JACKSON, Miss. -- Whether he's huffing through the Himalayas or sweating his way across the Sahara, E.B. "Bud" Robinson always completes his strenuous marathons. Next to what he faces in his working life, the exotic tests of endurance often seem a relief.

Mr. Robinson is chairman and chief executive of Deposit Guaranty Corp., a Mississippi banking company with $4.8 billion of assets. In spite of improving earnings, the bank faces sluggish loan demand that presents a challenge as great as any race.

"Without loan demand, they're living off credit quality, and that will play out in a couple more quarters," said Peter Tuz, who follows Deposit Guaranty for Morgan Keegan & Co., a Memphis brokerage firm. "Without loan demand, their earnings could fall next year."

If Mr. Robinson is worried, it does not break through his disciplined exterior of optimism. "Loan demand is going up gradually, and what we're doing in sales and services is beginning to make a difference," he said.

He was referring to initiatives started several years ago after internal customer surveys indicated service problems at Deposit Guaranty. Mr. Robinson quickly launched a major push to retrain employees.

Brokerage Efforts

Mr. Robinson also has put more emphasis on Deposit Guaranty Investments, the company's brokerage subsidiary. This year, DGI introduced a line of proprietary mutual funds and beefed up its sales force. Its team of 28 fund hawkers represents the second-largest brokerage operation, after Merrill Lynch & Co., in the tiny state.

Deposit Guaranty is the largest bank holding company based in Mississippi. Its empire includes a $1 billion-asset subsidiary bank in Shreveport, La.

Within its home state, Deposit runs virtually neck and neck with Jackson-based Trustmark Corp., which has $4.2 billion in assets. Each boasts about a 14% share of deposits statewide.

Deposit Guaranty's asset-quality problems began mounting in the late 1980s, culminating in 1990 with weak net income of $24.5 million, or $1.49 a share.

Since, then it has been on a steady climb to recovery. Last year the bank earned $45.5 million, or $2.63 a share, for a return on assets of 0.95% and return on equity of 14.41%.

312% Coverage

Earnings for the first six months of 1993 were $35 million, or $1.99 a share, elevating ROA to a robust 1.45% and ROE to 19.89%.

As Mr. Tuz noted, the main driver of earnings has been improving asset quality rather than fundamental business growth. The bank company's $65 million loan-loss reserve covers an excessive 312% of nonperforming loans, permitting Deposit Guaranty to report zero provisions for two of the last three quarters.

In its most recently completed quarter, Deposit Guaranty began drawing down the reserve. It took a "negative" provision of $11 million, transferring the funds to its bottom line.

"They shouldn't need a loan-loss provision for the next two quarters, and it's debatable right now whether they need one for next year," Mr. Tuz said. "So they will still benefit from the improving credit quality they've demonstrated."

Loan demand is another problem. The nationwide problem is especially acute in Mississippi, where the Southeast's weakest economy has historically resulted in lower loan-to-deposit ratios at banks than in most other states. Deposit Guaranty's ratio within Mississippi -- 64% -- is above the state average of 62%.

But in this year's second quarter, the bank reported a slight 2.6% gain in loan volume over the previous three months. Moreover, the loan ratio was only 1% higher than in the year-earlier quarter, according to Sterne, Agee & Leach, a Birmingham-based brokerage firm.

Need Acknowledged

Deposit Guaranty is somewhat responsible for its loan volume problems, since it has been deliberately promoting runoff in Shreveport to scrub an acquired portfolio there of bad assets. But Mr. Robinson acknowledges that the company needs to crank up its loan generation.

He says he's encouraged by an embryonic revival of commercial real estate financing in the Jackson area, which is less overbuilt than most urban markets. Indeed, it boasts a 95% occupancy rate in class A commercial space.

"I see some activity that is coming and picking up that's going to get us into a better loan situation than we have right now," the executive said. "But I think it's going to be slow for the whole country."

One effect of Deposit Guaranty's anemic loan-to-deposit ratio is depressed net interest income. That, in turn, leads to low marks on the company's efficiency ratio, which measures operating revenue as a percentage of noninterest expense.

At 67%, Deposit Guaranty's efficiency ratio is high relative to its peers.

"Deposit Guaranty's got to have some fat in there on the expense side," says Bradford M. Johnson, an Atlanta-based analyst at Sterne Agee. "The banks with the best market position are always a little more lethargic about cost cutting."

Passing Up a Gamble

Meanwhile, Mr. Robinson is hoping to pump up revenue through loans. His best chance for that, however, rests on an industry that makes him uneasy -- gambling. Mississippi is one of six states that recently legalized water-borne casinos.

It now has more than 20 dockside casinos operating along the Mississippi River, including eight opened since August 1992. Local statisticians claim that the casinos have created some 10,000 new jobs, but Mr. Robinson is wary.

"I personally have very mixed emotions over the whole issue of casino gambling," he said. "I get concerned over what's going to happen and where the shakeout in the industry will come from. But I've been surprised so far how big and how broad the market is."

Mr. Robinson said he knows of casino loans made by competitors that were paid back in months instead of years. For now, Deposit Guaranty isn't making those bets. The bank's policy is to make loans only when they involve established, national gambling operators who can pay back the money from other properties.

Looking Out of State

Rather than dropping all his chips on the gaming table, Mr. Robinson is looking at neighboring states for future expansion.

He's particularly interested in the so-called "Arklatex" region, where northwestern Louisiana borders Texas and Arkansas. The Shreveport bank, he said, would provide an ideal springboard for further acquisitions there.

On the broader issue of independence, Mr. Robinson said his board intends "to control our own destiny ... to be the acquirer rather than the acquiree."

But the banker, who has an undergraduate degree from North Carolina's Davidson College and an MBA from Harvard, is a realist. "If someone comes along with a really high proposal for our bank, we'd certainly have to look at it."

Meanwhile, there are few ardent suitors for the state's five largest banks. "There's not a lot to really drag people into that market," said Henry Jr. Coffey Jr., an analyst at Tennessee's J.C. Bradford & Co.

But as takeover opportunities diminish in neighboring states, attention will turn to Mississippi, most analysts believe.

Deposit Guaranty's attractions include a 35% deposit market share in Jackson, the state's most prosperous market. It also boasts the most widespread statewide retail network -- 120 branches in 18 of Mississippi's 20 largest markets.

The bank also dominates the state in areas such as trust ($12.5 billion in assets) and international banking, while ranking near the top in brokerage and residential mortgages.

Acquisition overtures are most likely to come from Alabama and Tennessee, both home to several expansion-minded banks larger than Deposit Guaranty.

John W. Woods, the chairman and chief executive of Birmingham-based Amsouth Bancorp., which has $11.1 billion in assets, has told stock analysts that he recently approached some Mississippi banks but failed to make a deal.

Mr. Robinson, a Mississippi native who began his career as a municipal bond trader at Deposit in 1967, declines to discuss specifics but admits he has been approached by some out-of-state parties.

"We've basically told them we're flattered, but this is not the direction the board or management is going right now," the 52-year-old banker said. "But we certainly want to keep them in mind, because nobody completely knows the future."

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