0000950144-95-002562.txt : 19950914 0000950144-95-002562.hdr.sgml : 19950914 ACCESSION NUMBER: 0000950144-95-002562 CONFORMED SUBMISSION TYPE: POS AM PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 19950911 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BANCORPSOUTH INC CENTRAL INDEX KEY: 0000701853 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 640659571 STATE OF INCORPORATION: MS FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: POS AM SEC ACT: 1933 Act SEC FILE NUMBER: 033-91338 FILM NUMBER: 95572930 BUSINESS ADDRESS: STREET 1: ONE MISSISSIPPI PL CITY: TUPELO STATE: MS ZIP: 38801 BUSINESS PHONE: 6016802000 MAIL ADDRESS: STREET 1: PO BOX 789 CITY: TUPELO STATE: MS ZIP: 38802-0789 FORMER COMPANY: FORMER CONFORMED NAME: BANCORP OF MISSISSIPPI INC DATE OF NAME CHANGE: 19920703 POS AM 1 BANCORPSOUTH, INC. POST EFFECTIVE AMEND. NO.2 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 11, 1995 REGISTRATION NO. 33-91338 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------------- POST-EFFECTIVE AMENDMENT NO. 2 TO FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ----------------------- BANCORPSOUTH, INC. (Exact name of Registrant as specified in its charter) MISSISSIPPI 64-0659571 6798 (State or other jurisdiction of (I.R.S. Employer (Primary Standard Industrial incorporation organization) Identification Number) or Classification Code Number)
ONE MISSISSIPPI PLAZA TUPELO, MISSISSIPPI 38801 (601) 680-2000 (Address, Including Zip Code, and Telephone Number, including Area Code, of Registrant's Principal Executive Offices) ----------------------- AUBREY BURNS PATTERSON BANCORPSOUTH, INC. ONE MISSISSIPPI PLAZA TUPELO, MISSISSIPPI 38801 (601) 680-2000 (Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service) ----------------------- Copies of communications to: THEODORE W. LENZ, ESQ. WALLER LANSDEN DORTCH & DAVIS 2100 NASHVILLE CITY CENTER 511 UNION STREET NASHVILLE, TENNESSEE 37219-1760 (615) 244-6380 ----------------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Post-Effective Amendment to the Registration Statement and appropriate stockholder action. If the securities being registered on this Form are to be offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [ ] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box: [X] ================================================================================ 2 BANCORPSOUTH, INC. CROSS REFERENCE SHEET (PURSUANT TO ITEM 501(b) OF REGULATION S-K)
Items of Form S-4 Prospectus or Prospectus Supplement Caption or Location ----------------- ------------------------------------------------------- A. INFORMATION ABOUT THE TRANSACTION 1. Forepart of Registration Statement and Outside Front Cover Page of Prospectus . . . . . . . . Facing Page of Registration Statement; Outside Front Cover Page of Prospectus, Outside Front Cover of Prospectus Supplement 2. Inside Front and Outside Back Cover Pages of Prospectus . . . . . Inside Front Cover Page of Prospectus 3. Risk Factors, Ratio of Earnings to Fixed Charges and Other Information . . . . . . . . . . . . "Summary"; "Selected Financial Data"; "The Merger"; "The Merger Agreement"; "Comparison of Rights of Shareholders" 4. Terms of the Transaction . . . . . . "Summary"; "The Merger" 5. Pro Forma Financial Information . . . "Selected Financial Data" 6. Material Contracts with the Company Being Acquired . . . . . . The Merger Agreement 7. Additional Information Required for Reoffering by Persons and Parties Deemed to be Underwriters . . . . . . . . . . . Not Applicable 8. Interests of Named Experts and Counsel . . . . . . . . . . . . Not Applicable 9. Disclosure of Commission Position on Indemnification for Securities Act Liabilities . . . . Not Applicable B. INFORMATION ABOUT THE REGISTRANT 10. Information with Respect to S-3 Registrants . . . . . . . . . . "Incorporation of Certain Information by Reference"; "Summary"; "The Company" 11. Incorporation of Certain Information by Reference . . . . . "Incorporation of Certain Information by Reference" 12. Information with Respect to S-2 or S-3 Registrants . . . . . . Not Applicable 13. Incorporation of Certain Information by Reference . . . . . Not Applicable
3 14. Information with Respect to Registrants Other than S-3 or S-2 Registrants . . . . . . . . Not Applicable C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED 15. Information with Respect to S-3 Companies . . . . . . . . . . . Not Applicable 16. Information with Respect to S-2 or S-3 Companies . . . . . . . "Incorporation of Certain Information by Reference"; "Summary"; "Wes- Tenn Management" 17. Information with Respect to Companies Other than S-3 or S-2 Companies . . . . . . . . . Not Applicable D. VOTING AND MANAGEMENT INFORMATION 18. Information if Proxies, Consents or Authorizations are to be Solicited . . . . . . . . . . . . . "Summary"; "The Special Meeting"; "The Merger"; "Incorporation of Certain Information by Reference"; "Description of BancorpSouth Common Stock"; "Description of Wes-Tenn Common Stock" 19. Information if Proxies, Consents or Authorizations are not to be Solicited in an Exchange Offer . . . . . . . . . . . . . . . Not Applicable
4 WES-TENN BANCORP, INC. _________________________ 200 West Washington Avenue Covington, Tennessee 38019 _________________________ September ___, 1995 Dear Shareholder: You are cordially invited to attend a special meeting of the shareholders of Wes-Tenn Bancorp, Inc. in Covington, Tennessee on October ___, 1995 at ___:00 __.m. Central Time. At this special meeting, you will be asked to consider and vote upon an Agreement and Plan of Merger, dated as of June 16, 1995, pursuant to which Wes-Tenn Bancorp, Inc. is to merge with and into BancorpSouth, Inc., a Mississippi corporation, with BancorpSouth, Inc. being the surviving corporation. As part of the transaction, Tennessee Community Bank, a subsidiary of Wes-Tenn Bancorp, Inc., is to merge with and into Volunteer Bank, a Tennessee banking corporation and subsidiary of BancorpSouth, Inc., with Volunteer Bank being the surviving corporation. As a result of the merger with BancorpSouth, Inc., your shares of Common Stock of Wes- Tenn Bancorp, Inc. will be converted into shares of Common Stock of BancorpSouth, Inc. in accordance with the exchange ratio described in the Agreement and Plan of Merger and in the enclosed Joint Prospectus Supplement and Proxy Statement. Further information concerning the special meeting and the proposed mergers is set forth in the enclosed Notice of Special Meeting and Joint Prospectus Supplement and Proxy Statement. Wes-Tenn Bancorp, Inc.'s management and legal counsel and representatives of Volunteer Bank and BancorpSouth, Inc. will be in attendance at the special meeting to answer questions and to explain the proposed mergers in detail. Your vote on the proposed merger with BancorpSouth, Inc. is of great importance. The affirmative vote of the holders of a majority of the outstanding shares of Common Stock of Wes-Tenn Bancorp, Inc. entitled to vote, among other conditions, is required for the approval of the proposed merger. Even if you plan to attend the special meeting, we ask that you execute and promptly return your completed proxy in the enclosed postage-paid envelope so that your vote can be recorded at the meeting. If you attend the meeting, you may withdraw your proxy and vote your shares personally. The Board of Directors of Wes-Tenn Bancorp, Inc. has considered and approved the proposed merger with BancorpSouth, Inc., and unanimously recommends that shareholders vote FOR approval of the merger. Very truly yours, Charles M. Ennis President and Chief Executive Officer 5 WES-TENN BANCORP, INC. _________________________ 200 West Washington Avenue Covington, Tennessee 38019 _________________________ NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD OCTOBER __, 1995 _________________________ A special meeting of the shareholders of Wes-Tenn Bancorp, Inc. is to be held at the offices of Wes-Tenn Bancorp, Inc. at 200 West Washington Avenue, Covington, Tennessee on October ___, 1995 at ___:00 __.m. Central Time, for the following purposes: (1) To consider and vote upon an Agreement and Plan of Merger, dated as of June 16, 1995, which provides for, among other things, the merger of Wes-Tenn Bancorp, Inc. with and into BancorpSouth, Inc., a Mississippi corporation and a registered bank holding company, with BancorpSouth, Inc. being the surviving corporation; and (2) To transact such other business as may properly come before the special meeting or any adjournment thereof. Only shareholders of record of Wes-Tenn Bancorp, Inc. at the close of business on September ___, 1995 are entitled to notice of and to vote at the special meeting. In the event that there are insufficient shares represented to approve the proposed merger at the special meeting, such meeting may be adjourned to permit further solicitation. The Tennessee Business Corporation Act provides that holders of shares of Wes-Tenn Common Stock outstanding at the time of the special meeting who do not vote in favor of the Agreement and Plan of Merger and who otherwise comply with certain notice and other requirements set forth in Tennessee Code Annotated Section Section 48-23-101 et seq., a copy of which is included as Annex A to the enclosed Joint Prospectus Supplement and Proxy Statement, will have the right to dissent and to be paid cash for the fair value of their shares. Any shareholder of Wes-Tenn Bancorp, Inc. dissenting from the proposed merger and desiring to receive the appraised fair value of such shareholder's shares must file with the Secretary of Wes-Tenn Bancorp, Inc. prior to or at the special meeting a written objection to the proposed merger, stating that the shareholder intends to dissent in the event that the proposed merger is effected. For a detailed discussion of the procedures required to exercise these rights, see "The Special Meeting-Dissenters' Rights" and Annex A in the enclosed Joint Prospectus Supplement and Proxy Statement. Even if you plan to attend the special meeting, we ask that you execute and promptly return your completed proxy in the enclosed postage-paid envelope so that your vote can be recorded at the meeting. If you attend the meeting, you may withdraw your proxy and vote your shares personally. By Order of the Board of Directors, Janeice Frisbee Secretary Covington, Tennessee September ___, 1995 6 JOINT PROSPECTUS SUPPLEMENT (TO PROSPECTUS DATED JUNE 9, 1995) AND PROXY STATEMENT 1,586,096 SHARES BANCORPSOUTH, INC. COMMON STOCK ____________________ This Joint Prospectus Supplement and Proxy Statement ("Supplement/Proxy Statement") relates to the issuance of up to an aggregate of 1,586,096 shares of Common Stock, $2.50 par value per share (the "BancorpSouth Common Stock"), of BancorpSouth, Inc. (the "Company"), a Mississippi corporation, a bank holding company registered under the Bank Holding Company Act of 1956, as amended (the "BHCA"), and a savings and loan holding company registered under the Savings and Loan Holding Company Act, as amended (the "SLHCA"), to the shareholders of Wes-Tenn Bancorp, Inc. ("Wes-Tenn"), a bank holding company registered under the BHCA, in connection with an Agreement and Plan of Merger, dated as of June 16, 1995 (the "Merger Agreement"), described herein and separately furnished with this Supplement/Proxy Statement. Pursuant to the Merger Agreement, Wes-Tenn is to be merged with and into the Company (the "Merger"), Tennessee Community Bank ("TCB"), a Tennessee banking corporation and wholly-owned subsidiary of Wes-Tenn, is to merge with and into Volunteer Bank ("Volunteer"), a Tennessee banking corporation and wholly-owned subsidiary of the Company, and the separate existence of Wes-Tenn and TCB will end. Each outstanding share of Common Stock of Wes-Tenn, $1 par value per share (the "Wes-Tenn Common Stock"), is to be converted into 0.6296 shares of BancorpSouth Common Stock (subject to adjustment as described below) as described in the Merger Agreement and herein. The outstanding shares of BancorpSouth Common Stock are, and the shares offered hereby will be, included for quotation on The Nasdaq Stock Market National Market ("Nasdaq"). The last reported sale price of BancorpSouth Common Stock on Nasdaq on September 5, 1995 was $40 per share. This Supplement/Proxy Statement also serves as the proxy statement of Wes-Tenn with respect to a special meeting of the shareholders of Wes-Tenn to be held at _____ __.m. Central Time on October ___, 1995, at 200 West Washington Avenue, Covington, Tennessee, or any adjournment thereof, to consider and vote upon the transactions described in the Merger Agreement (the "Special Meeting"). All information contained in this Supplement/Proxy Statement related to the Company and its subsidiaries has been supplied by the Company and all information relating to Wes-Tenn and its subsidiaries has been supplied by Wes-Tenn. This Supplement/Proxy Statement and the accompanying proxy card are first being mailed to shareholders of Wes-Tenn on or about September __, 1995. _______________ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS SUPPLEMENT/PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. _______________ SHARES OF BANCORPSOUTH COMMON STOCK TO BE ISSUED PURSUANT TO THE MERGER AGREEMENT ARE NOT A SAVINGS OR DEPOSIT ACCOUNT AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY. _______________ THE DATE OF THIS SUPPLEMENT/PROXY STATEMENT IS SEPTEMBER ___, 1995. 7 TABLE OF CONTENTS
Page ---- AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-4 INCORPORATION OF CERTAIN INFORMATION BY REFERENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-4 SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-5 SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-13 THE SPECIAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-18 Matters to Be Considered at the Special Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-18 Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-18 Shares Entitled to Vote; Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-18 Voting and Revocability of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-18 Solicitation of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-19 Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-19 THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-21 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-21 Background of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-21 Reasons for the Merger; Recommendation of the Board of Directors . . . . . . . . . . . . . . . . . . . . . . S-24 Fairness Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-26 Regulatory Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-33 Interests of Certain Persons in the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-33 Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-33 Certain Federal Income Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-34 Resale Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-35 Comparison of Rights of Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-36 Stock Option Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-36 THE MERGER AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-37 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-37 Exchange Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-37 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-38 Conduct of Business Pending the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-39 Conditions to Consummation of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-39 Employment of Wes-Tenn Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-40 Filing for Regulatory Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-41 Amendment of the Merger Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-41 Termination of the Merger Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-41 DESCRIPTION OF WES-TENN COMMON STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-42 Voting Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-42 Beneficial Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-42 WES-TENN MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-43 COMPARISON OF RIGHTS OF SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-45 Voting Rights; Cumulative Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-45 Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-45 Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-47 Removal of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-47 Indemnification of Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-47
S-2 8 Permitted Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-48 Rights of Shareholders to Call Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-48 LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-49 EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-49 Annex A -- Provisions of T.C.A. Section Section 48-23-101 et seq. relating to dissenters' rights . . . . . . . . . A-1 Annex B -- Fairness Opinion of Mercer Capital Management, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
______________ No person has been authorized to give any information or to make any representations other than those contained in this Supplement/Proxy Statement in connection with the offering made hereby, and, if given or made, such information or representations must not be relied upon as having been authorized by the Company. This Supplement/Proxy Statement does not constitute an offer to sell or a solicitation of an offer to buy any securities other than the shares of BancorpSouth Common Stock offered hereby or an offer to sell or a solicitation of an offer to buy such shares to any person, or the solicitation of a proxy from any person, in any jurisdiction in which such offer, solicitation of an offer or proxy solicitation is unlawful. The delivery of this Supplement/Proxy Statement at any time does not imply that the information herein is correct as of any time subsequent to its date. S-3 9 AVAILABLE INFORMATION The Company and Wes-Tenn are reporting companies subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports and other information with the Securities and Exchange Commission (the "Commission"). Reports and other information filed by the Company and Wes-Tenn with the Commission can be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549; 500 West Madison Street, Suite 1400, Chicago, Illinois 60661; and 7 World Trade Center, Suite 1300, New York, New York, 10048. Copies of such materials can be obtained at prescribed rates from the Public Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. The Company has filed with the Commission a Post-Effective Amendment (the "Amendment") to a Registration Statement on Form S-4 (the "Registration Statement") under the Securities Act of 1933 (the "Securities Act") with respect to the securities offered hereby. This Supplement/Proxy Statement, which forms a part of the Amendment, does not contain all the information set forth in the Amendment or the Registration Statement and the exhibits thereto. Certain items have been omitted in accordance with the Commission's rules and regulations. For further information with respect to the Company, Wes-Tenn and the securities offered hereby, reference is made to the Registration Statement, including all amendments thereto and the exhibits filed as a part thereof. Wes-Tenn's 1994 Annual Report to Shareholders, Annual Report on Form 10-K for the year ended December 31, 1994, Quarterly Report on Form 10-Q for the quarter ended June 30, 1995, as well as the Merger Agreement, excluding exhibits and schedules, are being separately furnished to each shareholder of Wes-Tenn concurrently with this Supplement/Proxy Statement. INCORPORATION OF CERTAIN INFORMATION BY REFERENCE Wes-Tenn's 1994 Annual Report to Shareholders, Annual Report on Form 10-K for the year ended December 31, 1994 and Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 are being separately furnished concurrently with this Supplement/Proxy Statement and, except with respect to the portions of Wes-Tenn's 1994 Annual Report to Shareholders other than Wes-Tenn's consolidated financial statements and notes thereto and management's discussion and analysis of financial condition and results of operations, are incorporated herein by reference. The Company's Annual Report on Form 10-K for the year ended December 31, 1994, Quarterly Report on Form 10-Q for the quarter ended June 30, 1995, Current Report on Form 8-K filed on June 22, 1995 and Current Report on Form 8-K filed on July 14, 1995 are incorporated herein by reference. All documents filed with the Commission by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Supplement/Proxy Statement and prior to the Special Meeting shall be deemed to be incorporated by reference into this Supplement/Proxy Statement. Any statement contained herein, or in a document incorporated or deemed to be incorporated by reference in this Supplement/Proxy Statement shall be deemed to be modified or superseded for purposes of this Supplement/Proxy Statement to the extent that a statement contained in this Supplement/Proxy Statement or in any other subsequently filed document which also is or is deemed to be incorporated by reference in this Supplement/Proxy Statement modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Supplement/Proxy Statement. THIS SUPPLEMENT/PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. A COPY OF THESE DOCUMENTS IS AVAILABLE UPON REQUEST FROM CATHY M. ROBERTSON, CORPORATE SECRETARY, BANCORPSOUTH, INC., ONE MISSISSIPPI PLAZA, TUPELO, MISSISSIPPI 38801, (601) 680-2000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS PRIOR TO THE SPECIAL MEETING, ANY REQUEST SHOULD BE MADE BY OCTOBER ___, 1995. S-4 10 SUMMARY The following summary of certain information contained elsewhere in this Supplement/Proxy Statement does not purport to be complete and is qualified in its entirety by the more detailed information appearing elsewhere or incorporated by reference herein. Unless the context otherwise requires, all references to the "Company" include BancorpSouth, Inc. and its wholly-owned subsidiaries. Unless the context otherwise requires, all references to "Wes- Tenn" include Wes-Tenn Bancorp, Inc. and its direct and indirect wholly-owned subsidiaries. PARTIES TO THE MERGER TRANSACTION BANCORPSOUTH, INC.; VOLUNTEER BANK The Company was incorporated in February 1982 in the State of Mississippi, and is a bank holding company registered under the BHCA and a savings and loan holding company registered under the SLHCA. The Company owns all of the outstanding capital stock of Volunteer, a Tennessee banking corporation with its principal office located in Jackson, Tennessee and 14 branch offices located in west Tennessee; Bank of Mississippi, a Mississippi banking corporation with its principal office located in Tupelo, Mississippi and 84 branch offices located across the State of Mississippi; and Laurel Federal Savings and Loan Association, a federally chartered savings and loan association with its principal office located in Laurel, Mississippi and seven branch offices located in west Mississippi. The principal executive offices of the Company are located at One Mississippi Plaza, Tupelo, Mississippi 38801, and its telephone number is (601) 680-2000. Effective as of July 31, 1995, First Federal Bank for Savings ("First Federal"), a federally chartered savings bank located in Starkville, Mississippi, merged with and into Bank of Mississippi in exchange for shares of BancorpSouth Common Stock. First Federal was chartered in 1934 as a federal savings and loan association, converted to a mutual savings bank in 1988 and converted to a stock savings bank in October 1993. First Federal operated from a single office located in Starkville, Mississippi and at June 30, 1995 had total assets of approximately $25 million and total deposits of approximately $22 million. The Company accounted for the merger with First Federal as a pooling of interests. Effective as of September 1, 1995, Volunteer acquired substantially all of the assets, and assumed certain liabilities, of Shelby Bank, a Tennessee banking corporation, in exchange for shares of BancorpSouth Common Stock. Shelby Bank operated a general commercial banking business at a single office located in Bartlett, Shelby County, Tennessee and at June 30, 1995 had assets of approximately $25.8 million. WES-TENN BANCORP, INC.; TENNESSEE COMMUNITY BANK Wes-Tenn was incorporated in February 1987 in the State of Tennessee and is a bank holding company registered under the BHCA. Wes-Tenn owns all of the outstanding capital stock of TCB, a Tennessee banking corporation which operates a general commercial banking business through its principal office in Covington, Tennessee and 14 branch offices located in west Tennessee. The principal executive offices of Wes-Tenn are located at 200 West Washington Avenue, Covington, Tennessee 38019 and its telephone number is (901) 476-7166. Effective as of April 3, 1995, West Tennessee Financial Corporation ("WTFC"), a Tennessee corporation and bank holding company, merged with and into Wes-Tenn in exchange for shares of Wes-Tenn Common Stock. WTFC owned all of the capital stock of Community Bank of West Tennessee, a Tennessee banking corporation ("CBWT"), which simultaneously merged with and into TCB. CBWT operated a general commercial banking business in two locations in southwest Tennessee and at March 31, 1995 had total assets of approximately $38 million. Wes-Tenn accounted for the merger with WTFC as a purchase, with approximately $1 million of consideration paid in excess of fair value of net assets acquired in the merger recorded as goodwill. S-5 11 Effective as of April 17, 1995, Wes-Tenn effected a four-for-one stock split of Wes-Tenn Common Stock. For additional information concerning Wes-Tenn, see Wes-Tenn's 1994 Annual Report to Shareholders, Annual Report on Form 10-K for the year ended December 31, 1994 and Quarterly Report on Form 10-Q for the quarter ended June 30, 1995, which accompany this Supplement/Proxy Statement. THE MERGER If the Merger Agreement is approved by the shareholders of Wes-Tenn and certain other conditions are satisfied: (i) Wes-Tenn will merge with and into the Company; (ii) TCB will merge with and into Volunteer; (iii) the Wes-Tenn Common Stock will be converted into BancorpSouth Common Stock in accordance with the Exchange Ratio, as defined below; and (iv) the separate existence of Wes-Tenn and TCB will cease. The Merger Agreement contains various representations and warranties by the Company and Wes-Tenn, and the obligations of such parties are subject to certain conditions. See "The Merger Agreement." CONVERSION OF WES-TENN COMMON STOCK Upon effectiveness of the Merger, each share of Wes-Tenn Common Stock, other than shares held by dissenting shareholders, will be converted into, and become exchangeable for, 0.6296 shares of BancorpSouth Common Stock, subject to adjustment as discussed below (the "Exchange Ratio"), and cash in lieu of the issuance of fractional shares of BancorpSouth Common Stock (together, the "Merger Consideration"). The Exchange Ratio was determined through arm's- length negotiations between the management of the Company and management of Wes-Tenn. The Exchange Ratio may be adjusted in the event of a change in the price per share of BancorpSouth Common Stock, pursuant to the terms of the Merger Agreement. There can be no assurance that the price per share of BancorpSouth Common Stock will not change prior to consummation of the Merger. The Exchange Ratio is to be adjusted in the event that the average of the high "bid" and low "ask" prices per shares of BancorpSouth Common Stock for each of the 20 trading days immediately preceding the consummation of the Merger (the "Recalculated Price") is less than $32.8738 or more than $44.4763. If the Recalculated Price is less than $32.8738, Wes-Tenn may terminate the Merger Agreement unless the Company agrees to recalculate the Exchange Ratio as set forth in the Merger Agreement. If the Recalculated Price is greater than $44.4763, the Company may terminate the Merger Agreement unless Wes-Tenn agrees to recalculate the Exchange Ratio as set forth in the Merger Agreement. SPECIAL MEETING OF SHAREHOLDERS OF WES-TENN; RECORD DATE The Special Meeting will be held on October ___, 1995 at ___:00 __.m. Central Time at the offices of Wes-Tenn at 200 West Washington Avenue, Covington, Tennessee. The purpose of the Special Meeting is to consider and vote upon the Merger Agreement and any other matters that may be properly brought before the shareholders of Wes-Tenn at the Special Meeting. Only holders of record of shares of Wes-Tenn Common Stock at the close of business on September ___, 1995 will be entitled to receive notice of and to vote at the Special Meeting. VOTE REQUIRED; RECOMMENDATION OF THE BOARD OF DIRECTORS Consummation of the Merger will require the affirmative vote of the holders of a majority of the outstanding shares of Wes-Tenn Common Stock. Each share of Wes-Tenn Common Stock is entitled to one vote. At September 8, 1995, Wes-Tenn's directors, executive officers and affiliates beneficially owned 383,672 shares of Wes-Tenn Common Stock, or approximately 15.23% of the then outstanding shares of Wes-Tenn Common Stock. The directors and executive officers of Wes-Tenn have indicated that they S-6 12 intend to vote their shares of Wes-Tenn Common Stock for approval and adoption of the Merger Agreement. See "Special Meeting -- Vote Required." THE WES-TENN BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AS BEING IN THE BEST INTERESTS OF THE WES-TENN SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT THE WES-TENN SHAREHOLDERS VOTE FOR THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. The vote of the holders of BancorpSouth Common Stock is not required to approve the Merger. BACKGROUND OF AND REASONS FOR THE MERGER On April 12, 1995, representatives of Volunteer met with representatives of Wes-Tenn to discuss a possible business combination proposed by Volunteer. Michael W. Weeks, the Chairman of the Board and Chief Executive Officer of Volunteer, described the Company's operations in Mississippi and Tennessee and presented a financial analysis of a combined entity of the Company and Wes-Tenn, based upon a merger consideration of approximately two times Wes-Tenn's book value. On April 20, 1995, representatives of the Company and Wes-Tenn met to discuss the Company's strategy and banking philosophy and Wes-Tenn's potential role in such strategy. On May 9, 1995, the Planning Committee reported to the Wes-Tenn Board of Directors the substance of its discussions with representatives of the Company. On May 19, 1995, members of the Wes-Tenn Planning Committee met with its legal counsel and representatives of an investment banking firm to review publicly available information compiled by the investment banking firm, which showed that the Company compared favorably to nine other bank holding companies operating in the southeastern or midsouth United States with respect to such factors as earnings per share, dividend yield, asset quality, stock performance, stock price to earnings and book value ratios and capital ratios. The information also included a summary of published price to earnings, price to book value and premium to core deposits multiples for acquisitions in Tennessee, the southeastern United States and nationwide. The book value multiple resulting from the merger consideration proposed by the Company significantly exceeded the median of the published price to book value multiples. On May 25, 1995, Wes-Tenn's Planning Committee and representatives of the Company met to discuss the details of the proposed business combination, following which the Wes-Tenn Board of Directors authorized the Planning Committee to proceed with the transaction. On June 1, 1995, counsel to the Company delivered an initial draft of the Merger Agreement to Wes-Tenn and its counsel. The Planning Committee met with its counsel on June 3 and June 4, 1995 to discuss the draft Merger Agreement and to develop comments and responses to such agreement. On June 5, 1995, the Planning Committee and representatives of the Company, and their respective legal advisors, met to negotiate the terms of the proposed Merger Agreement. On June 7, 1995, counsel to the Company distributed a due diligence request and a confidentiality agreement to Wes-Tenn, which was executed by the Company and Wes-Tenn on June 9, 1995. On June 10, 1995, the Wes-Tenn Board of Directors met with its counsel and discussed a revised draft of the agreement. From June 13-16, 1995, representatives of the Company and Wes-Tenn each conducted a due diligence review and continued to negotiate the final terms of the Merger Agreement. On June 14, 1995, the Wes-Tenn Board of Directors met to review further the revised agreement and to hear from its counsel and management the results of a due diligence review of the Company. On June 15, 1995, the Wes-Tenn Board of Directors met with its legal counsel and unanimously approved the Merger Agreement, which was executed by the parties on June 16, 1995. On June 28, 1995, the Company's Board of Directors ratified the execution of the Merger Agreement and authorized preparation of this Supplement/Proxy Statement. In reaching its determination that the Merger and the Merger Agreement are fair to, and in the best interest of, Wes-Tenn and its shareholders, the Wes-Tenn Board of Directors considered a number of factors, including, without limitation, that (i) the proposed Merger Consideration exceeded the minimum amount that management of Wes-Tenn considered necessary in order to consider a possible acquisition of Wes-Tenn, and the price to book value multiple of approximately 2.05 resulting from the proposed Merger Consideration generally significantly exceeded the median book value multiple of other acquisitions in S-7 13 Tennessee, the southeastern United States and nationwide, (ii) consummation of the Merger is conditioned on the receipt by Wes-Tenn of a fairness opinion, (iii) the Company's financial and stock performance compared favorably with other bank holding companies in the region, (iv) the Merger would allow Wes-Tenn shareholders to become shareholders in a well-capitalized institution, whose stock is traded on Nasdaq with sufficient trading volume to provide liquidity for Wes-Tenn shareholders and whose recent earnings and dividend payments have been strong; (v) the Company offers an opportunity for more rapid growth than Wes-Tenn, and as the Company grows, the price to book value multiple of BancorpSouth Common Stock would likely improve to approximate that of larger bank holding companies in the southeastern United States and the Company would likely increase its level of institutional shareholders, (vi) the Merger would create one of the largest banks in the west Tennessee area and would allow Volunteer to significantly increase its market area, which overlaps with TCB's market area in only two counties, thereby limiting anti-trust concerns and likely making Wes-Tenn more valuable to the Company than other potential acquirors, (vii) Volunteer had expressed interest in retaining Wes-Tenn's senior management and including directors of Wes-Tenn on the Volunteer Board of Directors, (viii) the Merger would generally be a tax-free transaction for Wes-Tenn and its shareholders, and (ix) the Merger presented a more attractive alternative than remaining independent and growing internally, remaining independent for a period of time and then selling Wes-Tenn, and remaining independent and growing through future acquisitions. See "The Merger -- Background of the Merger" and "The Merger -- Reasons for the Merger; Recommendation of the Board of Directors." FAIRNESS OPINION Mercer Capital Management, Inc. ("Mercer Capital"), a valuation advisory firm headquartered in Memphis, Tennessee, was retained by Wes-Tenn on August 14, 1995, after the Merger Agreement had been executed and delivered, to render a formal written opinion addressed to the Board of Directors of Wes-Tenn as to the fairness from a financial point of view of the terms of the Merger to the shareholders of Wes-Tenn (the "Fairness Opinion"). On September 8, 1995, Mercer Capital rendered the Fairness Opinion, which is attached hereto as Annex B. See "The Merger -- Fairness Opinion." SHAREHOLDERS' RIGHTS OF APPRAISAL The Tennessee Business Corporation Act provides that holders of shares of Wes-Tenn Common Stock outstanding at the time of the Special Meeting who do not vote in favor of the Merger Agreement and who otherwise comply with certain notice and other requirements set forth in Sections 48-23-101 et seq. of the Tennessee Code Annotated will have the right to dissent and to be paid cash for the fair value of their shares. See "The Special Meeting -- Dissenters' Rights" and Annex A hereto. If a shareholder of Wes-Tenn elects to exercise such shareholder's right to dissent from the Merger and demand payment of the fair or appraised value of such shareholder's shares of Wes-Tenn Common Stock, such shareholder must satisfy both of the following conditions, as well as the other applicable procedural requirements: (i) the shareholder must deliver to Wes-Tenn prior to the Special Meeting a written notice of intent to demand payment for such shareholder's shares, and (ii) the shareholder may not vote his or her shares in favor of the Merger. Written notices should be submitted to Janeice Frisbee, Secretary, Wes-Tenn Bancorp, Inc., 200 West Washington Avenue, Covington, Tennessee 38019. A proxy or vote against the Merger without prior delivery of a written notice of intent to demand payment is not sufficient to satisfy the notice requirements of the statute. A condition to the parties' obligations under the Merger Agreement is that the amount of cash consideration payable by the Company to shareholders of Wes-Tenn shall not exceed 9.9% of the total consideration in the Merger or such lesser amount required for the Merger to qualify as a pooling of interests. S-8 14 Holders of BancorpSouth Common Stock are not entitled to dissenters' rights with respect to the Merger. CONDITIONS; REGULATORY APPROVALS Consummation of the Merger is subject to certain conditions, including the approval of Wes-Tenn shareholders and the receipt of applicable regulatory approvals or consents, including those of the Federal Deposit Insurance Corporation (the "FDIC") and the Tennessee Department of Financial Institutions (the "TDFI"). The Company filed an application with the FDIC on August 18, 1995 and anticipates a response to such application by October 15, 1995. The Company filed an application with the TDFI on August 18, 1995 and anticipates a response to such application by October 20, 1995. See "The Merger -- Regulatory Approvals" and "The Merger Agreement -- Conditions to Consummation of the Merger." INTERESTS OF CERTAIN PERSONS IN THE MERGER At September 8, 1995, the directors and executive officers of Wes-Tenn beneficially owned an aggregate of 383,672 shares of Wes-Tenn Common Stock and, based upon an Exchange Ratio of 0.6296 and assuming such shares are owned upon effectiveness of the Merger, would receive an aggregate of approximately 241,560 shares of BancorpSouth Common Stock upon consummation of the Merger. See "The Merger -- Interests of Certain Persons in the Merger" and "Description of Wes-Tenn Common Stock -- Beneficial Ownership." Pursuant to the Merger Agreement, the Company has agreed to increase the number of directors on Volunteer's Board of Directors by up to eight persons. The Company, as the sole shareholder of Volunteer, will have these additional Volunteer directorships filled by the election of members of the Wes-Tenn Board of Directors serving as of the consummation of the Merger. The Company has also agreed to nominate, following consummation of the Merger, a member of the Wes-Tenn Board of Directors, chosen by the Company after consultation with the Wes-Tenn Board of Directors, for a seat on the Board of Directors of the Company. See "Management of Wes-Tenn." CERTAIN FEDERAL INCOME TAX CONSEQUENCES Consummation of the Merger is conditioned upon the receipt by Wes-Tenn of an opinion of KPMG Peat Marwick LLP, independent certified public accountants, to the effect that, for federal income tax purposes, the Merger will constitute a tax-free reorganization under Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the "Code"). The opinion of KPMG Peat Marwick LLP will not be binding on the Internal Revenue Service or any court. If the Merger was determined not to qualify as a "reorganization" under Section 368(a) of the Code, the Merger would be treated as a taxable sale of assets by Wes-Tenn followed by the liquidation of Wes-Tenn. A shareholder of Wes-Tenn who receives cash in lieu of a fractional share of BancorpSouth Common Stock in the Merger will recognize gain (or loss) as if the fractional share had been received and then redeemed for the cash. The amount of gain or loss will equal the difference between the amount of cash and the shareholder's basis in the fractional share interest. In such event, any gain or loss recognized will be capital gain (or loss) if the shares of Wes-Tenn Common Stock are held by such shareholder as a capital asset at the Effective Time. The receipt of cash for shares of Wes-Tenn Common Stock as a result of the exercise of dissenters' rights will be taxable as a redemption of those shares for the cash. Any shareholder considering the exercise of dissenters' rights should consult his or her tax advisor regarding the tax consequences of exercising dissenters' rights. See "The Merger -- Certain Federal Income Tax Consequences." S-9 15 ACCOUNTING TREATMENT The Company intends to account for the Merger as a pooling of interests. A condition to the performance by each of the parties under the Merger Agreement is the receipt of an opinion of KPMG Peat Marwick LLP that the Merger will qualify as a pooling of interests and that the amount of cash consideration payable by the Company to shareholders of Wes-Tenn shall not exceed 9.9% of the total consideration in the Merger or such lesser amount required for the Merger to qualify as a pooling of interests. RESALE RESTRICTIONS Shares of BancorpSouth Common Stock received by the shareholders of Wes-Tenn in the Merger will be freely transferable, except that shares of BancorpSouth Common Stock received by persons who are deemed to be "affiliates" (as that term is defined under the Securities Act) of Wes-Tenn at the time of the Special Meeting may be re-sold by them only in certain permitted circumstances. Wes-Tenn has agreed to use its best efforts to cause each of its affiliates to deliver to the Company a written agreement providing that such person will not sell, pledge, transfer, or otherwise dispose of the shares of Wes-Tenn Common Stock held by such person except as contemplated by the Merger Agreement and will not sell, pledge, transfer, or otherwise dispose of the shares of BancorpSouth Common Stock to be received by such person upon consummation of the Merger except in compliance with applicable provisions of the Securities Act and the rules and regulations thereunder and until such time as financial results covering at least 30 days of combined operations of the Company and Wes-Tenn have been published. Shares of BancorpSouth Common Stock issued to affiliates of Wes-Tenn in exchange for Wes-Tenn Common Stock will not be transferable until such time as financial results covering at least 30 days of combined operations of the Company and Wes-Tenn have been published, regardless of whether each such affiliate has provided the written agreement to the Company. This Supplement/Proxy Statement is not intended to be used in connection with the resale of BancorpSouth Common Stock by such affiliates. See "The Merger -- Resale Restrictions." STOCK OPTION AGREEMENT In conjunction with, and in furtherance of, the execution of the Merger Agreement, the Company and Wes-Tenn entered into a stock option agreement (the "Stock Option Agreement") whereby the Company was granted an irrevocable option (the "Option") to purchase up to 472,441 shares of Wes-Tenn Common Stock at a cash purchase price of $18 per share. The Option may be exercised by the Company, in whole or in part, at any time or from time to time, on or before the earlier to occur of (i) the consummation of the Merger or (ii) 12 months after the first occurrence, without prior written consent of the Company, of (A) Wes-Tenn or TCB entering into, or the Wes-Tenn Board of Directors recommending that Wes-Tenn shareholders approve, an agreement to engage in a merger, consolidation or similar transaction, a purchase, lease or other acquisition of more than 5% of the assets of Wes-Tenn or TCB, or a purchase or other acquisition of securities representing 5% or more of the voting power of Wes-Tenn or TCB (each, an "Acquisition Transaction") with any person or entity other than the Company, or (B) any person or entity other than the Company acquiring beneficial ownership or the right to acquire beneficial ownership of 10% or more of the outstanding shares of Wes-Tenn Common Stock. In the event that an Acquisition Transaction with Wes-Tenn is consummated by a party other than the Company, the Company may elect, in lieu of exercise of the Option, to receive $3 million in cash. The Company may also elect to receive a lesser amount of cash that may be paid by Wes-Tenn without obtaining prior regulatory approval and to exercise the Option as to a pro rata number of shares of Wes-Tenn Common Stock subject to the Option, based on the amount of cash payment to the Company. The Stock Option Agreement could make an Acquisition Transaction involving Wes-Tenn more costly to effect because of the $3 million cash payment provision or the necessity of acquiring shares of Wes-Tenn Common Stock acquired by the Company under the Option. S-10 16 COMPARATIVE MARKET DATA The BancorpSouth Common Stock has been traded on Nasdaq under the symbol "BOMS" since 1985. At September 5, 1995, there were approximately 7,363 shareholders of record of the BancorpSouth Common Stock. At September 5, 1995, there were approximately 699 shareholders of record of the Wes-Tenn Common Stock. Wes-Tenn Common Stock is not listed, traded or quoted on any securities exchange or in the over-the-counter market, and no dealer makes a market in the Wes-Tenn Common Stock, although isolated transactions between individuals occur from time to time. In order to provide some liquidity in the Wes-Tenn Common Stock, Wes-Tenn has from time to time redeemed shares of Common Stock from shareholders who wish to sell their shares. In February 1993, Wes-Tenn redeemed 84,772 shares of Wes-Tenn Common Stock at $8.50 per share and 12,360 warrants at $2 per warrant. In September 1993, Wes-Tenn redeemed 29,760 shares at $9.625 per share. During the fourth quarter of 1994, Wes-Tenn redeemed 61,380 shares at $13.75 per share and 63,492 warrants at $7.625 per warrant. To the knowledge of Wes-Tenn's management, the most recent transaction with respect to Wes-Tenn Common Stock was effected at $25 per share on August 29, 1995. These amounts have been adjusted to give effect to a four-for-one stock split of Wes-Tenn Common Stock on April 17, 1995. At June 15, 1995, the date immediately preceding the public announcement of the proposed Merger, the closing price per share as reported on Nasdaq for the BancorpSouth Common Stock was $39.50. At September 5, 1995, the closing price per share of BancorpSouth Common Stock was $40. The table below sets forth, for the periods indicated, the range of closing sales prices as reported on Nasdaq for the BancorpSouth Common Stock.
