affecting financial institutions in general, the ability of BancorpSouth to identify and effectively integrate potential acquisitions, the ability of BancorpSouth to manage its growth and effectively serve an expanding customer and market base, geographic concentrations of BancorpSouth’s assets and susceptibility to economic downturns in that area, availability of and costs associated with maintaining and/or obtaining adequate and timely sources of liquidity, the ability of BancorpSouth to compete with other financial services companies, the ability of BancorpSouth to repurchase its common stock on favorable terms, possible adverse rulings, judgments, settlements and other outcomes of pending or threatened litigation, other factors generally understood to affect the financial condition or 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.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

BANCORPSOUTH, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

		September 30,				December 31,
		2006				2005
		(Unaudited)				(1)
		(In thousands)
ASSETS
Cash and due from banks		$	377,005			$	461,659
Interest bearing deposits with other banks			7,231				6,809
Held-to-maturity securities, at amortized cost			1,684,483				1,412,529
Available-for-sale securities, at fair value			1,184,976				1,353,882
Federal funds sold and securities purchased under agreement to resell			20,851				409,531
Loans and leases			7,819,408				7,401,212
Less: Unearned income			45,726				35,657
Allowance for credit losses			97,391				101,500
Net loans			7,676,291				7,264,055
Loans held for sale			76,590				74,271
Premises and equipment, net			281,349				261,172
Accrued interest receivable			92,099				78,730
Goodwill			143,700				138,754
Other assets			315,367				307,282
TOTAL ASSETS		$	11,859,942			$	11,768,674
LIABILITIES
Deposits:
Demand: Noninterest bearing		$	1,753,566			$	1,798,892
Interest bearing			2,775,033				2,965,057
Savings			728,168				729,279
Other time			4,235,607				4,114,030
Total deposits			9,492,374				9,607,258
Federal funds purchased and securities sold under agreement to repurchase			715,108				748,139
Other short-term borrowings			200,000				2,000
Accrued interest payable			37,349				24,435
Junior subordinated debt securities			144,847				144,847
Long-term debt			136,096				137,228
Other liabilities			102,809				127,601
TOTAL LIABILITIES			10,828,583				10,791,508
SHAREHOLDERS’ EQUITY
Common stock, $2.50 par value Authorized - 500,000,000 shares, Issued - 79,131,256 and 79,237,345 shares, respectively			197,828				198,093
Capital surplus			112,644				108,961
Accumulated other comprehensive loss			(13,879	)			(16,233	)
Retained earnings			734,766				686,345
TOTAL SHAREHOLDERS’ EQUITY			1,031,359				977,166
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	11,859,942			$	11,768,674

See accompanying notes to consolidated financial statements.

BANCORPSOUTH, INC. AND SUBSIDIARIES

Consolidated Statements of Income
(Unaudited)

		Three months ended								Nine months ended
		September 30,								September 30,
		2006				2005				2006				2005
		(In thousands, except for per share amounts)
INTEREST REVENUE:
Loans and leases		$	143,712			$	115,800			$	405,481			$	329,479
Deposits with other banks			295				166				612				417
Federal funds sold and securities purchased under agreement to resell			609				1,061				4,431				1,649
Held-to-maturity securities:
Taxable			16,107				9,160				46,478				28,377
Tax-exempt			2,017				1,667				5,981				4,822
Available-for-sale securities:
Taxable			10,405				11,761				32,698				38,271
Tax-exempt			1,215				1,481				3,854				4,649
Loans held for sale			878				686				2,987				2,275
Total interest revenue			175,238				141,782				502,522				409,939
INTEREST EXPENSE:
Deposits			62,964				44,790				173,527				123,127
Federal funds purchased and securities sold under agreement to repurchase			8,498				3,692				20,949				8,443
Other			7,378				4,859				18,498				15,081
Total interest expense			78,840				53,341				212,974				146,651
Net interest revenue			96,398				88,441				289,548				263,288
Provision for credit losses			2,526				14,725				2,252				22,492
Net interest revenue, after provision for credit losses			93,872				73,716				287,296				240,796
NONINTEREST REVENUE:
Mortgage lending			41				4,207				6,937				7,382
Service charges			17,354				15,860				50,293				46,997
Trust income			2,344				2,161				6,685				6,054
Security gains, net			9				20				36				461
Insurance commissions			17,556				14,830				51,412				45,187
Other			11,930				11,085				40,241				39,024
Total noninterest revenue			49,234				48,163				155,604				145,105
NONINTEREST EXPENSE:
Salaries and employee benefits			58,453				52,173				174,402				157,992
Occupancy, net of rental income			8,598				6,751				23,799				20,004
Equipment			5,896				5,501				17,481				16,588
Other			25,714				25,088				77,331				75,193
Total noninterest expense			98,661				89,513				293,013				269,777
Income before income taxes			44,445				32,366				149,887				116,124
Income tax expense			13,818				9,507				46,016				35,730
Net income		$	30,627			$	22,859			$	103,871			$	80,394
Earnings per share: Basic		$	0.39			$	0.29			$	1.31			$	1.03
Diluted		$	0.38			$	0.29			$	1.31			$	1.02
Dividends declared per common share		$	0.20			$	0.19			$	0.59			$	0.57

See accompanying notes to consolidated financial statements.