BANCORPSOUTH COMMON STOCK(1) --------------- HIGH LOW ---- --- 1995 First Quarter . . . . . . . . . . . . . . . . . . . $36.50 $32.25 Second Quarter . . . . . . . . . . . . . . . . . . 40.00 36.00 Third Quarter (through September 5, 1995) . . . . . 40.50 38.75 1994 First Quarter . . . . . . . . . . . . . . . . . . . $33.00 $29.00 Second Quarter . . . . . . . . . . . . . . . . . . 33.25 29.00 Third Quarter . . . . . . . . . . . . . . . . . . 36.25 34.00 Fourth Quarter . . . . . . . . . . . . . . . . . . 34.75 31.00 1993 First Quarter . . . . . . . . . . . . . . . . . . . $31.96 $29.57 Second Quarter . . . . . . . . . . . . . . . . . . 35.00 31.09 Third Quarter . . . . . . . . . . . . . . . . . . 34.78 31.63 Fourth Quarter . . . . . . . . . . . . . . . . . . 36.96 31.00 1992 First Quarter . . . . . . . . . . . . . . . . . . . $27.17 $23.26 Second Quarter . . . . . . . . . . . . . . . . . . 27.83 25.65 Third Quarter . . . . . . . . . . . . . . . . . . 27.83 23.91 Fourth Quarter . . . . . . . . . . . . . . . . . . 31.09 26.09
______________________ (1) All share prices for BancorpSouth Common Stock have been adjusted to give effect to a 15% stock dividend paid on December 1, 1993 to all shareholders of record on November 15, 1993. S-11 17 COMPARATIVE PER SHARE DATA The following table presents selected comparative unaudited per share data (i) of each of the Company and Wes-Tenn on a historical basis, (ii) for the Company and Wes-Tenn on a pro forma basis, (iii) for the Company, Wes-Tenn and other pending acquisitions on a pro forma basis, (iv) for Wes-Tenn on a pro forma equivalent basis; and (v) for Wes-Tenn and other pending acquisitions on a pro forma equivalent basis.
BOOK VALUE PER SHARE: December 31, 1994 JUNE 30, 1995 --------------------------- ------------------- The Company historical (1) . . . . . . . . . . . . . . . $25.71 $27.01 Wes-Tenn historical (2) . . . . . . . . . . . . . . . . . 11.51 12.35 The Company and Wes-Tenn pro forma (3) . . . . . . . . . 24.57 25.87 The Company, Wes-Tenn and other pending acquisitions pro forma (4) . . . . . . . . . . . . . . . . . . . . 24.67 25.96 Wes-Tenn pro forma equivalent (5) . . . . . . . . . . . . 15.47 16.29 Wes-Tenn and other pending acquisitions pro forma equivalent (6) . . . . . . . . . . . . . . . . . . . . 15.53 16.34 NET INCOME PER SHARE (7): SIX MONTHS YEAR ENDED DECEMBER 31, ENDED JUNE 30, ---------------------------- ------------------ 1992 1993 1994 1995 ---- ---- ---- ---- The Company historical (1) . . . . . . . . . . . . . . . $2.32 2.95 $3.00 $1.71 Wes-Tenn historical (8) (2) . . . . . . . . . . . . . . . 1.29 1.59 1.38 0.66 The Company and Wes-Tenn pro forma (3) . . . . . . . . . 2.25 2.88 2.88 1.60 The Company, Wes-Tenn and other pending acquisitions pro forma (4) . . . . . . . . . . . . . . . . . . . . 2.18 2.82 2.85 1.59 Wes-Tenn pro forma equivalent (5) . . . . . . . . . . . . 1.42 1.81 1.81 1.01 Wes-Tenn and other pending acquisitions pro forma equivalent (6) . . . . . . . . . . . . . . . . . . . . 1.37 1.78 1.79 1.00 CASH DIVIDENDS PER SHARE: SIX MONTHS YEAR ENDED DECEMBER 31, ENDED JUNE 30, ----------------------------- ------------------- 1992 1993 1994 1995 ---- ---- ---- ---- The Company historical . . . . . . . . . . . . . . . . . $1.02 $1.08 $1.11 $0.60 Wes-Tenn historical (2) . . . . . . . . . . . . . . . . . 0.26 0.32 0.37 0.19 The Company and Wes-Tenn pro forma (3) . . . . . . . . . 1.02 1.08 1.11 0.60 The Company, Wes-Tenn and other pending acquisitions pro forma (4) . . . . . . . . . . . . . . . . . . . . 1.02 1.08 1.11 0.60 Wes-Tenn pro forma equivalent (5) . . . . . . . . . . . . 0.64 0.68 0.70 0.38 Wes-Tenn and other pending acquisitions pro forma equivalent (6) . . . . . . . . . . . . . . . . . . . . 0.64 0.68 0.70 0.38
_______________________________ (1) Presented as if the merger of LF Bancorp, Inc. with and into the Company as of March 31, 1995 (the "LF Bancorp Merger") had been effective throughout the periods presented and assumes LF Bancorp's conversion from mutual to stock ownership occurred on January 1, 1992. (2) Effective as of April 17, 1995, Wes-Tenn effected a four-for-one stock split of Wes-Tenn Common Stock. The per share data have been adjusted for all periods presented to give effect to the stock split. (3) Presented as if the Merger had been effective throughout the periods presented. (4) Presented as if the Merger and other pending acquisitions had been effective through the periods presented. (5) Calculated by multiplying the Company and Wes-Tenn's pro forma value by the quotient calculated by dividing the number of shares of BancorpSouth Common Stock issuable under the Merger Agreement by the number of shares of Wes-Tenn Common Stock outstanding as of the end of the period. (6) Calculated by multiplying the Company, Wes-Tenn and other pending acquisitions' pro forma value by the quotient described in Note (6) above. (7) Reflects net income per share before accounting change and extraordinary item. (8) Presented as if the merger of WTFC with and into Wes-Tenn had been effective throughout the periods presented. S-12 18 SELECTED FINANCIAL DATA The following tables set forth for the Company and Wes-Tenn certain historical consolidated financial information, and for the Company, certain unaudited pro forma condensed consolidated financial information. The financial information set forth below is derived from, and should be read in conjunction with, the respective consolidated financial statements, and the notes thereto, of the Company and of Wes-Tenn which have been incorporated herein by reference. The unaudited historical financial data for the six months ended June 30, 1994 and 1995 have been derived from the unaudited financial statements of the Company, which have been restated for the LF Bancorp Merger, which was accounted for as a pooling of interests, and of Wes-Tenn. The historical consolidated financial information for the years ended December 31, 1990, 1991, 1992, 1993 and 1994, have not been restated for the LF Bancorp Merger or the merger with First Federal, as such mergers were not significant. In the opinion of management of the Company and Wes-Tenn, all adjustments, consisting of normal, recurring adjustments necessary for a fair presentation of the consolidated financial statements, have been included. BANCORPSOUTH, INC. SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
FOR THE SIX MONTHS FOR THE YEARS ENDED DECEMBER 31, ENDED JUNE 30, ---------------------------------------------------------------- --------------------- 1990 1991 1992 1993 1994 1994 1995 ---- ---- ---- ---- ---- ---- ---- EARNINGS SUMMARY: Interest revenue . . . . . . . $ 178,703 $ 178,448 $ 164,139 $ 157,250 $ 173,208 $ 87,856 $ 107,757 Interest expense . . . . . . . 104,673 93,730 71,200 61,952 69,332 35,462 47,355 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Net interest revenue . . . . 74,030 84,718 92,939 95,298 103,876 52,394 60,402 Provision for credit losses . . 5,965 8,436 11,483 7,754 5,652 2,457 2,366 Other revenue . . . . . . . . . 17,540 19,427 19,981 23,781 23,421 10,320 14,339 Other expense . . . . . . . . . 63,783 71,988 77,472 80,742 85,799 43,763 50,200 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Income before income tax and accounting change . . . . . . 21,822 23,721 23,965 30,583 35,846 16,494 22,175 Applicable income taxes . . . . 4,429 5,283 5,400 7,200 10,400 4,365 7,137 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Income before accounting change 17,393 18,438 18,565 23,383 25,446 12,129 15,038 Accounting change, net of tax . -- -- -- 3,200 -- -- -- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Net income . . . . . . . . . . $ 17,393 $ 18,438 $ 18,565 $ 26,583 $ 25,446 $ 12,129 $ 15,038 ========== ========== ========== ========== ========== ========== ========== PER SHARE DATA: Primary: Income before accounting change $ 2.33 $ 2.47 $ 2.47 $ 2.99 $ 3.21 $ 1.39 $ 1.71 Accounting change, net of tax . -- -- -- 0.41 -- -- -- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Net income . . . . . . . . . . $ 2.33 $ 2.47 $ 2.47 $ 3.40 $ 3.21 $1.39 $ 1.71 ========== ========== ========== ========== ========== ========== ========== Fully diluted: Income before accounting change $ 2.26 $ 2.40 $ 2.40 $ 2.97 $ 3.21 $ 1.38 $ 1.70 Accounting change, net of tax . -- -- -- 0.40 -- -- -- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Net income . . . . . . . . . . $ 2.26 $ 2.40 $ 2.40 $ 3.37 $ 3.21 $ 1.38 $ 1.70 ========== ========== ========== ========== ========== ========== ========== Cash dividends . . . . . . . . $ 0.86 $ 0.94 $ 1.02 $ 1.08 $ 1.11 $ 0.54 $ 0.60 Book value . . . . . . . . . . $ 18.32 $ 19.95 $ 21.55 $ 23.95 $ 25.94 $ 24.70 $ 27.01 BALANCE SHEET DATA (PERIOD END): Total assets . . . . . . . . . $1,870,693 $2,001,210 $2,137,004 $2,306,709 $2,518,398 $2,609,643 $2,817,727 Loans, net of unearned income . 1,187,001 1,266,340 1,332,283 1,507,593 1,733,730 1,710,610 1,918,843 Allowance for credit losses . . 17,676 18,825 21,205 24,019 27,529 25,360 29,483 Securities . . . . . . . . . . 451,763 466,716 469,842 485,746 566,256 605,808 576,885 Deposits . . . . . . . . . . . 1,621,039 1,752,967 1,876,093 2,031,477 2,171,748 2,283,217 2,465,922 Long-term debt: Parent . . . . . . . . . . . 33,996 33,309 32,541 24,508 24,508 24,508 24,508 Subsidiaries . . . . . . . . -- -- -- -- 23,520 24,862 21,790 Total shareholders' equity . . 135,288 148,570 161,668 188,600 205,329 215,267 236,900 BALANCE SHEET DATA (AVERAGES): Total assets . . . . . . . . . $1,830,881 $1,939,678 $2,052,408 $2,197,330 $2,418,415 $2,558,943 $2,753,549 Total shareholders' equity . . 128,547 141,607 155,327 177,304 195,884 210,438 229,948 Average shares outstanding . . 7,349,488 7,414,576 7,474,192 7,775,139 7,888,662 8,714,423 8,763,840 SELECTED RATIOS (ANNUALIZED): Return on average assets . . . 0.95% 0.95% 0.90% 1.21% 1.05% 0.95% 1.09% Return on average shareholders' equity . . . . 13.53 13.02 11.95 15.06 12.99 11.53 12.96 Net interest margin . . . . . . 4.69 4.99 5.19 4.95 4.86 4.65 4.93 Net charge-offs to average loans . . . . . . . . . . . . 0.43 0.63 0.70 0.35 0.13 N/A 0.55 Tier 1 capital to risk-weighted assets . . . . . . . . . . . 10.14 9.99 9.90 11.00 10.63 N/A 11.67 Total capital to risk-weighted assets . . . . . . . . . . . 13.94 13.42 13.10 13.70 12.89 N/A 13.88 Leverage ratio . . . . . . . . 7.29 7.57 7.50 8.30 8.00 N/A 8.25
______________________________ N/A - Information not available S-13 19 WES-TENN BANCORP, INC. SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
FOR THE SIX MONTHS FOR THE YEARS ENDED DECEMBER 31, ENDED JUNE 30, -------------------------------------------------------------- ----------------------- 1990 1991 1992 1993 1994 1994 1995 ---- ---- ---- ---- ---- ----- ---- EARNINGS SUMMARY: Interest revenue . . . . . . . . $ 22,167 $ 22,727 $ 21,915 $ 22,356 $ 20,924 $ 10,251 $ 12,558 Interest expense . . . . . . . . 14,569 13,644 11,087 9,790 9,154 4,273 6,543 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Net interest revenue . . . . 7,598 9,083 10,828 12,566 11,770 5,978 6,015 Provision for credit losses . . 386 824 1,008 1,063 285 133 169 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Net interest after provision 7,212 8,259 9,820 11,503 11,485 5,845 5,846 Non-interest revenue . . . . . . 1,395 1,716 1,990 1,941 1,631 580 1,232 Non-interest expenses . . . . . 6,101 6,970 7,210 8,299 8,540 4,057 4,828 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Income before income taxes 2,506 3,005 4,600 5,145 4,576 2,368 2,250 Applicable income taxes . . . . 850 987 2,027 1,633 1,354 738 612 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Net income . . . . . . . . . . $ 1,656 $ 2,018 $ 2,573 $ 3,512 $ 3,222 $ 1,630 $ 1,638 ========== ========== ========== ========== ========== ========== ========== PRO FORMA(1): Interest income . . . . . . . . $ 24,402 $ 25,191 $ 24,562 $ 24,947 $ 23,630 $ 11,599 $ 13,251 Interest expense . . . . . . . . 16,151 15,193 12,441 11,052 10,527 4,914 6,946 Net interest income . . . . . . 8,251 9,998 12,121 13,895 13,103 6,685 6,305 Net income . . . . . . . . . . . 1,798 2,271 2,967 3,917 3,533 1,887 1,674 PER SHARE DATA(2): Net income . . . . . . . . . . . $ 0.77 $ 0.98 $ 1.29 $ 1.63 $ 1.44 $ 0.75 $ 0.69 Cash dividends . . . . . . . . . 0.23 0.24 0.26 0.32 0.37 0.18 0.19 Book value, net . . . . . . . . 7.32 8.18 10.26 12.05 11.51 11.31 12.35 Pro Forma Per Share Data(1)(2): Net income . . . . . . . . . . . $ 0.73 $ 0.95 $ 1.29 $ 1.59 $ 1.38 $ 0.75 $ 0.66 BALANCE SHEET DATA (PERIOD END): Total assets . . . . . . . . . . $ 232,791 $ 248,899 $ 270,995 $ 279,231 $ 287,668 $ 273,787 $ 339,661 Loans, net of unearned income . 145,654 155,863 164,151 168,217 176,926 175,463 223,656 Allowance for credit losses . . 1,600 1,892 2,362 2,730 2,588 2,880 2,769 Securities . . . . . . . . . . . 55,781 52,609 69,167 90,103 92,920 83,138 95,685 Deposits . . . . . . . . . . . . 211,167 223,831 241,194 239,827 238,106 229,158 277,340 Other borrowed money . . . . . . 3,048 5,106 5,495 11,574 21,715 17,115 27,136 Total shareholders' equity . . . 15,568 16,858 21,190 24,676 25,132 25,299 31,100 BALANCE SHEET DATA (AVERAGES): Total assets . . . . . . . . . . $ 225,908 $ 238,002 $ 257,395 $ 270,161 $ 276,104 $ 272,536 $ 313,351 Total shareholders' equity . . . 14,817 15,530 18,853 22,849 26,068 24,652 27,945 Average shares outstanding . . . 2,136,776 2,066,120 1,988,068 2,151,016 2,232,576 2,180,028 2,361,214 SELECTED RATIOS (ANNUALIZED): Return on average assets . . . . 0.73% 0.85% 1.00% 1.30% 1.17% 1.20% 1.05% Return on average equity . . . . 11.18 12.99 13.65 15.37 12.36 13.22 11.72 Net interest margin . . . . . . 3.68 4.18 4.73 5.09 4.64 4.78 4.16 Net charge-offs to average loans . . . . . . . . . . . . . 0.23 0.34 0.33 0.41 0.24 (0.02) 0.09 Tier 1 capital to risk-weighted assets . . . . . . . . . . . . . 10.55 11.91 14.55 16.56 16.76 16.71 15.45 Total capital to risk-weighted assets . . . . . . . . . . . . . 11.63 13.16 15.80 17.81 18.01 17.96 16.70 Leverage ratio . . . . . . . . . 6.69 6.77 7.82 8.84 9.02 9.24 8.91
_____________________ (1) Effective as of April 3, 1995, Wes-Tenn acquired all of the outstanding capital stock of WTFC. The acquisition has been accounted for as a purchase for financial reporting purposes. The pro forma amounts include the combined historical results of Wes-Tenn and WTFC as if the acquisition had occurred at the beginning of the periods presented. (2) Effective as of April 17, 1995, Wes-Tenn effected a four-for-one stock split of Wes-Tenn Common Stock. The per share and average share data have been adjusted for all periods presented to give effect to the stock split. S-14 20 PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION The following tables contain unaudited pro forma condensed consolidated financial information showing a balance sheet at June 30, 1995 and statements of income for the six months ended June 30, 1994 and 1995, and for the years ended December 31, 1992, 1993 and 1994, for (i) the Company; (ii) the Company and Wes-Tenn; and (iii) the Company, Wes-Tenn and other pending acquisitions. The other pending acquisitions are (i) the merger with First Federal; and (ii) the Shelby Bank purchase and assumption. The unaudited pro forma financial information reflects each acquisition using either the pooling of interests or purchase method of accounting in accordance with the accounting requirements applicable to each respective transaction. The unaudited pro forma financial information should be read in conjunction with the historical consolidated financial statements and notes thereto of the Company, Wes-Tenn, First Federal and Shelby Bank. The historical financial statements of the Company for the 1992, 1993 and 1994 fiscal years and the six months ended June 30, 1995 include financial information of LF Bancorp, which merged with and into the Company as of March 31, 1995 in a transaction accounted for as a pooling of interests. The pro forma financial statements of Wes-Tenn for the 1992, 1993 and 1994 fiscal years and the six months ended June 30, 1995 include financial information of WTFC, which merged with and into Wes-Tenn as of April 3, 1995 in a transaction accounted for as a purchase. Pro forma results are not necessarily indicative of future operating results. PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET JUNE 30, 1995 (UNAUDITED)
HISTORICAL ---------------------------------------------- OTHER PENDING THE COMPANY WES-TENN ACQUISITIONS ADJUSTMENTS PRO FORMA ------------ -------- ------------- ----------- --------- ASSETS (IN THOUSANDS) Cash and due from banks . . . . . . $ 137,767 $ 11,753 $ 4,147 $ 153,667 Loans and leases, net . . . . . . . 1,889,360 220,887 26,366 2,136,613 Held-to-maturity securities . . . . 444,842 49,795 7,136 501,773 Available-for-sale securities . . . 132,043 45,890 7,538 185,471 Mortgages held for sale . . . . . . 24,160 -- -- 24,160 Premises and equipment, net . . . . 72,271 5,610 1,369 $ 250 (2) 79,500 Other assets . . . . . . . . . . . . 117,284 5,726 4,233 1,000 (3) 238 (4) 128,481 ---------- -------- ------- ------ ---------- Total assets . . . . . . . . $2,817,727 $339,661 $50,789 $1,488 $3,209,665 ========== ======== ======= ====== ========== LIABILITIES Deposits: Non-interest bearing . . . . $ 331,834 $ 22,663 $ 3,727 $ 358,224 Interest bearing . . . . . . 2,134,088 254,677 42,450 2,431,215 ---------- -------- ------- ---------- Total deposits . . . 2,465,922 277,340 46,177 2,789,439 Short-term borrowings . . . . . . . 36,473 1,725 -- 38,198 Long-term debt . . . . . . . . . . . 46,298 25,411 -- 71,709 Other liabilities . . . . . . . . . 32,134 4,085 279 36,498 ---------- -------- ------- ---------- Total liabilities . . . . . . 2,580,827 308,561 46,456 2,935,844 ---------- -------- ------- ---------- SHAREHOLDERS' EQUITY Common stock . . . . . . . . . . . . 22,065 2,519 3,030 $ 118 (6) (2,677) (5) 26,501 1,446 (1) Capital surplus . . . . . . . . . . 73,847 11,758 4,057 (118) (6) (78) (5) (1,446) (1) 88,020 Unrealized gain (loss) on available-for-sale securities, net 776 (96) (20) 20 (5) 680 Retained earnings . . . . . . . . . 141,246 16,919 (2,734) 4,223 (5) 159,654 Less cost of treasury stock . . . . (1,034) -- -- (1,034) ---------- -------- ------- ---------- Total shareholders' equity . 236,900 31,100 4,333 1,488 273,821 ---------- -------- ------- ------ ---------- Total liabilities and shareholders' equity . . . . $2,817,727 $339,661 $50,789 $1,488 $3,209,665 ========== ======== ======= ====== ==========
___________________________ (1) Reclassification of capital accounts to reflect the exchange of Wes-Tenn Common Stock for BancorpSouth Common Stock. (2) Estimated write-up of premises and equipment acquired from Shelby Bank. (3) Deferred tax asset related to net operating loss carry-forward of Shelby Bank. (4) Cost in excess of fair value of net assets acquired from Shelby Bank. (5) Adjustments to capital accounts to reflect the transaction with Shelby Bank. (6) Reclassification of capital accounts to reflect the exchange of shares of First Federal's common stock for BancorpSouth Common Stock. S-15 21 PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, ---------------------------------------------------------------------------------------------------- 1994 1995 --------------------------------------------------- --------------------------------------------- The Company, Wes- The Company, Wes- Tenn & Other Tenn & Other The Company Pending The Company Pending The Company & Wes-Tenn Acquisitions The Company & Wes-Tenn Acquisitions Historical(1) Pro Forma Pro Forma Historical(1) Pro Forma Pro Forma ---------- --------- --------- ---------- --------- --------- (in thousands except per share amounts) Interest revenue . . . . . . $87,856 $99,455 $100,894 $107,757 $120,315 $122,023 Interest expense . . . . . . 35,462 40,376 41,016 47,355 53,898 54,795 ------- ------- -------- -------- -------- -------- Net interest revenue . . . . 52,394 59,079 59,878 60,402 66,417 67,228 Provision for credit losses . . . . . . . . . . . 2,457 2,590 2,601 2,366 2,535 2,536 ------- ------- -------- -------- -------- -------- Net interest revenue, after provision for credit losses . . . . . . . . . . . 49,937 56,489 57,277 58,036 63,882 64,692 Other revenue . . . . . . . . 10,320 11,080 11,258 14,339 15,571 15,749 Other expense . . . . . . . . 43,763 48,327 49,122 50,200 55,028 55,862 ------- ------- -------- -------- -------- -------- Income before income tax . . 16,494 19,242 19,413 22,175 24,425 24,579 Applicable income taxes . . . 4,365 5,226 5,288 7,137 7,749 7,781 ------- ------- -------- -------- -------- -------- Net income . . . . . . . . . $12,129 $14,016 $ 14,125 $ 15,038 $ 16,676 $ 16,798 ======= ======= ======== ======== ======== ======== Earnings per share(1) . . . . $ 1.39 $ 1.36 $ 1.34 $ 1.71 $ 1.60 $ 1.59 ======= ======= ======== ======== ======== ======== Average shares(1) . . . . . . 8,734 10,320 10,509 8,815 10,401 10,590
___________________ (1) Presented as if the LF Bancorp Merger had been effective throughout the periods presented and assumes LF Bancorp's conversion from mutual to stock ownership occurred on January 1, 1992. (2) Effective as of April 17, 1995, Wes-Tenn effected a four-for-one stock split of Wes-Tenn Common Stock. The per share and average share data have been adjusted for all periods presented to give effect to the stock split. S-16 22 PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the Years Ended December 31, ---------------------------------------------------------------------------------------------------------- 1992 1993 1994 ------------------------------------ ----------------------------------- -------------------------------- The The The Company, Company, Company, Wes-Tenn & Wes-Tenn & Wes-Tenn& The Other The Other The Other The Company Pending The Company Pending The Company Pending Company & Wes-Tenn Acquisitions Company & Wes-Tenn Acquisition Company & Wes-Tenn Acquisitions Historical(1) Pro Forma Pro Forma Historical(1) Pro Forma Pro Forma Historical(1) Pro Forma ProForma ------------- --------- ---------- ------------- --------- --------- ------------- --------- -------- (in thousands except per share amounts) Interest revenue . . . $180,285 $204,847 $207,836 $171,035 $195,982 $198,753 $185,256 $208,886 $211,884 Interest expense . . . 79,996 92,437 94,267 68,112 79,164 80,580 75,102 85,629 86,983 -------- -------- -------- -------- -------- -------- -------- -------- -------- Net interest revenue . 100,289 112,410 113,569 102,923 116,818 118,173 110,154 123,257 124,901 Provision for credit losses . . . . . . . . 11,818 12,870 12,968 7,886 8,999 9,097 5,652 5,937 6,004 -------- -------- -------- -------- -------- -------- -------- -------- -------- Net interest revenue, after provision for credit losses . . . . . 88,471 99,540 100,601 95,037 107,819 109,076 104,502 117,320 118,897 Other revenue . . . . . 21,105 23,358 23,856 24,027 26,365 26,911 24,347 26,143 26,552 Other expense . . . . . 82,394 90,509 92,227 84,837 94,184 95,906 91,671 101,264 102,931 -------- -------- -------- -------- -------- -------- -------- -------- -------- Income before income tax and accounting change . . . . . . . 27,182 32,389 32,230 34,227 40,000 40,081 37,178 42,199 42,518 Applicable income taxes 6,954 9,194 9,339 8,402 10,258 10,386 10,876 12,361 12,466 -------- -------- -------- -------- -------- -------- -------- -------- -------- Net income before accounting change and extraordinary item . . $ 20,228 $ 23,195 $ 22,891 $ 25,825 $ 29,742 $ 29,695 $ 26,302 $ 29,838 $ 30,052 ======== ======== ======== ======== ======== ======== ======== ======== ======== EARNINGS PER SHARE(2) Primary: Net income before accounting change and extraordinary item . . . . . . . $ 2.43 $ 2.34 $ 2.26 $ 2.99 $ 2.91 $ 2.85 $ 3.01 $ 2.89 $ 2.86 ======== ======== ======== ======== ======== ======== ======== ======== ======== Fully diluted: Net income before accounting change and extraordinary item . . . . . . . $ 2.32 $ 2.25 $ 2.18 $ 2.95 $ 2.88 $ 2.82 $ 3.00 $ 2.88 $ 2.85 ======== ======== ======== ======== ======== ======== ======== ======== ======== AVERAGE SHARES(1) Primary . . . . . . . 8,335 9,921 10,110 8,651 10,237 10,426 8,750 10,335 10,524 Fully diluted . . . . 8,731 10,317 10,506 8,747 10,333 10,522 8,757 10,343 10,532
____________________ (1) Presented as if the LF Bancorp Merger had been effective throughout the periods presented and assumes LF Bancorp's conversion from mutual to stock ownership occurred on January 1, 1992. (2) Effective as of April 17, 1995, Wes-Tenn effected a four-for-one stock split of Wes-Tenn Common Stock. The per share and average share data have been adjusted for all periods presented to give effect to the stock split. S-17 23 THE SPECIAL MEETING MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING The Special Meeting will be held on October ___, 1995 at ___:00 __.m. Central Time at the offices of Wes-Tenn at 200 West Washington Avenue, Covington, Tennessee. The purpose of the Special Meeting is to consider and vote upon the Merger Agreement and any other matters that may be properly brought before the shareholders of Wes-Tenn at the Special Meeting. In the event that there are insufficient shares represented to approve the Merger at the Special Meeting, the Special Meeting may be adjourned to permit further solicitation. THE WES-TENN BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AS BEING IN THE BEST INTERESTS OF THE WES-TENN SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT THE WES-TENN SHAREHOLDERS VOTE FOR THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. VOTE REQUIRED Consummation of the Merger will require the affirmative vote of the holders of a majority of the outstanding shares of Wes-Tenn Common Stock. Each share of Wes-Tenn Common Stock is entitled to one vote. At September 8, 1995, Wes-Tenn's directors, executive officers and affiliates beneficially owned 383,672 shares of Wes-Tenn Common Stock, or approximately 15.23% of the then outstanding shares of Wes-Tenn Common Stock. The directors and executive officers of Wes-Tenn have indicated that they intend to vote their shares of Wes-Tenn Common Stock for approval and adoption of the Merger Agreement. The vote of the holders of BancorpSouth Common Stock is not required to approve the Merger. SHARES ENTITLED TO VOTE; QUORUM Only holders of record of shares of Wes-Tenn Common Stock at the close of business on September ___, 1995 will be entitled to receive notice of and to vote at the Special Meeting. At September 8, 1995, there were 2,519,212 shares of Wes-Tenn Common Stock outstanding. A majority of the outstanding shares of Wes-Tenn Common Stock entitled to vote must be represented in person or by proxy at the Special Meeting in order for a quorum to be present at the Special Meeting for the purpose of voting on the Merger Agreement. VOTING AND REVOCABILITY OF PROXIES Shares of Wes-Tenn Common Stock represented by properly executed proxies received at or prior to the Special Meeting will be voted at the Special Meeting in the manner specified by the holders of such shares. Properly executed proxies which do not contain voting instructions will be voted FOR approval and adoption of the Merger Agreement. With respect to the matters considered at the Special Meeting, an abstention has the same effect as a vote against the proposal. The grant of a proxy does not preclude a shareholder of Wes-Tenn from voting in person or otherwise revoking a proxy. Attendance at the Special Meeting will not in and of itself constitute revocation S-18 24 of a proxy. A shareholder of Wes-Tenn may revoke a proxy at any time prior to its exercise by delivering to Janeice Frisbee, Secretary, Wes-Tenn Bancorp, Inc., 200 West Washington Avenue, Covington, Tennessee 38019, a duly executed revocation or a proxy bearing a later date, or by voting in person at the Special Meeting. SOLICITATION OF PROXIES Wes-Tenn will bear the cost of the solicitation of proxies from its shareholders, except that the Company will bear the cost of printing and mailing the Prospectus (including this Supplement/Proxy Statement). In addition to solicitation by mail, the directors, officers and employees of Wes-Tenn may solicit proxies from shareholders of Wes- Tenn by telephone, facsimile or in person. Such persons will not be additionally compensated, but will be reimbursed for reasonable out-of-pocket expenses incurred in connection with such solicitation. Arrangements may also be made with brokerage firms, nominees, fiduciaries and other custodians for the forwarding of solicitation materials to the beneficial owners of shares held of record by such persons, and Wes-Tenn will reimburse such persons for their reasonable out-of-pocket expenses in connection therewith. SHAREHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR PROXY. DISSENTERS' RIGHTS Shareholders of Wes-Tenn are entitled to dissent from the Merger Agreement and, if the Merger is consummated, to receive cash from the Company equal to the fair value of their shares of Wes-Tenn Common Stock. Shareholders of Wes- Tenn who elect to dissent from the Merger and demand payment of the fair value of their shares of Wes-Tenn Common Stock must strictly comply with the applicable provisions set forth in Sections 48-23-101 et seq. of the Tennessee Code Annotated, a copy of which is attached hereto as Annex A. THE FOLLOWING DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE APPLICABLE DISSENSION REQUIREMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO ANNEX A HERETO. If a shareholder of Wes-Tenn elects to exercise the shareholder's right to dissent from the Merger and demand payment of the fair value of such shareholder's shares of Wes-Tenn Common Stock, the shareholder must satisfy both of the following conditions, as well as the other applicable procedural requirements: (i) the shareholder must deliver to Wes-Tenn prior to the vote at the Special Meeting a written notice of the shareholder's intent to demand payment for his or her shares, and (ii) the shareholder may not vote his or her shares in favor of the Merger. Written notice with respect to dissenters' rights should be submitted to Janeice Frisbee, Secretary, Wes-Tenn Bancorp, Inc., 200 West Washington Avenue, Covington, Tennessee 38019. As discussed in "The Special Meeting -- Voting and Revocability of Proxies," executed proxies that are returned without specific instructions will be voted FOR the approval and adoption of the Merger Agreement; accordingly, a shareholder wishing to dissent from the Merger should be certain to complete such shareholder's proxy appropriately. Within ten days after approval of the Merger Agreement by the shareholders of Wes-Tenn, Wes-Tenn will provide written notice to each dissenting shareholder of where and by when demand for payment must be sent, and where and when certificates representing shares of Wes-Tenn Common Stock must be deposited. In addition, Wes-Tenn will provide a form for demanding payment. A dissenting shareholder must, in order to be entitled to appraisal rights, demand payment for his or her shares of Wes-Tenn Common Stock, certify whether beneficial ownership of shares was acquired before June 16, 1995, the date of the first announcement to news media of the principal terms of the Merger Agreement, and deposit the certificates S-19 25 representing the shares in accordance with Wes-Tenn's notice to the shareholders. A dissenting shareholder may not withdraw his or her demand for appraisal and accept the terms offered in the Merger unless Wes-Tenn consents to such withdrawal. Upon the later of the consummation of the Merger or receipt of a demand for payment, the Company will pay to each dissenting shareholder who has complied with the requirements discussed above the Company's estimate of the fair value of such shareholder's shares of Wes-Tenn Common Stock, plus accrued interest. Such payment will be accompanied by a copy of Wes-Tenn's financial statements at and for the year ended December 31, 1994 and Wes-Tenn's latest available interim financial statements, a statement of the Company's estimate of the fair value of the shareholder's shares, an explanation of how interest was calculated and a statement of such shareholder's right to reject the Company's offer and demand the fair value of his or her shares. If the Company and a dissenting shareholder do not agree upon the fair value of such shareholder's shares, the Company must commence a judicial proceeding within two months of receiving the shareholder's payment demand and petition the court to determine the fair market value of the shares and accrued interest. A condition to the parties' obligations under the Merger Agreement is that the amount of cash consideration payable by the Company to shareholders of Wes-Tenn shall not exceed 9.9% of the total consideration in the Merger or such lesser amount required for the Merger to qualify as a pooling of interests. S-20 26 THE MERGER GENERAL The Merger Agreement provides for the merger of Wes-Tenn with and into the Company and the conversion of shares of Wes-Tenn Common Stock into shares of BancorpSouth Common Stock. As part of the transactions provided for in the Merger Agreement, TCB will also merge with and into Volunteer. At the Effective Time, the separate existence of Wes-Tenn and TCB will cease. The Merger transactions are intended to qualify as poolings of interests for accounting purposes and as tax-free reorganizations for federal income tax purposes. The discussion in this Supplement/Proxy Statement regarding the Merger and the description of the principal terms of the Merger Agreement are subject to and qualified in their entirety by reference to the Merger Agreement. BACKGROUND OF THE MERGER Since its acquisition of Tri-County Federal Savings Bank in 1992, Wes-Tenn has focused on operating efficiencies relating to that transaction, including the merger of its banking affiliates, centralizing and consolidating management and systems and increasing its market penetration. In April 1995, Wes-Tenn completed the acquisition of WTFC, which the Company had also attempted to acquire in 1994. From time to time, Wes-Tenn management has received casual expressions of interest from other bank holding companies in acquiring Wes-Tenn; however, no meetings, substantive discussions or proposals resulted from such expressions of interest. In January 1995, Michael W. Weeks, the Chairman and Chief Executive Officer of Volunteer, contacted Duke H. Brasfield, Chairman of Wes-Tenn, and expressed Volunteer's interest in a possible business combination between Wes-Tenn and Volunteer. Mr. Brasfield declined to discuss such a transaction at that time due to Wes-Tenn's then pending merger with WTFC. On April 3, 1995, following completion of the WTFC merger, Mr. Weeks again contacted Mr. Brasfield and indicated Volunteer's continued interest in pursuing a business combination with Wes-Tenn. On April 12, 1995, Mr. Weeks and J. Ronald Hodges, the President and Chief Operating Officer of Volunteer, met with Mr. Brasfield, Charles M. Ennis, the President and Chief Executive Officer of Wes-Tenn, and Stephen N. Smith, a director of Wes-Tenn, each of whom is a member of Wes-Tenn's Planning Committee. Mr. Weeks described the Company's operations in Mississippi and Tennessee and reiterated Volunteer's interest in a potential business combination with Wes-Tenn. Mr. Weeks presented a financial analysis of a combined entity of the Company and Wes-Tenn, based upon a merger consideration of approximately two times Wes-Tenn's book value. On April 20, 1995, the same persons, in addition to Aubrey Burns Patterson, Chairman and Chief Executive Officer of the Company, met to discuss the Company's strategy and banking philosophy and Wes-Tenn's potential role in such strategy. Mr. Patterson noted that Wes-Tenn's assets would represent approximately 10% of the total assets of a combined entity of the Company and Wes-Tenn and that Wes-Tenn shareholders would hold approximately 15% of such entity's outstanding capital stock. On May 9, 1995, Wes-Tenn's Planning Committee reported to the Wes-Tenn Board of Directors the substance of its discussions with representatives of the Company. The Wes-Tenn Board of Directors noted that (i) a combined entity of Wes-Tenn and the Company would have total assets in excess of $800 million and would create one of the largest banks in the west Tennessee area, (ii) a merger with TCB would allow S-21 27 Volunteer to significantly increase its size and market area, thereby making Wes-Tenn potentially more valuable to the Company than other prospective acquirors, (iii) TCB's and Volunteer's offices compete in only two counties, thereby limiting anti-trust concerns, and (iv) Volunteer had expressed interest in retaining Wes-Tenn's senior management and including directors of Wes-Tenn on the Volunteer Board of Directors, which would give Wes-Tenn a significant voice in the combined bank entity. The Wes-Tenn Board of Directors directed the Planning Committee to continue such discussions and to engage legal counsel and to obtain financial and stock price information on the Company. The Planning Committee, which was enlarged to include director Hugh T. Simonton, Jr., engaged Baker, Donelson, Bearman & Caldwell as legal counsel. Members of the Planning Committee also requested that Morgan Keegan & Company, Inc. ("Morgan Keegan"), an investment banking firm headquartered in Memphis, Tennessee, which provides research coverage on the Company and makes a market in BancorpSouth Common Stock and the stock of over 35 other southeastern financial institutions, provide the Planning Committee with financial and stock performance information about the Company. On May 19, 1995, the Planning Committee met with its legal counsel and representatives of Morgan Keegan to review publicly available information compiled by Morgan Keegan regarding the Company's earnings per share, dividend yield, asset quality, stock performance, stock price to earnings and book value ratios, capital ratios and other factors, and similar information for four bank holding companies of comparable size to the Company and five larger bank holding companies operating in the southeastern or midsouth United States. The information showed that the Company compared favorably to the other bank holding companies with respect to the various factors for which information was compiled. The information also included a summary of published price to earnings, price to book value and premium to core deposits multiples for acquisitions in Tennessee, the southeastern United States and nationwide. The book value multiple resulting from the merger consideration proposed by the Company significantly exceeded the median of the published price to book value multiples (except with respect to nationwide acquisitions of relatively small institutions during 1993 and 1994). Morgan Keegan had not yet been engaged by Wes-Tenn to render any services with respect to the proposed merger and, accordingly, did not provide a formal report or analysis. The Planning Committee, along with its counsel, met privately to discuss the Company's proposal and the information compiled by Morgan Keegan. Members of the Planning Committee noted that (i) the Company appeared to be in strong financial condition, (ii) the Company's dividend yield exceeded that of Wes-Tenn, (iii) BancorpSouth Common Stock is traded on Nasdaq in sufficient volume to provide liquidity for Wes-Tenn shareholders, (iv) the Company appeared to be pursuing an acquisition strategy and, accordingly, offered an opportunity for more rapid growth than Wes-Tenn, (v) as the Company grows, the price to book value multiple of BancorpSouth Common Stock would likely improve to approximate that of larger bank holding companies in the southeastern United States, and (vi) as the Company grows, it would be likely to increase its level of institutional shareholders, which was then at a relatively low level of less than 8%. On May 24, 1995, the Company's Board of Directors discussed the proposed Merger, which had been previously discussed in a series of meetings of the Executive Committee of the Company's Board of Directors. Mr. Patterson outlined Wes-Tenn's operations and the structure of the proposed transaction. He noted benefits of the Merger to the Company, including the complementary location of Wes-Tenn's bank locations with respect to the Company's bank locations. Mr. Patterson also provided the Company's Board of Directors with an analysis of a combined entity of the Company and Wes-Tenn under different scenarios, including a merger consideration of approximately two times Wes-Tenn's book value. Following Mr. Patterson's presentation, the Company's Board of Directors approved the Company's negotiation of the Merger. S-22 28 On May 25, 1995, the Planning Committee and representatives of the Company met and discussed the details of a proposed combination, including price, timing, board representation, management, employment by the Company of certain officers of Wes-Tenn, operational issues and other matters. The Planning Committee reported to the Wes-Tenn Board of Directors, which authorized the Planning Committee to proceed. Representatives of the Company met with attorneys from Waller Lansden Dortch & Davis, special counsel to the Company, and directed them to prepare an initial draft of the Merger Agreement. On June 1, 1995, Waller Lansden Dortch & Davis delivered an initial draft of the Merger Agreement to Wes-Tenn and its counsel. The Planning Committee met with its counsel on June 3 and June 4, 1995 to discuss the draft Merger Agreement and to develop comments and responses to such agreement, which included as a condition to the Merger that Wes- Tenn would obtain the Fairness Opinion. On June 5, 1995, the Planning Committee and representatives of the Company, and their respective legal advisors, met to negotiate the terms of the proposed Merger Agreement. At this meeting the parties agreed upon certain aspects of the pricing mechanism for the Merger, including the date for determining the book value of Wes-Tenn and the components included in determining such book value. In addition, the parties agreed that they would conduct their due diligence review prior to execution of the Merger Agreement, that one representative of Wes-Tenn would be nominated to serve as a member of the Company's Board of Directors, and that Wes-Tenn employees would receive credit for prior service with Wes-Tenn for purposes of the Company's 401(k) plan. It was also agreed that the Company would be granted an option to purchase 472,441 shares of Wes-Tenn Common Stock which are exercisable upon the occurrence of certain events, including Wes-Tenn entering into an agreement to be acquired by another party. The Company rejected proposals by representatives of Wes-Tenn to increase the proposed consideration and to provide employment agreements to certain Wes-Tenn employees. The parties agreed that since the issues remaining to be resolved were manageable, the parties should commence their due diligence reviews. On June 7, 1995, counsel to the Company distributed a due diligence request and a confidentiality agreement to Wes-Tenn. On June 9, 1995, the Company and Wes-Tenn executed and delivered confidentiality agreements in anticipation of exchanging confidential information and conducting due diligence reviews. On June 10, 1995, the Wes-Tenn Board of Directors met with its counsel and discussed a revised draft of the agreement. From June 13-16, 1995, representatives of the Company and Wes-Tenn each conducted a due diligence review. During this period, the parties continued to negotiate the final terms of the Merger Agreement, including the pricing mechanism, vesting of credits under Wes-Tenn's 401(k) plan and the term of non-competition agreements between Volunteer and certain employees of Wes-Tenn. On June 14, 1995, the Wes-Tenn Board of Directors met to review further the revised agreement and to hear from its counsel and management the results of a due diligence review of the Company conducted by such Wes-Tenn representatives. S-23 29 On June 15, 1995, the Wes-Tenn Board of Directors met with its legal counsel and unanimously approved the Merger Agreement, which was executed by the parties in Covington, Tennessee on June 16, 1995. On June 28, 1995, Mr. Patterson outlined the final terms of the Merger Agreement for the Company's Board of Directors, which ratified the execution of the Merger Agreement and authorized preparation of this Supplement/Proxy Statement. On August 15, 1995, Mercer Capital, a valuation advisory firm headquartered in Memphis, Tennessee, which had previously provided valuation services to Wes-Tenn, was retained by Wes-Tenn to deliver the Fairness Opinion. For information regarding the Fairness Opinion and the selection of Mercer Capital, see "The Merger -- Fairness Opinion." REASONS FOR THE MERGER; RECOMMENDATION OF THE BOARD OF DIRECTORS Management of the Company and Volunteer believe that Wes-Tenn's market areas are comparable to Volunteer's existing market areas. In addition, they perceive that economies of scale available through the merger of Volunteer's and Wes-Tenn's administration functions, and increased competitiveness resulting from combined marketing efforts and budgets, should significantly enhance the operations and financial results of Volunteer. In addition, the Merger should strengthen Wes-Tenn's abilities (as a part of Volunteer) to compete and be successful in its existing markets, in that Volunteer offers services that are not currently available to customers of Wes-Tenn, including trust services, investment banking services and premier banking services. In reaching its determination that the Merger and the Merger Agreement are fair to, and in the best interest of, Wes-Tenn and its shareholders, the Wes-Tenn Board of Directors consulted with its legal counsel, Wes-Tenn's management and the Planning Committee, and considered the information compiled by Morgan Keegan and a number of factors, including, without limitation, the following: 1. The proposed Merger Consideration exceeded the minimum amount that management of Wes-Tenn considered necessary in order to consider a possible acquisition of Wes-Tenn. In addition, the price to book value multiple of approximately 2.05 resulting from the proposed merger consideration generally significantly exceeded the median book value multiple of other acquisitions in Tennessee, the southeastern United States and nationwide (which were approximately 1.47, 1.85 and 1.73, respectively, during 1994 and approximately 1.65, 1.82 and 1.77, respectively, during the first four months of 1995). 2. Consummation of the Merger is conditioned on the receipt by Wes-Tenn of a fairness opinion from an independent third party that the transactions contemplated by the Merger Agreement are fair to the shareholders of Wes-Tenn from a financial point of view. In August 1995, Wes-Tenn retained Mercer Capital to render the Fairness Opinion. 3. The Company's earnings per share, dividend yields, stock performance, asset quality, stock price to earnings and book value ratios, capital ratio and other factors compared favorably to those of four bank holding companies of comparable size to the Company and five larger bank holding companies operating in the southeastern or midsouth United States. S-24 30 4. The Merger would allow Wes-Tenn shareholders to become shareholders in a well-capitalized institution, whose stock is traded on Nasdaq with sufficient trading volume to provide liquidity for Wes-Tenn shareholders and whose recent earnings and dividend payments have been strong. 5. The Company appears to be pursuing an acquisition strategy and, accordingly, offered an opportunity for more rapid growth than Wes-Tenn, and that as the Company grows, the price to book value multiple of BancorpSouth Common Stock would likely improve to approximate that of larger bank holding companies in the southeastern United States and the Company would likely increase its level of institutional shareholders. 6. The Merger would create an entity with total assets in excess of $800 million and one of the largest banks in the west Tennessee area. The Merger would allow Volunteer to significantly increase its market area, which overlaps with TCB's market area in only two counties, thereby limiting anti-trust concerns. The Wes-Tenn Board of Directors perceived that these factors would likely make Wes-Tenn more valuable to the Company than other potential acquirors. 7. Volunteer had expressed interest in retaining Wes-Tenn's senior management and including directors of Wes-Tenn on the Volunteer Board of Directors, which would give Wes-Tenn a significant voice in the combined bank entity. 8. The Wes-Tenn Board of Directors was advised by its legal counsel that the Merger would generally be a tax-free transaction for Wes-Tenn and its shareholders to the extent such shareholders receive shares of BancorpSouth Common Stock. An additional condition to consummation of the Merger is the receipt of an opinion of KPMG Peat Marwick LLP that the Merger will qualify as a tax-free reorganization for federal income tax purposes. 9. The Wes-Tenn Board of Directors reviewed the current and prospective economic and regulatory environments and competitive constraints facing banking and financial institutions in Wes-Tenn's market area. In addition, they reviewed recent business combinations involving financial institutions, either announced or completed, during the past year in the United States, Tennessee and contiguous states, and the increased size of competing financial institutions in Wes-Tenn's market areas resulting from such combinations. The Wes-Tenn Board of Directors reviewed alternatives to the Merger, including remaining independent and growing internally, remaining independent for a period of time and then selling Wes-Tenn, and remaining independent and growing through future acquisitions, and determined that, based upon the factors discussed above, the Merger presented the most attractive alternative. The Wes-Tenn Board of Directors concluded that, in light of these factors, it would be in the best interests of Wes-Tenn, its shareholders, depositors and customers for Wes-Tenn to merge with the Company in the proposed Merger. In view of the variety of factors considered in connection with its evaluation of the Merger, the Wes-Tenn Board of Directors did not find it practicable to, and did not quantify or otherwise attempt to assign relative weights to the specific factors considered in reaching its determination. THE BOARD OF DIRECTORS OF WES-TENN UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF WES-TENN VOTE TO APPROVE AND ADOPT THE MERGER AGREEMENT. S-25 31 FAIRNESS OPINION Prior to the mailing of this Supplement/Proxy Statement, Mercer Capital delivered a preliminary Fairness Opinion, that the consideration to be received by Wes-Tenn's shareholders is fair from a financial point of view as of September 8, 1995. A copy of the Fairness Opinion, which sets forth certain assumptions made, matters considered and limitations on the reviews undertaken, is attached hereto as Annex B. Mercer Capital is a national valuation advisory firm headquartered in Memphis, Tennessee, which was retained by Wes-Tenn to advise Wes-Tenn's management with respect to consideration proposed to be conveyed in the Merger and to render the Fairness Opinion. The Board of Directors of Wes-Tenn selected Mercer Capital in August 1995 based upon Mercer Capital's extensive experience in the valuation of financial institutions generally and in the State of Tennessee specifically, and Mercer Capital's eight year history of providing valuation and related corporate finance advisory services to Wes-Tenn. Mercer Capital delivered the preliminary Fairness Opinion and the Fairness Memorandum, both dated September 8, 1995, to the Board of Directors of Wes-Tenn. The Fairness Opinion was issued from a financial point of view on behalf of Wes-Tenn shareholders and stated that in Mercer Capital's opinion, the Merger was fair from a financial point of view. An updated Fairness Opinion was subsequently issued by Mercer Capital to coincide with the mailing of the Supplement/Proxy Statement and is included as Annex B hereto. The Fairness Opinion should not be construed as a recommendation to any Wes-Tenn shareholder as to how their shares should be voted. Nor does the Fairness Opinion address the underlying business decision to effect the Merger. Shareholders are urged to read the Fairness Opinion in its entirety. In connection with rendering their opinion, Mercer Capital reviewed and analyzed, among other things, the following (1) the Prospectus and related Supplement/Proxy Statement; (2) the Merger Agreement; (3) audited financial statements for Wes-Tenn and Wes-Tenn's annual reports on Form 10-K for the fiscal years ended December 31, 1990 through 1994 and quarterly reports on Form 10-Q for the quarters ended March 31 and June 30, 1995; (4) audited financial statements for the Company and the Company's annual reports on Form 10-K for the fiscal years ended December 31, 1990 through 1994 and quarterly reports on Form 10-Q for the quarters ended March 31 and June 30, 1995; (5) the Joint Prospectus and Proxy Statement with respect to the LF Bancorp merger; (6) the Joint Prospectus and Proxy Statement with respect to the First Federal merger; (7) historical pricing information for the BancorpSouth Common Stock and Wes-Tenn Common Stock; (8) certain information with respect to the pricing of transactions which Mercer Capital believes to be comparable to the Merger; and (9) certain information with respect to the pricing of bank holding companies which Mercer Capital believes to be comparable to the Company. As part of its due diligence process, representatives of Mercer Capital met with officers of both the Company and Wes-Tenn and discussed the market for each institution's shares, historical financial performance and prospective performance, asset quality, operating strategies and other matters Mercer Capital believed relevant to the inquiry. S-26 32 In arriving at its opinion, Mercer Capital assumed and relied upon the accuracy and completeness of all of the financial and other information provided to it or that was publicly available. Mercer Capital did not attempt to verify any such information, nor did it seek to determine the adequacy of the loan loss provision for either institution. Mercer Capital did not conduct a physical inspection of the properties of Wes-Tenn or the Company, nor did its personnel obtain any independent appraisals of any properties. The following is summary of the factors considered in the Fairness Opinion as presented to the Wes-Tenn Board of Directors in the Fairness Memorandum. 1. Terms of the Merger Agreement; 2. An analysis of the consideration proposed to be exchanged in the Merger in relation to indications of fair market value of Wes-Tenn derived through considering comparable (guideline) transactions, discounted cash flow and earnings dilution analyses; 3. An analysis of the estimated pro forma changes in book value per share, earnings per share and overall ownership from the perspective of Wes-Tenn shareholders; 4. A review of the Company's historical financial performance, historical stock pricing, the liquidity of its shares and current pricing in relation to other publicly traded bank holding companies based in the mid-south United States; 5. Tax consequences of the Merger for Wes-Tenn shareholders; and, 6. Restrictions or lack thereof placed on the shares of BancorpSouth Common Stock received by the Wes-Tenn shareholders in the Merger. Transaction Overview. Under the terms of the Merger Agreement, dated June 16, 1995, Wes-Tenn shareholders will receive 0.6296 shares of BancorpSouth Common Stock for each share of Wes-Tenn Common Stock as long as the market price of BancorpSouth Common Stock is not less than $32.8738 per share or greater than $44.4763 per share. The Exchange Ratio was based upon a negotiated price of $24.35 per share of Wes-Tenn Common Stock divided by the market price of BancorpSouth Common Stock of $38.675 per share. The negotiated price per share of Wes-Tenn Common Stock corresponds to 2.05 times the adjusted book value of $11.88 per share at May 31, 1995, reflecting certain adjustments to reported book value as agreed by both parties. For purposes of the Merger Agreement, the BancorpSouth Common Stock share price was derived by averaging the mid-point between each day's high "bid" and low "ask" price for the 20 trading days ended on June 13, 1995. The market price for purposes of the closing will be based upon the average of the mid-point between each day's high "bid" and low "ask" price for the 20 trading days ending immediately prior to the closing date. The Exchange Ratio may be adjusted as follows: 1. In the event that the calculated market price is less than $32.8738 per share, Wes-Tenn may, at its option and without penalty, terminate the Merger Agreement unless the Company agrees to recalculate the Exchange Ratio using the following formula for the BancorpSouth Common Stock stock price: S-27 33 $38.675 - ( $32.8738 - Recalculated Price ) = BancorpSouth Common Stock Price; or 2. In the event that the calculated market price is greater than $44.4763 per share, the Company may, at its option and without penalty, terminate the Merger Agreement unless Wes-Tenn agrees to recalculate the Exchange Ratio using the following formula for the BancorpSouth Common Stock stock price: $38.675 + ( Recalculated Price - $44.4763 ) = BancorpSouth Common Stock Price; The present Exchange Ratio implies that 1,586,096 shares of BancorpSouth Common Stock will be issued for the 2,519,212 outstanding shares of Wes-Tenn Common Stock. No fractional shares will be issued. Instead, fractional shares will be converted into cash. Based upon the recent closing price of BancorpSouth Common Stock of $40.00 per share, Wes-Tenn shareholders will receive consideration equal to $25.18 per share of Wes-Tenn Common Stock, while the aggregate consideration will total $63.4 million. The purchase price represents 204% of Wes-Tenn's reported book value of $12.35 per share as of June 30, 1995 and 19.5x Wes-Tenn's pro forma earnings of $1.29 per share for the twelve month period ended June 30, 1995. Mercer Capital noted that Wes-Tenn's reported earnings were $1.38 per share for the twelve month period ended June 30, 1995 and include the results of WTFC since it was acquired on April 3, 1995. As indicated under "Selected Financial Data", pro forma earnings, representing the combined earnings of Wes-Tenn and WTFC for all periods presented, for the twelve month period ended June 30, 1995 are calculated by the following formula: $1.38 per share (pro forma fiscal year 1994 from $1.44 per share) + $0.66 per share (pro forma year to date at June 30, 1995) - $0.75 per share (pro forma year to date at June 30, 1994) = $1.29 per share on a pro forma basis versus $1.38 per share on a reported basis. Valuation Analysis. The valuation of Wes-Tenn considered three separate valuation methods: comparable transaction, dilution analysis, and discounted cash flow. The purpose of the valuation analysis was to develop an estimated range of fair market value for Wes-Tenn under the assumption of a change-in-control and compare the results with the pricing of the Merger. Comparable Transaction Method. The comparable transaction method seeks to develop an indication of value for a subject company by analyzing prices paid for similar institutions which have been acquired. With regard to the banking industry, most transactions are measured in terms of price/book ratios and price/earnings ratios. Although the price/book ratio tends to be the more widely quoted of the two, Mercer Capital noted that the price/earnings ratio is generally more important since acquirors are most concerned with the target's earning capacity. Also, the market's relative pricing of the buyer (in relation to earnings) will dictate the size of an offer before earnings dilution becomes an issue. In addition, price/book multiples vary depending upon the amount of equity used to finance the balance sheet. Price/book ratios tend to decline as equity rises and increase when equity decreases. S-28 34 Mercer Capital also noted that price/earnings ratios vary, particularly when the seller's earnings are extremely high or low relative to the industry. In general, price/earnings ratios decline as return on assets increases and rise as earnings fall. With regard to Wes-Tenn, Mercer Capital reviewed prices paid for acquired commercial banks in relation to the sellers' book value and earnings as compiled by SNL Securities. The data was divided into four groups: (1) all privately acquired commercial banks, (2) southeastern United States based commercial banks, (3) commercial banks with $100 to $500 million of assets which were acquired for common stock, and (4) commercial banks based in Tennessee, Arkansas and Mississippi. Indications of value using the transaction method were based upon Wes-Tenn's earnings of $1.29 per share for the twelve month period ended June 30, 1995 on a pro forma basis and Wes-Tenn's reported book value of $12.35 per share as of the same date. Mercer Capital calculated the average price/book ratio for each comparable group in 1994 and 1995. In addition, the median price/earnings ratio was calculated for each comparable group in 1994 and 1995. The respective price/book and price/earnings ratios were then multiplied times Wes-Tenn's book value and earnings per share to derive a range of indicated value. The range of value was then compared with the price offered by the Company. The overall range of estimated value based upon the 1994 median price/earnings transaction data was $17.16 per share (13.3 x $1.29) to $22.45 per share (17.4 x $1.29) with a mid-point of $19.80 per share. The overall range of estimated value based upon the 1995 median price/earnings transaction data was $19.74 per share (15.3 x $1.29) to $23.09 per share (17.9 x $1.29) with a mid-point of $20.83 per share. The range of value based upon the 1994 average price/book transaction data as applied to Wes-Tenn's June 30, 1995 book value was $20.62 per share (1.67 x $12.35) to $24.32 per share (1.97 x $12.35). The mid-point for the 1994 transaction data was $22.47 per share. The range of value based upon the 1995 average price/book transaction data as applied to Wes-Tenn's June 30, 1995 book value was $21.97 per share (1.78 x $12.35) to $24.32 per share (1.97 x $12.35). The mid-point for the 1995 transaction data was $23.15 per share. Mercer Capital noted that the price offered by the Company slightly exceeded the upper end of the cited ranges based upon the closing price of shares of BancorpSouth Common Stock immediately prior to issuing the Fairness Memorandum. Dilution Analysis. A dilution analysis was conducted whereby hypothetical acquisition offers for Wes-Tenn were generated under the assumption that the buyer would structure an offer so that pro forma earnings dilution would be minimal (generally less than 1.0% for the smaller acquirors and less than 0.50% for the larger buyers) in a stock-for-stock transaction. Mercer Capital noted that a dilution analysis can be affected by many things. Relatively higher pricing may be obtainable if the buyer is large in relation to the target, if the buyer's shares are trading at a rich multiple to earnings and/or substantial merger economies are obtainable. The implication is that larger buyers or those with particularly strong stock prices can pay a higher price without incurring much dilution in the acquisition of smaller institutions if they have a strategic or competitive reason to do so. S-29 35 A stock-for-stock valuation analysis for Wes-Tenn assuming a non-dilutive merger with Union Planters Corporation, First Tennessee National Corporation, First American Corporation, First Commercial Corporation, and Boatmen's Bancshares was conducted in which the buyers were assumed to realize merger economies on the order of 10% of Wes-Tenn's existing expense structure. The institutions listed above were selected since they are publicly traded with readily available information and, to varying degrees, represented possible acquirors of Wes-Tenn. Mercer Capital's analysis indicated an overall range of estimated values of $20.83 per share to $23.74 per share given the constraints of avoiding dilution to pro-forma earnings. The analysis indicated that the Company's offer was at the upper end of likely acquisition prices, unless an acquiror chose to "pay-up" for Wes-Tenn to achieve certain corporate objectives. Discounted Cash Flow. A discounted cash flow analysis was also conducted to develop an estimate of value an acquiror might place on Wes-Tenn viewed from the perspective of cash flow potential. Free cash flow for a financial institution differs from the traditional definition typically associated with other industries. Free cash flow for a financial institution is defined as the amount of earnings which can be distributed and still maintain a targeted equity-to-asset ratio since capital management is imperative for financial institutions. Value obtained via the discounted cash flow method for Wes-Tenn was defined as equal to the existing excess equity, plus the present value of all distributable earnings projected during the next five years and a terminal value. The terminal value represented the estimated value of Wes-Tenn at the end of the projection period and was based upon a multiple of projected year 2000 earnings. The terminal value was derived by multiplying assumed acquisition multiples of 15.0x and 16.0x times Wes-Tenn's projected year 2000 earnings. The terminal values' price/earnings multiples were selected as ratios which presently approximate national median acquisition multiples for commercial banks as reported by SNL Securities. Projections used as a basis for the discounted cash flow analysis were prepared by Mercer Capital with Wes-Tenn management's concurrence as to the reasonableness of the underlying assumptions. Although many assumptions regarding yields, overhead, etc., were made, the projections were geared so that future performance would approximate current earnings (a return on average assets of about 1.15%) with some slight upward bias, while asset growth was assumed modest (about 4.0% per year). The projections also assumed that an acquiror would extract $4.5 million of equity capital immediately, reducing the equity to asset ratio to 7.9% and then maintain a ratio of roughly 7.9 - 8.0% by distributing all earnings beyond what was necessary to maintain the target capital ratio. A range of estimated value was derived based upon discount rates, or required rates of return for potential acquirors, of 12.0% to 13.0%, and price/earnings multiples applied to projected year 2000 earnings of 15.0 to 16.0. The indicated values were from $53.2 million ($21.10 per share) to $57.6 million ($22.85 per share). Discount rates used to discount the projected cash flows to their present value represent estimated rates of return an investor would require from an investment in Wes-Tenn. The discount rates were developed using the capital asset pricing model. Based upon the three valuation methods, Mercer Capital noted that the terms of the Merger resulted in pricing at the upper end of the indicated range of value based upon the pricing of the Company's shares as of the date the memorandum was issued. S-30 36 Pro Forma Analysis. Mercer Capital analyzed the prospective change in pro forma dividends per share, earnings per share, book value per share and overall ownership from the perspective of Wes-Tenn shareholders. The following is a summary of Mercer Capital's findings: Dividends Per Share. The Company's current indicated dividend of $1.20 per share is equivalent to $0.76 per Wes-Tenn exchange adjusted share, or an increase of 100% above the current Wes-Tenn indicated annual payout of $0.38 per share. Wes-Tenn shareholders will therefore experience a significant increase in the dividend cash flow associated with their investment. Earnings Per Share. Pro-forma earnings are estimated to total $2.03 per exchange adjusted share of Wes-Tenn Common Stock for the twelve month period ended June 30, 1995. The increase exceeds Wes-Tenn's latest twelve month earnings (on a pro forma basis for the WTFC acquisition) of $1.29 per share by $0.74, or 57%. Book Value Per Share. Exchange adjusted book value is estimated to increase about 32% from $12.35 per share to $16.29 per exchange adjusted share. Ownership. The collective ownership of Wes-Tenn shareholders will decline from 100% of Wes-Tenn to approximately 15% of the Company after the Merger is consummated. Collectively, Wes-Tenn shareholders will be the largest shareholder of the Company. Mercer Capital has made no warranties or representations regarding the actual change in proforma earnings and book value and other such calculations for Wes-Tenn shareholders. Where possible, pro-forma and pro forma earnings were derived from schedules presented in the Supplement/Proxy Statement. The analysis was developed making certain assumptions regarding accounting treatment and the like. Actual pro forma changes may differ. Review of the Company's Financial Performance. Mercer Capital noted that the Company is a $2.8 billion asset institution whose primary subsidiaries operate in Mississippi (Bank of Mississippi and LF Bancorp) and west Tennessee (Volunteer). The Company has completed or announced five acquisitions in the past three years, Volunteer Bancshares, Inc. (Jackson, Tennessee), LF Bancorp, Inc. (Laurel, Mississippi) First Federal Bank for Savings (Starkville, Mississippi), Shelby Bank (Bartlett, Tennessee) and Wes-Tenn. Once the Wes-Tenn acquisition is completed, the Company will have approximately $2.4 billion of assets in Mississippi and $800 million of assets in Tennessee. Mercer Capital noted that the Company is believed to have one or more of the more attractive franchises in Mississippi since it primarily operates in the state's higher growth markets and has avoided the Mississippi delta. Other factors reviewed included (1) historical earnings; (2) balance sheet composition and overall growth trends; (3) asset quality; (4) capital structure; (5) composition of the loan portfolio; (6) deposit and other funding sources; and (7) analyst's outlook for shares of BancorpSouth Common Stock. Shareholder Liquidity. Mercer Capital noted that another primary benefit of the Merger is the ability of Wes-Tenn shareholders to exchange illiquid shares of Wes-Tenn Common Stock for the Company's publicly traded shares, which are listed on Nasdaq. During the past two years, average weekly trading volume of shares of BancorpSouth Common Stock has totaled approximately 25,000 shares. The market for shares of Wes-Tenn Common Stock is nominal. Mercer Capital reviewed the trading history of BancorpSouth Common Stock for the prior two and one-half years and compared it with S-31 37 the Nasdaq. Comparisons were also made with the current and historical valuation of the Company in relation to the mid-south United States (defined as Alabama, Arkansas, Louisiana, Kentucky, Mississippi, Missouri and Tennessee) based bank holding companies which Mercer Capital believed to be comparable to the Company. Other Considerations. In