BANCORPSOUTH, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows
(Unaudited)

		Nine months ended
		September 30,
		2006				2005
		(In thousands)
Operating Activities:
Net income		$	103,871			$	80,394
Adjustment to reconcile net income to net cash provided by operating activities:
Provision for credit losses			2,252				22,492
Depreciation and amortization			18,910				18,396
Deferred taxes			863				(3,093	)
Amortization of intangibles			3,549				10,336
Amortization of debt securities premium and discount, net			10,471				11,933
Security gains, net			(36	)			(463	)
Net deferred loan origination expense			(5,451	)			(5,501	)
Excess tax benefit from exercise of stock options			(1,154	)			—
Increase in interest receivable			(13,369	)			(4,575	)
Increase in interest payable			12,914				7,882
Realized gain on student loans sold			(2,806	)			(2,966	)
Proceeds from student loans sold			104,850				110,837
Origination of student loans held for sale			(92,778	)			(97,121	)
Realized gain on mortgages sold			(3,517	)			(5,277	)
Proceeds from mortgages sold			417,520				422,530
Origination of mortgages held for sale			(425,588	)			(421,748	)
Increase in bank-owned life insurance			(4,600	)			(4,586	)
Other, net			(38,822	)			2,400
Net cash provided by operating activities			87,079				141,870
Investing activities:
Proceeds from calls and maturities of held-to-maturity securities			294,342				204,162
Proceeds from calls and maturties of available-for-sale securities			273,679				239,847
Proceeds from sales of available-for-sale and trading securities			250				36,804
Purchases of held-to-maturity securities			(567,645	)			(189,245	)
Purchases of available-for-sale securities			(109,568	)			(42,938	)
Net decrease (increase) in short-term investments			388,680				(166,772	)
Net increase in loans and leases			(409,037	)			(261,962	)
Purchases of premises and equipment			(40,128	)			(30,406	)
Proceeds from sale of premises and equipment			1,445				474
Net cash paid for acquisitions			(4,840	)			(4,376	)
Other, net			3,011				192
Net cash used in investing activities			(169,811	)			(214,220	)
Financing activities:
Net (decrease) increase in deposits			(114,884	)			162,176
Net increase in short-term debt and other liabilities			164,893				30,431
Repayment of long-term debt			(1,132	)			(3,500	)
Issuance of common stock			4,740				4,423
Purchase of common stock			(10,143	)			(7,103	)
Excess tax benefit from exercise of stock options			1,154				—
Payment of cash dividends			(46,128	)			(50,779	)
Net cash (used in) provided by financing activities			(1,500	)			135,648
(Decrease) increase in cash and cash equivalents			(84,232	)			63,298
Cash and cash equivalents at beginning of period			468,468				322,536
Cash and cash equivalents at end of period		$	384,236			$	385,834

See accompanying notes to consolidated financial statements.

BANCORPSOUTH, INC. AND SUBSIDIARIES

NOTE 1 — BASIS OF FINANCIAL STATEMENT PRESENTATION AND PRINCIPLES OF CONSOLIDATION

The accompanying unaudited interim consolidated financial statements of BancorpSouth, Inc. (the “Company”) have been prepared in conformity with accounting principles generally accepted in the United States of America and follow general practices within the industries in which the Company operates. For further information, refer to the audited consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005. In the opinion of management, all adjustments necessary for a fair presentation of the consolidated financial statements have been included and all such adjustments were of a normal recurring nature. The results of operations for the three-month and nine-month periods ended September 30, 2006 are not necessarily indicative of the results to be expected for the full year.

The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries, BancorpSouth Bank (the “Bank”) and Risk Advantage, Inc., and the Bank’s wholly-owned subsidiaries, Century Credit Life Insurance Company, Personal Finance Corporation, BancorpSouth Insurance Services, Inc., BancorpSouth Investment Services, Inc. and BancorpSouth Municipal Development Corporation.

Key employees and directors of the Company and its subsidiaries have been granted stock options under the Company’s stock incentive plans. Prior to January 1, 2006, the Company accounted 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 was 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 was estimated on the date of grant using the Black-Scholes option-pricing model. The Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 123R, “Share-Based Payment,” on January 1, 2006. As a result of the adoption of SFAS No. 123R, the Company recognized compensation costs for previously granted unvested awards of approximately $24,000 during the first nine months of 2006. These awards were granted in 2005 with a fair value determined using the Black-Scholes option-pricing model with the following assumptions: ten-year expected option life; 3.40% dividend yield; 21.00% volatility; and 3.50% risk-free interest rate. The Company recognized compensation costs for newly granted unvested awards of approximately $105,000 during the first nine months of 2006. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” for the three months and nine months ended September 30, 2005:

		Three months				Nine months
		ended				ended
		September 30, 2005				September 30, 2005
		(In thousands, except per share amounts)
Net income, as reported		$	22,859			$	80,394
Deduct: Stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects			(180	)			(532	)
Pro forma net income		$	22,679			$	79,862
Basic earnings per share:    As reported		$	0.29			$	1.03
Pro forma			0.29				1.02
Diluted earnings per share: As reported		$	0.29			$	1.02
Pro forma			0.29				1.02