addition to the items discussed above, other factors considered in rendering the Fairness Opinion included: 1. All shares of BancorpSouth Common Stock received by shareholders of Wes-Tenn will be freely transferable, except shares received by persons who are deemed to be "affiliates" of Wes-Tenn as defined under the Securities Act. Rule 145 promulgated under the Securities Act permits affiliates to sell up to 1% of the outstanding share of BancorpSouth Common Stock in each three month period commencing with the public announcement of the results of 30 days of combined operations. It is expected that no affiliate of Wes-Tenn will own as much as 1% of the outstanding shares of BancorpSouth Common Stock following the merger. Accordingly, such affiliates should be able to sell their BancorpSouth Common Stock following the public announcement of 30 days of combined operations; 2. Tax opinion has been issued that the transaction will be treated as a tax-free reorganization under Section 368(a) of the Code for federal income tax purposes. Thus, the Merger will not trigger capital gains tax liabilities for Wes-Tenn shareholders; 3. The Company appears to represent an attractive acquisition candidate for a larger bank holding company which desires to enter select Mississippi and west Tennessee markets or consolidate existing market share. Thus, a second premium may be realized at some point in the future should the Company be acquired. Mercer Capital, however, made no warranties or representations about such an event occurring, or, in the event of an acquisition, whether or not shareholders of the Company would obtain a premium price; 4. Wes-Tenn shareholders will benefit through increased diversification. As investors in a bank holding company whose operations span Mississippi and west Tennessee, Wes-Tenn shareholders will not be solely dependent upon the west Tennessee market; and 5. A number of bank acquisitions entail the granting of options to the buyer by the seller to deter other possible acquirors from making a competing offer. In the case of Wes-Tenn, Mercer Capital did not view the option granted to the Company as problematical since the Company has offered a price which appears to be at the upper end of likely offers from other potential acquirors. For its services as a financial advisor, Wes-Tenn paid Mercer Capital a fee of $25,000, plus reasonable out-of-pocket expenses. S-32 38 REGULATORY APPROVAL Consummation of the Merger is conditioned on, among other things, the receipt of approvals by governmental authorities required in connection with the Merger, including approvals by the FDIC and the TDFI. As a state non-member bank, Volunteer must file an application with the FDIC for approval of the Merger pursuant to Sections 18(c) and 18(d) of the Federal Deposit Insurance Act. The FDIC may disapprove the application if it finds that the Merger tends to create or result in a monopoly, substantially lessens competition or would be in restraint of trade. Volunteer filed such application with the FDIC on August 18, 1995 and anticipates a response from the FDIC regarding approval or disapproval of the application prior to October 15, 1995. Following approval of the application by the FDIC, the United States Department of Justice would have an additional 15 calendar days to submit any adverse comments with regard to the Merger relating to competitive factors. In addition, the Company must file an application with the TDFI for approval of the Merger pursuant to Sections 45-12-101 et seq. of the Tennessee Code Annotated. This application specifically relates to the proposed merger of Wes-Tenn with and into the Company. The TDFI will accept the FDIC application described above with respect to the proposed merger of TCB with and into Volunteer. The Company filed this application with the TDFI on August 18, 1995 and anticipates a response from the TDFI regarding approval or disapproval prior to October 20, 1995. INTERESTS OF CERTAIN PERSONS IN THE MERGER At September 8, 1995, the directors and executive officers of Wes-Tenn beneficially owned an aggregate of 383,672 shares of Wes-Tenn Common Stock and, based upon the Exchange Ratio of 0.6296 and assuming such shares are owned at the Effective Time, would receive an aggregate of approximately 241,560 shares of BancorpSouth Common Stock upon consummation of the Merger. See "Description of Wes-Tenn Common Stock -- Beneficial Ownership." Pursuant to the Merger Agreement, the Company has agreed to increase the number of directors on Volunteer's Board of Directors by up to eight persons. The Company, as the sole shareholder of Volunteer, will have these additional Volunteer directorships filled by the election of certain Wes-Tenn directors serving as of the consummation of the Merger. The Company has also agreed to nominate following consummation of the Merger a member of the Wes-Tenn Board of Directors, chosen by the Company after consultation with the Wes-Tenn Board of Directors, for a seat on the Board of Directors of the Company. For information regarding the members of the Wes-Tenn Board of Directors, see "Wes-Tenn Management." ACCOUNTING TREATMENT The Company intends to account for the Merger as a pooling of interests. Under this method of accounting, the Company will record the assets and liabilities of Wes-Tenn after the Effective Time at the amounts recorded on the books of Wes-Tenn prior to the Merger. A condition to the performance of each S-33 39 of the parties under the Merger Agreement is the receipt of an opinion of KPMG Peat Marwick LLP that the Merger will qualify as a pooling of interests. CERTAIN FEDERAL INCOME TAX CONSEQUENCES The following is a summary of the material federal income tax consequences of the Merger. This summary relates only to shares of Wes-Tenn Common Stock held as a capital asset within the meaning of Section 1221 of the Code by persons who are citizens or residents of the United States. This summary does not discuss the tax consequences to categories of holders entitled to special treatment under the Code (including, without limitation, foreign persons, tax-exempt organizations, insurance companies, financial institutions and dealers in stocks and securities). No rulings will be sought from the Internal Revenue Service with respect to the federal income tax consequences of the Merger. Shareholders of Wes-Tenn are urged to consult their own tax advisors as to specific tax consequences of the Merger. A condition to the consummation of the Merger is the receipt of an opinion of KPMG Peat Marwick LLP, independent certified public accountants, to the effect that (i) assuming the Merger qualifies as a statutory merger under applicable law, the Merger will be a "reorganization" within the meaning of Section 368(a)(1)(A) of the Code; (ii) Wes-Tenn and the Company will each "be a party to a reorganization" within the meaning of Section 368(b) of the Code, assuming the shareholders of Wes-Tenn have a sufficient continuing ownership interest in the Company to meet the continuity of interest requirement; (iii) no gain or loss will be recognized by Wes-Tenn or the Company as a result of the Merger; (iv) the basis of the assets of Wes-Tenn in the hands of the Company will be the same as the basis of such assets in the hands of Wes-Tenn immediately prior to the Merger; (v) the holding period of the assets of Wes-Tenn acquired by the Company will include the period during which the assets were held by Wes-Tenn; (vi) no gain or loss will be recognized by the Wes-Tenn shareholders upon the receipt of BancorpSouth Common Stock in exchange for shares of Wes-Tenn Common Stock, in connection with the Merger; (vii) the basis of the BancorpSouth Common Stock (including any fractional share interest) received by a Wes-Tenn shareholder in connection with the Merger will be the same as the basis of the shares of Wes-Tenn Common Stock surrendered in exchange therefor; (viii) the holding period of the BancorpSouth Common Stock (including any fractional share interest) received by a shareholder of Wes-Tenn in connection with the Merger will include the holding period of the shares of Wes-Tenn Common Stock surrendered in exchange therefor, provided that the shares of Wes-Tenn Common Stock are held as a capital asset at the Effective Time; and (ix) cash received in lieu of a fractional share of BancorpSouth Common Stock will be treated as having been received as a distribution in full payment in exchange for a fractional share interest in BancorpSouth Common Stock. The opinion of KPMG Peat Marwick LLP will be based on customary assumptions and representations regarding, among other things, the ownership of shares of Wes-Tenn Common Stock, the future ownership of the BancorpSouth Common Stock and the Company's future business plans. One important assumption is that the continuity of interest test will be met, which requires, among other things, that, at the Effective Time, there will be no plan or intention by shareholders of Wes-Tenn to sell or otherwise dispose of more than 50%, in the aggregate, of the shares of BancorpSouth Common Stock received in the Merger. For purposes of that assumption, the sale or redemption of any shares of Wes-Tenn Common Stock in anticipation of the Merger, as well as the exercise of dissenters' rights, will be treated as a sale of the number of shares of BancorpSouth Common Stock that would have been received in exchange for such shares had they not been sold, redeemed or the subject of dissenters' rights. The opinion of KPMG Peat Marwick LLP will not be binding on the Internal Revenue Service or any court. If the S-34 40 Merger was determined not to qualify as a "reorganization" under Section 368(a) of the Code, the Merger would be treated as a taxable sale of assets by Wes-Tenn followed by the liquidation of Wes-Tenn. A shareholder of Wes-Tenn who receives cash in lieu of a fractional share of BancorpSouth Common Stock in the Merger will recognize gain (or loss) as if the fractional share had been received and then redeemed for the cash. The amount of gain or loss will equal the difference between the amount of cash and the shareholder's basis in the fractional share interest. In such event, any gain or loss recognized will be capital gain (or loss) if the shares of Wes-Tenn Common Stock are held by such shareholders as a capital asset at the Effective Time. The receipt of cash for shares of Wes-Tenn Common Stock as a result of the exercise of dissenters' rights will be taxable as a redemption of those shares for the cash. Any shareholders considering the exercise of dissenters' rights should consult the shareholder's tax advisor regarding the tax consequences of exercising dissenters' rights. THE DISCUSSION SET FORTH ABOVE DOES NOT ADDRESS ANY STATE, LOCAL OR FOREIGN TAX ASPECTS OF THE MERGER. THE DISCUSSION IS BASED ON CURRENTLY EXISTING PROVISIONS OF THE CODE, EXISTING AND PROPOSED TREASURY REGULATIONS THEREUNDER AND CURRENT ADMINISTRATIVE RULINGS AND COURT DECISIONS. ALL OF THE FOREGOING ARE SUBJECT TO CHANGE AND ANY SUCH CHANGES COULD AFFECT THE CONTINUING VALIDITY OF THIS DISCUSSION. EACH SHAREHOLDER OF WES-TENN SHOULD CONSULT THE SHAREHOLDER'S OWN TAX ADVISOR WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO SUCH SHAREHOLDER, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND FOREIGN TAX LAWS. RESALE RESTRICTIONS All shares of BancorpSouth Common Stock received by shareholders of Wes-Tenn in the Merger will be freely transferable, except that shares of BancorpSouth Common Stock received by persons who are deemed to be "affiliates" (as such term is defined under the Securities Act) of Wes-Tenn prior to the Merger may be resold by them only in transactions permitted by the resale provisions of Rule 145 promulgated under the Securities Act or as otherwise permitted under the Securities Act. Persons who may be deemed to be affiliates of Wes-Tenn generally include individuals or entities that control, are controlled by, or are under common control with, such party and may include certain officers and directors of Wes-Tenn as well as principal shareholders of Wes-Tenn. Rule 145 permits affiliates to sell up to 1% of the outstanding BancorpSouth Common Stock in each three month period commencing with the public announcement of the results of 30 days of combined operations of the Company and Wes-Tenn. It is expected that no affiliates of Wes-Tenn will own as much as 1% of the outstanding shares of BancorpSouth Common Stock following the Merger. Accordingly, such affiliates should be able to sell their BancorpSouth Common Stock following the public announcement of 30 days of combined operations. Wes-Tenn has agreed to use its best efforts to cause each of its affiliates to deliver to the Company a written agreement providing that such person will not sell, pledge, transfer, or otherwise dispose of the shares of Wes-Tenn Common Stock held by such person except as contemplated by the Merger Agreement and will not sell, pledge, transfer, or otherwise dispose of the shares of BancorpSouth Common Stock to be received by such person upon consummation of the Merger except in compliance with applicable provisions of the Securities Act and the rules and regulations thereunder and until such time as financial results covering at least 30 days of combined operations of the Company and Wes-Tenn have been published. Shares of BancorpSouth Common Stock S-35 41 issued to affiliates of Wes-Tenn in exchange for Wes-Tenn Common Stock will not be transferable until such time as financial results covering at least 30 days of combined operations of the Company and Wes-Tenn have been published, regardless of whether each such affiliate has provided the written agreement to the Company. This Supplement/Proxy Statement is not intended to be used in connection with the resale of BancorpSouth Common Stock by such affiliates. COMPARISON OF RIGHTS OF SHAREHOLDERS At the Effective Time, shareholders of Wes-Tenn will automatically become shareholders of the Company (except for shareholders of Wes-Tenn who exercise dissenters' rights). The Company is a Mississippi corporation which is governed by provisions of the Mississippi Business Corporation Act, the Company's Restated Articles of Incorporation, as amended, and its Bylaws. Wes-Tenn is a Tennessee corporation governed by provisions of the Tennessee Business Corporation Act, Wes-Tenn's Charter and its Bylaws. See "Comparison of Rights of Shareholders." STOCK OPTION AGREEMENT In conjunction with, and in furtherance of, the execution of the Merger Agreement, the Company and Wes-Tenn entered into the Stock Option Agreement whereby the Company was granted the Option to purchase up to 472,441 shares of Wes-Tenn Common Stock at a cash purchase price of $18 per share. The Option may be exercised by the Company, in whole or in part, at any time or from time to time, on or before the earlier to occur of (i) the consummation of the Merger or (ii) 12 months after the first occurrence, without prior written consent of the Company, of (A) Wes-Tenn or TCB entering into, or the Wes-Tenn Board of Directors recommending that Wes-Tenn shareholders approve, an agreement to engage in an Acquisition Transaction with any person or entity other than the Company, or (B) any person or entity other than the Company acquiring beneficial ownership or the right to acquire beneficial ownership of 10% or more of the outstanding shares of Wes-Tenn Common Stock. In the event that an Acquisition Transaction with Wes-Tenn is consummated by a party other than the Company, the Company may elect, in lieu of exercise of the Option, to receive $3 million in cash. The Company may also elect to receive a lesser amount of cash that may be paid by Wes-Tenn without obtaining prior regulatory approval and to exercise the Option as to a pro rata number of shares of Wes-Tenn Common Stock subject to the Option, based on the amount of cash payment to the Company. The Stock Option Agreement could make an Acquisition Transaction involving Wes-Tenn more costly to effect because of the $3 million cash payment provision or the necessity of acquiring shares of Wes-Tenn Common Stock acquired by the Company under the Option. S-36 42 THE MERGER AGREEMENT The following is a brief summary of certain provisions of the Merger Agreement. This summary is qualified in its entirety by reference to the full text of the Merger Agreement, which is incorporated herein by reference. A copy of the Merger Agreement, without exhibits and schedules, is being furnished separately to each shareholder of Wes-Tenn concurrently with this Supplement/Proxy Statement. THE MERGER Subject to the terms and conditions of the Merger Agreement, at the Effective Time, Wes-Tenn will be merged with and into the Company, and the separate existence of Wes-Tenn will cease. The Company will be the surviving corporation in the Merger and will continue to be governed by the laws of the State of Mississippi, and the separate corporate existence of the Company and all of its rights and liabilities as a banking corporation organized under the laws of the State of Mississippi will continue. The shares of Wes-Tenn Common Stock will be converted into shares of BancorpSouth Common Stock in a transaction intended to qualify as a pooling of interests for accounting purposes and as a tax-free reorganization for federal income tax purposes. The Merger is to be consummated at the offices of Waller Lansden Dortch & Davis, Nashville, Tennessee, special counsel to the Company, on or before 30 days following the satisfaction or waiver of the conditions to closing set forth in the Merger Agreement (the "Closing Date") at 11:00 a.m. Central Time, or at any other place and date as the parties fix by mutual consent. Subject to and in accordance with the laws of the States of Mississippi and Tennessee, the Effective Time will occur at 5:00 p.m. Central Time on the Closing Date or such other time as of which the Merger shall have become effective in accordance with the applicable provisions of the States of Mississippi and Tennessee. At the Effective Time, by virtue of the Merger and without any action on the part of any holder of any capital stock of Wes-Tenn, each share of Wes-Tenn Common Stock, other than shares held by dissenting shareholders, will be converted into, and become exchangeable for, the Merger Consideration, consisting of 0.6296 shares of BancorpSouth Common Stock (subject to adjustment as described below), in accordance with the Exchange Ratio, and cash in lieu of the issuance of fractional shares of BancorpSouth Common Stock. The Exchange Ratio was determined through arm's-length negotiations between the management of the Company and management of Wes-Tenn. The Exchange Ratio is to be adjusted in the event that the Recalculated Price, the average of the high "bid" and low "ask" prices per share of BancorpSouth Common Stock for each of the 20 trading days immediately preceding the Closing Date, is less than $32.8738 or more than $44.4763. If the Recalculated Price is less than $32.8738, Wes-Tenn may terminate the Merger Agreement unless the Company agrees to recalculate the Exchange Ratio as set forth in the Merger Agreement. If the Recalculated Price is greater than $44.4763, the Company may terminate the Merger Agreement unless Wes-Tenn agrees to recalculate the Exchange Ratio as set forth in the Merger Agreement. EXCHANGE PROCEDURES On or prior to the Closing Date, the Company will direct Trust Company Bank, Atlanta, Georgia (the "Exchange Agent") to issue certificates representing shares of BancorpSouth Common Stock to be issued S-37 43 in the Merger. The Company will also deposit with the Exchange Agent the cash required to make cash payments in lieu of fractional shares. From and after the Effective Time, each holder of a certificate which immediately prior to the Effective Time represented outstanding shares of Wes-Tenn Common Stock ("Wes-Tenn Certificate"), other than shares with respect to which dissenters' rights, if any, are granted by reason of the Merger under the Tennessee Code, will be entitled to receive in exchange therefor, upon surrender thereof to the Exchange Agent, a certificate or certificates representing the number of whole shares of BancorpSouth Common Stock into which such holder's shares of Wes-Tenn Common Stock were converted and cash in lieu of any fractional shares. Notwithstanding any other provision of the Merger Agreement, until holders or transferees of Wes-Tenn Certificates have surrendered such certificates for exchange as provided herein, no dividends shall be paid with respect to any shares represented by such certificates and no payment for fractional shares shall be made. Upon surrender of a Wes-Tenn Certificate, there shall be paid to the holder of such certificate, without interest, the amount of any dividends which theretofore became payable, but which were not paid by reason of the foregoing, with respect to the number of whole shares of BancorpSouth Common Stock represented by the certificate or certificates issued upon such surrender. As soon as practicable after the Effective Time, the Exchange Agent will mail to each holder of record of a Wes- Tenn Certificate a notice and transmittal form advising such holder of the effectiveness of the Merger and the procedure for use in effecting the surrender of Wes-Tenn Certificates in exchange for certificates representing shares of BancorpSouth Common Stock. Upon surrender of Wes-Tenn Certificates to the Exchange Agent the certificates shall be cancelled. No fractional shares of BancorpSouth Common Stock will be issued upon the surrender for exchange of Wes-Tenn Certificates and no BancorpSouth Common Stock dividend, stock split or interest shall relate to any fractional security, and such fractional interests shall not entitle the owner thereof to vote or to any other rights of a security holder. In lieu of any such fractional shares, each holder of shares of Wes-Tenn Common Stock who would otherwise be entitled to a fractional share of BancorpSouth Common Stock upon surrender of Wes-Tenn Certificates for exchange, will be entitled to receive from the Exchange Agent a cash payment in lieu of such fractional share equal to such fraction multiplied by $38.675, subject to adjustment in the event that the Exchange Ratio is recalculated. If the Recalculated Price is less than $32.8738, then the amount used to determine payment for fractional shares will be $38.675 less ($32.8738 less the Recalculated Price) or, if the Recalculated Price is greater than $44.4763, such amount will be $38.675 plus (the Recalculated Price less $44.4763). REPRESENTATIONS AND WARRANTIES The Merger Agreement contains certain representations and warranties by Wes-Tenn to the Company, including those relating to: (i) brokers' and finders' fees with respect to the Merger; (ii) employee benefit plans; (iii) tax matters; (iv) insurance policies; (v) rights and licenses owned and/or used; (vi) material contracts; (vii) clear title to assets and properties; (viii) books of account and corporate records maintained in substantial compliance with legal and accounting requirements; and (ix) ownership of BancorpSouth Common Stock by Wes-Tenn or its directors and officers. The Merger Agreement contains certain representations and warranties by each of the Company and Wes-Tenn to the other party, including those relating to: (i) their respective due organization, power and standing; (ii) the authorization, execution, delivery and enforceability of the Merger Agreement; (iii) their respective capital structures; (iv) the absence of conflicts with their respective governing documents or any S-38 44 law, rule, regulation, judgment, decree, order or agreement to which they are subject; (v) since December 31, 1994, the incurrence of any material liability, except in the ordinary course of business, any material adverse change in their respective business, operations, assets or condition, any material change in their respective mode of management, operation or method of accounting, or any failure to operate their respective business in all material respects in the ordinary course consistent with their respective past practice; (vi) the absence of pending or threatened judicial or administrative proceedings, except as disclosed; (vii) full compliance with the law; (viii) all governmental authorizations necessary for the conduct of business; (ix) supervisory matters, including provision of copies of correspondence and written agreements; (x) absence of certain changes or events; (vii) this Supplement/Proxy Statement; (xi) reports filed under the Exchange Act; and (xii) the accuracy of such representations and warranties as of the date this Supplement/Proxy Statement is mailed to shareholders and as of the Closing Date. CONDUCT OF BUSINESS PENDING THE MERGER Wes-Tenn has agreed, among other things, prior to the consummation of the Merger, to conduct its operations according to its usual, regular and ordinary course in substantially the same manner as theretofore conducted. Except with the prior written consent of the Company, Wes-Tenn will not, among other things, (i) enter into any contract or instrument involving expenditure or lending of money or credit in excess of its legal lending limit; (ii) issue any shares of Wes-Tenn Common Stock or TCB capital stock, or grant any stock options or rights convertible into Wes-Tenn Common Stock or TCB capital stock; (iii) declare, set aside or pay any dividend other than quarterly dividends in an amount not to exceed $0.0950 per share of Wes-Tenn Common Stock; (iv) make any change in its capital stock or amend its governing documents; (v) make any capital expenditures of more than $50,000 individually or $100,000 in the aggregate; (vi) enter into any contracts or agreements that cannot be terminated without penalty and/or notice of not more than 30 days; or (vii) encourage, solicit or initiate any proposals or offers from any person (other than with respect to the Merger) relating to any acquisition of all or a substantial portion of the assets of Wes-Tenn, or any merger, consolidation or business combinations with Wes-Tenn, or, except as required by fiduciary obligations, participate in any discussions or negotiations regarding the foregoing. Wes-Tenn and the Company have each agreed to afford the officers and representatives of the other party, until consummation of the Merger, full access to their business records, to use their best efforts to consummate the transactions contemplated by the Merger Agreement, to take no action that would adversely affect governmental approval of the Merger and to use reasonable care to ensure that the Merger qualifies for the pooling of interests method of accounting. CONDITIONS TO CONSUMMATION OF THE MERGER The obligations of the Company and Wes-Tenn under the Merger Agreement are subject to satisfaction of the following conditions on or prior to the Closing Date, unless waived: (i) receipt of approvals from all appropriate state and federal governmental authorities, including the FDIC and the TDFI, required in connection with the Merger not later than December 16, 1995 (which date may be extended to March 16, 1996, upon request by the Company and approval by Wes-Tenn), subject to no conditions which in the reasonable judgment of the Company would restrict its or its subsidiaries' operations and business activities following the Merger; (ii) any waiting period required prior to the Merger shall have elapsed, and the Merger shall not be then enjoined, restrained or prohibited by a court, tribunal or government agency; (iii) the Merger Agreement shall have been adopted and approved by a majority vote of the shareholders of Wes-Tenn; (iv) Wes-Tenn shall have obtained the Fairness Opinion, dated as of the mailing date, that the transactions contemplated by the Merger Agreement are fair from a financial point of view; (v) the S-39 45 representations and warranties of each party in the Merger Agreement shall have been true and correct when made and, in addition, shall be true and correct on and as of the Closing Date, with the same force and effect as though made on and as of the Closing Date; (vi) receipt by the Company and Wes-Tenn of an opinion of KPMG Peat Marwick LLP that the Merger will qualify as a pooling of interests for accounting purposes and as a tax-free reorganization for federal income tax purposes; (vii) the amount of cash consideration payable by the Company to shareholders of Wes-Tenn shall not exceed 9.9% of the total consideration in the Merger or such lesser amount required for the Merger to qualify as a pooling of interests; (viii) the Amendment to the Registration Statement shall have been declared effective by the Commission, no order suspending the sale of the shares of BancorpSouth Common Stock in any jurisdiction shall have been issued and no proceedings for that purpose shall have been instituted or shall be, to the Company's knowledge, contemplated; (ix) the shares of BancorpSouth Common Stock to be issued in the Merger shall have been qualified for listing on Nasdaq; and (x) each party shall have performed in all material respects all obligations and agreements and complied with all covenants contained in the Merger Agreement to be performed and complied with by such party on or prior to the Closing Date. The obligations of Wes-Tenn under the Merger Agreement are subject to satisfaction of the following additional conditions on or prior to the Closing Date, unless waived: (i) between June 16, 1995 (the date of the Merger Agreement) and the Closing Date, there shall not have occurred any material adverse change in the assets, business, operations, employees, revenue, income, prospects, condition (financial or otherwise), liabilities, net worth or results of operations of the Company, taken as a whole, provided that changes in the market price of BancorpSouth Common Stock shall not be considered with respect to this condition; and (ii) the Company shall have delivered to Wes-Tenn an opinion or opinions of counsel, dated as of the Closing Date, in form and substance satisfactory to Wes-Tenn and its counsel. The obligations of the Company under the Merger Agreement are subject to the satisfaction of the following additional conditions on or prior to the Closing Date, unless waived: (i) between June 16, 1995 (the date of the Merger Agreement) and the Closing Date, there shall not have occurred any material adverse change in the assets, business, operations, employees, revenue, income, prospects, condition (financial or otherwise), liabilities, net worth or results of operations of Wes-Tenn; (ii) Wes-Tenn shall have delivered to the Company an opinion or opinions of counsel, dated as of the Closing Date, in form and substance reasonably satisfactory to the Company and its counsel; (iii) the officers and directors of Wes-Tenn shall have submitted their resignations from such positions, effective as of the Effective Time; (iv) not more than 2,519,212 shares of Wes-Tenn Common Stock shall be outstanding immediately prior to the Effective Time, and no other securities exchangeable for any equity security of Wes-Tenn or TCB shall be outstanding; and (v) Wes-Tenn shall have delivered a letter from Wes-Tenn's independent certified public accountants with respect to the financial information of Wes-Tenn. EMPLOYMENT OF WES-TENN EMPLOYEES The Company has undertaken to provide employees of TCB who are hired as employees of Volunteer following the Merger with the same employee benefits as other new hires of Volunteer, to give effect to all prior years of service with TCB for purposes of determining employee benefit eligibility waiting periods (but not benefit vesting or accrual), and to waive any uninsured waiting period otherwise applicable to health insurance provided to such employees. Such TCB employees will be given credit for vesting purposes under the Company's 401(k) plan for past years of service with TCB if such credit can be given under applicable law without amending or violating the terms of the Company's 401(k) plan. The Company has no obligation to hire any employees of Wes-Tenn or TCB in any capacity. S-40 46 The Company has also agreed to provide the executive officers and directors of Wes-Tenn, for a period of three years following the Merger, with indemnification against liabilities asserted against such persons for actions or omissions in their official capacities prior to the Merger on the same terms provided by Wes-Tenn. FILING FOR REGULATORY APPROVAL The Company and Wes-Tenn have each agreed to cooperate in the preparation and submission of applications or other documents to be filed in connection with regulatory approval of the Merger and to furnish information reasonably necessary with respect to applying for such approval. AMENDMENT OF THE MERGER AGREEMENT The Merger Agreement may be amended or discharged by a written agreement between the parties. However, after approval of the Merger Agreement by Wes-Tenn's shareholders, the parties may not amend the Merger Agreement if such amendment would affect the rights of the Wes-Tenn shareholders. TERMINATION OF THE MERGER AGREEMENT The Company or Wes-Tenn may, on or at any time prior to the Closing Date, terminate the Merger Agreement: (i) by mutual written consent authorized by the boards of directors of the Company and Wes-Tenn, (ii) by either party, upon delivery of written notice to the other party, if any event occurs that renders impossible the satisfaction in any material respect one or more of the conditions set forth in the Merger Agreement to the obligations of the notifying party, and noncompliance is not waived by the notifying party; (iii) as stipulated in the Merger Agreement with respect to the rights of the parties to terminate upon refusal to recompute the Exchange Ratio; or (iv) by either party, if the Effective Time does not occur on or before March 31, 1996 (subject to extension in the event that the parties agree to extend the period for obtaining governmental approvals of the Merger), or any court of competent jurisdiction in the United States or other federal or state governmental body shall have issued an order, decree, or ruling or taken any other action restraining, enjoining, or otherwise prohibiting the Merger or other transactions contemplated and such order, decree, ruling or other action shall become final and non-appealable. S-41 47 DESCRIPTION OF WES-TENN COMMON STOCK VOTING SECURITIES Shareholders of record of Wes-Tenn Common Stock as of the close of business on September ___, 1995 are entitled to one vote for each share of Wes-Tenn Common Stock then held at the Special Meeting. At September 8, 1995, Wes-Tenn had 2,519,212 shares of Wes-Tenn Common Stock issued and outstanding, which is the only outstanding class of Wes-Tenn's capital stock. The presence in person or by proxy of at least a majority of the outstanding shares of Wes-Tenn Common Stock entitled to vote is necessary to constitute a quorum at the Special Meeting. In the event that there are not sufficient votes present for a quorum, or to ratify any proposal at the time of the Special Meeting, the Special Meeting may be adjourned in order to permit the further solicitation of proxies. For a description of the rights and privileges of holders of Wes-Tenn Common Stock and a comparison of those rights with those of the BancorpSouth Common Stock, see "Comparison of Rights of Shareholders." BENEFICIAL OWNERSHIP Persons and groups owning in excess of 5% of the Wes-Tenn Common Stock are required to file certain reports with the Commission regarding such ownership pursuant to the Exchange Act. At September 8, 1995 there were no owners of record of 5% or more of Wes-Tenn Common Stock.