NOTE 2 — LOANS AND LEASES

The composition of the loan and lease portfolio by collateral type as of the dates indicated was as follows:

		September 30,								December 31,
		2006				2005				2005
		(In thousands)
Commercial and agricultural		$	986,207			$	861,700			$	930,259
Consumer and installment			385,856				388,347				388,610
Real estate mortgage:
1-4 Family			2,639,803				2,444,111				2,518,224
Other			3,452,339				3,110,961				3,228,445
Lease financing			310,989				282,643				302,311
Other			44,214				34,450				33,363
Total		$	7,819,408			$	7,122,212			$	7,401,212

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

		September 30,								December 31,
		2006				2005				2005
		(In thousands)
Non-accrual loans		$	6,289			$	8,103			$	8,816
Loans 90 days or more past due			16,859				13,539				17,744
Restructured loans			1,952				2,240				2,239
Total non-performing loans		$	25,100			$	23,882			$	28,799

NOTE 3 — ALLOWANCE FOR CREDIT LOSSES

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

		Nine months ended								Year ended
		September 30,								December 31,
		2006				2005				2005
		(In thousands)
Balance at beginning of period		$	101,500			$	91,673			$	91,673
Provision charged to expense			2,252				22,492				24,467
Recoveries			3,927				3,652				4,557
Loans and leases charged off			(10,288	)			(16,750	)			(20,433	)
Other, net			—				—				1,236
Balance at end of period		$	97,391			$	101,067			$	101,500

NOTE 4 — SECURITIES

The following table summarizes information pertaining to temporarily impaired held-to-maturity and available-for-sale securities with continuous unrealized loss positions at September 30, 2006:

		Continuous Unrealized Loss Position
		Less Than 12 Months								12 Months or Longer								Total
		Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
		Value				Losses				Value				Losses				Value				Losses
		(In thousands)
Held-to-maturity securities:
U.S. Treasury		$	4,956			$	11			$	5,048			$	33			$	10,004			$	44
U.S. Government agencies			537,027				4,106				726,998				21,271				1,264,025				25,377
Obligations of states and political subdivisions			38,787				349				38,779				730				77,566				1,079
Total		$	580,770			$	4,466			$	770,825			$	22,034			$	1,351,595			$	26,500
Available-for-sale securities:
U.S. Government agencies		$	101,150			$	680			$	852,874			$	23,940			$	954,024			$	24,620
Obligations of states and political subdivisions			2,440				14				7,346				141				9,786				155
Other			19				1				7,963				37				7,982				38
Total		$	103,609			$	695			$	868,183			$	24,118			$	971,792			$	24,813

Based upon review of the sector credit ratings of these securities, the ability to hold the securities until the impairment has been recovered and the volatility of their market price, the impairments related to these securities were determined to be temporary.

NOTE 5 — PER SHARE DATA

The computation of basic earnings per share (“EPS”) 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 share-based awards using the treasury stock method.

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

		Three months ended September 30,
		2006												2005
		Income				Shares				Per Share				Income				Shares				Per Share
		(Numerator)				(Denominator)				Amount				(Numerator)				(Denominator)				Amount
		(In thousands, except per share amounts)
Basic EPS
Income available to common shareholders		$	30,627				79,104			$	0.39			$	22,859				78,224			$	0.29
Effect of dilutive share- based awards			—				473								—				346
Diluted EPS
Income available to common shareholders plus assumed exercise of all outstanding share-based awards		$	30,627				79,577			$	0.38			$	22,859				78,570			$	0.29

		Nine months ended September 30,
		2006												2005
		Income				Shares				Per Share				Income				Shares				Per Share
		(Numerator)				(Denominator)				Amount				(Numerator)				(Denominator)				Amount
		(In thousands, except per share amounts)
Basic EPS
Income available to common shareholders		$	103,871				79,154			$	1.31			$	80,394				78,216			$	1.03
Effect of dilutive stock options			—				398								—				344
Diluted EPS
Income available to common shareholders plus assumed exercise		$	103,871				79,552			$	1.31			$	80,394				78,560			$	1.02

NOTE 6 — COMPREHENSIVE INCOME

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

		Three months ended September 30,
		2006												2005
		Before				Tax				Net				Before				Tax				Net
		tax				(expense)				of tax				tax				(expense)				of tax
		amount				benefit				amount				amount				benefit				amount
		(In thousands)
Unrealized gains on available-for-sale securities:
Unrealized (losses) gains arising during holding period		$	11,137			$	(4,261	)		$	6,876			$	(4,364	)		$	1,671			$	(2,693	)
Less: Reclassification adjustment for net (gains) losses realized in net income			(2	)			1				(1	)			(20	)			7				(13	)
Other comprehensive income (loss)		$	11,135			$	(4,260	)		$	6,875			$	(4,384	)		$	1,678			$	(2,706	)
Net income											30,627												22,859
Comprehensive income										$	37,502											$	20,153