Percentage of Outstanding Shares of Wes-Tenn Shares of Wes-Tenn Common Common Stock Name of Beneficial Owner Stock Beneficially Owned(1) Beneficially Owned(1)(2) ------------------------ --------------------------- ------------------------ Billy G. Barnes . . . . . . . . . . . . . 18,584(3) * Duke H. Brasfield . . . . . . . . . . . . 75,908(4) 3.01% Billy W. Burrough . . . . . . . . . . . . 24,000(5) * Charles M. Ennis . . . . . . . . . . . . 71,208(6) 2.83 Arvis H. Fletcher . . . . . . . . . . . . 16,480 * Fletcher H. Goode . . . . . . . . . . . . 31,448 1.25 J. Penn Mohon . . . . . . . . . . . . . . 16,000 * Earl M. Quinley . . . . . . . . . . . . . 22,368 * Hugh T. Simonton, Jr. . . . . . . . . . . 11,000 * Billy L. Smith . . . . . . . . . . . . . 13,784 * Stephen N. Smith . . . . . . . . . . . . 1.57 Don M. Stephens . . . . . . . . . . . . . 6,040 * Henry S. Vaughan . . . . . . . . . . . . 26,000 1.03 Edwin Kendall Williams . . . . . . . . . 11,176(8) * Officers and Directors as a Group (15 Persons) 383,672 15.23
___________________________ * Less than 1% (1) Includes shares of Wes-Tenn Common Stock as to which such person, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise has or shares voting power and/or investment power. Of the shares of Wes-Tenn Common Stock shown, none represent shares of Wes-Tenn Common Stock which may be acquired within 60 days through an exercise of an option, warrant or right, conversion of a convertible security or revocation of a revocable trust. Unless otherwise indicated, a shareholder possesses sole voting and investment power with respect to all of the shares of Wes-Tenn Common Stock shown opposite his name. (2) Based upon 2,519,212 shares of Wes-Tenn Common Stock outstanding. (3) Includes 3,264 shares of Wes-Tenn Common Stock owned by Mr. Barnes' wife, Peggy Barnes, for which Mr. Barnes shares voting and investment power. (4) Includes 26,996 shares of Wes-Tenn Common Stock owned by Mr. Brasfield's wife, Martha B. Brasfield, and 2,928 shares in custodial accounts for Mr. Brasfield's children. Mr. Brasfield shares voting and investment power for the above mentioned shares. (5) Includes 12,000 shares of Wes-Tenn Common Stock owned by Mr. Burrough's wife, Mary Jane Burrough, for which Mr. Burrough shares voting and investment power. (6) Includes 3,584 shares of Wes-Tenn Common Stock owned by Mr. Ennis' wife, Patricia S. Ennis, for which Mr. Ennis shares voting and investment power. (7) Includes 1,692 shares of Wes-Tenn Common Stock owned by Mr. Smith's wife, Kaye P. Smith, for which Mr. Smith shares voting and investment power. (8) Includes 1,160 shares of Wes-Tenn Common Stock owned by Mr. Williams' wife, Nell Shoaf Williams, for which Mr. Williams shares voting and investment power. S-42 48 WES-TENN MANAGEMENT The following sets forth certain information regarding the members of the Wes-Tenn Board of Directors:
YEAR FIRST PRINCIPAL BECAME A TERM NAME AGE OCCUPATION DIRECTOR EXPIRES ---- --- ---------- ---------- ------- Billy G. Barnes . . . . . . . . . 67 Retired Merchant 1992 1997 Duke H. Brasfield . . . . . . . . 48 Attorney 1985 1999 Billy W. Burrough . . . . . . . . 65 Postmaster, 1992 1998 Retired Merchant Charles M. Ennis . . . . . . . . 45 President and 1992 1999 Chief Executive Officer of Wes- Tenn and TCB Arvis H. Fletcher . . . . . . . . 65 Retired Farmer 1967 1998 Fletcher H. Goode . . . . . . . . 65 Physician 1992 1997 J.P. Mohon . . . . . . . . . . . 73 Retired Farmer 1979 1997 Earl M. Quinley . . . . . . . . . 70 Retired Banker 1992 1998 Hugh T. Simonton, Jr. . . . . . . 51 Paint Contractor 1989 1999 Billy L. Smith . . . . . . . . . 69 Retired Merchant 1985 1998 Stephen N. Smith . . . . . . . . 52 Insurance Agent 1987 1999 Henry S. Vaughan . . . . . . . . 73 Retired County 1954 1998 Executive E.K. Williams . . . . . . . . . . 77 Retired Pharmacist 1968 1997
__________________________ Mr. Billy G. Barnes formerly served as the President of San-Bar, Inc., a retail company located in Somerville, Tennessee. Mr. Duke H. Brasfield is an attorney practicing with Brasfield and Brasfield, Covington, Tennessee. Mr. Billy W. Burrough is a retired merchant and serves as postmaster in Drummonds, Tennessee. Mr. Charles M. Ennis served in various management capacities of Wes-Tenn and TCB from 1972 to May 1989. In May 1989, he became President of Tri-County. Mr. Ennis served in that capacity until April 1993, at which time Tri-County merged with TCB and Mr. Ennis was named President of TCB. He became Chief Executive Officer of TCB in October 1993 and was named President and Chief Executive Officer of Wes-Tenn in January 1994. Mr. Arvis H. Fletcher is a retired farmer in Burlison, Tennessee. Dr. Fletcher H. Goode is a practicing ophthalmologist in Millington and Covington, Tennessee. Mr. J.P. Mohon, who was President of Coleman Motor Co., Inc., a farm implement dealership in Covington, Tennessee, from 1962 to 1983, is currently retired. S-43 49 Mr. Earl M. Quinley formerly served as President of Tri-County. He is currently retired. Mr. Hugh T. Simonton, Jr. is a partner in Hugh Simonton & Sons, a family-owned painting contractor business in Covington, Tennessee. Mr. Billy L. Smith, formerly President of Smith Oil Company, Inc., in Covington, Tennessee, is currently retired. Mr. Stephen N. Smith is an insurance agent for Jamieson & Fisher Insurance Agency, in Covington, Tennessee. Mr. Henry S. Vaughan, formerly county executive of Tipton County, Tennessee, is currently retired. Mr. E.K. Williams, a pharmacist and former owner of Covington Drug Store in Covington, Tennessee, is currently retired. S-44 50 COMPARISON OF RIGHTS OF SHAREHOLDERS The following is a comparison of the rights a shareholders of Wes-Tenn now possesses under applicable governing authority and would possess as a shareholders of the Company with respect to the various factors set forth below: VOTING RIGHTS; CUMULATIVE VOTING Wes-Tenn - The Bylaws of Wes-Tenn, as amended (the "Wes-Tenn Bylaws") provide that each share of issued and outstanding Wes-Tenn Common Stock entitles the holder to one vote on each matter with respect to which shareholders are entitled to vote. Neither the Wes-Tenn Bylaws nor the Charter of Wes-Tenn, as amended (the "Wes-Tenn Charter"), provide for cumulative voting by shareholders. Company - The Restated Articles of Incorporation of the Company, as amended (the "BancorpSouth Charter") provides that each share of issued and outstanding BancorpSouth Common Stock entitles the holder to one vote on each matter with respect to which shareholders are entitled to vote. The BancorpSouth Charter and Bylaws do not provide for cumulative voting by shareholders. CHANGE OF CONTROL Wes-Tenn - The Wes-Tenn Charter and Bylaws contain several provisions which make a change of control of Wes-Tenn more difficult to accomplish without the approval of the Board of Directors of Wes-Tenn. The Board of Directors of Wes- Tenn is divided into three classes so that only one-third of the directors will be subject to re-election at each annual meeting of the shareholders of Wes-Tenn. The Wes-Tenn Charter also provides that the affirmative vote of the holders of not less than 75% of the outstanding voting stock of Wes-Tenn is required in the event that the Board of Directors of Wes-Tenn does not recommend to the shareholders of Wes-Tenn a vote in favor of a merger or consolidation of Wes-Tenn with, or a sale, exchange or lease of all or substantially all of the assets of Wes-Tenn to, any person or entity. The Wes-Tenn Charter and Bylaws do not provide for any preemptive rights of Wes-Tenn shareholders. Certain Tennessee statutes provide additional restrictions on changes in control of Tennessee corporations, such as Wes-Tenn. The Tennessee Business Combination Act ("TBCA") provides that a shareholder owning 10% or more of the outstanding voting stock of a Tennessee corporation cannot engage in a business combination with the corporation unless the combination (i) takes places at least five years after the shareholder first acquired 10% or more of the corporation's voting stock, and (ii) either (A) the business combination is approved by at least two-thirds of the non- interested voting shares of the corporation or (B) satisfies certain fairness conditions specified in the TBCA. However, such requirements do not apply if the combination is approved by the corporation's board of directors before the shareholder attains such ownership percentage, or the corporation may enact a charter amendment or bylaw to remove itself entirely from the TBCA. Wes-Tenn has not adopted a charter or bylaw amendment removing Wes-Tenn from coverage under the TBCA. The Tennessee Control Share Acquisition Act contains provisions similar to those of Mississippi's control share acquisition act described below. The Tennessee Investor Protection Act ("TIPA") applies to tender offers directed at corporations that have substantial assets in Tennessee and are either incorporated in or have a principal office in Tennessee. The TIPA requires an offeror making a tender offer for an offeree company to file a registration statement with the Tennessee Commissioner of Commerce and Insurance, who may require additional information related to the takeover offer and may call for hearings. The TIPA does not apply to an offer that the offeree company's board of directors recommended to its shareholders. The Tennessee Greenmail Act ("TGA") applies to any Tennessee S-45 51 corporation that has a class of voting stock registered or traded on a national securities exchange or registered under Section 12(g) of the Exchange Act, such as Wes-Tenn. The TGA provides that it is unlawful for any corporation or subsidiary to purchase any of its shares at a price above the market value, as defined in the TGA, from any person who holds more than 3% of the class of the securities purchased if such person has held such shares for less than two years, unless either the purchase is first approved by the affirmative vote of a majority of the outstanding shares of each class of voting stock or the corporation makes an offer of at least equal value per share to all holders of shares of such class. Company - The BancorpSouth Charter contains several provisions which make a change of control of the Company more difficult to accomplish without the approval of the Board of Directors of the Company. The Board of Directors of the Company is divided into three classes so that only one-third of the directors will be subject to reelection at each annual meeting of the shareholders of the Company. The BancorpSouth Charter also provides that the affirmative vote of the holders of not less than 80% of the outstanding shares of voting stock of the Company is required in the event that the Board of Directors of the Company does not recommend to the shareholders of the Company a vote in favor of a merger or consolidation of the Company with, or a sale or lease of all or substantially all of the assets of the Company to, any person or entity. In addition, the affirmative vote of the holders of not less than 80% of the outstanding shares of voting stock of the Company, as well as at least 67% of the outstanding shares of voting stock of the Company not held by a person owning or controlling 20% or more of the Company's voting stock ("Controlling Person"), shall be required for the approval of a merger, consolidation, or sale or lease of all or substantially all of the Company's assets with or to a Controlling Person, except in certain instances. The Company has implemented a shareholders' rights plan under which a common stock purchase right attaches to and trades with each share of BancorpSouth Common Stock. Upon the occurrence of certain events, including the acquisition of or tender for 20% or more of the outstanding shares of BancorpSouth Common Stock by any person, then the holders of each such purchase right (except those held by the acquiring person) will be entitled to purchase a share of BancorpSouth Common Stock at 50% of the then current market price. Certain Mississippi statutes provide additional restrictions on changes in control of Mississippi corporations, such as the Company. The Mississippi Shareholder Protection Act ("MSPA") regulates business combinations such as mergers, consolidations and asset purchases where before or after the transaction the acquiror became the beneficial owner of 20% or more of the voting power of the outstanding stock of the corporation. The MSPA requires a business combination with an interested shareholder to be approved by (i) 80% of the votes entitled to be cast by outstanding shares of voting stock, voting as a single class and (ii) two-thirds of the votes entitled to be cast which are held by the disinterested shareholders of the corporation, voting as a single class. However, a business combination is not subject to these voting requirements if the business combination meets certain fairness standards set forth in the MSPA or is approved by 80% of certain directors of the corporation. The Mississippi Control Share Acquisition Act removes voting rights from a purchaser's shares of voting stock of certain Mississippi corporations in the event that an acquisition of shares of such a corporation's voting stock brings the purchaser's voting power to 20%, one-third or a majority of all voting power. The purchaser's voting rights can be established only by a majority vote if the purchaser announces a good faith intention to make the control share acquisition; however, the control shares will regain the voting rights three years after the date of a shareholder's vote which failed to approve the voting rights of such control shares. The Mississippi Business Tender Offer Law ("MBTOL") applies to tender offers directed at corporations that have substantial assets in Mississippi and at least 20% of their outstanding equity securities are owned by residents of Mississippi, and requires an offeror making a tender offer for S-46 52 a subject company to file a registration statement with the Mississippi Secretary of State, who may require additional information concerning the takeover and may call for hearings. Certain transactions are exempted from the MBTOL, including an offer in which the consideration is in whole or part securities registered under the Securities Act. BOARD OF DIRECTORS Wes-Tenn - The Wes-Tenn Bylaws provide that the Board of Directors of Wes-Tenn is to have the entire management of the business of Wes-Tenn. Wes-Tenn's Board of Directors is to consist of nine to 19 members, as determined from time to time by resolution adopted by three-fourths of Wes-Tenn's Board of Directors. At September 8, 1995, the Wes-Tenn Board of Directors consisted of 13 members. The members of Wes-Tenn's Board of Directors are divided into three classes, with the classes elected for staggered three-year terms. Company - The Company's Bylaws provide that the business and affairs of the Company are to be managed by the Company's Board of Directors. The Company's Board of Directors is to consist of nine to 24 members, as determined from time to time by the Company's Board of Directors, and at September 8, 1995, consisted of 12 members. The members of the Company's Board of Directors are divided into three classes, with the classes elected for staggered three-year terms. REMOVAL OF DIRECTORS Wes-Tenn - The Wes-Tenn Bylaws provide that a director may be removed without cause by a majority vote of the shareholders. A director may be removed for cause by a majority of the entire Board of Directors of Wes-Tenn. Company - The BancorpSouth Charter provides that a director of the Company may be removed for cause by the affirmative vote of a majority of the entire Board of Directors of the Company, and may be removed by the shareholders of the Company only for cause. INDEMNIFICATION OF MANAGEMENT Wes-Tenn - The Wes-Tenn Charter provides that the personal liability of directors to Wes-Tenn or its shareholders for monetary damages for breach of fiduciary duty is eliminated to the maximum extent authorized by Sections 48-18-1501 et seq. of the Tennessee Business Corporation Act, except that liability is not eliminated for breach of a director's duty of loyalty to Wes-Tenn or its shareholders, for acts or omissions not in good faith or involving intentional misconduct or a knowing violation of laws, or for any unlawful distribution under Section 48-18-304 of the Tennessee Business Corporation Act. The Wes-Tenn Bylaws provide that Wes-Tenn may indemnify actual expenses of any action or proceeding to any person made a party to such proceeding by reason of being or having been an officer, director or employee of Wes-Tenn or serving in such capacity at the request of Wes-Tenn. Indemnification is not available when the indemnitee is finally adjudged to be guilty or liable for gross negligence, willful misconduct or criminal acts in furtherance of his or her duties to Wes-Tenn. Indemnification is only available in relation to any compromise settlement with the approval of either a court of competent jurisdiction or the holders of record of a majority of the outstanding shares of Wes-Tenn or the Board of Directors acting by vote of directors not parties to the same or substantially the same action constituting a majority of the whole number of directors. The Wes-Tenn Bylaws authorize Wes-Tenn, upon an affirmative vote of the majority of its Board of Directors, to purchase insurance for the purpose of indemnifying its officers and directors. S-47 53 Company - The BancorpSouth Charter provides that directors of the Company shall not be personally liable to the Company or its shareholders for monetary damages for any action or failure to act as a director, except for liability for the amount of a financial benefit received by a director to which he is not entitled, an intentional infraction of harm on the Company or its shareholders, a violation of Section 79-4-8.33 of the Mississippi Business Corporation Act, or an intentional violation of criminal law. The BancorpSouth Charter also provides that, if the law of Mississippi is amended to limit or expand the liability of directors, the liability of directors will be limited or expanded according to such amended provisions. In addition, the BancorpSouth Charter provides that the Company shall indemnify, and upon request shall advance expenses to any officer or director who was, or is a party to, or is threatened to be made a party to, any threatened, pending or completed action, suit or proceeding because such person is or was a director or officer of the Company. PERMITTED ACTIVITIES Wes-Tenn - The Wes-Tenn Charter provides that Wes-Tenn may exercise all powers of a bank holding company, engage in any and all banking and non-banking activities allowed for such a bank holding company, and do everything advisable or convenient for the accomplishment of these purposes, and do any other act connected with these purposes not forbidden by law. Company - The BancorpSouth Charter provides that the Company may engage in any business activity or exercise any power permitted by law. RIGHTS OF SHAREHOLDERS TO CALL SPECIAL MEETINGS Wes-Tenn - The Wes-Tenn Bylaws provide that special meetings of the shareholders may be called by the President of Wes-Tenn or by a majority of the Board of Directors or whenever one or more shareholders who are entitled to vote and hold at least 10% of the Wes-Tenn Common Stock issued and outstanding make written application to the Secretary of Wes- Tenn stating the time, place and purpose of the special meeting. Company - The BancorpSouth Charter provides that special meetings of the shareholders of the Company may be called by the Chief Executive Officer or Secretary of the Company, or by the holders of not less than a majority of the shares entitled to vote at such meeting. S-48 54 LEGAL MATTERS The validity of the shares of BancorpSouth Common Stock to be issued to the shareholders of Wes-Tenn in the Merger will be passed upon by Waller Lansden Dortch & Davis, Nashville, Tennessee, special counsel to the Company. Certain matters concerning the Merger will be passed upon on behalf of the Company by Riley, Ford, Caldwell & Cork, P.A., Tupelo, Mississippi. Frank A. Riley, a shareholder of such firm, is a director of the Company. Certain legal matters concerning the Merger will be passed upon on behalf of Wes-Tenn by Baker, Donelson, Bearman & Caldwell, Memphis, Tennessee. EXPERTS The Consolidated Financial Statements of the Company, as of December 31, 1994 and 1993, and for each of the years in the three-year period ended December 31, 1994, have been incorporated by reference in this Supplement/Proxy Statement and in the Registration Statement in reliance upon the report of KPMG Peat Marwick LLP, independent certified public accountants, incorporated by reference herein, and upon the authority of such firm as experts in accounting and auditing. The report of KPMG Peat Marwick LLP refers to the Company, adopting the provisions of Financial Accounting Standards Board's Statement of Financial Account Standard No. 109, "Accounting for Income Taxes" in 1993 and Statement of Financial Accounting Standard No. 115, "Accounting for Certain Investments in Debt and Equity Securities" in 1994. The Consolidated Financial Statements of Wes-Tenn as of December 31, 1994 and 1993 and for each of the years in the three-year period ended December 31, 1994, included in this Supplement/Proxy Statement and in the Registration Statement, are included in reliance upon the report of KPMG Peat Marwick LLP, independent certified public accountants, upon the authority of such firm as experts in accounting and auditing. The report of KPMG Peat Marwick LLP refers to Wes-Tenn adopting the provisions of Financial Accounting Board's Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" in 1993. S-49 55 ANNEX A TENNESSEE BUSINESS CORPORATION ACT -- DISSENTERS' RIGHTS PART 1-RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES 48-23-101. DEFINITIONS. -- (1) "Beneficial shareholder" means the person who is a beneficial owner of shares held by a nominee as the record shareholder; (2) "Corporation" means the issuer of the shares held by a dissenter before the corporate action, or the surviving or acquiring corporation by merger or share exchange of that issuer; (3) "Dissenter" means a shareholder who is entitled to dissent from corporate action under Section 48-23- 102 and who exercises that right when and in the manner required by Section Section 48-23-201--48-23-209; (4) "Fair value", with respect to a dissenter's shares, means the value of the shares immediately before the effectuation of the corporate action to which the dissenter objects, excluding any appreciation or depreciation in anticipation of the corporate action; (5) "Interest" means interest from the effective date of the corporate action that gave rise to the shareholder's right to dissent until the date of payment, at the average auction rate paid on United States treasury bills with a maturity of six (6) months (or the closest maturity thereto) as of the auction date for such treasury bills closest to such effective date; (6) "Record shareholder" means the person in whose name shares are registered in the records of a corporation or the beneficial owner of shares to the extent of the rights granted by a nominee certificate on file with a corporation; and (7) "Shareholder" means the record shareholder or the beneficial shareholder. [Acts 1986, ch. 887, Section 13.01.] 48-23-102. RIGHT TO DISSENT. -- (a) A shareholder is entitled to dissent from, and obtain payment of the fair value of his shares in the event of, any of the following corporate actions: (1) Consummation of a plan of merger to which the corporation is a party: (A) If shareholder approval is required for the merger by Section 48-21-103 or the charter and the shareholder is entitled to vote on the merger; or (B) If the corporation is a subsidiary that is merged with its parent under Section 48-21-104; (2) Consummation of a plan of share exchange to which the corporation is a party as the corporation whose shares will be acquired, if the shareholder is entitled to vote on the plan; (3) Consummation of a sale or exchange of all, or substantially all, of the property of the corporation other than in the usual and regular course of business, if the shareholder is entitled to vote on the sale or exchange, including a sale in dissolution, but not including a sale pursuant to court order or a sale for cash pursuant to a plan by which all or substantially all of the net proceeds of the sale will be distributed to the shareholders within one (1) year after the date of sale; (4) An amendment of the charter that materially and adversely affects rights in respect of a dissenter's shares because it: (A) Alters or abolishes a preferential right of the shares; (B) Creates, alters, or abolishes a right in respect of redemption, including a provision respecting a sinking fund for the redemption or repurchase, of the shares; (C) Alters or abolishes a preemptive right of the holder of the shares to acquire shares or other securities; A-1 56 (D) Excludes or limits the right of the shares to vote on any matter, or to cumulate votes, other than a limitation by dilution through issuance of shares or other securities with similar voting rights; or (E) Reduces the number of shares owned by the shareholder to a fraction of a share, if the fractional share is to be acquired for cash under Section 48-16-104; or (5) Any corporate action taken pursuant to a shareholder vote to the extent the charter, bylaws, or a resolution of the Board of Directors provides that voting or nonvoting shareholders are entitled to dissent and obtain payment for their shares. (b) A shareholder entitled to dissent and obtain payment for his shares under this chapter may not challenge the corporate action creating his entitlement unless the action is unlawful or fraudulent with respect to the shareholder or the corporation. (c) Notwithstanding the provisions of subsection (a), no shareholder may dissent as to any shares of a security which, as of the date of the effectuation of the transaction which would otherwise give rise to dissenters' rights, is listed on an exchange registered under Section 6 of the Securities Exchange Act of 1934, as amended, or is a "national market system security," as defined in rules promulgated pursuant to the Securities Exchange Act of 1934, as amended. [Acts 1986, ch. 887, Section 13.02.] 48-23-103. DISSENT BY NOMINEES AND BENEFICIAL OWNERS. -- (a) A record shareholder may assert dissenters' rights as to fewer than all the shares registered in his name only if he dissents with respect to all shares beneficially owned by any one (1) person and notifies the corporation in writing of the name and address of each person on whose behalf he asserts dissenters' rights. The rights of apartial dissenter under this subsection are determined as if the shares as to which he dissents and his other shares were registered in the names of different shareholders. (b) A beneficial shareholder may assert dissenters' rights as to shares of any one (1) or more classes held on his behalf only if: (1) He submits to the corporation the record shareholder's written consent to the dissent not later than the time the beneficial shareholder asserts dissenters' rights; and (2) He does so with respect to all shares of the same class of which he is the beneficial shareholder or over which he has power to direct the vote. [Acts 1986, ch. 887, Section 13.03.] PART 2-PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS 48-23-201. NOTICE OF DISSENTERS' RIGHTS. -- (a) If proposed corporate action creating dissenters' rights under Section 48-23-102 is submitted to a vote at a shareholders' meeting, the meeting notice must state that shareholders are or may be entitled to assert dissenters' rights under this chapter and be accompanied by a copy of this chapter. (b) If corporate action creating dissenters' rights under Section 48-23-102 is taken without a vote of shareholders, the corporation shall notify in writing all shareholders entitled to assert dissenters' rights that the action was taken and send them the dissenters' notice described in Section 48-23-203. (c) A corporation's failure to give notice pursuant to this section will not invalidate the corporate action. [Acts 1986, ch. 887, Section 13.20.] 48-23-202. NOTICE OF INTENT TO DEMAND PAYMENT. -- (a) If proposed corporate action creating dissenters' rights under Section 48-23-102 is submitted to a vote at a shareholders' meeting, a shareholder who wishes to assert dissenters' rights: (1) Must deliver to the corporation, before the vote is taken, written notice of his intent to demand payment for his shares if the proposed action is effectuated; and A-2 57 (2) Must not vote his shares in favor of the proposed action. No such written notice of intent to demand payment is required of any shareholder to whom the corporation failed to provide the notice required by Section 48-23-201. (b) A shareholder who does not satisfy the requirements of subsection (a) is not entitled to payment for his shares under this chapter. [Acts 1986, ch. 887, Section 13.21.] 48-23-203. DISSENTERS' NOTICE. -- (a) If proposed corporate action creating dissenters' rights under Section 48-23-102 is authorized at a shareholders' meeting, the corporation shall deliver a written dissenters' notice to all shareholders who satisfied the requirements of Section 48-23-202. (b) The dissenters' notice must be sent no later than ten (10) days after the corporate action was authorized by the shareholders or effectuated, whichever is the first to occur, and must: (1) State where the payment demand must be sent and where and when certificates for certificated shares must be deposited; (2) Inform holders of uncertificated shares to what extent transfer of the shares will be restricted after the payment demand is received; (3) Supply a form for demanding payment that includes the date of the first announcement to news media or to shareholders of the principal terms of the proposed corporate action and requires that the person asserting dissenters' rights certify whether or not he acquired beneficial ownership of the shares before that date; (4) Set a date by which the corporation must receive the payment demand, which date may not be fewer than one (1) nor more than two (2) months after the date the subsection (a) notice is delivered; and (5) Be accompanied by a copy of this chapter if the corporation has not previously sent a copy of this chapter to the shareholder pursuant to Section 48-23-201. [Acts 1986, ch. 887, Section 13.22.] 48-23-204. DUTY TO DEMAND PAYMENT. -- (a) A shareholder sent a dissenters' notice described in Section 48-23-203 must demand payment, certify whether he acquired beneficial ownership of the shares before the date required to be set forth in the dissenters' notice pursuant to Section 48-23-203(b)(3), and deposit his certificates in accordance with the terms of the notice. (b) The shareholder who demands payment and deposits his share certificates under subsection (a) retains all other rights of a shareholder until these rights are cancelled or modified by the effectuation of the proposed corporate action. (c) A shareholder who does not demand payment or deposit his share certificates where required, each by the date set in the dissenters' notice, is not entitled to payment for his shares under this chapter. (d) A demand for payment filed by a shareholder may not be withdrawn unless the corporation with which it was filed, or the surviving corporation, consents thereto. [Acts 1986, ch. 887, Section 13.23.] 48-23-205. SHARE RESTRICTIONS. -- (a) The corporation may restrict the transfer of uncertificated shares from the date the demand for their payment is received until the proposed corporate action is effectuated or the restrictions released under Section 48-23-207. (b) The person for whom dissenters' rights are asserted as to uncertificated shares retains all other rights of a shareholder until these rights are cancelled or modified by the effectuation of the proposed corporate action. [Acts 1986, ch. 887, Section 13.24.] 48-23-206. PAYMENT. -- (a) Except as provided in Section 48-23-208, as soon as the proposed corporate action is effectuated, or upon receipt of a payment demand, whichever is later, the corporation shall pay each dissenter who complied with Section 48-23-204 the amount the corporation estimates to be the fair value of his shares, plus accrued interest. A-3 58 (b) The payment must be accompanied by: (1) The corporation's balance sheet as of the end of a fiscal year ending not more than sixteen (16) months before the date of payment, an income statement for that year, a statement of changes in shareholders' equity for that year, and the latest available interim financial statements, if any; (2) A statement of the corporation's estimate of the fair value of the shares; (3) An explanation of how the interest was calculated; (4) A statement of the dissenter's right to demand payment under Section 48-23-209; and (5) A copy of this chapter if the corporation has not previously sent a copy of this chapter to the shareholder pursuant to Section 48-23-201 or Section 48-23-203. [Acts 1986, ch. 887, Section 13.25.] 48-23-207. FAILURE TO TAKE ACTION. -- (a) If the corporation does not effectuate the proposed action that gave rise to the dissenters' rights within two (2) months after the date set for demanding payment and depositing share certify, the corporation shall return the deposited certificates and release the transfer restrictions imposed on uncertificated shares. (b) If after returning deposited certificates and releasing transfer restrictions, the corporation effectuates the proposed action, it must send a new dissenters' notice under Section 48-23-203 and repeat the payment demand procedure. [Acts 1986, ch. 887, Section 13.26.] 48-23-208. AFTER-ACQUIRED SHARES. -- (a) A corporation may elect to withhold payment required by Section 48-23-206 from a dissenter unless he was the beneficial owner of the shares before the date set forth in the dissenters' notice as the date of the first announcement to news media or to shareholders of the principal terms of the proposed corporate action. (b) To the extent the corporation elects to withhold payment under subsection (a), after effectuating the proposed corporate action, it shall estimate the fair valueof the shares, plus accrued interest, and shall pay this amount to each dissenter who agrees to accept it in full satisfaction of his demand. The corporation shall send with its offer a statement of its estimate of the fair value of the shares, an explanation of how the interest was calculated, and a statement of the dissenter's right to demand payment under Section 48-23-209. [Acts 1986, ch. 887, Section 13.27.] 48-23-209. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER. -- (a) A dissenter may notify the corporation in writing of his own estimate of the fair value of his shares and amount of interest due, and demand payment of his estimate (less any payment under Section 48-23-206), or reject the corporation's offer under Section 48-23-208 and demand payment of the fair value of his shares and interest due, if: (1) The dissenter believes that the amount paid under Section 48-23-206 or offered under Section 48-23-208 is less than the fair value of his shares or that the interest due is incorrectly calculated; (2) The corporation fails to make payment under Section 48-23-206 within two (2) months after the date set for demanding payment; or (3) The corporation, having failed to effectuate the proposed action, does not return the deposited certificates or release the transfer restrictions imposed on uncertificated shares within two (2) months after the date set for demanding payment. (b) A dissenter waives his right to demand payment under this section unless he notifies the corporation of his demand in writing under subsection (a) within one (1) month after the corporation made or offered payment for his shares. [Acts 1986, ch. 887, Section 13.28.] PART 3-JUDICIAL APPRAISAL OF SHARES 48-23-301. COURT ACTION. -- (a) If a demand for payment under Section 48-23-209 remains unsettled, the corporation shall commence a proceeding within two (2) months after receiving the A-4 59 payment demand and petition the court to determine the fair value of the shares and accrued interest. If the corporation does not commence the proceeding within the two-month period, it shall pay each dissenter whose demand remains unsettled the amount demanded. (b) The corporation shall commence the proceeding in a court of record having equity jurisdiction in the county where the corporation's principal office (or, if none in this state, its registered office) is located. If the corporation is a foreign corporation without a registered office in this state, it shall commence the proceeding in the county in this state where the registered office of thedomestic corporation merged with or whose shares were acquired by the foreign corporation was located. (c) The corporation shall make all dissenters (whether or not residents of this state) whose demands remain unsettled, parties to the proceeding as in an action against their shares and all parties must be served with a copy of the petition. Nonresidents may be served by registered or certified mail or by publication as provided by law. (d) The jurisdiction of the court in which the proceeding is commenced under subsection (b) is plenary and exclusive. The court may appoint one (1) or more persons as appraisers to receive evidence and recommend decision on the question of fair value. The appraisers have the powers described in the order appointing them, or in any amendment to it. The dissenters are entitled to the same discovery rights as parties in other civil proceedings. (e) Each dissenter made a party to the proceeding is entitled to judgment: (1) For the amount, if any, by which the court finds the fair value of his shares, plus accrued interest, exceeds the amount paid by the corporation; or (2) For the fair value, plus accrued interest, of his after-acquired shares for which the corporation elected to withhold payment under Section 48-23-208. [Acts 1986, ch. 887, Section 13.30.] 