		Nine months ended September 30,
		2006												2005
		Before				Tax				Net				Before				Tax				Net
		tax				(expense)				of tax				tax				(expense)				of tax
		amount				benefit				amount				amount				benefit				amount
		(In thousands)
Unrealized gains on available-for-sale securities:
Unrealized (losses) gains arising during holding period		$	3,822			$	(1,460	)		$	2,362			$	(15,068	)		$	5,771			$	(9,297	)
Less: Reclassification adjustment for net (gains) losses realized in net income			(13	)			5				(8	)			(346	)			132				(214	)
Other comprehensive income (loss)		$	3,809			$	(1,455	)		$	2,354			$	(15,414	)		$	5,903			$	(9,511	)
Net income											103,871												80,394
Comprehensive income										$	106,225											$	70,883

NOTE 7 — JUNIOR SUBORDINATED DEBT SECURITIES

In 2002, the Company issued $128,866,000 in 8.15% Junior Subordinated Debt Securities to BancorpSouth Capital Trust I (the “Trust”), a business trust. The Trust used the proceeds from the issuance of five million shares of

8.15% trust preferred securities, $25 face value per share, to acquire the 8.15% Junior Subordinated Debt Securities. Both the Junior Subordinated Debt Securities and the trust preferred securities mature on January 28, 2032 and are callable at the option of the Company after January 28, 2007.

Pursuant to the merger with Business Holding Corporation (“BHC”) on December 31, 2004, the Company assumed the liability for $6,186,000 in Junior Subordinated Debt Securities issued to Business Holding Company Trust I, a statutory trust. Business Holding Company Trust I used the proceeds from the issuance of 6,000 shares of trust preferred securities to acquire the Junior Subordinated Debt Securities. Both the Junior Subordinated Debt Securities and the trust preferred securities mature on April 7, 2034, and are callable at the option of the Company, in whole or in part, on any January 7, April 7, July 7, or October 7 on or after April 7, 2009. The Junior Subordinated Debt Securities and the trust preferred securities pay a per annum rate of interest, reset quarterly, equal to the three-month London Interbank Offered Rate (“LIBOR”) plus 2.80% from January 30, 2004 to April 7, 2009 and thereafter at LIBOR plus 2.85%.

Pursuant to the merger with Premier Bancorp, Inc. (“Premier”) on December 31, 2004, the Company assumed the liability for $3,093,000 in Junior Subordinated Debt Securities issued to Premier Bancorp Capital Trust I, a statutory trust. Premier Bancorp Capital Trust I used the proceeds from the issuance of 3,000 shares of trust preferred securities to acquire the Junior Subordinated Debt Securities. Both the Junior Subordinated Debt Securities and the trust preferred securities mature on November 7, 2032, and are callable at the option of the Company, in whole or in part, on any February 7, May 7, August 7 or November 7 on or after November 7, 2007. The Junior Subordinated Debt Securities and the trust preferred securities pay a per annum rate of interest, reset quarterly, equal to the three-month LIBOR plus 3.45%.

Pursuant to the merger with American State Bank Corporation (“ASB”) on December 1, 2005, the Company assumed the liability for $6,702,000 in Junior Subordinated Debt Securities issued to American State Capital Trust I, a statutory trust. American State Capital Trust I used the proceeds from the issuance of 6,500 shares of trust preferred securities to acquire the Junior Subordinated Debt Securities. Both the Junior Subordinated Debt Securities and the trust preferred securities mature on April 7, 2034, and are callable at the option of the Company, in whole or in part, on July 7, October 7, January 7 or April 7 on or after April 7, 2009. The Junior Subordinated Debt Securities and the trust preferred securities pay a per annum rate of interest, reset quarterly, equal to the three-month LIBOR plus 2.80%.

NOTE 8 — GOODWILL AND OTHER INTANGIBLE ASSETS

The changes in the carrying amount of goodwill by operating segment for the nine months ended September 30, 2006 were as follows:

						General
		Community				Corporate
		Banking				and Other				Total
		(In thousands)
Balance as of December 31, 2005		$	103,462			$	35,292			$	138,754
Goodwill acquired during the period			1,152				3,343				4,495
Purchase accounting adjustments			451				—				451
Balance as of September 30, 2006		$	105,065			$	38,635			$	143,700

The following tables present information regarding the components of the Company’s identifiable intangible assets for the dates and periods indicated:

		As of								As of
		September 30, 2006								December 31, 2005
		Gross Carrying				Accumulated				Gross Carrying				Accumulated
		Amount				Amortization				Amount				Amortization
		(In thousands)
Amortized intangible assets:
Core deposit intangibles		$	20,699			$	11,151			$	20,699			$	9,455
Customer relationship intangibles			23,164				9,866				22,890				8,051
Non-solicitation intangibles			65				55				52				35
Total		$	43,928			$	21,072			$	43,641			$	17,541
Unamortized intangible assets:
Trade names		$	688			$	—			$	688			$	—
Pension plan intangibles			1,057				—				1,057				—
Total		$	1,745			$	—			$	1,745			$	—

		Three months ended								Nine months ended
		September 30,								September 30,
		2006				2005				2006				2005
		(In thousands)
Aggregate amortization expense for:
Core deposit intangibles		$	557			$	602			$	1,696			$	1,819
Customer relationship intangibles			571				643				1,815				2,033
Non-solicitation intangibles			4				6				20				19
Total		$	1,132			$	1,251			$	3,531			$	3,871

The following table presents information regarding estimated amortization expense on the Company’s amortizable identifiable intangible assets for the year ended December 31, 2006, and the succeeding four years:

						Customer				Non-
		Core Deposit				Relationship				Solicitation
		Intangibles				Intangibles				Intangibles				Total
		(In thousands)
Estimated Amortization Expense:
For year ended December 31, 2006		$	2,240			$	2,361			$	22			$	4,623
For year ended December 31, 2007			2,015				2,047				7				4,069
For year ended December 31, 2008			1,735				1,811				—				3,546
For year ended December 31, 2009			1,546				1,554				—				3,100
For year ended December 31, 2010			1,207				1,360				—				2,567

NOTE 9 — PENSION AND OTHER POSTRETIREMENT BENEFITS

The following tables present the components of net periodic benefit costs for the periods indicated:

		Pension Benefits								Other Benefits
		Three months ended								Three months ended
		September 30,								September 30,
		2006				2005				2006				2005
		(In thousands)
Service cost		$	1,743			$	1,820			$	—			$	1
Interest cost			1,328				1,360				8				37
Expected return on assets			(1,500	)			(1,262	)			—				—
Amortization of unrecognized transition amount			5				4				—				—
Recognized prior service cost			60				63				166				198
Recognized net (gain) loss			412				516				(7	)			—
Net periodic benefit costs		$	2,048			$	2,501			$	167			$	236

		Pension Benefits								Other Benefits
		Nine months ended								Nine months ended
		September 30,								September 30,
		2006				2005				2006				2005
		(In thousands)
Service cost		$	5,229			$	4,608			$	—			$	3
Interest cost			3,984				3,680				24				111
Expected return on assets			(4,500	)			(4,088	)			—				—
Amortization of unrecognized transition amount			15				14				—				—
Recognized prior service cost			180				187				498				594
Recognized net (gain) loss			1,236				946				(21	)			—
Net periodic benefit costs		$	6,144			$	5,347			$	501			$	708

NOTE 10 — RECENT PRONOUNCEMENTS

In March 2006, SFAS No. 156, “Accounting for Servicing of Financial Assets,” was issued. SFAS No. 156 amends SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,” as it relates to the accounting for separately recognized servicing assets and servicing liabilities by requiring that all separately recognized servicing assets and servicing liabilities be initially measured by fair value, if practicable. SFAS No. 156 also permits the subsequent measurement of separately recognized servicing assets and servicing liabilities at fair value. SFAS No. 156 was adopted by the Company effective January 1, 2006 with the Company electing to measure its servicing rights at fair value at each reporting date. The adoption of SFAS No. 156 has had no material impact on the Company’s financial statements.

In June 2006, Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes — an interpretation of SFAS 109.” FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS 109, “Accounting for Income Taxes,” and prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken or expected to be taken on a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company is currently evaluating the impact that the adoption of FIN 48 will have on the financial position and results of operations of the Company.

In February 2006, SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments, an amendment of FASB Statements No. 133 and 140,” was issued. SFAS No. 155 permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS No. 133, establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation, clarifies that concentrations

of credit risk in the form of subordination are not embedded derivatives and amends SFAS No. 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS No. 155 is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006. The adoption of SFAS No. 155 is expected to have no material impact on the financial position or results of operations of the Company.

In September 2006, SFAS No. 157, “Fair Value Measurements,” was issued. SFAS No. 157 establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The adoption of SFAS No. 157 is expected to have no material impact on the financial position or results of operations of the Company.

In September 2006, SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of SFAS No. 87, 88, 106, and 132R,” was issued. SFAS No. 158 requires an employer to recognize the over-funded or under-funded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income. SFAS No. 158 also requires an employer to measure the funded status of a plan as of the date of its year-end statement of financial position. SFAS No. 158 recognition and disclosure requirements are effective as of the end of the fiscal year ending after December 15, 2006. SFAS No. 158 measurement requirements are effective for fiscal years ending after December 15, 2008. Based on the preliminary funding status as of September 30, 2006, the adoption of SFAS No. 158 is expected to have no material impact on the financial position, results of operations or regulatory requirements for capital of the Company.

In September 2006, Staff Accounting Bulletin No. 108 (“SAB 108”), “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” was issued. SAB 108 provides interpretative guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement. SAB 108 requires registrants to quantify errors using both a balance sheet and an income statement approach and to evaluate whether either approach results in quantifying a misstatement material in light of relevant quantitative and qualitative factors. SAB 108 must be applied to annual financial statements for the first fiscal year ending after November 15, 2006. The application of SAB 108 is expected to have no material impact on the financial position or results of operations of the Company.