48-23-302. COURT COSTS AND COUNSEL FEES. -- (a) The court in an appraisal proceeding commenced under Section 48-23-301 shall determine all costs of the proceeding, including the reasonable compensation and expenses of appraisers appointed by the court. The court shall assess the costs against the corporation, except that the court may assess costs against all or some of the dissenters, in amounts the court finds equitable, to the extent the court finds the dissenters acted arbitrarily, vexatiously, or not in good faith in demanding payment under Section 48-23-209. (b) The court may also assess the fees and expenses of counsel and experts for the respective parties, in amounts the court finds equitable: (1) Against the corporation and in favor of any or all dissenters if the court finds the corporation did not substantially comply with the requirements of Section Section 48-23-201 -- 48-23-209; or (2) Against either the corporation or a dissenter, in favor of any other party, if the court finds that the party against whom the fees and expenses are assessed acted arbitrarily, vexatiously, or not in good faith with respect to the rights provided by this chapter. (c) If the court finds that the services of counsel for any dissenter were of substantial benefit to other dissenters similarly situated, and that the fees for those services should not be assessed against the corporation, the court may award to these counsel reasonable fees to be paid out of the amounts awarded to the dissenters who were benefited. [Acts 1986, ch. 887, Section 13.31.] A-5 60 Annex B MERCER CAPITAL 5860 Ridgeway Center Parkway, Suite 410 Memphis, Tennessee 38120-4048 Phone: (901) 685-2120 Telecopier: (901) 685-2199 September 8, 1995 The Board of Directors c/o Mr. Charles Ennis, President Wes-Tenn Bancorp, Inc. 200 West Washington Avenue Covington, Tennessee 38019 Re: Preliminary Fairness Opinion Regarding the Proposed Acquisition of Wes-Tenn Bancorp, Inc. by BancorpSouth, Inc. Dear Directors: Mercer Capital Management, Inc. ("Mercer Capital") has been retained by the Board of Directors of Wes-Tenn Bancorp, Inc. ("WSTN") to issue a fairness opinion for the proposed merger between WSTN and BancorpSouth ("BOMS"). The fairness opinion is issued from a financial point of view on behalf of WSTN shareholders. A detailed discussion of the factors considered in rendering the opinion are addressed in the accompanying Fairness Memorandum. AMERICA'S BUSINESS VALUATION RESOURCE B-1 61 The Board of Directors c/o Mr. Charles Ennis September 8, 1995 Page two Under the terms of the merger agreement, dated June 16, 1995, WSTN shareholders will receive 0.6296 shares of BOMS for each WSTN share as long as BOMS' share price is not less than $32.8738 per share or greater than $44.4763 per share.(1) The exchange ratio was based upon a negotiated price of $24.35 per WSTN share divided by the BOMS market price of $38.675 per share.(2) The negotiated price per WSTN share corresponds to 2.05 times adjusted book value of $11.88 per share at May 31, 1995, reflecting certain adjustments to reported book value as agreed by both parties. The exchange ratio may be adjusted as follows: 1. In the event that the calculated market price is less than $32.8738 per share, WSTN may, at its option and without penalty, terminate the Agreement unless BOMS agrees to recalculate the exchange ratio using the following formula for BOMS' stock price: $38.675 - ($32.8738 - Recalculated Price) = BancorpSouth Price; or 2. In the event that the calculated market price is greater than $44.4763 per share, BOMS may, at its option and without penalty, terminate the Agreement unless WSTN agrees to recalculate the exchange ratio using the following formula for BOMS' stock price: $38.675 + (Recalculated Price - $44.4763) = BancorpSouth Price; The present exchange ratio implies that 1,586,096 BOMS shares will be issued for WSTN's 2,519,212 outstanding common shares. No fractional share, however will be issued. Instead, fractional shares will be converted into cash. ------------------- (1) The market price for purposes of the closing will be based upon the average of the mid-point between each day's high "bid" and low "ask" price for the 20 trading days ending immediately prior to the closing date. (2) BOMS' share price was derived by averaging the mid-point between each day's high "bid" and low "ask" price for the 20 trading days ended on June 13, 1995. B-2 62 The Board of Directors c/o Mr. Charles Ennis September 8, 1995 Page three Based upon BOMS' recent closing price of $40.00 per share, WSTN shareholders will receive consideration equal to $25.18 per WSTN share, while the aggregate consideration will total $63.4 million. The purchase price represents 204% of WSTN's reported book value of $12.35 per share as of June 30, 1995 and 19.5x WSTN's pro forma earnings of $1.29 per share for the twelve month period ended June 30, 1995.(3) As part of the engagement, representatives of Mercer Capital visited with WSTN management in Covington and BOMS management in Tupelo, Mississippi. Factors considered in rendering the opinion include: 1. Terms of the Agreement and Plan of Merger ("the Agreement"); 2. An analysis of the BOMS acquisition pricing in relation to indications of fair market value of WSTN derived through considering comparable (guideline) transactions, discounted cash flow and earnings dilution analyses; 3. An analysis of the estimated pro-forma changes in book value per share, earnings per share, dividends per share and overall ownership from the perspective of the WSTN shareholders; 4. A review of BOMS' historical financial performance, historical stock pricing, the liquidity of its shares and current pricing in relation to other publicly traded bank holding companies based in the Mid-South; 5. Tax consequences of the merger for WSTN shareholders; and, --------------------- (3) The Company's reported earnings were $1.38 per share for the twelve month period ended June 30, 1995 and included the results of West Tennessee Financial Corporation ("WTFC") since it was acquired on April 3, 1995. Pro forma earnings include the combined results of WSTN and WTFC as if the merger occurred prior to June 30, 1994. As shown in the S-4, pro forma earnings for the twelve month period ended June 30, 1995 are calculated by the following formula: [$1.38 per share (pro forma FY 94) + $0.66 per share (pro forma YTD @ 6/95) - $0.75 per share (pro forma YTD) @ 6/94) = $1.29 per share on pro forma basis versus $1.38 per share on a reported basis]. B-3 63 The Board of Directors c/o Mr. Charles Ennis September 8, 1995 Page four 6. Restrictions (lack of) placed on BOMS shares received in the merger. Mercer Capital did not compile nor audit WSTN's or BOMS' financial statements, nor have we independently verified the information reviewed. We have relied upon such information as being complete and accurate in all material respects. We have not made an independent valuation of the loan portfolio, adequacy of the loan loss reserve or other assets of either institution. Our opinion does not constitute a recommendation to any shareholder as to how the shareholder should vote on the proposed merger; nor have we expressed any opinion as to the prices at which any security of BOMS or WSTN might trade in the future. Based upon our analysis of the proposed transaction, it is our opinion that the acquisition of Wes-Tenn Bancorp, Inc. by BancorpSouth is fair from a financial point of view for WSTN shareholders. Sincerely yours, MERCER CAPITAL MANAGEMENT, INC. /s/ J. Michael Julius --------------------------- J. Michael Julius, ASA, CFA Vice President /s/ Jeff K. Davis ----------------------- Jeff K. Davis, ASA, CFA Vice President B-4 64 PROSPECTUS 2,175,000 SHARES BANCORPSOUTH, INC. COMMON STOCK -------------------- BancorpSouth, Inc. (the "Company"), a Mississippi corporation, a bank holding company registered under the Bank Holding Company Act of 1956, as amended (the "BHCA"), and a savings and loan holding company registered under the Savings and Loan Holding Company Act, as amended ("SLHCA"), may from time to time offer shares of common stock, par value $2.50 per share (the "BancorpSouth Common Stock"), in an aggregate amount of up to 2,175,000 shares, on terms to be determined at the time of such offering. The BancorpSouth Common Stock may be offered in such amounts, at such prices and on such terms to be set forth in a supplement to this Prospectus (a "Supplement"). The BancorpSouth Common Stock is to be offered directly by the Company in connection with the acquisition of, or business combination with, certain banking or savings institutions. The specific terms under which the BancorpSouth Common Stock is being offered in connection with the delivery of this Prospectus will be set forth in the applicable Supplement and will include the specific number of shares of BancorpSouth Common Stock and the issuance price per share. BancorpSouth Common Stock may not be sold through this Prospectus without delivery of the applicable Supplement. -------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. -------------------- THE DATE OF THIS PROSPECTUS IS JUNE 9, 1995 65 TABLE OF CONTENTS
Page ---- AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 INCORPORATION OF CERTAIN INFORMATION BY REFERENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Supervision and Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 DESCRIPTION OF BANCORPSOUTH COMMON STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Dividend Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Liquidation Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Preemptive Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Certain Anti-takeover Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 BancorpSouth Common Stock Purchase Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
-------------------- No person has been authorized to give any information or to make any representations other than those contained in this Prospectus in connection with the offering made hereby, and, if given or made, such information or representations must not be relied upon as having been authorized by the Company. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities other than the shares of BancorpSouth Common Stock offered hereby or an offer to sell or a solicitation of an offer to buy such shares to any person, or the solicitation of a proxy from any person, in any jurisdiction in which such offer, solicitation of an offer or proxy solicitation is unlawful. The delivery of this Prospectus at any time does not imply that the information herein is correct as of any time subsequent to its date. 2 66 AVAILABLE INFORMATION The Company has filed a Registration Statement on Form S-4, including amendments thereto, if any, with respect to the BancorpSouth Common Stock (the "Registration Statement") with the Securities and Exchange Commission (the "Commission"). This Prospectus and any accompanying Supplement do not contain all of the information set forth in the Registration Statement and the exhibits and schedules thereto. Statements contained in this Prospectus as to the contents of any contract or other document referred to are not necessarily complete and in each instance reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement or as previously filed with the Commission and incorporated herein by reference. For further information with respect to the Company and the BancorpSouth Common Stock, reference is made to such Registration Statement, exhibits and schedules. A copy of the Registration Statement may be inspected by anyone without charge at the Commission's principal office at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of all or any part thereof may be obtained from the Commission upon payment of certain fees prescribed by the Commission. The Company is subject to the informational requirements of the Securities Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files reports, proxy statements and other information with the Commission. Such reports, proxy statements and other information filed by the Company can be inspected and copied at the public reference facilities maintained by the Commission, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549, as well as the following Commission Regional Offices: New York Regional Office, 7 World Trade Center, 13th Floor, New York, New York 10048; and Chicago Regional Office, 500 West Madison Street, 14th Floor, Chicago, Illinois 60601-2511. Copies can be obtained by mail at prescribed rates. Requests should be directed to the Commission's Public Reference Section, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549. INCORPORATION OF CERTAIN INFORMATION BY REFERENCE The Company's Annual Report on Form 10-K for the period ending December 31, 1994, and Quarterly Report on Form 10-Q for the period ending March 31, 1995, are incorporated herein by reference. All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus shall be deemed to be incorporated by reference into this Prospectus. Any statement contained herein, or in a document incorporated or deemed to be incorporated by reference herein, shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any subsequently filed document which also is or is deemed to be incorporated by reference herein, modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. A COPY OF THESE DOCUMENTS IS AVAILABLE UPON REQUEST FROM CATHY M. ROBERTSON, CORPORATE SECRETARY, BANCORPSOUTH, INC., ONE MISSISSIPPI PLAZA, TUPELO, MISSISSIPPI 38801, (601) 681-2000. 3 67 THE COMPANY The Company is a Mississippi corporation, a bank holding company and a savings and loan holding company, with commercial banking operations in Mississippi and Tennessee, and savings and loan operations in Mississippi. The principal executive offices of the Company are located at One Mississippi Plaza, Tupelo, Mississippi 38801, and its telephone number is (601) 680-2000. SUPERVISION AND REGULATION The Company is a bank holding company registered under the BHCA and is subject to supervision by the Board of Governors of the Federal Reserve System (the "Federal Reserve") and the Federal Reserve Bank of St. Louis. The Company is also a savings and loan holding company registered under the SLHCA, and is subject to supervision by the Office of Thrift Supervision ("OTS") and the periodic reporting requirements of the OTS. Bank of Mississippi ("BOM") and Volunteer Bank ("Volunteer"), which are subsidiaries of the Company, are Mississippi and Tennessee state banks, respectively, and are subject to regulation by the banking regulatory agency in their respective state. The deposits of each of the Company's subsidiaries are insured by the Federal Deposit Insurance Corporation ("FDIC") and therefore each is subject to examination by the FDIC. Federal Reserve. The Company is required to file periodic reports and such additional information as the Federal Reserve may require pursuant to the BHCA. The Federal Reserve may also examine the Company and its subsidiaries. The BHCA requires Federal Reserve approval before the Company may acquire substantially all the assets of any bank if by the acquisition the Company would own or control more than 5% of the voting shares of the bank, or for a merger or consolidation with another bank holding company. The Company may, however, engage in or acquire an interest in a company that engages in activities which the Federal Reserve has determined by regulation or order to be so closely related to banking or managing or controlling banks as to be properly incident thereto. The Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA") amended provisions of the BHCA to specifically authorize the Federal Reserve to approve an application by a bank holding company to acquire control of a savings association. FIRREA also authorized a bank holding company that controls a savings association to merge or consolidate the assets and liabilities of the savings association with, or transfer assets and liabilities to, any subsidiary bank which is a member of the Bank Insurance Fund ("BIF") with the approval of the appropriate federal banking agency and the Federal Reserve Board. The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") further amended the BHCA to permit federal savings associations to acquire or be acquired by any insured depository institution. As a result of these provisions, there have been a number of acquisitions of savings associations by bank holding companies and other financial institutions in recent years. The Federal Reserve has adopted a risk-based capital adequacy assessment system for bank holding companies. Assets are weighted by a risk factor and a ratio is calculated by dividing qualifying capital by the risk-weighted assets. Tier I capital generally includes common stock and retained earnings. Total capital is comprised of Tier I capital and Tier II capital, which includes certain allowances for loan losses, certain subordinated debt and perpetual preferred stock. 4 68 The Company is a legal entity which is separate and distinct from its subsidiaries. Federal law restricts extensions of credit by its subsidiaries to the Company or its affiliates. Dividends to stockholders of the Company may be paid only from dividends paid to the Company by its subsidiaries. CRA. The Community Reinvestment Act of 1977 ("CRA") and its implementing regulations are intended to encourage regulated financial institutions to meet the credit needs of their local community or communities, including low and moderate income neighborhoods, consistent with the safe and sound operation of such financial institutions. The regulations provide that the appropriate regulatory authority will assess CRA reports in connection with applications for establishment of domestic branches, acquisition of banks or mergers involving bank holding companies. FDIC. Deposits in each of the Company's subsidiaries are insured by the FDIC and, pursuant to provisions of the Federal Deposit Insurance Act ("FDIA"), any FDIC-insured subsidiary of the Company can be held liable for any loss incurred by, or reasonably expected to be incurred by, the FDIC in connection with the default of a commonly controlled FDIC-insured subsidiary or any assistance by the FDIC to any commonly controlled FDIC-insured subsidiary in danger of default. FDICIA. FDICIA implemented a number of provisions applicable to insured banks and bank holding companies. Federal bank regulatory agencies are required to establish standards for safety and soundness of banks and bank holding companies relating to internal controls and audit systems, loan documentation, credit underwriting, interest rate risk exposure, asset growth and compensation. FDICIA also requires bank holding companies to guarantee compliance with any capital restoration plans entered into by a subsidiary bank and the FDIC. The activities of insured state banks, including non-subsidiary equity investment, is generally limited under the FDICIA to those permitted for national banks. FDICIA also requires regulations by federal banking agencies establishing minimum loan to value ratios for all real estate mortgage and construction loans. The FDICIA also requires regulations to limit risks posed by an insured bank's "exposure" to another bank. Exposure includes extension of credit, purchases of securities issued by the other bank or acceptance of securities issued by the other bank as collateral for an extension of credit. Regulations pursuant to FDICIA limit such exposure. Interstate Banking. In September 1994, the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 ("IBBEA") was enacted. Beginning September 29, 1995, IBBEA permits adequately capitalized and managed bank holding companies to acquire control of banks in states other than their home states, subject to federal regulatory approval, without regard to whether such a transaction is prohibited by the laws of any state. IBBEA permits states to continue to require that an acquired bank have been in existence for a certain minimum time period, which may not exceed five years. A bank holding company may not, following an interstate acquisition, control more than 10% of the nation's total amount of bank deposits or 30% of bank deposits in the relevant state (unless the state enacts legislation to raise the 30% limit). States retain the ability to adopt legislation to effectively lower the 30% limit. Beginning June 1, 1997, federal banking regulators may approve merger transactions involving banks located in different states, without regard to laws of any state prohibiting such transactions; except that, mergers may not be approved with respect to banks located in states that, prior to June 1, 1997, enacted legislation prohibiting mergers by banks located in such state with out-of-state institutions. Federal banking regulators may permit an out-of-state bank to open new branches in another state if such state has enacted legislation permitting interstate branching. Affiliated institutions are authorized to accept deposits for existing accounts, renew time deposits, and close and service loans for affiliated institutions without being deemed an impermissible branch of the affiliate. 5 69 OTS. The Company is a unitary savings and loan holding company subject to regulatory oversight by the OTS. As such, the Company is required to register and file periodic reports with the OTS and is subject to regulation and examination by the OTS. As a federally-chartered savings association, Laurel Federal Savings and Loan Association ("Laurel Federal"), a subsidiary of the Company, is subject to extensive regulation by the OTS. Laurel Federal must file reports with the OTS concerning its activities and financial condition, in addition to obtaining regulatory approvals prior to entering into certain transactions such as mergers with or acquisitions of other savings institutions. The regulatory structure gives the OTS extensive discretion in connection with its supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes. State Banking Regulation. BOM is subject to supervision, regulation and examination by the Mississippi Department of Banking and Consumer Finance. Volunteer is subject to supervision, regulation and examination by the Tennessee Department of Financial Institutions. State regulations in Mississippi and Tennessee relate to such matters as loans, mortgages, consolidations, required reserves, allowable investments, issuance of securities, payment of dividends, establishment of branches, filing of periodic reports and other matters affecting the business of BOM and Volunteer. 6 70 DESCRIPTION OF BANCORPSOUTH COMMON STOCK The Company has authorized 500 million shares of BancorpSouth Common Stock, $2.50 par value. DIVIDEND RIGHTS Holders of outstanding shares of BancorpSouth Common Stock are entitled to receive such dividends, if any, as may be declared by the Board of Directors of the Company, in its discretion, out of funds legally available therefor. VOTING RIGHTS Holders of BancorpSouth Common Stock are entitled to one vote per share on all matters to be voted on by the stockholders of the Company, including the election of directors, and do not have cumulative voting rights. Under the Mississippi Business Corporation Act, an affirmative vote of the majority of the stockholders present at a meeting is sufficient in order to take most stockholder actions. Certain extraordinary actions require greater percentages of affirmative stockholder votes, including an increase, without a recommendation by the Board of Directors of such increase, in the maximum number of members of the Board of Directors of the Company or an amendment or repeal of the anti-takeover provision described below. LIQUIDATION RIGHTS In the event of the liquidation of the Company, the holders of BancorpSouth Common Stock are entitled to receive pro rata any assets distributed to stockholders with respect to their shares, after payment of all debts and payments to holders of preferred stock of the Company, if any. PREEMPTIVE RIGHTS Holders of BancorpSouth Common Stock have no right to subscribe to additional shares of capital stock that may be issued by the Company. CERTAIN ANTI-TAKEOVER PROVISIONS The Company's Restated Articles of Incorporation, as amended, generally require the affirmative vote of the holders of 80% of the outstanding shares of BancorpSouth Common Stock to approve (i) a merger or consolidation of the Company with, or (ii) a sale, exchange or lease of all or substantially all of the assets (as defined in the Restated Articles of Incorporation) of the Company to any person or entity, unless such transaction is approved by the Board of Directors of the Company. The Restated Articles of Incorporation of the Company also require the affirmative vote of the holders of 80% of the outstanding shares of the BancorpSouth Common Stock, and the affirmative vote of the holders of 67% of the shares of BancorpSouth Common Stock held by stockholders other than a Controlling Party (as defined below), for the approval or authorization of any merger, consolidation, sale, exchange or lease of all or substantially all of the assets of the Company if such transaction involves any stockholders "owning or controlling" 20% or more of the BancorpSouth Common Stock outstanding at the time of the proposed transaction (a "Controlling Party"). The terms "owning or controlling" are not defined in the Company's Restated Articles of Incorporation. Management of the Company assumes that such terms would be interpreted in accordance with the meaning of the term "beneficial ownership" under the Exchange Act; however, if is uncertain how such terms would be construed under the laws of the State of Mississippi or whether such terms would encompass the possession of a revocable proxy to direct the vote of shares of BancorpSouth Common Stock. However, these voting requirements are not applicable in transactions in which: (a) the cash or fair market value of the property, securities or other consideration to be received (which includes BancorpSouth Common Stock retained by the Company's 7 71 existing stockholders in a transaction in which the Company is the surviving entity) per share by holders of BancorpSouth Common Stock in such transaction is not less than the highest per share price (with appropriate adjustments for recapitalizations, stock splits, stock dividends and distributions) paid by the Controlling Party in the acquisition of any of its holdings of the BancorpSouth Common Stock in the three years preceding the announcement of the proposed transaction, or (b) the transaction is approved by a majority of the Board of Directors of the Company. Neither of these provisions of the Restated Articles of Incorporation may be repealed or amended except by the affirmative vote of 80% of the total voting power of the Company. BANCORPSOUTH COMMON STOCK PURCHASE RIGHTS Following stockholder approval of a Shareholder Rights Plan in April 1991, the Company issued one common stock purchase right (a "Right") for each issued and outstanding share of BancorpSouth Common Stock. Each Right attaches to and trades with each share of BancorpSouth Common Stock; provided, however, that the Rights will separate from the BancorpSouth Common Stock and be distributed upon the occurrence of certain events, including the acquisition of or tender for 20% or more of the outstanding shares of BancorpSouth Common Stock by any person (an "Acquiring Person") or if the Board of Directors of the Company determines that a person beneficially owning 10% or more of the outstanding shares of BancorpSouth Common Stock has become an "Adverse Person," as defined in the Shareholder Rights Plan. In the event that a person becomes an Acquiring Person or is declared an Adverse Person by the Board of Directors of the Company, then each Right will entitle the holder thereof to purchase one share of BancorpSouth Common Stock at 50% of the then current market price, subject to adjustments as described in the Shareholder Rights Plan. At any time after the aforementioned events, the Board of Directors of the Company may exchange each Right for one share of BancorpSouth Common Stock, subject to adjustment as described in the Shareholder Rights Plan. If an Acquiring Person effects certain transactions with the Company, including a merger, share exchange, or transfer of over 50% of the Company's assets or earning power, then each Right shall entitle the holder thereof to purchase a share of common stock of the Acquiring Person at 50% of the then current market price for such common stock. Shares of BancorpSouth Common Stock owned by an Acquiring Person or Adverse Person will not be entitled to exercise the Rights as set forth above. The Rights are redeemable at $.01 per Right at any time prior to the close of business on the tenth day after the public announcement that a person has become an Acquiring Person or been declared an Adverse Person by the Board of Directors of the Company. The Rights are not exercisable until the expiration of the applicable ten day period, and the Rights will expire at the close of business on April 24, 2001, unless earlier redeemed. The Board of Directors of the Company is entitled to interpret the provisions of the Shareholder Rights Plan, which may be amended in certain respects by the Board of Directors of the Company at any time. 8 72 LEGAL MATTERS The validity of the shares of BancorpSouth Common Stock to be offered hereunder will be passed upon by Waller Lansden Dortch & Davis, Nashville, Tennessee, special counsel to the Company. Certain matters concerning this offering will be passed upon on behalf of the Company by Riley, Ford, Caldwell & Cork, P.A., Tupelo, Mississippi. Frank A. Riley, a shareholder of such firm, is a director of the Company. EXPERTS The Consolidated Financial Statements of the Company, as of December 31, 1994 and 1993, and for each of the years in the three-year period ended December 31, 1994, have been incorporated by reference in this Prospectus and in the Registration Statement in reliance upon the report of KPMG Peat Marwick LLP, independent certified public accountants, incorporated by reference herein, and upon the authority of such firm as experts in accounting and auditing. 9 73 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS. A. Restated Articles of Incorporation and Bylaws. The Company's Restated Articles of Incorporation provide that it will indemnify, and upon request advance expenses to, any person (or his estate) who was or is a party to any legal proceeding because he is or was a director, officer or employee of the Company, or is or was serving at the request of the Company as a director, officer, partner, trustee, employee or agent of another corporation, partnership, or other entity, against any liability incurred in that proceeding (A) to the full extent permitted by the Mississippi Business Corporation Act (the "Mississippi Corporation Act"), and (B) despite the fact that such person did not meet the standard of conduct specified in the Mississippi Corporation Act or would be disqualified for indemnification under that Act, if a determination is made that (i) the person seeking indemnity is fairly and reasonably entitled to indemnification in view of all of the relevant circumstances, and (ii) his acts or omissions did not constitute gross negligence or willful misconduct. A request for reimbursement or advancement of expenses prior to final disposition of the proceeding must be accompanied by an undertaking to repay the advances if it is ultimately determined that he did not meet the requisite standard of conduct but it need not be accompanied by an affirmation that the person seeking indemnity believed he has met the standard of conduct. The Company's Bylaws provide that it will indemnify officers and directors who are a party to any legal proceeding because he is or was an officer or director of the Company against any expenses or awards in connection therewith if he acted in good faith and in a manner he reasonably believed to be in the best interest of the Company and, with respect to any criminal proceeding, had no reasonable cause to believe his conduct was unlawful. The Company also will indemnify officers and directors who are a party to any derivative suit with respect to the Company because that person is or was an officer or director of the Company, against expenses incurred in connection with that action unless he is found to have acted without good faith and without that degree of care, diligence and skill which ordinarily prudent men would exercise in similar circumstances and in like positions, unless, despite such finding of liability, the court determines that he is entitled to indemnity. The Bylaws also provide that the Company may (i) advance to the officer or director the expenses incurred in defending a proceeding upon receipt of an undertaking that he will repay amounts advanced unless it ultimately is determined that he is entitled to be indemnified, and (ii) purchase and maintain insurance on behalf of an officer or director against any liability arising out of his acting as such. B. Mississippi Corporation Act. In addition to the foregoing provisions of the Company's Restated Articles of Incorporation and Bylaws, directors, offiers, employees and agents of the Company and its subsidiaries may be indemnified by the Company pursuant to Sections 79-4-8.50 through 79-4-8.58 of the Mississippi Corporation Act. C. Insurance. The Company maintains and pays premiums on an insurance policy on behalf of its officers and directors against liability asserted against or incurred by such persons in or arising from their capacity as such. II-1 74 D. Commission Policy On Indemnification. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling the Company pursuant to the foregoing provisions, the Company has been informed that in the opinion of the Commission such indemnification is against public policy as expressed in the Act and is therefore unenforceable. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) Exhibits
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS ------- ----------------------- 2.1 -- Agreement and Plan of Merger, dated as of June 16, 1995, between the Registrant, Volunteer Bank, Wes-Tenn Bancorp, Inc. and Tennessee Community Bank(1) 3.1 -- Restated Articles of Incorporation of the Registrant(2) 3.2 -- Amendment to Articles of Incorporation of Registrant, as filed on May 4, 1994(2) 3.3 -- Bylaws of the Registrant, as amended(3) 5.1 -- Opinion of Waller Lansden Dortch & Davis 8.1 -- Opinion of KPMG Peat Marwick LLP as to tax matters 10.1 -- Stock Option Agreement, dated as of June 16, 1995, between the Registrant and Wes-Tenn Bancorp, Inc. 11.1 -- Statement re computation of earnings per share(4) 13.1 -- Wes-Tenn Bancorp, Inc. 1994 Annual Report to Shareholders (only as to Wes-Tenn Bancorp, Inc. Consolidated Financial Statements, and notes thereto, and Management's Discussion and Analysis of Financial Condition and Results of Operations) 21.1 -- List of subsidiaries of the Registrant(4) 23.1 -- Consent of KPMG Peat Marwick LLP (with respect to financial statements of the Registrant) 23.2 -- Consent of KPMG Peat Marwick LLP (with respect to financial statements of Wes-Tenn Bancorp, Inc.) 23.3 -- Consent of KPMG Peat Marwick LLP (with respect to, and included in, opinion filed as Exhibit 8.1) 23.4 -- Consent of Waller Lansden Dortch & Davis (included in opinion filed as Exhibit 5.1) 23.5 -- Consent of Mercer Capital Management, Inc. 24.1 -- Power of Attorney (included on page II-5)
___________________ (1) Incorporated by reference to exhibits filed with the Registrant's Current Report on Form 8-K, filed on June 20, 1995. (2) Incorporated by reference to exhibits filed with the Registrant's Registration Statement on Form S-4, filed on January 5, 1995. (3) Incorporated by reference to exhibits filed with the Registrant's Annual Report on Form 10-K for the year ended December 31, 1985. (4) Incorporated by reference to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994. ITEM 22. UNDERTAKINGS. The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: II-2 75 (i) To include any prospectus required by Section 10(a)(3) of the Securities Act; (ii) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective Registration Statement. (iii) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement. (2) For the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. The undersigned registrant hereby undertakes as follows: that prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form. The registrant undertakes that every prospectus: (i) that is filed pursuant to the paragraph immediately preceding, or (ii) that purports to meet the requirements of Section 10(a)(3) of the Act and is used in connection with an offering of securities subject to Rule 415, will be filed as part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant, pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted against the Registrant by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate II-3 76 jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The undersigned Registrant hereby undertakes to respond to requests for information that is incorporated by reference into the Prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the Registration Statement through the date of responding to the request. The undersigned Registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the Registration Statement when it became effective. II-4 77 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused Post-Effective Amendments to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Tupelo, State of Mississippi, on September 7, 1995. BANCORPSOUTH, INC. By: /S/ Aubrey Burns Patterson --------------------------- Aubrey Burns Patterson Chairman of the Board and Chief Executive Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Aubrey Burns Patterson and L. Nash Allen, Jr., and each of them, his true and lawful attorney-in-fact, as agent and with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacity, to sign any or all amendments to this Post-Effective Amendment to the Registration Statement and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agents in full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully and to all intents and purposes as they might or be in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, and their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Post-Effective Amendment to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Name Title Date ---- ----- ---- /S/ Aubrey Burns Patterson Chairman of the Board, Chief September 7, 1995 ---------------------------------------- Executive Officer, Director Aubrey Burns Patterson (principal executive officer) /S/ L. Nash Allen, Jr. Treasurer and Chief Financial September 7, 1995 ---------------------------------------- Officer (principal financial and L. Nash Allen, Jr. accounting officer) /S/ S. H. Davis Director September 7, 1995 ---------------------------------------- S. H. Davis /S/ Hassell H. Franklin Director September 7, 1995 ---------------------------------------- Hassell H. Franklin /S/ W. G. Holliman, Jr. Director September 7, 1995 ---------------------------------------- W. G. Holliman, Jr.
II-5 78
Name Title Date ---- ----- ---- /S/ A. Douglas Jumper Director September 7, 1995 ----------------------------------------- A. Douglas Jumper /S/ Turner O. Lashlee Director September 7, 1995 ----------------------------------------- Turner O. Lashlee /S/ Alan W. Perry Director September 7, 1995 ----------------------------------------- Alan W. Perry /S/ Frank A. Riley Director September 7, 1995 ----------------------------------------- Frank A. Riley /S/ Travis E. Staub Director September 7, 1995 ----------------------------------------- Travis E. Staub /S/ Dr. Andrew R. Townes Director September 7, 1995 ----------------------------------------- Dr. Andrew R. Townes /S/ Lowery A. Woodall Director September 7, 1995 ----------------------------------------- Lowery A. Woodall Director September 7, 1995 ----------------------------------------- J. Louis Griffin, Jr.