In September, 2006, the Emerging Issues Task Force (“EITF”) reached a final consensus on Issue No. 06-4 (“EITF 06-4”), “Accounting for the Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements”. EITF 06-4 requires employers to recognize a liability for future benefits provided through endorsement split-dollar life insurance arrangements that extend into postretirement periods in accordance with SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions” or APB Opinion No. 12, “Omnibus Opinion – 1967.” EITF 06-4 is effective for fiscal years beginning after December 15, 2007. Entities should recognize the effects of applying this Issue through either (a) a change in accounting principle through a cumulative-effect adjustment to retained earnings or to other components of equity or net assets in the statement of financial position as of the beginning of the year of adoption or (b) a change in accounting principle through retrospective application to all prior periods. The Company is currently evaluating the impact that the adoption of EITF 06-4 will have on the financial position of the Company.

NOTE 11 — BUSINESS COMBINATIONS

On December 1, 2005, ASB, a financial holding company with approximately $358 million in assets headquartered in Jonesboro, Arkansas, merged with and into the Company. Pursuant to the merger, ASB’s subsidiary, American State Bank, merged with and into the Bank. Consideration paid to complete this transaction consisted of 1,127,544 shares of the Company’s common stock in addition to cash paid to the ASB shareholders in the aggregate amount of $25,001,242. This transaction was accounted for as a purchase. This acquisition was not material to the financial position or results of operations of the Company.

NOTE 12 — 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 and nine-month periods ended September 30, 2006 and 2005 were as follows:

						General
		Community				Corporate
		Banking				and Other				Total
		(In thousands)
Three months ended September 30, 2006:
Results of Operations
Net interest revenue		$	86,620			$	9,778			$	96,398
Provision for credit losses			2,460				66				2,526
Net interest revenue after provision for credit losses			84,160				9,712				93,872
Noninterest revenue			25,905				23,329				49,234
Noninterest expense			67,718				30,943				98,661
Income before income taxes			42,347				2,098				44,445
Income taxes			13,166				652				13,818
Net income		$	29,181			$	1,446			$	30,627
Selected Financial Information
Total assets (at end of period)		$	9,880,324			$	1,979,618			$	11,859,942
Depreciation and amortization			6,519				1,246				7,765
Three months ended September 30, 2005:
Results of Operations
Net interest revenue		$	80,572			$	7,869			$	88,441
Provision for credit losses			14,658				67				14,725
Net interest revenue after provision for credit losses			65,914				7,802				73,716
Noninterest revenue			23,852				24,311				48,163
Noninterest expense			58,876				30,637				89,513
Income before income taxes			30,890				1,476				32,366
Income taxes			9,073				434				9,507
Net income		$	21,817			$	1,042			$	22,859
Selected Financial Information
Total assets (at end of period)		$	9,261,286			$	1,803,972			$	11,065,258
Depreciation and amortization			6,065				3,470				9,535

						General
		Community				Corporate
		Banking				and Other				Total
		(In thousands)
Nine months ended September 30, 2006:
Results of Operations
Net interest revenue		$	261,835			$	27,713			$	289,548
Provision for credit losses			2,167				85				2,252
Net interest revenue after provision for credit losses			259,668				27,628				287,296
Noninterest revenue			79,049				76,555				155,604
Noninterest expense			195,302				97,711				293,013
Income before income taxes			143,415				6,472				149,887
Income taxes			44,029				1,987				46,016
Net income		$	99,386			$	4,485			$	103,871
Selected Financial Information
Total assets (at end of period)		$	9,880,324			$	1,979,618			$	11,859,942
Depreciation and amortization			18,601				3,858				22,459
Nine months ended September 30, 2005:
Results of Operations
Net interest revenue		$	240,369			$	22,919			$	263,288
Provision for credit losses			22,356				136				22,492
Net interest revenue after provision for credit losses			218,013				22,783				240,796
Noninterest revenue			73,828				71,277				145,105
Noninterest expense			176,364				93,413				269,777
Income before income taxes			115,477				647				116,124
Income taxes			35,531				199				35,730
Net income		$	79,946			$	448			$	80,394
Selected Financial Information
Total assets (at end of period)		$	9,261,286			$	1,803,972			$	11,065,258
Depreciation and amortization			18,159				10,573				28,732

NOTE 13 — MORTGAGE SERVICING RIGHTS

                    Mortgage Servicing Rights (“MSRs”) are capitalized based on the fair value of the servicing right on the date the corresponding mortgage loan is sold. In determining the fair value of capitalized MSRs, the Company utilizes the expertise of an independent third party. An estimate of the fair value of the Company’s capitalized MSRs is determined by the independent third party utilizing assumptions about factors such as mortgage interest rates, discount rates, mortgage loan prepayment speeds, market trends and industry demand. The aforementioned estimate and assumptions are reviewed by management. Because the valuation is determined by using discounted cash flow models, the primary risk inherent in valuing the MSRs is the impact of fluctuating interest rates on the estimated life of the servicing revenue stream. The use of different estimates or assumptions could also produce different fair values. The Company does not hedge the value of capitalized MSRs and, therefore, the Company is susceptible to significant fluctuations in the fair value of its MSRs in changing interest rate environments.

The Company has one class of mortgage servicing assets comprised of closed end loans for one-to-four family residences, secured by first liens. The following table presents the activity in this class for the period indicated:

		2006
		(In thousands)
Fair value as of January 1		$	36,456
Additions:
Origination of servicing assets			4,662
Changes in fair value:
Due to change in valuation inputs or assumptions used in the valuation model			(3,078	)
Other changes in fair value			45
Fair value as of September 30		$	38,085

All of the changes to the values of the MSRs are recorded as part of mortgage lending noninterest revenue on the income statement. As part of mortgage lending noninterest revenue, the Company recorded contractual servicing fees of $2.02 million and $2.04 million and servicing fees and ancillary fees of $267,000 and $291,000 for the third quarter ended September 30, 2006 and 2005, respectively. The Company recorded contractual servicing fees of $6.06 million and $6.15 million and servicing fees and ancillary fees of $748,000 and $834,000 for the nine months ended September 30, 2006 and 2005, respectively.

NOTE 14 — COMMITMENTS AND CONTINGENT LIABILITIES

During the second quarter of 2006, the State Tax Commission of the State of Mississippi and the Company resolved the issues related to the State Tax Commission’s audit of the Bank’s income tax returns for the tax years 1998 through 2001. As a result, the Company paid additional taxes in the amount of $40,000, plus interest of $25,000. The balance of the previously recorded liability related to this matter of approximately $1.95 million was credited against the Company’s second quarter’s income tax expense.

NOTE 15 — SUBSEQUENT EVENTS

On October 31, 2006, the Company announced the signing of a definitive agreement to acquire City Bancorp, parent company of The Signature Bank headquartered in Springfield, Missouri, with approximately $847 million in assets and approximately $600 million in deposits as of September 30, 2006. The Signature Bank operates six full service banking locations in Springfield, Missouri and one loan production office in Clayton (St. Louis), Missouri. The transaction is valued at approximately $170 million and is expected to be completed during the first quarter of 2007, subject to approval of City Bancorp’s shareholders, federal and state banking regulators and other customary closing conditions.

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

OVERVIEW

BancorpSouth, Inc. (the “Company”) is a regional financial holding company with approximately $11.9 billion in assets headquartered in Tupelo, Mississippi. BancorpSouth Bank (the “Bank”), the Company’s wholly-owned banking subsidiary, has commercial banking operations in Mississippi, Tennessee, Alabama, Arkansas, Texas and Louisiana. During the third quarter of 2006, the Bank entered the Florida market by opening a full-service bank office in Destin, Florida. The Bank and its consumer finance, credit insurance, insurance agency and brokerage subsidiaries provide commercial banking, leasing, mortgage origination and servicing, insurance, brokerage and trust services to corporate customers, local governments, individuals and other financial institutions through an extensive network of branches and offices.

Management’s discussion and analysis provides a narrative discussion of the Company’s financial condition and results of operations. For a complete understanding of the following discussion, you should refer to the unaudited consolidated financial statements for the three-month and nine-month periods ended September 30, 2006 and 2005

and the notes to such financial statements found under “Part I, Item 1. Financial Statements.” of this report. This discussion and analysis is based on reported financial information. The information that follows is provided to enhance comparability of financial information between periods and to provide a better understanding of the Company’s operations.

As a financial holding company, the financial condition and operating results of the Company are heavily influenced by economic trends nationally and in the specific markets in which the Company’s subsidiaries provide financial services. Most of the revenue of the Company is derived from the operation of its principal operating subsidiary, the Bank. The financial condition and operating results of the Bank are affected by the level and volatility of interest rates on loans, investment securities, deposits and other borrowed funds, and the impact of economic cycles on loan demand and creditworthiness of existing borrowers. The financial services industry is highly competitive and heavily regulated. The Company’s success depends on its ability to compete aggressively within its markets while maintaining sufficient asset quality and cost controls to generate net income.

The tables below summarize the Company’s net income, net income per share, return on average assets and return on average shareholders’ equity for the three months and nine months ended September 30, 2006 and 2005. Management believes these amounts and ratios are key indicators of the Company’s financial performance.

		Three months ended
		September 30,
		2006				2005				% Change
(Dollars in thousands, except per share amounts)
Net income		$	30,627			$	22,859				33.98	%
Net income per share: Basic		$	0.39			$	0.29				34.48
Diluted		$	0.38			$	0.29				31.03
Return on average assets (annualized)			1.03	%			0.83	%			24.10
Return on average shareholders’ equity (annualized)			11.94	%			9.70	%			23.09

		Nine months ended
		September 30,
		2006				2005				% Change
(Dollars in thousands, except per share amounts)
Net income		$	103,871			$	80,394				29.20	%
Net income per share: Basic		$	1.31			$	1.03				27.18
Diluted		$	1.31			$	1.02				28.43
Return on average assets (annualized)			1.18	%			0.99	%			19.19
Return on average shareholders’ equity (annualized)			13.95	%			11.61	%			20.16