II-6 79 INDEX TO EXHIBITS
Sequentially Exhibit Numbered Number Exhibit Page ------ ------- ------------ 2.1 -- Agreement and Plan of Merger, dated as of June 16, 1995, between the Registrant, Volunteer Bank, Wes-Tenn Bancorp, Inc. and Tennessee Community Bank(1) 3.1 -- Restated Articles of Incorporation of the Registrant(2) 3.2 -- Amendment to Articles of Incorporation of Registrant, as filed on May 4, 1994(2) 3.3 -- Bylaws of the Registrant, as amended(3) 5.1 -- Opinion of Waller Lansden Dortch & Davis 8.1 -- Opinion of KPMG Peat Marwick LLP as to tax matters 10.1 -- Stock Option Agreement, dated as of June 16, 1995, between the Registrant and Wes-Tenn Bancorp, Inc. 11.1 -- Statement re computation of earnings per share(4) 13.1 -- Wes-Tenn Bancorp, Inc. 1994 Annual Report to Shareholders (only as to Wes-Tenn Bancorp, Inc. Consolidated Statements, and notes thereto, and Management's Discussion and Analysis of Financial Condition and Results of Operations) 21.1 -- List of subsidiaries of the Registrant(4) 23.1 -- Consent of KPMG Peat Marwick LLP (with respect to financial statements of the Registrant) 23.2 -- Consent of KPMG Peat Marwick LLP (with respect to financial statements of Wes-Tenn Bancorp, Inc.) 23.3 -- Consent of KPMG Peat Marwick LLP (with respect to, and included in, opinion filed as Exhibit 8.1) 23.4 -- Consent of Waller Lansden Dortch & Davis (included in opinion filed as Exhibit 5.1) 23.5 -- Consent of Mercer Capital Management, Inc. 24.1 -- Power of Attorney (included on page II-5) ------------
(1) Incorporated by reference to exhibits filed with the Registrant's Current Report on Form 8-K, filed on June 20, 1995. (2) Incorporated by reference to exhibits filed with the Registrant's Registration Statement on Form S-4, filed on January 5, 1995. (3) Incorporated by reference to exhibits filed with the Registrant's Annual Report on Form 10-K for the year ended December 31, 1985. (4) Incorporated by reference to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994. EX-5.1 2 OPINION OF WALLER LANSDEN DORTCH & DAVIS 1 Exhibit 5.1 WALLER LANSDEN DORTCH & DAVIS Nashville City Center 511 Union Street, Suite 2100 Post Office Box 198966 Nashville, Tennessee 37219-8966 (615) 244-6380 (615) 244-6804 fax September 8, 1995 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Re: BancorpSouth, Inc. Post-Effective Amendment No. 2 to a Registration Statement on Form S-4 Ladies and Gentlemen: We are acting as counsel to BancorpSouth, Inc., a Mississippi corporation (the "Company"), in connection with the registration under the Securities Act of 1933 (the "Act") of an aggregate of 1,586,096 shares of the Company's Common Stock, $2.50 par value per share (the "Shares"), pursuant to a Post-Effective Amendment No. 2 to a Registration Statement on Form S-4 (the "Registration Statement"). We have examined and relied upon such records, documents and other instruments as in our judgment are necessary and appropriate in order to express the opinion hereinafter set forth, and have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, and the conformity to original documents of all documents submitted to us as certified or photostatic copies. Based upon the foregoing, we are of the opinion that the Shares, when issued and delivered in the manner and on the terms described in the Registration Statement (after the Registration Statement is declared effective), will be duly authorized, validly issued, fully paid and non-assessable. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and further consent to the reference to us under the caption "Legal Matters" in the prospectus included in the Registration Statement. Very truly yours, Waller Lansden Dortch & Davis EX-8.1 3 OPINION OF KPMG PEAT MARWICK 1 Exhibit 8.1 September 8, 1995 Board of Directors BancorpSouth, Inc. One Mississippi Plaza Tupelo, MS 38801 Board of Directors Wes-Tenn Bancorp, Inc. 200 West Washington Avenue Covington, Tennessee 38019 Gentlemen: You have requested our opinion as to the federal income tax consequences resulting from a plan (the "Merger") pursuant to which Wes-Tenn Bancorp, Inc. ("Wes-Tenn") will be merged with and into BancorpSouth, Inc. ("BancorpSouth") and Tennessee Community Bank ("TCB"), a wholly-owned subsidiary of Wes-Tenn, will be merged with and into Volunteer Bank("Volunteer"), a wholly-owned subsidiary of BancorpSouth. The delivery of this opinion, dated as of the Effective Time of the Merger, is a condition to the Merger pursuant to Section 5.1 of the Merger Agreement. In rendering our opinion, we have examined and relied upon the accuracy and completeness of the facts, information, covenants and representations contained in the originals or copies, certified or otherwise identified to our satisfaction, of the Merger Agreement, the Joint Proxy Statement/Prospectus and such other documents as we have deemed necessary or appropriate as a basis for the opinion set forth below. In addition, we have relied upon certain statements and representations made by BancorpSouth, Wes-Tenn, TCB and others, including representations set forth in certificates of the officers of BancorpSouth and Wes-Tenn (the "certificates"). Our opinion is conditioned on, among other things, the initial and continuing accuracy of the facts, information, covenants and representations set forth in the documents referred to above and statements and representations made by BancorpSouth, Wes-Tenn and others, including those set forth in the certificates. In our examination, we have assumed the genuiness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified or photostatic copies and the authenticity of the originals of such documents. We also have assumed that the transactions related to the Merger or contemplated by the Merger Agreement will be consummated in accordance with the Merger Agreement and as described in the Joint Proxy Statement/Prospectus, and that the Mergers qualify as statutory mergers under the laws of Tennessee and Mississippi. In rendering our opinion, we have considered the applicable provisions of the Internal Revenue Code of 1986, as amended ("the Code"), Treasury Regulations promulgated thereunder, pertinent judicial authorities, interpretive rulings of the Internal Revenue Service and such other authorities as we have considered relevant. It should be noted that statutes, regulations, judicial decision and administrative interpretations are subject to change at 2 Board of Directors September 8, 1995 Page 2 any time and, in some circumstances, with retroactive effect. A material change in the authorities upon which our opinion is based could affect our conclusions. We assume no duty to inform you of any changes in our opinion due to any change in law or fact that may subsequently occur or come to our attention. FACTUAL ASSUMPTIONS Wes-Tenn is a registered bank holding company organized under the laws of the State of Tennessee. Wes-Tenn's authorized capital stock consists of one class, represented by 10,000,000 shares of Common, $1.00 par value, of which 2,519,212 shares were issued and outstanding at September 8, 1995. Wes-Tenn owns all of the outstanding stock of TCB, a banking corporation organized under the laws of the State of Tennessee. BancorpSouth is a registered bank holding company organized under the laws of the State of Mississippi and a savings and loan holding company registered under the SLHCA. Its authorized capital stock consists of one class, represented by 24 million shares of Common, $2.50 par value per share, of which 8,850,475 shares were issued and outstanding at September 8, 1995. BancorpSouth owns all of the outstanding stock of Volunteer, a banking corporation organized under the laws of the State of Tennessee. For valid business purposes, pursuant to the Merger Agreement, Wes-Tenn will be merged with and into BancorpSouth with BancorpSouth as the surviving entity ("First Merger"). Upon consummation of the Merger, each share of Wes-Tenn stock (excluding any shares held by dissenting shareholders) will be exchanged for BancorpSouth stock simultaneously with First Merger. Simultaneously with the First Merger, TCB will be merged with and into Volunteer whereupon the separate existence of TCB will cease ("Second Merger"). In addition to the foregoing statement of facts, the following representations have been made: (a) The fair market value of BancorpSouth Stock received by the shareholders of Wes-Tenn will be approximately equal to the fair market value of Wes-Tenn Stock surrendered in the exchange. (b) There is no plan or intention by the shareholders of Wes-Tenn to sell, exchange or otherwise dispose of any of the BancorpSouth Stock received in the Merger. (c) Volunteer will acquire at least 90% of the fair market value of the net assets and at least 70% of the fair market value of the gross assets held by TCB immediately prior to the Merger. (d) BancorpSouth has no plan or intention to reacquire any of BancorpSouth Stock issued in the Merger. 3 Board of Directors September 8, 1995 Page 3 (e) BancorpSouth has no plan or intention to sell or otherwise dispose of any of the assets of Wes-Tenn acquired in the Merger. (f) Prior to the Merger, BancorpSouth will be in control of Volunteer within the meaning of Section 368(c). (g) Following the Merger, Volunteer will continue the historical business of TCB or use a significant portion of the historic business assets of TCB in a business, (h) BancorpSouth, Wes-Tenn and the shareholders of Wes-Tenn will pay their respective expenses, if any, incurred in connection with the Merger. (i) There is no intercorporate indebtedness existing between BancorpSouth and Wes-Tenn or between TCB and Volunteer that was issued, acquired, or will be settled at a discount. (j) No parties to the transaction are investment companies as defined in Section 368(a)(2)(F)(iii) and (iv). (k) Wes-Tenn and TCB are not under the jurisdiction of a court in a Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the Code. (l) The payment of cash in lieu of fractional shares of BancorpSouth Stock is not separately bargained for consideration, rather it is merely to save the expense and inconvenience of issuing and transferring fractional share interests. The total cash consideration in lieu of fractional shares will be less than one percent of the total consideration paid in the transaction and no Wes-Tenn shareholder will receive cash for more than one share of BancorpSouth Stock. (m) None of the compensation received by any shareholder-employee of Wes-Tenn or TCB will be separate consideration for, or allocable to, any of their shares of Wes-Tenn Stock; none of the shares of BancorpSouth Stock received by any shareholder-employee of Wes-Tenn or TCB will be separate consideration for, or allocable to, any employment agreement; and the compensation to be paid to any shareholder-employee of Wes-Tenn or TCB will be for services actually rendered and will be commensurate with amounts paid to third parties bargaining at arm's length for similar services. (n) The First Merger and the Second Merger will each qualify as statutory mergers under the corporate laws of Tennessee and Mississippi. OPINION FEDERAL INCOME TAX CONSEQUENCES Based solely on the above facts and representations, it is our opinion that: 4 Board of Directors September 8, 1995 Page 4 (1) The First and Second Mergers will constitute tax-free reorganizations within the meaning of Section 368(a) of the Code. (2) Each of BancorpSouth, Wes-Tenn, Volunteer, and TCB will be a party to the reorganization within the meaning of Section 368(b). (3) No gain or loss will be recognized by Wes-Tenn and TCB upon the transfer of its assets, subject to its liabilities, to BancorpSouth and Volunteer in the Mergers. Section 357(a) and 361(a). (4) No gain or loss will be recognized by BancorpSouth and Volunteer upon the receipt of the assets of Wes- Tenn and TCB, subject to liabilities, in the Mergers. Section 1032(a). (5) The basis of the assets of Wes-Tenn and TCB in the hands of BancorpSouth and Volunteer will be the same as the basis of such assets in the hands of Wes-Tenn and TCB immediately prior to the Mergers. Section 362(b). (6) The holding period of the assets of Wes-Tenn and TCB in the hands of BancorpSouth and Volunteer will include the period during which such assets were held by Wes-Tenn and TCB immediately prior to the Mergers. Section 1223(2). (7) No gain or loss will be recognized by the shareholders of Wes-Tenn upon receipt of solely BancorpSouth Stock (including any fractional share interests to which they may be entitled) in exchange for their holdings of Wes-Tenn Stock. Section 354(a)(1). (8) The basis of the BancorpSouth Stock to be received by the shareholders of Wes-Tenn (and any fractional share interests to which they may be entitled) will be the same as the basis in the Wes-Tenn Stock surrendered in the exchange. Section 358(a)(1). (9) The holding period of the BancorpSouth Stock received by the shareholders of Wes-Tenn (and any fractional share interests to which they may be entitled) will include such shareholders' holding period of the Wes-Tenn Stock prior to the exchange, provided that the Wes-Tenn Stock is held as a capital asset in the hands of the shareholders of Wes-Tenn on the date of the exchange. Section 1223(1). (10) The tax attributes enumerated in Section 381(c), including any earnings and profits or a deficit of earnings and profits, will be taken into account by BancorpSouth and Volunteer following the Mergers. (11) The payment of cash in lieu of fractional share interests of BancorpSouth Stock will be treated as if the fractional shares of BancorpSouth Stock were distributed as part of the exchange to the Wes-Tenn shareholders and then redeemed by BancorpSouth. The cash payments will be treated as having been received as distributions in full payment for the stock 5 Board of Directors September 8, 1995 Page 5 redeemed as provided in Section 302(a) of the Code. Rev. Rul. 66-365, 1966-2 C.B. 116 and Rev. Proc. 77-41, 1977-2 C.B. 574. (12) Where a Wes-Tenn shareholder elects to receive cash by exercising statutory dissenter's rights, such cash will be treated as having been received by the shareholder as a distribution in redemption of his or her Wes- Tenn Stock subject to the provisions and limitations of Section 302 of the Code. The opinions expressed above are rendered only with respect to the specific matters discussed herein, and we express no opinion with respect to any other federal or state income tax or legal aspect of the Merger. We are furnishing this opinion to you solely in connection with Section 5.1 of the Merger Agreement. This opinion is solely for your benefit and is not to be used, circulated, quoted or otherwise referred to for any purpose without our express written permission. We consent to the use of our report included herein and to the reference to our firm under the heading of "Certain Income Tax Consequences" in the prospectus. Very truly yours, KPMG PEAT MARWICK LLP By: /s/ Mark A. Medford ---------------------- Mark A. Medford Partner EX-10.1 4 STOCK OPTION AGREEMENT 1 Exhibit 10.1 STOCK OPTION AGREEMENT This STOCK OPTION AGREEMENT, is made and entered into as of June 16, 1995, by and between BANCORPSOUTH, INC., a Mississippi corporation and a registered bank holding company ("BancorpSouth"), and WES-TENN BANCORP, INC., a Tennessee corporation and a registered bank holding company ("Wes-Tenn"). W I T N E S S E T H WHEREAS, BancorpSouth and Wes-Tenn have this date entered into a definitive merger agreement (the "Merger Agreement") providing for the acquisition by BancorpSouth of Wes-Tenn and its direct and indirect subsidiaries (the "Wes-Tenn Subsidiaries") through the merger of BancorpSouth and Wes-Tenn (the "Transaction"); and WHEREAS, in order to induce BancorpSouth to enter into the Merger Agreement, Wes-Tenn has agreed to grant the Stock Option (as hereinafter defined); NOW, THEREFORE, in consideration of the premises and of the mutual covenants contained herein, the parties hereby agree as follows: 1. Grant of Stock Option. Subject to the terms and conditions set forth herein, Wes-Tenn hereby grants to BancorpSouth an irrevocable option (the "Stock Option") to purchase up to 472,441 shares (the "Shares") of Wes-Tenn's common stock, par value $1.00 per share (the "Common Stock"), at a cash purchase price of $18.00 per share (the "Exercise Price"). 2. Exercises of Stock Option. (a) Subject to the receipt of all necessary approvals required by, and the expiration or termination of any applicable waiting period under, any federal or state statutes regulating or governing the acquisition or change in control of banks or bank holding companies (the "Bank Regulatory Acts"), the Stock Option, subject to Section 2(b) below, may be exercised by BancorpSouth or its permitted assignee, in whole or in part, at any time or from time to time, on or before the termination of this Agreement (the "Termination Date"). The Termination Date shall be the earlier to occur of (i) the consummation of the Transaction or (ii) 12 months after the first occurrence of an Initial Triggering Event (as hereinafter defined). In the event BancorpSouth wishes to exercise the Stock Option, BancorpSouth shall send a written notice to Wes-Tenn specifying the total number of Shares it will purchase and a place and date not later than ten business days from the date such notice is given for the closing of such purchase. Notwithstanding the fact that the Termination Date has occurred, BancorpSouth shall be entitled to purchase those Shares with respect to which it has given notice of its election to exercise the Stock Option prior to the Termination Date. 1 2 (b) BancorpSouth may exercise the Stock Option, in whole or part, if, but only if, an Initial Triggering Event shall have occurred prior to the occurrence of the Termination Date, provided that BancorpSouth shall have sent the written notice of such exercise (as provided in subsection (a) of this Section 2). (c) The term "Initial Triggering Event" shall mean either of the following events or transactions occurring after the date hereof: (i) Wes-Tenn or Tennessee Community Bank, a Tennessee banking corporation ("TCB"), without having received BancorpSouth's prior written consent, shall have entered into an agreement to engage in an Acquisition Transaction (as hereinafter defined) with any person (the term "person" for purposes of this Agreement having the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations thereunder) other than BancorpSouth or any of its subsidiaries (each a "BancorpSouth Subsidiary") or the Board of Directors of Wes-Tenn or TCB shall have recommended that the shareholders of Wes-Tenn approve or accept any Acquisition Transaction with any person other than BancorpSouth or any BancorpSouth Subsidiary. For purposes of this Agreement, "Acquisition Transaction" shall mean (x) a merger or consolidation, or any similar transaction, involving Wes-Tenn or TCB, (y) a purchase, lease or other acquisition of more than 5% of the assets of Wes-Tenn or TCB, or (z) a purchase or other acquisition (including by way of merger, consolidation, share exchange or otherwise) of securities representing 5% or more of the voting power of Wes-Tenn or TCB; or (ii) Any person other than BancorpSouth or any BancorpSouth Subsidiary shall have acquired beneficial ownership or the right to acquire beneficial ownership of 10% or more of the outstanding shares of Common Stock of Wes- Tenn (the term "beneficial ownership" for purposes of this Agreement having the meaning assigned thereto in Section 13(d) of the Exchange Act, and the rules and regulations thereunder); (d) Wes-Tenn shall notify BancorpSouth promptly in writing of the occurrence of any Initial Triggering Event, it being understood that the giving of such notice by Wes-Tenn shall not be a condition to the right of BancorpSouth to exercise the Stock Option. 3. Payment and Delivery of Certificate(s). At any closing hereunder, BancorpSouth or its permitted assignee shall make payment to Wes-Tenn of the aggregate Exercise Price for the Shares so purchased by certified or official bank check or wire transfer of same day funds to an account specified by Wes-Tenn, and Wes-Tenn shall deliver to BancorpSouth or its permitted assignee a certificate or certificates in form satisfactory to BancorpSouth representing the number of Shares being purchased in the denominations designated by BancorpSouth in its notice of exercise. 4. Representations and Warranties of Wes-Tenn. Wes-Tenn hereby represents and warrants to BancorpSouth, as follows: 2 3 (a) Due Authorization. This Agreement has been duly authorized by all necessary corporate action on the part of Wes-Tenn and has been duly executed by a duly authorized officer of Wes-Tenn, and constitutes a valid and binding obligation of Wes-Tenn, enforceable against it in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights generally, and except that the availability of equitable remedies, including specific performance, is subject to the discretion of the court before which any proceeding therefor may be brought. (b) Due Organization. Wes-Tenn is a corporation duly organized, validly existing and in good standing under the laws of the State of Tennessee and has the requisite corporate power to enter into and perform this Agreement. (c) Stock Option Shares. Except for any filing required to be made under the Bank Regulatory Acts, Wes-Tenn has taken all necessary corporate and other action to authorize and reserve and to permit it to issue, and at all times from the date hereof through the Termination Date will keep reserved for issuances upon exercise of the Stock Option, 472,441 shares of Common Stock, all of which, upon issuance pursuant hereto, shall be duly and validly issued, fully paid and nonassessable, and shall be delivered free and clear of all charges, claims, liens, encumbrances, security interests or rights of others, including any preemptive rights. (d) No Conflicts. Subject to Section 2(b) hereof, neither the execution and delivery of this Agreement nor the consummation of the transaction contemplated hereby will violate or result in any violation of or be in conflict with or constitute a default under any term of the Charter or Bylaws of Wes-Tenn or any Wes-Tenn Subsidiary or of any agreement, instrument, judgment, decree, order, statute, rule or government regulation applicable to Wes-Tenn or any Wes-Tenn Subsidiary. 5. Representations and Warranties of BancorpSouth. BancorpSouth hereby represents and warrants to Wes-Tenn as follows: (a) Distribution. None of the Shares acquired upon exercise of the Stock Option will be transferred except in a transaction registered or exempt from registration under the Securities Act of 1933, as amended (the "Securities Act"), and any applicable state securities law. (b) No Conflicts. Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will violate or result in any violation of or be in conflict with or constitute a default under any term of the Articles of Incorporation or Bylaws of BancorpSouth or of any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to BancorpSouth. 6. Bank Regulatory Acts. BancorpSouth and Wes-Tenn will each, timely and promptly upon the election of BancorpSouth to exercise any portion of the Stock Option, make 3 4 all filings required under each of the Bank Regulatory Acts and use their best efforts to cause the receipt of all required approvals and the satisfaction or termination of all waiting periods under the Bank Regulatory Acts applicable to the exercise of the Stock Option. BancorpSouth and Wes-Tenn will furnish to each other such necessary information and reasonable assistance as may be requested in connection with their respective preparation of necessary filings or submissions to any governmental agency, including, without limitation, any filings necessary under the provisions of any of the Bank Regulatory Acts. BancorpSouth and Wes-Tenn will supply each other with copies of all correspondence, filings or communications (or memoranda setting forth the substance thereof) between either of them or their respective representatives and any governmental agency or authority or members of their respective staffs with respect to this Agreement or the transactions contemplated hereby. 7. Adjustment Upon Changes in Capitalization, Merger, Etc. In the event of any change in the Shares occurring on or after the date hereof, by reason of stock dividends, splitups, mergers, recapitalization, combinations, conversions, exchanges of shares or the like, the number and kind of shares or securities subject to the Stock Option and the Exercise Price per share and Cash Payment (to which reference is hereinafter made) shall be appropriately adjusted. 8. Election to Receive Cash. In the event an Acquisition Transaction with Wes-Tenn is consummated by a party other than BancorpSouth or a BancorpSouth Subsidiary, BancorpSouth, at its election and in full satisfaction of the Stock Option and any Shares to be received therefrom, and subject to any required regulatory approvals, shall be entitled to receive an amount in cash (the "Cash Payment") equal to $3,000,000 or, at the option of BancorpSouth, such lesser amount, if any, as may be paid by Wes-Tenn without being required to obtain any prior regulatory approval from any regulatory agency with respect thereto, in which case the number of Shares subject to the Stock Option shall be reduced by the number of Shares as to which payment was made. The Cash Payment shall be made within three business days of BancorpSouth's election to receive the Cash Payment by certified or official bank check or wire transfer of same day funds to such account as BancorpSouth shall designate. 9. Remedies. BancorpSouth, on the one hand, and Wes-Tenn, on the other hand, each acknowledges and agrees that the other would be irreparably damaged in the event any of the provisions of this Agreement were not performed by the other in accordance with their specific terms or were otherwise breached. It is accordingly agreed that each party shall be entitled to an injunction or injunctions to redress the breaches of this Agreement and to specifically enforce the terms and provisions hereof in any action instituted in any court of the United States or any state thereof having jurisdiction, in addition to any other remedy to which such party may be entitled at law or in equity. In the event litigation shall be necessary to enforce, interpret or rescind the provisions of this Agreement, the prevailing party shall be entitled to recover from the other party, in addition to other relief, the prevailing party's reasonable attorneys' fees for services before trial, on trial and on any appeal therefrom. 4 5 10. Miscellaneous. (a) Effect and Assignment of Agreement. This Agreement shall be binding upon and enforceable by and against the parties hereto and their respective successors and assigns; provided that this Agreement may be assigned by BancorpSouth only to a direct or indirect wholly owned subsidiary of BancorpSouth. (b) Amendments. This Agreement may not be modified, amended, altered or supplemented, except upon the execution and delivery of a written agreement executed by the parties. (c) Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by cable, telegram or telex, or by mail (registered or certified mail postage prepaid, return receipt requested) to the respective parties as follows: If to BancorpSouth: BancorpSouth, Inc. One Mississippi Plaza Tupelo, Mississippi 38801 Attention: Aubrey B. Patterson with copies (which shall not constitute notice) to: Frank A. Riley, Esq. Riley, Ford, Caldwell & Cork P.O. Box 1836 Tupelo, Mississippi 38802 Ralph W. Davis, Esq. Waller Lansden Dortch & Davis 511 Union Street, Suite 2100 Nashville, Tennessee 37219-1760 If to Wes-Tenn: Wes-Tenn Bancorp, Inc. 200 West Washington Covington, Tennessee 38019 Attention: Charles M. Ennis with a copy (which shall not constitute notice) to: 5 6 Robert Walker, Esq. Baker, Donelson, Bearman & Caldwell 165 Madison Avenue, Suite 2000 Memphis, Tennessee 38103 or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of a change of address shall only be effective upon receipt. (d) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Tennessee as applied to contracts executed in and to be performed in the State of Tennessee. (e) No Prior Agreements. This Agreement (i) contains the entire agreement, and supersedes all other prior agreements and understandings, both written and oral, between the parties hereto with respect to the subject matter hereof, and (ii) is not intended to confer upon any other person other than a permitted assignee any rights or remedies hereunder. (f) Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. (g) Expenses. Each of the parties shall pay its own expenses in connection with the negotiation, execution and performance of this Agreement. (h) Effect of Headings. The section headings herein are for convenience only and shall not affect the meanings or construction of this Agreement. (i) Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original, but all of which together shall constitute the same agreement. 6 7 IN WITNESS WHEREOF, BancorpSouth and Wes-Tenn have caused this Stock Option Agreement to be duly executed on their behalf and in their name, on the day and year first above written. BANCORPSOUTH, INC. By:/s/ Aubrey B. Patterson ----------------------- Its: Chairman & CEO -------------- WES-TENN BANCORP, INC. By:/s/ Charles M. Ennis -------------------- Its: President & CEO --------------- 7 EX-13.1 5 WES-TENN BANCORP, INC. 1994 ANNUAL REPORT 1 Exhibit 13.1 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION Wes-Tenn Bancorp, Inc. (the Company) is one bank holding company headquartered in Covington, Tennessee, whose principal subsidiary is Tennessee Community Bank (the Bank). In February 1992, the Company acquired Tri-County Federal Savings Bank (the Savings Bank) in a merger-conversion transaction accounted for as a pooling of interests. On April 2, 1993, the Bank, (at that time known as Tipton County Bank) and the Savings Bank merged assets and liabilities and began operation under the name Tennessee Community Bank. The Bank, its credit life subsidiary, and its finance company subsidiary, provide a full range of banking services to corporate customers, local governments, individuals and others through a network of branches located in nine counties of west Tennessee. The Bank has received regulatory approval of the acquisition of West Tennessee Financial Corporation, located in Selmer, Tennessee. The anticipated merger date is April 3, 1995. The following discussion provides a narrative analysis concerning the financial condition and results of operations of the Company. For a more thorough understanding of this discussion, reference can be made to the Consolidated Financial Statements and notes thereto presented elsewhere in this Annual Report. The accompanying financial statements are consolidated statements of the Company and the Bank. Statements prior to the merger of the Savings Bank have been restated to reflect their figures for all periods presented. 1994 VS. 1993 In the area of cash and demand balances with banks, there was a decrease of $2,091,000, and a decrease in interest-bearing deposits of $2,511,000 with shifts to other interest earning assets, most notably investment securities and loans. Included in this shift was a decrease of $3,125,000 in federal funds sold. Securities, including mortgage-backed securities, increased $5,125,000. The net decrease in market value of the available-for-sale securities portfolio was $3,012,000. Therefore, the actual change in the amounts of funds invested in securities was $8,137,000. Investment of stock of the Federal Home Loan Bank increased $817,000 as required by the increase in funds borrowed from that source. Reference can be made to the balance sheet and notes 1, 4, and 9 of the Consolidated Financial Statements for the composition of the investment portfolio. Gross loans increased net of unearned interest $8,596,000. The primary increase occurred in real estate loans, with a $7,713,000 increase in first mortgage residential loans, primarily single-unit homes. Management continues to seek residential loans, due to the secured nature of these credits, and current yields, while providing a service to its communities. The Bank's trade area continues to experience a demand for single family home loans, and real estate values continue to experience moderate increases. There was a decrease of $1,721,000 in deposits. Especially noteworthy is a shift between other time deposits and interest-bearing demand deposits. As interest rates continue to increase while remaining relatively low compared to those of the recent past, customers are opting for a shorter term deposit with easy access to their funds if interest rates should increase. There was an increase of $10,018,000 in Federal Home Loan Bank advances. These borrowings were used to invest in U.S. Government Agencies bearing a higher rate of interest. Net interest income decreased $796,000 during 1994. Total interest income decrease $1,432,000, and total interest expense decreased $636,000. Interest income on loans decreased $1,322,000 because of lower rates in effect throughout the year. Investment interest increased because of the increase in investments, which occurred primarily in the last quarter of the year. Interest expense on deposits decreased $940,000, due both to the decrease in deposits, and lower rates paid during 1994 on demand deposits. Interest expense on Federal Home Loan Bank advances increased $287,000 due to an increase in advances. The provision for credit losses decreased $778,000. This decrease is a result of improvement in levels of non-performing loans and an overall improved economy. Other non-interest income decreased $310,000, primarily as a result of losses on sales of securities of $163,000. The proceeds from the sales were used to purchase longer term securities. The increase in long-term earnings will offset the loss experienced this year. Salaries and employee benefits increased $442,000, although total non-interest expenses had a net increase of only $241,000. Net income for 1994 was $3,222,000, a decrease of $290,000, or 8.26% from 1993. Earnings per share decreased from $6.53 to $5.77. Reference is made to Note 13 of the Consolidated Financial Statements for additional share information. Currently, the Company is liability sensitive in the three month and twelve month time horizons. In a rising rate environment, the Company's earnings would be negatively affected, due to its inability to reprice earning assets at a pace in line with increases in cost of funds. 1993 VS. 1992 In the area of cash and due from banks, there was a decrease of $1,302,000, and a decrease in interest-bearing deposits of $2,185,000 with shifts to other interest earnings assets, most notably that of investment securities. Included in this shift was a decrease of $3,475,000 in federal funds sold. 5 2 Investment securities, including mortgage-backed securities, increased $11,739,000 as the Company sought investments with the greatest available return. Effective December 31, 1993, the Company adopted SFAS 115, which requires the Bank to designate its investment portfolio as either available-for-sale, or held-to-maturity, and with those designated as available-for-sale to be recorded at market value. The market valuation of securities available-for-sale was $1,685,000 at December 31, 1993. Loans increased, net of unearned interest, $4,066,000. The primary increase occurred in real estate loans, with $3,305,000 of this increase in first mortgage residential loans, primarily single-unit homes. The decrease of $1,367,000 in deposits was due in part to the loss of some deposits after the merger with the Savings Bank, as some customers sought to remain within FDIC insurance limits. Most noteworthy was an increase in non-interest bearing deposits and a decrease in certificates of deposit. The Company's net interest income increased $1,738,000 over 1992 due primarily to a decrease of $1,577,000 in interest paid on deposits. There was a decrease of $5,108,000 in interest-bearing deposits. Interest expense on borrowed funds increased $260,000 due to the increase in Federal Home Loan Bank advances, and the funds borrowed by the Company to purchase treasury shares and to redeem outstanding warrants. Other non-interest income and non-interest expense had modest changes. Net income for 1993 was $3,512,000, an increase of $939,000, or 36.5% over 1992. The most significant reason for this improvement was the improved net interest margin due to lower interest expense rates. CAPITAL RESOURCES/LIQUIDITY CAPITAL ADEQUACY. The Company is required to comply with the risk-based capital guidelines adopted in January 1989 by the Board of Governors of the Federal Reserve System (FRB). These replaced the previously existing guidelines as the operative standard of capital adequacy for bank holding companies and apply a variety of weighted factors which vary according to the level of risk associated with the assets. The guidelines require maintenance of minimum capital levels. The guidelines define capital as "core," or "Tier I," capital as consisting of common stockholders' equity, certain preferred stock issues and minority interest in unconsolidated subsidiaries and "supplementary," or "Tier II," capital as consisting of certain stock debt instruments, redeemable preferred stock issues and the allowance for loan losses. In each case, half of the required capital must be in the form of core capital. In accordance with the guidelines promulgated by the Federal Reserve Board, at December 31, 1994, the Company's Tier I capital was 6 3 $25,132,000 and Tier II capital was $27,720,000. At December 31, 1994, the Company's ratios substantially exceeded the minimums expected to be in effect for bank holding companies by year end 1995. The Bank meets or exceeds all applicable regulatory capital requirements. Management believes the Company's capital position is adequate for the level required for normal operation of the Company. LIQUIDITY. The Company views liquidity as active asset/liability management while maintaining a reasonable balance between rate sensitive assets and rate sensitive liabilities. Liquidity is the ability of the Company to fund the needs of its borrowers, depositors, and creditors. During the year ended December 31, 1994, there was a net decrease of $4,602,000 in cash and cash equivalents. The major uses of cash during the period were investing activities including loan originations, sales of federal funds, and purchases of investment securities. Although the Company has no formal liquidity policy, in the opinion of management, its liquidity levels are considered adequate. Neither the Company nor the Bank is subject to any specific regulation liquidity requirements imposed by regulatory orders. The bank is subject to general FDIC guidelines which do not require a minimum level of liquidity. Management believes its liquidity ratios meet or exceed these guidelines. RECENT DEVELOPMENTS The FASB has issued statement 114, "Accounting by Creditors for Impairment of a Loan." This statement requires that impaired loans that are within the scope of the statement be measured on the present value of expected future cash flows, discounted at the loan's effective interest rate or at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. This statement amends FASB Statement No. 5, "Accounting for Contingencies" and FASB Statement No. 15, "Accounting by Debtors and Creditors for Troubled Debt Restructures." This statement applies to financial statements for fiscal years beginning after December 15, 1994. SFAS No. 118, "Accounting by Creditors for Impairment of a Loan-Income Recognition and Disclosure," was issued in October 1994. Statement 118 amends SFAS No. 114 by eliminating income recognition provisions and certain disclosure requirements. It is effective for fiscal years beginning after December 15, 1994. Management believes the adoption of Statements 114 and 118 will not have a material impact on the Company's consolidated financial statements. During 1994, the Company adopted SFAS No. 119, "Disclosure about Derivative Financial Instruments and Fair Value of Financial Instruments." This statement amends SFAS statements No. 105, "Disclosure of Information about Financial Instruments with Off-Balance Sheet Risk and Financial Instruments with Concentrations of Credit Risk" and No. 107, "Disclosure about Fair Value of Financial Instruments." This statement requires specific disclosures on derivatives for financial instruments. RECENT LEGISLATION AND REGULATION The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) requires that deposit premiums be assessed based on the risk inherent in and financial soundness of a bank. In September 1992, the FDIC adopted a new risk-based premium schedule that increases the assessment rates on depository institutions. Under the new schedule, which took effect for the assessment period beginning January 1, 1994, the premiums will be ranging from $.23 to $.31 for every $100 of deposits. The Company's rate for 1994 was $.23, and the Company has been notified that its rate for the next six months will be $.23. Information received recently indicates that this rate might change before year-end to $.04. Recently published information by the Federal Deposit Insurance Corporation indicates that for the second half of 1995 this rate will be reduced, perhaps as low as $.05. 7 4 WES-TENN BANCORP, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1994 AND 1993
ASSETS 1994 1993 ---- ---- (in thousands) Cash and demand balances with banks (note 3) $ 7,965 10,056 Interest bearing deposits with banks 4,318 6,829 Securities available-for-sale, at fair values (amortized cost of $43,188 in 1994 and $60,845 in 1993) (notes 4 and 9) 41,861 62,530 Securities held-to-maturity (fair value of $44,643 in 1994 and $20,634 in 1993) (notes 4 and 9) 46,189 20,395 Federal funds sold 3,275 6,400 Stock in Federal Home Loan Bank, at cost (note 8) 1,595 778 Loans (notes 5, 8 and 9) 180,971 172,375 Less: Unearned income 4,045 4,158 Allowance for credit losses (note 6) 2,588 2,730 ---------- ------- NET LOANS 174,338 165,487 ---------- ------- Premises and equipment, net (note 7) 4,108 3,364 Other real estate 321 157 Accrued interest receivable 2,434 2,473 Other assets (note 12) 1,264 762 ---------- ------- TOTAL ASSETS $ 287,668 279,231 ========== ======= LIABILITIES AND STOCKHOLDERS' EQUITY DEPOSITS (NOTE 9): Demand: Non-interest bearing $ 22,463 22,355 Interest bearing 51,341 36,297 Savings: Other savings 33,610 33,736 Time, $100,000 and over 20,945 21,902 Other time 109,747 125,537 ---------- ------- TOTAL DEPOSITS 238,106 239,827 ---------- ------- Federal Home Loan Bank advances (note 8) 19,388 9,370 Other borrowed money (note 8) 2,327 2,204 Accrued interest payable 1,225 979 Other liabilities (note 12) 1,490 2,175 ---------- ------- TOTAL LIABILITIES 262,536 254,555 ---------- ------- STOCKHOLDERS' EQUITY (NOTE 13): Capital stock, $1 par value. Authorized 1,000,000 shares; issued and outstanding 591,673 and 542,416 shares in 1994 and 1993, respectively 592 542 Surplus 11,532 10,859 Undivided profits 15,727 13,279 Net unrealized (loss) gain on available for sale securities (825) 1,046 --------- ------- 27,026 25,726 Treasury stock - at cost, 45,758 and 30,413 shares, respectively 1,894 1,050 ---------- ------- TOTAL STOCKHOLDERS' EQUITY 25,132 24,676 Commitments and contingencies (note 14) ---------- ------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 287,668 279,231 ========== =======