Net income increased for the three months and nine months ended September 30, 2006 compared to the three months and nine months ended September 30, 2005. The increase in net income is attributable to several factors. The Company’s primary source of revenue, net interest revenue earned by the Bank, reflected continued positive trends for the three months and nine months ended September 30, 2006 compared to the same periods of 2005. Net interest revenue is the difference between interest earned on loans and investments and interest paid on deposits and other obligations. The Company’s net interest revenue was positively impacted by increases in interest rates as well as the increased loan demand resulting from favorable economic activity throughout most of the Bank’s markets and the Company’s continued focus on funding this growth with maturing investment securities and lower-cost liabilities, as well as FHLB short-term borrowings as needed. These factors combined to increase the Company’s net interest revenue to $96.40 million for the third quarter of 2006, a $7.96 million, or 9.00%, increase from $88.44 million for the third quarter of 2005. Net interest revenue increased to $289.55 million for the first nine months of 2006, a $26.26 million, or 9.97%, increase from $263.29 million for the first nine months of 2005. Also positively impacting net income was the decrease in the Company’s provision for credit losses in the third quarter of 2006 compared to the third quarter of 2005. In the third quarter of 2005, the Company increased its provision for credit losses by approximately $10.38 million, primarily as a result of Hurricane Katrina’s impact on the Mississippi Gulf Coast region and estimates of the effect on the Company’s customers. Because the actual effect of Hurricane

Katrina on the Company’s customers has been less than what was estimated in the third quarter of 2005, in the first nine months of 2006 the Company has been able to reverse $5.90 million of the allowance for credit losses recorded in the third quarter of 2005.

In recent years, the Company has taken steps to diversify its revenue stream by increasing its noninterest revenue from mortgage lending activities, insurance agency activities, brokerage activities and other bank-related fees. Management believes this diversification is important to reduce the impact of fluctuations in net interest revenue on the overall operating results of the Company. These diversification efforts resulted in an overall increase in noninterest revenue of 2.22% and 7.24% for the third quarter and first nine months of 2006, respectively, compared to the same periods in 2005. One of the primary contributors to the increase in noninterest revenue was insurance commissions, as commissions increased 18.38% and 13.78% for the third quarter and first nine months of 2006, respectively, compared to the same periods in 2005. While insurance commission revenue increased, the Company’s mortgage lending revenue decreased during the third quarter and first nine months of 2006 compared to the same periods in 2005. The decrease in mortgage lending revenue primarily resulted from the impact of a $3.67 million net decrease in the fair value of the Company’s mortgage servicing asset for the third quarter of 2006 compared to a $662,000 reversal of the previous impairment of the Company’s mortgage servicing asset during the third quarter of 2005. Other noninterest revenue increased 7.62% and 3.12% for the third quarter and first nine months of 2006,respectively, compared to the same periods in 2005 as the Company recorded receipt of an additional $1.00 million in insurance proceeds related to Hurricane Katrina during the third quarter of 2006. The Company also recorded a gain of $732,000 from the redemption of Class B shares of MasterCard common stock in connection with its initial public offering during the second quarter of 2006. Life insurance proceeds of $1.4 million received in the second quarter of 2006 were reclassed as a bad debt recovery in the third quarter of 2006 as they related to a previously charged off loan.

Improved asset quality resulted in annualized net charge-offs falling to 0.07% of average loans for the third quarter of 2006 from 0.27% of average loans for the third quarter of 2005 and to 0.11% of average loans for the first nine months of 2006 from 0.25% of average loans for the first nine months of 2005. Noninterest expense totaled $98.66 million for the third quarter of 2006 compared to $89.51 million for the third quarter of 2005, an increase of $9.15 million, or 10.22%. For the first nine months of 2006 and 2005, noninterest expense totaled $293.01 million and $269.78 million, respectively, representing an increase of 8.61%. The increase in noninterest expense for the third quarter and first nine months of 2006 resulted primarily from the impact of costs related to the integration and operation of American State Bank Corporation that was acquired and merged into the Company on December 1, 2005 and increased costs related to additional locations and facilities added since September 30, 2005. The major components of net income are discussed in more detail in the various sections that follow.

CRITICAL ACCOUNTING POLICIES

During the nine months ended September 30, 2006, there was no significant change in the Company’s critical accounting policies and no significant 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, 2005, with the exception of the following change regarding mortgage servicing rights.

Mortgage Servicing Rights

                    The Company recognizes as assets the rights to service mortgage loans for others, known as MSRs. Prior to the Company’s adoption of SFAS No. 156, MSRs were capitalized based on the relative fair value of the servicing right and the mortgage loan on the date the mortgage loan is sold. As a result of the Company’s adoption of SFAS No. 156 on January 1, 2006, the Company carries MSRs at fair value. In determining the fair value of capitalized MSRs, the Company utilizes the expertise of an independent third party. An estimate of the fair value of the Company’s capitalized MSRs is determined by the independent third party utilizing assumptions about factors such as mortgage interest rates, discount rates, mortgage loan prepayment speeds, market trends and industry demand. The aforementioned estimate and the assumptions used by the independent third party to arrive at the estimate are reviewed by management. Because the valuation is determined by using discounted cash flow models, the primary risk inherent in valuing the MSRs is the impact of fluctuating interest rates on the estimated life of the servicing revenue stream. The use of different estimates or assumptions could also produce different fair values.