See accompanying notes to consolidated financial statements. 9 5 WES-TENN BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
1994 1993 1992 ---- ---- ---- (in thousands, except per share amounts) INTEREST INCOME: Loans, including fees $15,883 17,205 17,005 Deposits with banks 209 419 727 Federal funds sold 113 166 173 Interest on investments: Taxable 3,364 3,183 2,815 Exempt from federal taxes 1,355 1,383 1,195 ------- ------ ------ TOTAL INTEREST INCOME 20,924 22,356 21,915 INTEREST EXPENSE: Deposits: Demand 1,586 1,411 1,446 Time, $100,000 and over 944 1,017 1,169 Other time and savings 5,747 6,789 8,159 Other borrowed funds 143 126 165 Federal Home Loan Bank advances 734 447 148 ------- ------ ------ TOTAL INTEREST EXPENSE 9,154 9,790 11,087 ------- ------ ------ NET INTEREST INCOME BEFORE PROVISION FOR CREDIT LOSSES 11,770 12,566 10,828 Provision for credit losses (note 6) 285 1,063 1,008 ------- ------ ------ NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 11,485 11,503 9,820 NON-INTEREST INCOME: Service charges on deposit accounts 727 711 647 Other service charges, commissions and fees 504 504 664 Securities (losses) gains, net (note 4) (163) 144 176 Other 563 582 503 ------- ------ ------ TOTAL NON-INTEREST INCOME 1,631 1,941 1,990 NON-INTEREST EXPENSE: Salaries 3,429 3,173 2,758 Employee benefits (note 11) 877 691 634 Occupancy expense, net of rental income (note 7) 545 539 482 Furniture and equipment expense 659 610 573 Federal insurance premiums 597 571 542 Other 2,433 2,715 2,221 ------- ------ ------ TOTAL NON-INTEREST EXPENSE 8,540 8,299 7,210 ------- ------ ------ INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 4,576 5,145 4,600 Income taxes (note 12) 1,354 1,683 2,027 ------- ------ ------ INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 3,222 3,462 2,573 Cumulative effect, at January 1, 1993 of change in accounting for income taxes (note 12) - 50 - ------- ------ ------ NET INCOME $ 3,222 3,512 2,573 ======= ====== ====== Earnings per share (note 13) $ 5.77 6.53 5.18 ======= ====== ======
See accompanying notes to consolidated financial statements. 10 6 WES-TENN BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
COMMON PAID-IN UNDIVIDED UNREALIZED TREASURY STOCK SURPLUS PROFITS GAIN (LOSS) STOCK TOTAL ----- ------- ------- ----------- ----- ----- (in thousands) Balances, January 1, 1992 480 9,890 8,280 - (1,792) 16,858 Cash dividends declared ($1.04 per share) - - (499) - - (499) Stock issuance (note 2) 35 359 - - 1,792 2,186 Conversion of warrants (note 13) 3 59 - - - 62 Net change in unrealized losses on marketable equity securities - - 53 - - 53 Purchase of treasury stock - - - - (43) (43) Net income - - 2,573 - - 2,573 ---- ------ ------ ------- ------ ------ Balances, December 31, 1992 518 10,308 10,407 - (43) 21,190 Cash dividends declared ($1.26 per share) - - (640) - - (640) Conversion of warrants (note 13) 24 576 - - - 600 Purchase of treasury stock - - - - (1,007) (1,007) Purchase of stock warrants - (25) - - - (25) Impact at December 31, 1993, of change in accounting for securities, net of taxes of $640 (notes 1 and 4) - - - 1,046 - 1,046 Net income - - 3,512 - - 3,512 ---- ------ ------ ------- ------ ------ Balances, December 31, 1993 542 10,859 13,279 1,046 (1,050) 24,676 Cash dividends declared ($1.48 per share) - - (774) - - (774) Conversion of warrants (note 13) 50 1,157 - - - 1,207 Purchase of treasury stock - - - - (844) (844) Purchase of stock warrants - (484) - - - (484) Change in market valuation of securities available-for-sale net of taxes of $(1,141) (note 4) - - - (1,871) - (1,871) Net income - - 3,222 - - 3,222 ---- ------ ------ ------- ------ ------ Balances, December 31, 1994 $592 11,532 15,727 (825) (1,894) 25,132 ==== ====== ====== ====== ====== ======
See accompanying notes to consolidated financial statements. 11 7 WES-TENN BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
1994 1993 1992 ---- ---- ---- (in thousands) NET CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 3,222 3,512 2,573 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Amortization of intangible assets 20 25 33 Depreciation and amortization of premises and equipment 445 408 314 Net (accretion) amortization of investment securities and mortgage-backed securities (30) 120 (402) Accretion of loan fees and discounts (122) (163) (142) Provision for possible credit losses 285 1,063 1,008 Provision for possible real estate losses 36 - 3 Decrease (increase) in trading securities, net - 2,019 (2,019) Stock dividends from Federal Home Loan Bank (62) (35) (20) Decrease in interest receivable 39 161 167 Increase (decrease) in interest payable 246 (51) (383) Losses (gain) on sale of investment securities 163 (43) (88) Other, net (104) 325 798 --------- -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES 4,138 7,341 1,842 --------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sales of real estate owned 190 677 798 Net decrease in federal funds sold 3,125 3,475 325 Purchase of securities held-to-maturity (28,265) (50,286) (37,577) Purchases of securities available-for-sale (5,936) - - Maturities of securities held-to-maturity 2,268 22,765 8,121 Maturities of securities available-for-sale 5,533 - - Proceeds from sales of securities available-for-sale 13,072 - - Proceeds from sales of securities - 8,461 12,123 Principal payments on mortgage-backed securities, held-to-maturity 432 5,225 1,265 Principal payments of mortgage-backed securities, available-for-sale 4,625 - - Net increase in loans (9,365) (4,598) (9,101) Capital expenditures for premises and equipment (1,189) (280) (183) Purchase of stock in FHLB (755) - - Proceeds from sale of premises and equipment - - 11 --------- -------- -------- NET CASH USED IN INVESTING ACTIVITIES $ (16,265) (14,561) (24,218) --------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Net (decrease) increase in deposits $ (1,721) (1,367) 17,363 Proceeds from other borrowed money 1,325 1,525 580 Principal payments on other borrowed money (1,202) (1,609) (1,503) Cash dividends paid (774) (640) (499) Purchase of treasury stock (844) (1,007) (43) Purchase of stock warrants (484) (25) - Proceeds from FHLB advances 16,000 6,500 1,500 Principal repayment on FHLB advances (5,982) (244) (218) Net proceeds from warrant conversion 1,207 600 2,248 --------- ------- ------- NET CASH PROVIDED BY FINANCING ACTIVITIES 7,525 3,733 19,428 --------- ------- ------- NET DECREASE IN CASH AND CASH EQUIVALENTS (4,602) (3,487) (2,948) Cash and due from banks at the beginning of the period 16,885 20,372 23,320 --------- ------- ------- Cash and due from banks at the end of the period $ 12,283 16,885 20,372 ========= ======= ======= SUPPLEMENTAL DISCLOSURES: Interest paid $ 8,908 9,841 11,470 Income taxes paid 1,251 1,776 1,459 Increase in other real estate due to foreclosures of loans 351 200 417 Net change in unrealized losses on marketable equity securities - - 53 Net change in market valuation of securities available-for-sale, net of deferred taxes of $(1,141) and $640 in 1994 and 1993, respectively (1,871) 1,046 - ========= ======= =======
See accompanying notes to consolidated financial statements. 12 8 WES-TENN BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1994, 1993 AND 1992 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The consolidated financial statements of Wes-Tenn Bancorp, Inc. and subsidiary (the Company) are prepared in conformity with generally accepted accounting principles and prevailing practices within the banking industry. Management of the Company is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and income and expenses for the periods reported. The Company, a one-bank holding company, is engaged in the business of banking and bank-related activities. The bank subsidiaries are subject to the regulations of certain federal and state agencies and undergo periodic examinations by those regulatory agencies. The following is a summary of the significant accounting and reporting policies used in preparing the consolidated financial statements. (See note 2.) PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Wes-Tenn Bancorp, Inc. and its wholly-owned subsidiary: Tennessee Community Bank (the Bank) and its wholly-owned subsidiaries, Wes-Tenn Mortgage Finance, Inc., TC Finance, Inc. and West Tennessee Life Insurance Company. All significant intercompany accounts and transactions are eliminated in consolidation. SECURITIES At December 31, 1993, the Company adopted SFAS 115, which addresses the accounting and reporting for investments in equity securities with a readily determinable market value and for all investments in debt securities. Under SFAS 115, the Company must classify these securities as either (1) securities held-to-maturity, (2) trading securities or (3) securities available for sale. If management has the positive intent and the Company has ability to hold securities to maturity, they are classified as held-to-maturity and are recorded at cost adjusted for amortization of premiums and accretion of discounts. Securities bought and held principally for the purpose of selling them in the near term are classified as trading securities and are reported at fair value, with unrealized gains and losses included in earnings. Securities not classified as either held-to-maturity or trading securities are classified as securities available-for-sale and are recorded at fair value, with unrealized gains and losses excluded from earnings and reported net of tax as a separate component of stockholders' equity until realized. Amortization of premiums and accretion of discounts are recorded using the interest method. Gains or losses from the sale of securities are recorded in non-interest income using the specific identification method. Prior to the adoption of Statement 115, the Company classified its marketable equity securities at the lower of cost or market, with a valuation allowance for unrealized losses established as a charge against stockholders' equity. Securities purchased with the intention of recognizing short-term profits were placed in a trading account and carried at market value. All other securities were carried at historical cost, adjusted for the amortization of premiums and accretion of discounts. When the Company's intent was to sell a security prior to maturity, it was deemed held for sale and carried at the lower of cost or market. There were no such securities identified at December 31, 1992. PREMISES AND EQUIPMENT Premises and equipment are stated at cost less accumulated depreciation. Provisions for depreciation are computed using the straight-line method for buildings and accelerated methods for furniture and equipment over the estimated useful life of the assets. Costs of major additions and improvements are capitalized; expenditures for maintenance and repairs are charged to expense as incurred. ALLOWANCE FOR CREDIT LOSSES The allowance for credit losses is maintained at a level considered adequate by management to absorb potential losses in the loan portfolio. The provision for credit losses is based on management's evaluation of the loan portfolio. Factors considered in management's evaluation are current and anticipated future economic conditions, previous loan loss experience, industry concentrations, and the overall quality of the loan portfolio. While management uses available information to recognize losses, 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 allowances for losses. Such agencies may require the Company to recognize additions to the allowances based on their judgments about information available to them at the time of their examination. INCOME RECOGNITION ON LOANS Loans are reported at the principal amount outstanding, net of unearned income and the allowance for credit losses. Unearned income on installment loans is amortized using methods which approximate the interest method. Management does not accrue interest on loans when it is determined that the borrower is unable to meet his contractual obligation or where interest or principal is 90 days or more past due, unless the loan is adequately secured and in process of collection. A loan may be designated as partially accruing when the rate of interest has been reduced because the borrower has experienced financial difficulties. Interest income on such loans is recognized at the reduced interest rate. Loan origination and commitment fees and certain direct loan origination costs are deferred and amortized as a yield adjustment to the related loans, generally over the contractual life of the loans. 13 9 WES-TENN BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS RETIREMENT PLANS The Company has a discretionary profit-sharing plan covering substantially all employees with more than one year of service. INCOME TAXES In February 1992, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. Statement 109 requires a change from the deferred method of accounting for income taxes of APB Opinion 11 to the asset and liability method of accounting for income taxes. Under the asset and liability method of Statement 109, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Under Statement 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Effective January 1, 1993, the Company adopted Statement 109 and the cumulative effect of that change in the method of accounting for income taxes in the 1993 consolidated statement of income was a benefit of $50,000. Pursuant to the deferred method under APB Opinion 11, which was applied in 1992 and prior years, deferred income taxes were recognized for income and expense items that were reported in different years for financial reporting purposes and income tax purposes using the tax rate applicable for the year of the calculation. Under the deferred method, deferred taxes are not adjusted for subsequent changes in tax rates. OTHER REAL ESTATE Other real estate is carried at the lower of the recorded investment in the property or its fair value less estimated selling costs. Any loss at foreclosure is charged to the allowance for credit losses. Provisions for operating expenses of such properties and gains and losses on their disposition are included in non-interest expense. EARNINGS PER SHARE The computations of earnings per share in each year is based on the weighted average number of shares outstanding during the year adjusted for dilutive stock warrants. (See note 13.) FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers and to reduce its own exposure to fluctuation in interest rates. These financial instruments include commitments to extend credit and standby letters of credit. (See note 14.) CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash and demand balances with banks and interest bearing deposits with banks. RECENT PRONOUNCEMENTS In May 1993, FASB also issued SFAS 114, Accounting by Creditors for Impairment of a Loan, as amended by SFAS 118, Accounting by Creditors for Impairment of a Loan-Income Recognition and Disclosures. This statement amends SFAS 5, Accounting for Contingencies, and SFAS 15, Accounting by Debtors and Creditors for Troubled Debt Restructurings, and prescribes the recognition criterion for loan impairment and the measurement methods for certain impaired loans and loans whose terms are modified in troubled-debt restructurings (a "restructured loan"). This statement is effective for financial statements issued for fiscal years beginning after December 15, 1994. The Company's adoption of this statement is not expected to have a material impact on its financial position or results of operation. During 1994, the Company adopted SFAS No. 119, Disclosure about Derivative Financial Instruments and Fair Value of Financial Instruments. This statement amends SFAS statements No. 105, Disclosure of Information about Financial Instruments with Off-Balance Sheet Risk and Financial Instruments with Concentrations of Credit Risk, and No. 107, Disclosure about Fair Value of Financial Instruments. This statement requires specific disclosures on derivatives for financial instruments. RECLASSIFICATIONS Certain 1993 and 1992 amounts have been reclassified to conform to 1994 financial statement presentation. 14 10 WES-TENN BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 2 BUSINESS COMBINATION - CONVERSION AND MERGER On September 27, 1991, the Company and Tri-County Federal Savings Bank (Tri-County) reached a definitive Restated Agreement and Plan of Reorganization providing for the Company's acquisition of Tri-County simultaneously with Tri-County's conversion from a federal mutual savings bank to a federal stock savings bank. Tri-County received regulatory approval and the merger-conversion was accomplished in February 1992 by the offering of 104,868 shares of the Company's common stock and common stock purchase warrants in exchange for 100% of Tri-County's newly-converted stock. The net proceeds from the issuance and sale of the Company's common stock and common stock purchase warrants, which approximated $2,200,000, was infused as additional capital of Tri-County. The transaction was accounted for as a pooling of interests. Conversion costs of approximately $100,000 were capitalized by Tri-County and will be amortized over a five-year period. All other costs of the offering in the amount of $388,140 were deducted from the proceeds of the shares sold in the conversion. At the time of the conversion, in accordance with regulatory requirements, Tri-County established a liquidation account for the benefit of eligible depositors who continued to maintain their accounts at Tri-County after the conversion in the amount of $3,928,273. The liquidation account will be reduced annually to the extent that eligible depositors have reduced their qualifying deposits. Subsequent increases will not restore an eligible account holder's interest in the liquidation account. In the event of a complete liquidation, each eligible depositor will be entitled to receive a distribution from the liquidation account in an amount proportionate to the current adjusted qualifying balances for each account then held. The liquidation account balance is not available for payment of dividends. At December 31, 1994, the liquidation balance had been reduced to a balance of $224,992. Prior to the merger, Tri-County's fiscal year end was September 30. Accordingly, its results are included as of that date for fiscal year 1992. In conjunction with Tri-County's merger with Tennessee Community Bank in 1993, the results of operations for the former Tri-County for the period October 1, 1992 to December 31, 1992 are included with the result of operations for the period ended December 31, 1993. NOTE 3 REQUIRED CASH BALANCES Aggregate average daily reserves of $2,078,000 were maintained at December 31, 1994 to satisfy federal regulatory requirements. NOTE 4 SECURITIES The amortized cost, gross unrealized holding gains, gross unrealized holding losses and fair value for available-for-sale and held-to-maturity securities by major security type at December 31 were as follows:
1994 -------------------------------------------------------- GROSS GROSS ESTIMATED AMORTIZED UNREALIZED UNREALIZED FAIR COST GAINS LOSSES VALUE ---- ----- ------ ----- (in thousands) Available-for-sale: U.S. Treasury securities and obligations of U.S. government corporations and agencies $17,058 8 1,245 15,821 Obligations of state and political subdivisions 14,833 264 22 15,075 Other securities 362 14 - 376 Mortgage-backed securities 10,935 7 353 10,589 ------- ----- ----- ------ Totals $43,188 293 1,620 41,861 ======= ===== ===== ====== Held-to-maturity: U.S. Treasury securities and obligations of U.S. government corporations and agencies 29,854 117 927 29,044 Obligations of state and political subdivisions 10,431 7 361 10,077 Mortgage-backed securities 5,904 - 382 5,522 ------- ----- ----- ------ Totals $46,189 124 1,670 44,643 ======= ===== ===== ======
15 11 WES-TENN BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1993 -------------------------------------------------------- GROSS GROSS ESTIMATED AMORTIZED UNREALIZED UNREALIZED FAIR COST GAINS LOSSES VALUE ---- ----- ------ ----- (in thousands) Available-for-sale: U.S. Treasury securities and obligations of U.S. government corporations and agencies $25,669 402 73 25,998 Obligations of state and political subdivisions 16,971 1,109 - 18,080 Other securities 264 46 2 308 Mortgage-backed securities 17,941 217 14 18,144 ------- ----- -- ------ Totals $60,845 1,774 89 62,530 ======= ===== == ====== Held-to-maturity: U.S. Treasury securities and obligations of U.S. government corporations and agencies 9,764 59 24 9,799 Obligations of state and political subdivisions 7,251 163 22 7,392 Mortgage-backed securities 3,380 83 20 3,443 ------- ----- -- ------ Totals $20,395 305 66 20,634 ======= ===== == ======
Maturities of securities classified as available-for-sale and held-to-maturity were as follows at December 31, 1994 (expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties):
ESTIMATED AMORTIZED FAIR COST VALUE ---- ----- (in thousands) Available-for-sale: Due in one year or less $ 9,422 9,156 Due after one year through five years 19,613 18,909 Due after five years through ten years 2,884 2,867 Due after ten years 334 340 ------- ------ 32,253 31,272 Mortgage-backed securities 10,935 10,589 ------- ------ $43,188 41,861 ======= ====== Held-to-maturity: Due in one year or less 6,468 6,371 Due after one year through five years 13,829 13,078 Due after five years through ten years 19,988 19,672 ------- ------ 40,285 39,121 Mortgage-backed securities 5,904 5,522 ------- ------ $46,189 44,643 ======= ======
Proceeds from sales of securities available-for-sale during 1994 were approximately $13,072,000. Gross gains of approximately $51,000 and gross losses of approximately $214,000 were realized on those sales. Proceeds from sales of securities during 1993 and 1992 were approximately $8,461,000 and $12,123,000, respectively. Gross gains of approximately $125,000 and $176,000 and gross losses of approximately $82,000 and $88,000 were recognized on those sales during 1993 and 1992, respectively. Gross gains of $101,000 and $88,000 were realized during 1993 and 1992, respectively, from sales of trading securities. Securities, including mortgage-backed securities, with a book value of approximately $8,810,000 and $15,582,000 at December 31, 1994 and 1993, respectively, were pledged to secure public deposits and pledged for other purposes as required by law. Investments in general obligations of the State of Tennessee as of December 31, 1994, had a book value of approximately $14,674,000 and a market value of approximately $14,890,000. 16 12 WES-TENN BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 5 LOANS Loans outstanding at December 31 by major lending classification were as follows:
1994 1993 ---- ---- (in thousands) Commercial and industrial loans $ 6,089 8,139 Real estate: Construction and land development 4,791 3,274 Secured by farmland and improvements 6,108 5,465 Secured by residential properties 100,199 91,674 Other real estate loans 16,962 13,078 Loans to individuals for household, family and other personal expenditures 37,677 40,838 Agricultural loans 4,683 5,514 All other loans 417 235 -------- ------- TOTAL LOANS, NET OF UNEARNED INCOME 176,926 168,217 Allowance for credit losses (2,588) (2,730) -------- ------- NET LOANS $174,338 165,487 ======== =======
The above table reflects loans net of unearned income. The amount of unearned discount remaining is approximately $4,045,000 and $4,158,000 at December 31, 1994 and 1993, respectively. Nonaccrual and restructured loans totaled approximately $220,000 and $375,000 at December 31, 1994 and 1993, respectively. The effect on income before income taxes had interest been earned at the contractual rates on these loans as compared to the actual amount earned was immaterial for 1994 and 1993. There were no commitments to lend additional funds to borrowers whose loans are classified as nonaccrual or restructured. NOTE 6 ALLOWANCE FOR CREDIT LOSSES A summary of changes in the allowance for credit losses for the years ended December 31 is as follows:
1994 1993 1992 ---- ---- ---- (in thousands) Balance at beginning of year $2,730 2,362 1,892 Provision charged to operating expenses 285 1,063 1,008 Deductions: Loans charged-off (697) (877) (858) Recoveries 270 182 320 ------ ----- ----- Net charge-offs (427) (695) (538) ------ ----- ----- Balance at end of year $2,588 2,730 2,362 ====== ===== =====
17 13 WES-TENN BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 7 PREMISES AND EQUIPMENT Premises and equipment and accumulated depreciation thereon at December 31 are as follows:
ESTIMATED USEFUL LIVES - YEARS 1994 1993 ------------- ---- ---- (in thousands) Land $ 456 381 Buildings 10-40 3,732 3,732 Furniture and equipment 3-7 2,683 1,814 ------ ----- TOTAL 6,871 5,927 Accumulated depreciation 2,763 2,563 ------ ----- PREMISES AND EQUIPMENT, NET $4,108 3,364 ====== =====
Depreciation expense on premises and equipment for the years ended December 31, 1994, 1993 and 1992 was approximately $445,000, $408,000 and $314,000, respectively. NOTE 8 FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWED MONEY
Borrowings consisted of the following at December 31: 1994 1993 ---- ---- (in thousands) Advances from Federal Home Loan Bank of Cincinnati with stated rates from 5.65% to 8.95% maturing from February 1, 2006 to November 1, 2013 $19,388 9,370 ======= ===== Open line of credit with a commercial bank, with an interest rate of 8.5%. Total available credit of $2,800,000. Interest due quarterly, principal annual through April 2003 1,330 830 Series 1 collateralized mortgage obligation bonds of Wes-Tenn Mortgage Finance, Inc.; secured by mortgage-backed securities with carrying values of $1,030,000 and $1,363,000 at December 31, 1994 and 1993, respectively. Interest is payable quarterly at a variable rate with a maximum rate of 12%. The average rate paid was 5.7% and 4.2% for 1994 and 1993, respectively. The bonds mature July 25, 2017 889 1,201 Other 108 173 ------- ----- TOTAL OTHER BORROWED MONEY $2,327 2,204 ======= =====
FHLB advances are secured by the stock of the FHLB and certain real estate loans of the Company totaling approximately $29,082,000 at December 31, 1994. 18 14 WES-TENN BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 9 FAIR VALUES OF FINANCIAL INSTRUMENTS Statement of Financial Accounting Standards No. 107, Disclosures About Fair Value of Financial Instruments (SFAS No. 107) requires that the Company disclose estimated fair values for its financial instruments. See note 14 for a discussion of the Company's off-balance sheet financial instruments whose fair values are estimated to be equal to their carrying value. The fair value of most investments and mortgage-backed securities is estimated based on market prices or dealer quotes. See "Note 4: Securities" for market values. The following table presents fair value information for financial instruments shown in the Company's balance sheet for which no market exists. The fair values for these financial instruments were calculated by discounting expected cash flows using the information presented. Because no market exists for these financial instruments and because management does not intend to sell these financial instruments, the Company does not know whether the fair values shown below represent values at which the respective financial instruments could be sold.
1994 ----------------------------------------------------------------- ESTIMATED CALCULATED CARRYING AVERAGE AVERAGE FAIR VALUE FAIR VALUE AMOUNT YIELD MATURITY RATE (*) AMOUNT ------ ----- -------- -------- ------ (in thousands) Commercial and industrial loans $ 6,089 10.03% 27 months 9.50% $ 6,099 Real estate: Construction and land development 4,791 8.42 3 months 9.50 4,740 Secured by farmland and improvements 6,108 9.09 8 months 9.50 6,076 Secured by residential properties 100,199 8.33 110 months 9.50 98,858 Other real estate loans 16,962 8.78 7 months 9.50 16,792 Loans to individuals for household, family and other personal expenditures 37,677 10.55 29 months 9.88 40,232 Agricultural loans 4,683 9.47 11 months 9.50 4,680 All other loans 417 8.20 20 months 9.50 306 Time deposits 130,692 4.95 8 months 5.52 130,275 Federal Home Loan Bank Advances 19,388 6.19 36 months 6.60 18,185 Other borrowed money 2,327 7.30 59 months 7.30 2,327
1993 ----------------------------------------------------------------- ESTIMATED CALCULATED CARRYING AVERAGE AVERAGE FAIR VALUE FAIR VALUE AMOUNT YIELD MATURITY RATE (*) AMOUNT ------ ----- -------- -------- ------ (in thousands) Commercial and industrial loans $ 8,139 8.97% 7 months 8.21% $ 8,175 Real estate: Construction and land development 3,274 8.92 3 months 8.00 3,283 Secured by farmland and improvements 5,465 8.82 8 months 8.08 5,482 Secured by residential properties 91,674 8.35 32 months 7.44 92,598 Other real estate loans 13,078 8.36 4 months 8.00 13,140 Loans to individuals for household, family and other personal expenditures 40,838 11.40 20 months 10.40 41,654 Agricultural loans 5,514 8.88 8 months 8.14 5,527 All other loans 235 8.00 20 months 7.50 238 Time deposits 147,439 4.23 4 months 3.65 147,691 Federal Home Loan Bank Advances 9,370 6.30 59 months 5.45 10,832 Other borrowed money 2,204 6.00 68 months 6.00 2,204
*Management has made estimates of fair value discount rates that it believes to be reasonable. However, because there is no market for these financial instruments, management has no basis to determine whether the rates shown would be indicated in an actual sale. The reader is encouraged to use different discount rates to calculate fair values for the Company's financial instruments if such rates are believed to be more appropriate. 19 15 WES-TENN BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SFAS No. 107 specifies that fair values should be calculated based on the value of one unit, without regard to any premium or discount that may result from concentrations of ownership of a financial instrument. In addition, SFAS No. 107 does not permit the Company to disclose an estimated fair value for its demand and savings deposits. Such deposits amount to a total of approximately $107,414,000 and $92,388,000 at December 31, 1994 and 1993, respectively, and annually provide funding to the Company at a cost significantly below the cost of borrowing funds in the market. Management believes that the Company's demand and savings deposits as continuing sources of less costly funding provide a significant additional value to the Company that is not reflected above. Because no market exists for a significant portion of the Company's financial instruments and because of the inherent imprecision of estimating fair value discount rates for financial instruments for which no market exists and because of the disclosure restrictions imposed by SFAS No. 107, management does not believe that the above information reflects the amounts that would be received if the Company's assets and liabilities were sold. NOTE 10 RELATED PARTY TRANSACTIONS From time to time, the Company provides credit to directors and executive officers of the Company and their affiliates. In management's opinion, such transactions are made on substantially the same terms as those prevailing at the time for comparable transactions with other persons and do not involve more than the normal risk of collectibility or present other unfavorable features. Such loans were approximately $628,000 and $569,000 at December 31, 1994 and 1993, respectively. During 1994, new loans of approximately $104,000 were made, and repayments of approximately $45,000 were received. NOTE 11 EMPLOYEE BENEFIT PLANS The Company maintains a non-contributory discretionary profit-sharing plan (the Plan) covering substantially all full-time employees who have completed at least one year of service and have attained the age of 21. Contributions to the Plan which are made at the discretion of the board of directors totaled approximately $210,000 and $195,000 for the years ended December 31, 1994 and 1993, respectively. NOTE 12 INCOME TAXES Income tax expense for the years ended December 31 consists of:
1994 1993 1992 ---- ---- ---- (in thousands) Current: Federal $1,140 1,523 1,232 State 290 345 320 ------ ----- ----- Total current 1,430 1,868 1,552 Deferred federal and state (76) (185) 475 ----- ---- ----- Total income tax expense $1,354 1,683 2,027 ====== ===== =====
20 16 WES-TENN BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Income tax expense for the years ended December 31, 1994, 1993 and 1992 differed from the amounts computed by applying the U.S. federal income tax rate of 34 percent as a result of the following:
1994 1993 1992 ---- ---- ---- (in thousands) Computed "expected" tax expense $1,556 1,749 1,564 Increase (reduction) in income taxes resulting from: Tax exempt income (403) (397) (348) State income taxes, net of federal income tax benefit 183 206 260 Statutory bad debt recapture - - 504 Other, net 18 125 47 ------ ----- ----- $1,354 1,683 2,027 ====== ===== =====
For the year ended December 31, 1992, deferred income tax expense resulted from timing differences in the recognition of income and expense for income tax and financial reporting purposes. The sources and tax effects of those timing differences consisted of $504,000 of statutory bad debt recapture and $(29,000) of various other differences. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at December 31, 1994 and 1993, are presented below (in thousands):
1994 1993 ---- ---- (in thousands) Deferred tax assets: Loans, principally due to allowance for possible loan losses and interest income recognition $ 88 43 Deferred compensation, principally due to accrual for financial reporting purposes 138 149 Unrealized loss on available for sale securities 501 - Other 81 54 ---- ---- Total gross deferred tax assets 808 246 Valuation allowance ( -) ( -) ---- ---- Net deferred tax assets 808 246 ---- ---- Deferred tax liabilities: Investments, principally due to dividends deferred for tax purposes (51) (28) Premises and equipment, principally due to differences in depreciation (131) (140) Unrealized gains on available for sale securities - (640) Other (53) (82) ---- ---- Total deferred tax liabilities (235) (890) ---- ---- Net deferred tax asset (liability) $573 (644) ==== ====
21 17 NOTE 13 STOCKHOLDERS' EQUITY AND PER SHARE DATA Dividends paid by the Company are provided primarily from dividends received from the subsidiary. Banking regulations limit the amount of dividends that may be paid without prior approval of the agencies which regulate the Bank. The computation of earnings per share in each year was based on the weighted average number of common shares outstanding. Stock warrants which were dilutive, were included as share equivalents using the treasury stock methods. The number of shares used in computing earnings per share was 558,144 and 537,754 and 497,017 in 1994, 1993 and 1992, respectively. Fully diluted earnings per share was not materially different from primary earnings per share for any years presented. The Company had outstanding at December 31, 1994, warrants to purchase approximately 9,600 shares of its common stock. The warrants were issued in 1992 in connection with the Tri-County merger (note 2). Each warrant is exercisable at $24.50 per share, and may be exercised during the periods of May 1 through July 31 of 1992 and 1993 and May 1, 1994 through February 3, 1995. In 1994 and 1993, respectively, 49,257 and 24,508 warrants were exercised and converted to shares of common stock. All outstanding warrants at December 31, 1994 were exercised before February 3, 1995. In January 1993, the Company filed a tender offering to purchase from existing shareholders up to 60,000 shares of its outstanding common stock for $34.00 per share, and up to 30,000 outstanding warrants for $8.00 per warrant. The offer expired on February 15, 1993 and resulted in the Company repurchasing 21,193 shares of common stock and 3,090 warrants at a total cost of approximately $745,000. The Company purchased an additional 7,440 shares in September 1993. During the fourth quarter of 1994, the Company purchased 15,345 shares of stock at $55 per share and those shares are reflected as treasury shares at December 31, 1994. During the fourth quarter of 1994, the Company also repurchased 15,873 warrants at $30.50 per warrant. NOTE 14 COMMITMENTS AND CONTINGENCIES In the normal course of business, the Company has various outstanding commitments to extend credit and standby letters of credit which are not disclosed in the accompanying consolidated financial statements. At December 31, 1994 and 1993, the Company had outstanding approximately $259,700 and $266,700, respectively, in standby letters of credit and commitments to extend approximately $9,986,000 and $6,711,000, respectively, under outstanding lines of credit. In the opinion of management, no significant credit losses will result from these commitments. NOTE 15 SUBSEQUENT EVENT - PENDING ACQUISITION On August 30, 1994, a definitive merger agreement was executed between the Company and West Tennessee Financial Corporation (WTFC), a bank holding company. WTFC owns all of the outstanding shares of capital stock of Community Bank of West Tennessee (Community Bank), formerly First Federal Savings and Loan Association, a state chartered commercial bank with its principal office located in Selmer, Tennessee and two additional branches in Hardin County. Pursuant to the merger agreement, WTFC is to be merged with and into the Company, with the Company being the surviving corporation. The shareholders of WTFC common stock, $.01 par value per share, are to receive $51 in cash or .9273 shares of the Company's common stock in exchange for each share of WTFC common stock. As soon as reasonably practical after the merger of WTFC into the Company, Community Bank will be merged into the Bank, with the Bank continuing as the surviving bank. The Company intends to account for the mergers under the purchase method of accounting. At December 31, 1994, WTFC had total assets of $36.2 million. The mergers are subject to the approval of WTFC's shareholders. Management expects this transaction to be consummated on April 3, 1995. 22 18 WES-TENN BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 16 CONDENSED PARENT COMPANY FINANCIAL INFORMATION Condensed financial information of Wes-Tenn Bancorp, Inc. (parent only) is as follows: CONDENSED BALANCE SHEETS DECEMBER 31
1994 1993 ------- ------ (in thousands) Assets: Cash and demand balances with banks $ 370 32 Investment in subsidiary 26,141 25,519 Other - 3 ------- ------ TOTAL ASSETS $26,511 25,554 ======= ====== Liabilities: Other borrowed money 1,330 830 Other liabilities 49 48 ------- ------ TOTAL LIABILITIES 1,379 878 ------- ------ Stockholders' equity 25,132 24,676 ------- ------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $26,511 25,554 ======= ======
CONDENSED STATEMENTS OF INCOME YEARS ENDED DECEMBER 31
1994 1993 1992 ---- ---- ---- (in thousands) Income: Dividends received from subsidiary $ 860 929 699 Other income - - 180 ------ ----- ----- 860 929 879 Expenses 96 156 139 ------ ----- ----- INCOME BEFORE EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARY 764 773 740 Equity in undistributed earnings of subsidiary 2,458 2,739 1,833 ------ ----- ----- NET INCOME $3,222 3,512 2,573 ====== ===== =====
CONDENSED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31
1994 1993 1992 ---- ---- ---- (in thousands) Net cash flows from operating activities: Net income $ 3,222 3,512 2,573 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Earnings from subsidiary (3,318) (3,668) (2,532) Dividends received from subsidiary 860 929 699 Other, net (31) 5 229 ------- ------- ------ NET CASH PROVIDED BY OPERATING ACTIVITIES 733 778 969 ------- ------- ------ Cash flows from financing activities: Principal payments on other borrowed money (825) (1,220) (1,060) Proceeds from other borrowed money 1,325 1,525 580 Cash dividends paid (774) (640) (499) Conversion of stock warrants 1,207 600 62 Purchase of treasury stock (844) (1,007) (43) Purchase of stock warrants (484) (25) - ------- ------ ------ NET CASH USED IN FINANCING ACTIVITIES (395) (767) (960) ------- ------ ------ NET INCREASE IN CASH AND DEMAND BALANCES WITH BANKS 338 11 9 Cash and demand balances with banks at the beginning of the year 32 21 12 ------- ------- ------ Cash and demand balances with banks at the end of the year $ 370 32 21 ======= ======= ======
23 19 INDEPENDENT AUDITORS' REPORT The Board of Directors Wes-Tenn Bancorp, Inc.: We have audited the accompanying consolidated balance sheets of Wes-Tenn Bancorp, Inc. and subsidiary as of December 31, 1994 and 1993, and the related consolidated statements of income, changes in stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1994. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Wes-Tenn Bancorp, Inc. and subsidiary at December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1994, in conformity with generally accepted accounting principles. As discussed in note 1 to the financial statements, the Company changed its methods of accounting for investments in debt and equity securities in 1993 to adopt the provisions of Financial Accounting Standards Board's Statements of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities. KPMG Peat Marwick LLP Memphis, Tennessee February 15, 1995 24 EX-23.1 6 CONSENT OF KPMG PEAT MARWICK 1 Exhibit 23.1 Peat Marwick LLP Morgan Keegan Tower, Suite 900 Fifty North Front Street Memphis, TN 38103 ACCOUNTANT'S CONSENT The Board of Directors BancorpSouth, Inc.: We consent to incorporation by reference in the registration statement on Post-Effective Amendment No. 2 to Form S-4 of BancorpSouth, Inc. of our report dated January 27, 1995 on the consolidated balance sheets of BancorpSouth, Inc. and subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1994, which report appears in the Annual Report of BancorpSouth, Inc. for the year ended December 31, 1994 and to the reference to our firm under the heading "Experts" in the Prospectus. Our report refers to a change in accounting for income taxes to adopt the provisions of the Financial Accounting Standards Board's SFAS 109 in 1993 and a change in accounting for securities to adopt the provisions of SFAS 115 in 1994. Memphis, Tennessee September 5, 1995 EX-23.2 7 CONSENT OF KPMG PEAT MARWICK 1 Exhibit 23.2 Peat Marwick LLP Morgan Keegan Tower, Suite 900 Fifty North Front Street Memphis, TN 38103 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS We consent to the incorporation herein by reference of our report dated February 15, 1995 and to the reference to our firm under the heading "Experts" in the Prospectus. Our report refers to a change in accounting for securities to adopt the Financial Accounting Standards Board's SFAS 115 in 1993. Memphis, Tennessee September 5, 1995 EX-23.5 8 CONSENT OF MERCER CAPITAL MANAGEMENT, INC. 1 Exhibit 23.5 MERCER CAPITAL 5860 Ridgeway Center Parkway, Suite 410 Memphis, Tennessee 38120-4048 Phone: (901) 685-2120 Telecopier: (901) 685-2199 September 8, 1995 Board of Directors BancorpSouth, Inc. One Mississippi Plaza Tupelo, Mississippi 38802 Board of Directors Wes-Tenn Bancorp, Inc. 200 West Washington Avenue Covington, Tennessee 38019 Gentlemen: We hereby consent to the use of our firm's name in the Form S-4 Registration Statement which includes BancorpSouth, Inc.'s Prospectus and Wes-Tenn Bancorp's Proxy Statement and do further consent to the references therein to our fairness opinion filed as an Exhibit to the Form S-4. Sincerely, MERCER CAPITAL MANAGEMENT, INC. /s/ Jeff K. Davis --------------------------- Jeff K. Davis, ASA, CFA Vice President